As filed with the Securities and Exchange Commission on February 12, 2008
File No. 001-33829
 
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
 
 
 
 
Amendment No. 2
to
 
Form 10
 
GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934
 
 
 
 
Dr Pepper Snapple Group, Inc.
(Exact name of Registrant as specified in its charter)
 
 
 
 
     
Delaware
  75-3258232
(State or other jurisdiction of
incorporation or organization)
  (I.R.S. employer
identification number)
     
5301 Legacy Drive, Plano, Texas
  75024
(Address of principal executive offices)
  (Zip Code)
(972) 673-7000
(Registrant’s telephone number, including area code)
 
 
 
 
Securities to be registered pursuant to Section 12(b) of the Act:
 
     
Title of Each Class to be so Registered
 
Name of Each Exchange on which Each Class is to be Registered
 
Common Stock, par value $0.01 per share
  New York Stock Exchange
 
 
 
 
Securities to be registered pursuant to Section 12(g) of the Act:
None
 
 


 

EXPLANATORY NOTE
 
As previously announced, Cadbury Schweppes plc intends to separate the beverage business it owns in the United States, Canada, Mexico and the Caribbean (which it refers to as its Americas Beverages business) from its global confectionery business and its other beverages business (located principally in Australia). As a result of the separation, which has several steps, Cadbury Schweppes plc shareholders will receive shares of Cadbury plc, a new U.K. public company which will own Cadbury Schweppes’ global confectionery business and its other beverages business (located principally in Australia), and common stock of Dr Pepper Snapple Group, Inc., a new U.S. public company which will own Cadbury Schweppes’ Americas Beverages business. These two publicly-traded companies will be independent from each other after the separation. The information statement contained in this Form 10 relates to the distribution described above and the establishment of Dr Pepper Snapple Group, Inc. A vote of the shareholders of Cadbury Schweppes plc is required to effect the separation and the distribution of common stock of Dr Pepper Snapple Group, Inc. and related matters described herein. The information statement has been prepared as if the vote of the shareholders of Cadbury Schweppes plc to approve the separation and the distribution of common stock of Dr Pepper Snapple Group, Inc. and related matters described herein had already occurred. The information statement will be distributed to shareholders of Cadbury Schweppes plc after the vote of the shareholders of Cadbury Schweppes plc has occurred and the Form 10 to which the information statement relates has been declared effective by the Securities and Exchange Commission.
 
Dr Pepper Snapple Group, Inc. filed its initial Form 10 registration statement under its former name, CSAB Inc. CSAB Inc. changed its name to Dr Pepper Snapple Group, Inc. on January 2, 2008.


 

DR PEPPER SNAPPLE GROUP, INC.
INFORMATION REQUIRED IN REGISTRATION STATEMENT
CROSS-REFERENCE SHEET BETWEEN INFORMATION STATEMENT AND ITEMS OF FORM 10
 
Certain information required to be included herein is incorporated by reference to specifically identified portions of the body of the information statement filed herewith as Exhibit 99.1. None of the information contained in the information statement shall be incorporated by reference herein or deemed to be a part hereof unless such information is specifically incorporated by reference.
 
Item 1.    Business.
 
The information required by this item is contained under the sections of the information statement entitled “Information Statement Summary,” “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Industry,” “Business,” “Our Relationship with Cadbury plc After the Distribution,” “The Distribution,” “Where You Can Find More Information” and “Index to Financial Statements” (and the financial statements referenced therein). Those sections are incorporated herein by reference.
 
Item 1A.    Risk Factors.
 
The information required by this item is contained under the section of the information statement entitled “Risk Factors.” That section is incorporated herein by reference.
 
Item 2.    Financial Information.
 
The information required by this item is contained under the sections of the information statement entitled “Information Statement Summary,” “Risk Factors,” “Capitalization,” “Selected Historical Combined Financial Data,” “Unaudited Pro Forma Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Index to Financial Statements” (and the financial statements referenced therein). Those sections are incorporated herein by reference.
 
Item 3.    Properties.
 
The information required by this item is contained under the section of the information statement entitled “Business — Real Property.” That section is incorporated herein by reference.
 
Item 4.    Security Ownership of Certain Beneficial Owners and Management.
 
The information required by this item is contained under the section of the information statement entitled “Ownership of Our Common Stock.” That section is incorporated herein by reference.
 
Item 5.    Directors and Executive Officers.
 
The information required by this item is contained under the section of the information statement entitled “Management.” That section is incorporated herein by reference.
 
Item 6.    Executive Compensation.
 
The information required by this item is contained under the section of the information statement entitled “Management.” That section is incorporated herein by reference.
 
Item 7.    Certain Relationships and Related Transactions.
 
The information required by this item is contained under the sections of the information statement entitled “Capitalization,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Our Relationship with Cadbury plc After the Distribution” and “Management.” Those sections are incorporated herein by reference.


 

Item 8.    Legal Proceedings.
 
The information required by this item is contained under the section of the information statement entitled “Business — Legal Matters.” That section is incorporated herein by reference.
 
Item 9.    Market Price of, and Dividends on, the Registrant’s Common Equity and Related Stockholder Matters.
 
The information required by this item is contained under the sections of the information statement entitled “Information Statement Summary,” “Dividend Policy,” “Description of Capital Stock” and “The Distribution.” Those sections are incorporated herein by reference.
 
Item 10.    Recent Sales of Unregistered Securities.
 
On October 24, 2007, Dr Pepper Snapple Group, Inc. sold one share of common stock, par value $0.01 per share, to Cadbury Schweppes plc pursuant to Section 4(2) of Securities Act of 1933, as amended.
 
Item 11.    Description of Registrant’s Securities to be Registered.
 
The information required by this item is contained under the section of the information statement entitled “Description of Capital Stock.” That section is incorporated herein by reference.
 
Item 12.    Indemnification of Directors and Officers.
 
The information required by this item is contained under the section of the information statement entitled “Description of Capital Stock — Anti-Takeover Effects of Various Provisions of Delaware Law and Our Certificate of Incorporation and By-laws — Limitations on Liability and Indemnification of Officers and Directors.” That section is incorporated herein by reference.
 
Item 13.    Financial Statements and Supplementary Data.
 
The information required by this item is contained under the sections of the information statement entitled “Information Statement Summary,” “Selected Historical Combined Financial Data,” “Unaudited Pro Forma Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Index to Financial Statements” (and the financial statements referenced therein). Those sections are incorporated herein by reference.
 
Item 14.    Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
 
None.
 
Item 15.    Financial Statements and Exhibits.
 
(a)   Financial Statements
 
The information required by this item is contained under the section of the information statement entitled “Index to Financial Statements” (and the financial statements referenced therein). That section is incorporated herein by reference.
 
(b)   Exhibits
 
See below.
 
The following documents are filed as exhibits hereto:
 
         
Exhibit
   
Number
 
Exhibit Description
 
  2 .1   Form of Separation and Distribution Agreement between Cadbury Schweppes plc and Dr Pepper Snapple Group, Inc. and, solely for certain provisions set forth therein, Cadbury plc
  10 .1   Form of Transition Services Agreement between Cadbury Schweppes plc and Dr Pepper Snapple Group, Inc.


 

         
Exhibit
   
Number
 
Exhibit Description
 
  10 .2*   Form of Tax-Sharing and Indemnification Agreement between Cadbury Schweppes plc and Dr Pepper Snapple Group, Inc. and, solely for certain provisions set forth therein, Cadbury plc
  10 .3   Form of Employee Matters Agreement between Cadbury Schweppes plc and Dr Pepper Snapple Group, Inc. and, solely for certain provisions set forth therein, Cadbury plc
  10 .4†   Agreement, dated June 15, 2004, between Cadbury Schweppes Bottling Group, Inc. (formerly Dr Pepper/Seven Up Bottling Group, Inc.) and CROWN Cork & Seal USA, Inc.
  10 .5†   First Amendment to the Agreement between Cadbury Schweppes Bottling Group, Inc. and CROWN Cork & Seal USA, Inc., dated August 25, 2005
  10 .6†   Second Amendment to the Agreement between Cadbury Schweppes Bottling Group, Inc. and CROWN Cork & Seal USA, Inc., dated June 21, 2006
  10 .7†   Third Amendment to the Agreement between Cadbury Schweppes Bottling Group, Inc. and CROWN Cork & Seal USA, Inc., dated April 4, 2007
  10 .8†   Fourth Amendment to the Agreement between Cadbury Schweppes Bottling Group, Inc. and CROWN Cork & Seal USA, Inc., dated September 27, 2007
  10 .9   Form of Dr Pepper License Agreement for Bottles, Cans and Pre-mix
  10 .10   Form of Dr Pepper Fountain Concentrate Agreement
  10 .11   Executive Employment Agreement, dated as of October 15, 2007, between CBI Holdings Inc. and Larry D. Young
  10 .12   Executive Employment Agreement, dated as of October 13, 2007, between CBI Holdings Inc. and John O. Stewart
  10 .13   Executive Employment Agreement, dated as of October 15, 2007, between CBI Holdings Inc. and Randall E. Gier
  10 .14   Executive Employment Agreement, dated as of October 15, 2007, between CBI Holdings Inc. and James J. Johnston, Jr.
  10 .15   Executive Employment Agreement, dated as of October 15, 2007, between CBI Holdings Inc. and Pedro Herrán Gacha
  10 .16   Executive Employment Agreement, dated as of October 1, 2007, between CBI Holdings Inc. and Gilbert M. Cassagne
  10 .17   Executive Employment Agreement, dated as of October 15, 2007, between CBI Holdings Inc. and John L. Belsito
  10 .18   Separation Letter, dated October 3, 2007, to Gilbert M. Cassagne
  10 .19   Form of Dr Pepper Snapple Group, Inc. Omnibus Stock Incentive Plan of 2008
  10 .20   Form of Dr Pepper Snapple Group, Inc. Annual Cash Incentive Plan
  10 .21   Form of Dr Pepper Snapple Group, Inc. Employee Stock Purchase Plan
  99 .1   Preliminary Information Statement of Dr Pepper Snapple Group, Inc. dated February 12, 2008
         
 


     
  *     To be filed by amendment.
      Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Act of 1933, as amended.


 

SIGNATURES
 
Pursuant to the requirements of Section 12 of the Securities Exchange Act of 1934, the registrant has duly caused this Amendment No. 2 to the registration statement to be signed on its behalf by the undersigned, thereunto duly authorized.
 
Dr Pepper Snapple Group, Inc.
 
  By: 
/s/   Larry D. Young
Name:     Larry D. Young
  Title:  President and Chief Executive Officer
 
Date: February 12, 2008


 

INDEX TO EXHIBITS
 
         
Exhibit
   
 Number 
 
Exhibit Description
 
  2 .1   Form of Separation and Distribution Agreement between Cadbury Schweppes plc and Dr Pepper Snapple Group, Inc. and, solely for certain provisions set forth therein, Cadbury plc
  10 .1   Form of Transition Services Agreement between Cadbury Schweppes plc and Dr Pepper Snapple Group, Inc.
  10 .2*   Form of Tax-Sharing and Indemnification Agreement between Cadbury Schweppes plc and Dr Pepper Snapple Group, Inc., and solely for certain provisions set forth therein, Cadbury plc
  10 .3   Form of Employee Matters Agreement between Cadbury Schweppes plc and Dr Pepper Snapple Group, Inc. and, solely for certain provisions set forth therein, Cadbury plc
  10 .4†   Agreement, dated June 15, 2004, between Cadbury Schweppes Bottling Group, Inc. (formerly Dr Pepper/Seven Up Bottling Group, Inc.) and CROWN Cork & Seal USA, Inc.
  10 .5†   First Amendment to the Agreement between Cadbury Schweppes Bottling Group, Inc. and CROWN Cork & Seal USA, Inc., dated August 25, 2005
  10 .6†   Second Amendment to the Agreement between Cadbury Schweppes Bottling Group, Inc. and CROWN Cork & Seal USA, Inc., dated June 21, 2006
  10 .7†   Third Amendment to the Agreement between Cadbury Schweppes Bottling Group, Inc. and CROWN Cork & Seal USA, Inc., dated April 4, 2007
  10 .8†   Fourth Amendment to the Agreement between Cadbury Schweppes Bottling Group, Inc. and CROWN Cork & Seal USA, Inc., dated September 27, 2007
  10 .9   Form of Dr Pepper License Agreement for Bottles, Cans and Pre-mix
  10 .10   Form of Dr Pepper Fountain Concentrate Agreement
  10 .11   Executive Employment Agreement, dated as of October 15, 2007, between CBI Holdings Inc. and Larry D. Young
  10 .12   Executive Employment Agreement, dated as of October 13, 2007, between CBI Holdings Inc. and John O. Stewart
  10 .13   Executive Employment Agreement, dated as of October 15, 2007, between CBI Holdings Inc. and Randall E. Gier
  10 .14   Executive Employment Agreement, dated as of October 15, 2007, between CBI Holdings Inc. and James J. Johnston, Jr.
  10 .15   Executive Employment Agreement, dated as of October 15, 2007, between CBI Holdings Inc. and Pedro Herrán Gacha
  10 .16   Executive Employment Agreement, dated as of October 1, 2007, between CBI Holdings Inc. and Gilbert M. Cassagne
  10 .17   Executive Employment Agreement, dated as of October 15, 2007, between CBI Holdings Inc. and John L. Belsito
  10 .18   Separation Letter, dated October 3, 2007, to Gilbert M. Cassagne
  10 .19   Form of Dr Pepper Snapple Group, Inc. Omnibus Stock Incentive Plan of 2008
  10 .20   Form of Dr Pepper Snapple Group, Inc. Annual Cash Incentive Plan
  10 .21   Form of Dr Pepper Snapple Group, Inc. Employee Stock Purchase Plan
  99 .1   Preliminary Information Statement of Dr Pepper Snapple Group, Inc. dated February 12, 2008
 
     
  *     To be filed by amendment.
      Portions of this Exhibit have been omitted and filed separately with the Securities and Exchange Commission as part of an application for confidential treatment pursuant to the Securities Act of 1933, as amended.

 

Exhibit 2.1
FORM OF
SEPARATION AND DISTRIBUTION AGREEMENT
AMONG
CADBURY PLC,
CADBURY SCHWEPPES PLC
AND
DR PEPPER SNAPPLE GROUP, INC.
Dated as of [_______], 2008

 


 

Table of Contents
                 
            Page
 
               
ARTICLE I DEFINITIONS AND INTERPRETATION     1  
 
  Section 1.01   Certain Defined Terms     1  
 
  Section 1.02   Interpretation and Rules of Construction     16  
 
               
ARTICLE II THE SEPARATION     16  
 
  Section 2.01   Transfer of Assets     16  
 
  Section 2.02   Assumption and Satisfaction of Liabilities     18  
 
  Section 2.03   Intercompany Balances     18  
 
  Section 2.04   Transfers Not Effected on or Prior to the Demerger Effective Time; Transfers Deemed Effective as of the Demerger Effective Time     19  
 
  Section 2.05   Transfer Documents     20  
 
  Section 2.06   Further Assurances     20  
 
  Section 2.07   Replacement of Guarantors and Obligors     21  
 
  Section 2.08   Disclaimer of Representations and Warranties     22  
 
               
ARTICLE III CERTAIN ACTIONS AT OR PRIOR TO THE DISTRIBUTION     23  
 
  Section 3.01   Certificate of Incorporation; Bylaws     23  
 
  Section 3.02   Directors     23  
 
  Section 3.03   Resignations     23  
 
  Section 3.04   Ancillary Agreements     23  
 
               
ARTICLE IV THE DISTRIBUTION     23  
 
  Section 4.01   The Distribution     23  
 
  Section 4.02   Fractional Shares     24  
 
  Section 4.03   Actions in Connection with the Distribution.     24  
 
  Section 4.04   Distribution Date     25  
 
  Section 4.05   Conditions to Distribution     25  
 
  Section 4.06   Consent to the Reduction     26  
 
               
ARTICLE V CERTAIN COVENANTS     26  
 
  Section 5.01   Non-Solicitation of Employees     26  
 
  Section 5.02   Auditors and Audits; Annual and Quarterly Financial Statements and Accounting     27  
 
  Section 5.03   CS Obligations     29  
 
               
ARTICLE VI INTELLECTUAL PROPERTY MATTERS     29  
 
  Section 6.01   Cadbury Names and Marks     29  
 
  Section 6.02   Beverages Names and Marks     30  
 
  Section 6.03   Memorabilia     32  
 
  Section 6.04   Additional Licenses     32  
 
  Section 6.05   Know-How Agreement     33  
 
  Section 6.06   Domain Names Agreement     33  

i


 

                 
            Page
ARTICLE VII INDEMNIFICATION     33  
 
  Section 7.01   Release of Pre-Distribution Claims     33  
 
  Section 7.02   Indemnification by CS     35  
 
  Section 7.03   Indemnification by DPS     36  
 
  Section 7.04   Procedures for Indemnification     36  
 
  Section 7.05   Cooperation in Defense and Settlement     38  
 
  Section 7.06   Indemnification Obligations Net of Insurance Proceeds and Other Amounts     38  
 
  Section 7.07   Additional Matters; Survival of Indemnities     39  
 
               
ARTICLE VIII ACCESS TO RECORDS; ACCESS TO INFORMATION; LEGAL AND OTHER MATTERS     39  
 
  Section 8.01   Provision of Corporate Records     39  
 
  Section 8.02   Access to Information     40  
 
  Section 8.03   Disposition of Information     40  
 
  Section 8.04   Witness Services     41  
 
  Section 8.05   Reimbursement; Other Matters     41  
 
  Section 8.06   Confidentiality     41  
 
  Section 8.07   Privileged Matters     42  
 
  Section 8.08   Ownership of Information     43  
 
  Section 8.09   Other Agreements     44  
 
  Section 8.10   Control of Legal Matters     44  
 
               
ARTICLE IX INSURANCE     46  
 
  Section 9.01   Policies and Rights Included Within Assets     46  
 
  Section 9.02   Administration; Other Matters     47  
 
  Section 9.03   Agreement for Waiver of Conflict and Shared Defense     48  
 
               
ARTICLE X DISPUTE RESOLUTION     48  
 
  Section 10.01   Disputes     48  
 
  Section 10.02   Dispute Resolution     48  
 
  Section 10.03   Continuity of Service and Performance     50  
 
               
ARTICLE XI TERMINATION     50  
 
  Section 11.01   Termination     50  
 
  Section 11.02   Effect of Termination     50  
 
  Section 11.03   Amendment     50  
 
  Section 11.04   Waiver     50  
 
               
ARTICLE XII MISCELLANEOUS     50  
 
  Section 12.01   Limitation of Liability     50  
 
  Section 12.02   Expenses     51  
 
  Section 12.03   Notices     51  
 
  Section 12.04   Public Announcements     52  
 
  Section 12.05   Severability     52  
 
  Section 12.06   Entire Agreement     52  
 
  Section 12.07   Assignment     52  

ii


 

                 
            Page
 
  Section 12.08   Parties in Interest     52  
 
  Section 12.09   Currency     52  
 
  Section 12.10   Tax Matters     52  
 
  Section 12.11   Employee Matters     53  
 
  Section 12.12   Governing Law     53  
 
  Section 12.13   Waiver of Jury Trial     53  
 
  Section 12.14   Survival of Covenants     53  
 
  Section 12.15   Counterparts     53  
 
               
SCHEDULES        
 
               
 
  Schedule 1.01(a)   AsiaPac Territory        
 
  Schedule 1.01(b)   Beverages Assets        
 
  Schedule 1.01(c)   Beverages Balance Sheet        
 
  Schedule 1.01(d)   Beverages Liabilities        
 
  Schedule 1.01(e)   Beverages Litigation Matters        
 
  Schedule 1.01(f)   Beverages Policies        
 
  Schedule 1.01(g)   Beverages Shared Policies        
 
  Schedule 1.01(h)   Cadbury plc Assets        
 
  Schedule 1.01(i)   Cadbury plc Balance Sheet        
 
  Schedule 1.01(j)   Cadbury plc Entities        
 
  Schedule 1.01(k)   Cadbury plc Liabilities        
 
  Schedule 1.01(l)   Cadbury plc Litigation Matters        
 
  Schedule 1.01(m)   Continuing Arrangements        
 
  Schedule 1.01(n)   DPS Entities        
 
  Schedule 1.01(o)   DPS Transaction Costs        
 
  Schedule 1.01(p)   Intercompany Balances        
 
  Schedule 1.01(q)   Required Consents        
 
  Schedule 1.01(r)   Shared Policies        
 
  Schedule 1.01(s)   Territory        
 
  Schedule 2.01(a)   Transfer of Assets        
 
  Schedule 2.01(c)   Shared Contracts        
 
  Schedule 2.07(a)   DPS Guarantees and Obligations        
 
  Schedule 2.07(d)   Cadbury plc Guarantees and Obligations        
 
  Schedule 8.10(c)(i)   Cadbury plc Claims        
 
  Schedule 8.10(c)(ii)   Beverages Claims        
 
  Schedule 8.10(c)(iii)   Joint Cadbury plc and Beverages Claims        
 
               
EXHIBITS        
 
               
 
  Exhibit 1.01(a)   Form of Employee Matters Agreement        
 
  Exhibit 1.01(b)   Form of Tax Sharing Agreement        
 
  Exhibit 1.01(c)   Form of Transition Services Agreement        
 
  Exhibit 4.06   Form of Letter of Consent to Reduction        
 
  Exhibit 6.06(a)   Form of Know-How Agreement        
 
  Exhibit 6.07   Form of Domain Names Agreement        

iii


 

SEPARATION AND DISTRIBUTION AGREEMENT
          SEPARATION AND DISTRIBUTION AGREEMENT (this “ Agreement ”), dated as of [___], 2008, among Cadbury Schweppes plc, a United Kingdom public limited company incorporated in England and Wales with registered number 0052457 and whose registered office is at 25 Berkeley Square, London W1J 6HB (“ CS ”), Dr Pepper Snapple Group, Inc., a Delaware corporation (“ DPS ”) and, solely for the purposes of Sections 4.01(a) and (b) and Section 5.03 , Cadbury plc, a United Kingdom public limited company incorporated in England and Wales with registered number 06497379 and whose registered office is at 25 Berkeley Square, London W1J 6HB. Each of CS and DPS is sometimes referred to herein as a “ Party ” and together, as the “ Parties ”.
          WHEREAS, CS, directly and through its various Subsidiaries, is engaged in the Cadbury plc Business and the Beverages Business;
          WHEREAS, the board of directors of CS has determined that it is in the best interests of CS and its shareholders to separate CS into two separate, publicly traded companies, which shall operate the Cadbury plc Business and the Beverages Business, respectively;
          WHEREAS, for U.S. federal income tax purposes, the separation and certain related transactions are intended to qualify as a tax-free transaction under Sections 355 and 368 of the Internal Revenue Code of 1986, as amended;
          WHEREAS, in order to effect such separation, the board of directors of CS has determined, among other things, that it is in the best interests of CS and its shareholders to enter into transactions pursuant to which (i) CS will become a wholly-owned subsidiary of Cadbury plc; (ii) CS and/or one or more members of the Cadbury plc Group will, collectively, retain or acquire beneficial ownership of all of the Cadbury plc Assets and Assume all of the Cadbury plc Liabilities and DPS and/or one or more members of the DPS Group will, collectively, retain or acquire beneficial ownership of all of the Beverages Assets and Assume all of the Beverages Liabilities; and (iii) DPS will distribute to the holders of Cadbury plc Beverages Shares on a pro rata basis (in each case without consideration being paid by such shareholders) all of the outstanding shares of common stock, par value $0.01 per share, of DPS (the “ DPS Common Stock ”) (such transactions as they may be amended or modified from time to time, collectively, the “ Plan of Separation ”); and
          WHEREAS, CS and DPS have determined that it is necessary and desirable to set forth the agreements that will effect the Plan of Separation and to set forth certain other agreements that will govern certain other matters following the Demerger Effective Time;
          NOW, THEREFORE, in consideration of the foregoing and the mutual covenants and agreements herein contained, and intending to be legally bound hereby, CS and DPS hereby agree as follows:
ARTICLE I
DEFINITIONS AND INTERPRETATION
          Section 1.01 Certain Defined Terms . For purposes of this Agreement:
          “ Action ” shall mean any demand, action, claim, suit, countersuit, arbitration,

 


 

inquiry, subpoena, proceeding or investigation by or before any Governmental Entity or any arbitration or mediation tribunal.
          “ Affiliate ” shall mean, with respect to any specified Person, any other Person that directly, or indirectly through one or more intermediaries, controls, is controlled by, or is under common control with, such specified Person. For the purposes of this definition, “control”, when used with respect to any specified Person, shall mean the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of such Person, whether through the ownership of voting securities or other interests, by Contract or otherwise.
          “ Ancillary Agreements ” shall mean the Transfer Documents, the Transition Services Agreement, the Tax Sharing Agreement, the Employee Matters Agreement, the Domain Names Agreement and the Know-How Agreement.
          “ AsiaPac Territory ” shall mean the countries as set forth in Schedule 1.01(a) .
          “ Assets ” shall mean all assets, properties, claims and rights (including goodwill), wherever located (including in the possession of vendors or other third parties or elsewhere), of every kind, character and description, whether real, personal or mixed, tangible, intangible or contingent, in each case, whether or not recorded or reflected or required to be recorded or reflected on the Records or financial statements of any Person, including the following:
     (i) all accounting and other legal and business books, records, ledgers and files, whether printed, electronic or written;
     (ii) all apparatuses, computers and other electronic data processing and communications equipment, fixtures, machinery, equipment, furniture, office equipment, automobiles, trucks, aircraft and other transportation equipment, special and general tools, test devices, prototypes and models and other tangible personal property;
     (iii) all inventories of products, goods, materials, parts, raw materials, packaging, ingredients and supplies, in each case, whether finished or in process;
     (iv) all interests in real property of whatever nature, including easements, whether as owner, mortgagee or holder of a Security Interest in real property, lessor, sublessor, lessee, sublessee or otherwise;
     (v) (A) all interests in any capital stock or other equity interests of any Subsidiary or any other Person, (B) all bonds, notes, debentures or other securities issued by any Subsidiary or any other Person, and (C) all loans, advances or other extensions of credit or capital contributions to any Subsidiary or any other Person;
     (vi) all Contracts, including license Contracts, leases of personal property, open purchase orders for raw materials, packaging, ingredients, supplies, parts or services, unfilled orders for the manufacture and sale of products and other Contracts or commitments;
     (vii) all deposits, letters of credit and performance and surety bonds;

2


 

          (viii) all written (including in electronic form) technical information, data, specifications, research and development information, engineering drawings and specifications, operating and maintenance manuals, and materials and analyses prepared by consultants and other third parties;
          (ix) all Intellectual Property;
          (x) all Software;
          (xi) all cost information, sales and pricing data, customer prospect lists, supplier records, customer and supplier lists, customer and vendor data, correspondence and lists, product data and literature, artwork, design, development and business process files and data, vendor and customer drawings, specifications, quality records and reports and other books, records, studies, surveys, reports, plans and documents;
          (xii) all prepaid expenses, trade accounts and other accounts and notes receivables;
          (xiii) all claims, rights or benefits against any Person or pursuant to any Action, choses in action or similar rights, whether accrued or contingent;
          (xiv) all rights under insurance policies and all rights in the nature of insurance, indemnification or contribution;
          (xv) all licenses, permits, approvals and authorizations which have been issued by any Governmental Entity;
          (xvi) all cash or cash equivalents, bank accounts, lock boxes and other deposit arrangements; and
          (xvii) all interest rate, currency, commodity or other swap, collar, cap or other hedging or similar Contracts or arrangements.
          “ Beverages Assets ” shall mean:
          (i) the ownership interests in those Business Entities that are included in the definition of the DPS Group and all of the Assets owned or held by such Business Entities (other than any Assets that constitute Cadbury plc Assets);
          (ii) all Beverages Contracts and any rights or claims arising thereunder;
          (iii) any rights or claims or contingent rights or claims primarily relating to or arising from the Beverages Business;
          (iv) any and all Assets reflected on the Beverages Balance Sheet or the accounting records supporting such balance sheet and any Assets acquired by or for DPS or any member of the DPS Group subsequent to the date of such balance sheet which, had they been so acquired on or before such date and owned as of such date, would have been reflected on such balance sheet if prepared on a consistent basis, subject to any

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dispositions of any of such Assets subsequent to the date of such balance sheet;
     (v) subject to ARTICLE IX , any rights of any member of the DPS Group under any Policies, including any rights thereunder arising after the Distribution Date in respect of any Policies that are occurrence policies;
     (vi) all Beverages Claims and, to the extent relating to the Beverages Business, Joint Cadbury plc and Beverages Claims; and
     (vii) the Assets set forth in Schedule 1.01(b) and any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets which have been or are to be Transferred to DPS or any other member of the DPS Group.
          Notwithstanding the foregoing, the Beverages Assets shall not include any Assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be retained by or Transferred to any member of the Cadbury plc Group.
          “ Beverages Balance Sheet ” shall mean the combined balance sheet of the DPS Group, including the notes thereto, as of December 31, 2007, prepared to give effect to the Transactions contemplated hereby, as set forth in Schedule 1.01(c) ; provided that to the extent any Assets or Liabilities are Transferred by CS or any member of the Cadbury plc Group to DPS or any member of the DPS Group or vice versa in connection with the Plan of Separation and on or prior to the Distribution Date, such Assets and/or Liabilities shall be deemed to be included or excluded from the Beverages Balance Sheet, as the case may be.
          “ Beverages Business ” shall mean the business of (i) manufacturing, distributing, selling, marketing and promoting carbonated and non-carbonated beverages and other food products throughout the Territory bearing brands owned by or licensed to a member of the DPS Group and (ii) licensing brands owned by or licensed to a member of the DPS Group, including for use with confectionery and other products, to the extent permitted, in the Territory.
          “ Beverages Contracts ” shall mean the following Contracts to which any member of the Cadbury plc Group or any member of the DPS Group is a party or by which any member of the Cadbury plc Group or any member of the DPS Group or any of their respective Assets is bound, whether or not in writing:
     (i) any Contract that relates primarily to the Beverages Business;
     (ii) any Contract or part thereof that is otherwise expressly contemplated pursuant to this Agreement (including pursuant to Section 2.01(c) ) or any of the Ancillary Agreements to be assigned to any member of the DPS Group; and
     (iii) any Beverages IP Agreement.
          “ Beverages Indemnitees ” shall mean each member of the DPS Group and each of their directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing, other than the Cadbury plc Indemnitees.

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          “ Beverages Intellectual Property ” shall mean the Beverages Owned Intellectual Property and the Beverages Licensed Intellectual Property.
          “ Beverages IP Agreements ” shall mean all licenses of Intellectual Property (i) from any member of the DPS Group to any other Person and (ii) to any member of the DPS Group from any other Person.
          “ Beverages Liabilities ” shall mean:
     (i) any Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto, including Schedule 1.01(d) hereto) as Liabilities to be Assumed by any member of the DPS Group, and all obligations and Liabilities expressly Assumed by any member of the DPS Group under this Agreement or any of the Ancillary Agreements;
     (ii) any Liabilities to the extent relating to, arising out of or resulting from:
     (A) the operation or conduct of the Beverages Business prior to, on or after the Demerger Effective Time (including any such Liability to the extent relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority) with respect to the Beverages Business);
     (B) the operation or conduct of any business conducted by any member of the DPS Group at any time after the Demerger Effective Time (including any such Liability to the extent relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority) with respect to the Beverages Business);
     (C) any Beverages Assets, whether arising before, on or after the Demerger Effective Time;
     (D) any terminated or divested Business Entity, business or operation formerly and primarily owned or managed by or associated with DPS or any Beverages Business;
     (E) any indebtedness (including debt securities and asset-backed debt) of any member of the DPS Group or indebtedness (regardless of the issuer of such indebtedness) exclusively relating to the Beverages Business or any indebtedness (regardless of the issuer of such indebtedness) secured exclusively by any of the Beverages Assets (including any Liabilities relating to, arising out of or resulting from a claim by a holder of any such indebtedness, in its capacity as such); and
     (F) any Beverages Litigation Matter, Future Beverages Litigation Matter and, to the extent relating to the Beverages Business, any Future Joint Litigation Matter; and

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     (iii) all Liabilities reflected as liabilities or obligations on the Beverages Balance Sheet or the accounting records supporting such balance sheet, and all Liabilities arising or Assumed after the date of such balance sheet which, had they arisen or been Assumed on or before such date and been retained as of such date, would have been reflected on such balance sheet or such records if prepared on a consistent basis, subject to any discharge of such Liabilities subsequent to the date of the Beverages Balance Sheet.
          Notwithstanding anything to the contrary herein, the Beverages Liabilities shall not include any Cadbury plc Liabilities.
          “ Beverages Licensed Intellectual Property ” shall mean all Intellectual Property that a member of the DPS Group is licensed to use pursuant to the Beverages IP Agreements.
          “ Beverages Litigation Matters ” means the Actions set forth in Schedule 1.01(e) hereto and any other Actions related to the Beverages Assets or Beverages Liabilities commenced on or before the Distribution Date.
          “ Beverages Owned Intellectual Property ” shall mean all Intellectual Property owned by a member of the DPS Group.
          “ Beverages Policies ” shall mean the Policies, current or past, that are owned or maintained by or on behalf of any member of the Cadbury plc Group or any member of the DPS Group, which relate exclusively to the Beverages Business and are either maintained by DPS or a member of the DPS Group or assignable to DPS or a member of the DPS Group, as set forth in Schedule 1.01(f) .
          “ Beverages Shared Policies ” shall mean the Policies, current or past, that are owned or maintained by or on behalf of any member of the Cadbury plc Group or any member of the DPS Group which relate to the Beverages Business, other than Beverages Policies, as set forth in Schedule 1.01(g) .
          “ Business Day ” shall mean any day that is not a Saturday, a Sunday or any other day on which banks are required or authorized by Law to be closed in The City of New York, United States or London, England.
          “ Business Entity ” shall mean any Person (other than a natural person) which may legally hold title to Assets.
          “ Cadbury plc Assets ” shall mean:
     (i) the ownership interests in those Business Entities that are included in the definition of the Cadbury plc Group and all of the Assets owned or held by such Business Entities (other than any Assets that constitute Beverages Assets);
     (ii) all Cadbury plc Contracts and any rights or claims arising thereunder;
     (iii) any rights or claims or contingent rights or claims primarily relating to or arising from the Cadbury plc Business;

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     (iv) any and all Assets reflected on the Cadbury plc Balance Sheet or the accounting records supporting such balance sheet and any Assets acquired by or for CS or any member of the Cadbury plc Group subsequent to the date of such balance sheet which, had they been so acquired on or before such date and owned as of such date, would have been reflected on such balance sheet if prepared on a consistent basis, subject to any dispositions of any of such Assets subsequent to the date of such balance sheet;
     (v) subject to ARTICLE IX , any rights of any member of the Cadbury plc Group under any Policies, including any rights thereunder arising after the Distribution Date in respect of any Policies that are occurrence policies;
     (vi) all Cadbury plc Claims and, to the extent relating to the Cadbury plc Business, Joint Cadbury plc and Beverages Claims; and
     (vii) the Assets set forth in Schedule 1.01(h) and any and all Assets that are expressly contemplated by this Agreement or any Ancillary Agreement as Assets which have been or are to be Transferred to CS or any other member of the Cadbury plc Group.
          Notwithstanding the foregoing, the Cadbury plc Assets shall not include any Assets that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto) as Assets to be retained by or Transferred to any member of the DPS Group.
          “ Cadbury plc Balance Sheet ” shall mean the unaudited pro forma statement of net assets of the Cadbury plc Group, as of December 31, 2007, prepared to give effect to the transactions contemplated hereby, including the notes thereto, as set forth in Schedule 1.01(i) ; provided that to the extent any Assets or Liabilities are Transferred by DPS or any member of the DPS Group to CS or any member of the Cadbury plc Group or vice versa in connection with the Plan of Separation and on or prior to the Distribution Date, such assets and/or liabilities shall be deemed to be included or excluded from the Cadbury plc Balance Sheet, as the case may be.
          “ Cadbury plc Beverages Shares ” shall mean the issued and outstanding shares of [___] pence each of Cadbury plc.
          “ Cadbury plc Business ” shall mean the business of manufacturing, distributing, selling, marketing and promoting (i) confectionery and other food products throughout the world and (ii) carbonated and non-carbonated beverages outside of the Territory.
          “ Cadbury plc Contracts ” shall mean the following Contracts to which CS or any of its Affiliates is a party as of the date hereof or by which it or any of its Affiliates as of the date hereof or any of their respective Assets is bound, whether or not in writing:
     (i) any Contract that relates primarily to the Cadbury plc Business; and
     (ii) any Contract or part thereof that is otherwise expressly contemplated pursuant to this Agreement (including pursuant to Section 2.01(c) ) or any of the Ancillary Agreements to be assigned to any member of the Cadbury plc Group.

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          “ Cadbury plc Group ” shall mean Cadbury plc and each Business Entity that is a Subsidiary of Cadbury plc immediately after the Demerger Effective Time, and each Business Entity that becomes a Subsidiary of Cadbury plc after the Demerger Effective Time, which shall include those entities identified as such in Schedule 1.01(j) .
          “ Cadbury plc Indemnitees ” shall mean each member of the Cadbury plc Group and each of their respective directors, officers, employees and agents and each of the heirs, executors, successors and assigns of any of the foregoing, other than the Beverages Indemnitees.
          “ Cadbury plc Liabilities ” shall mean:
     (i) any and all Liabilities that are expressly contemplated by this Agreement or any Ancillary Agreement (or the Schedules hereto or thereto, including Schedule 1.01(k) hereto) as Liabilities to be Assumed by any member of the Cadbury plc Group, and all obligations and Liabilities expressly Assumed by any member of the Cadbury plc Group under this Agreement or any of the Ancillary Agreements;
     (ii) any and all Liabilities to the extent relating to, arising out of or resulting from:
     (A) the operation or conduct of the Cadbury plc Business prior to, on or after the Demerger Effective Time (including any such Liability to the extent relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority) with respect to the Cadbury plc Business);
     (B) the operation or conduct of any business conducted by any member of the Cadbury plc Group at any time after the Demerger Effective Time (including any such Liability to the extent relating to, arising out of or resulting from any act or failure to act by any director, officer, employee, agent or representative (whether or not such act or failure to act is or was within such Person’s authority) with respect to the Cadbury plc Business);
     (C) any Cadbury plc Assets, whether arising before, on or after the Demerger Effective Time;
     (D) any terminated or divested Business Entity, business or operation formerly and primarily owned or managed by or associated with CS or any Cadbury plc Business;
     (E) any indebtedness (including debt securities and asset-backed debt) of any member of the Cadbury plc Group or indebtedness (regardless of the issuer of such indebtedness) exclusively relating to the Cadbury plc Business or any indebtedness (regardless of the issuer of such indebtedness) secured exclusively by any of the Cadbury plc Assets (including any Liabilities relating to, arising out of or resulting from a claim by a holder of any such indebtedness, in its capacity as such); and

8


 

     (F) any Cadbury plc Litigation Matter, any Future Cadbury plc Litigation Matter and, to the extent relating to the Cadbury plc Business, any Future Joint Litigation Matter; and
     (iii) all Liabilities reflected as liabilities or obligations on the Cadbury plc Balance Sheet or the accounting records supporting such balance sheet, and all Liabilities arising or Assumed after the date of such balance sheet which, had they arisen or been Assumed on or before such date and been retained as of such date, would have been reflected on such balance sheet or such records if prepared on a consistent basis, subject to any discharge of such Liabilities subsequent to the date of the Cadbury plc Balance Sheet.
          Notwithstanding anything to the contrary herein, the Cadbury plc Liabilities shall not include any Beverages Liabilities.
          “ Cadbury plc Litigation Matters ” means the Actions set forth in Schedule 1.01(l) hereto and any other Actions related to the Cadbury plc Assets or Cadbury plc Liabilities commenced on or before the Distribution Date.
          “ Cadbury plc Ordinary Shares ” shall mean the issued and outstanding ordinary shares of [___]p each of Cadbury plc.
          “ Circular ” shall mean the circular sent to holders of CS Ordinary Shares containing details of the Plan of Separation.
          “ Claims Administration ” shall mean the processing of claims made under the Shared Policies, including the reporting of claims to the insurance carriers, management and defense of claims and providing for appropriate releases upon settlement of claims.
          “ Confidential Information ” shall mean confidential or proprietary Information concerning a Party and/or its Subsidiaries which, prior to or following the Demerger Effective Time, has been disclosed by a Party or its Subsidiaries to another Party or its Subsidiaries, in written, oral (including by recording), electronic, or visual form to, or otherwise has come into the possession of, the other Party or its Subsidiaries, including pursuant to the provisions of Section 8.01 , 8.02 or 8.03 or any other provision of this Agreement (except to the extent that such Information can be shown to have been (i) in the public domain through no fault of such Party or its Subsidiaries or (ii) lawfully acquired from other sources by such Party or its Subsidiaries to which it was furnished; provided , however , in the case of clause (ii) that, to the furnished Party’s knowledge, such sources did not provide such Information in breach of any confidentiality obligations).
          “ Consents ” shall mean any consents, waivers or approvals from, or notification requirements to, any Person other than a Governmental Entity, in each case, in connection with the Plan of Separation.
          “ Continuing Arrangements ” shall mean those arrangements set forth in Schedule 1.01(m) and such other commercial arrangements among the Parties that are intended to survive and continue following the Demerger Effective Time.

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          “ Contract ” shall mean any agreement, contract, obligation, indenture, instrument, lease, arrangement, commitment or undertaking (whether written or oral and whether express or implied).
          “ CS ADRs ” shall mean the American Depositary Receipts evidencing the American depository shares representing CS Ordinary Shares.
          “ CS Ordinary Shares ” shall mean the issued and outstanding ordinary shares of 12.5 pence each of CS.
          “ Demerger Effective Time ” shall mean the time at which the Plan of Separation becomes effective, expected to be [___] p.m. British Summer Time on [______], 2008 or such other time as the Court Order is registered.
          “ Disclosure Documents ” shall mean any registration statement or other document (including the Form 10 and the Prospectus) filed with the SEC or the FSA by or on behalf of any Party or any of its controlled Affiliates in connection with the Plan of Separation, and also includes any information statement, prospectus, offering memorandum, offering circular (including the Circular and any franchise offering circular or any similar disclosure statement), or similar disclosure document, whether or not filed with the SEC or the FSA or any other Governmental Entity related to the Plan of Separation, which offers for sale or registers the Transfer or distribution of any security of such Party or any of its controlled Affiliates.
          “ Distribution ” shall mean the distribution by DPS on the Distribution Date to holders of record of shares of Cadbury plc Beverages Shares as of the Distribution Record Date of the issued and outstanding DPS Common Stock on the basis of [___] shares of DPS Common Stock for every one outstanding Cadbury plc Beverages Share.
          “ Distribution Date ” shall mean the date which DPS distributes all of the issued and outstanding shares of DPS Common Stock to the holders of Cadbury plc Beverages Shares.
          “ Distribution Record Date ” shall mean 6:00 p.m. Greenwich Mean Time or British Summer Time, as applicable to the time of year, on the Business Day immediately preceding the date on which the Court Order is registered by the UK Registrar of Companies at Companies House.
          “ DPS Group ” shall mean DPS and each Business Entity that is a Subsidiary of DPS immediately after the Demerger Effective Time, and each Business Entity that becomes a Subsidiary of DPS after the Demerger Effective Time, which shall include those entities identified as such in Schedule 1.01(n) .
          “ DPS Transaction Costs ” shall mean the categories of out-of-pocket transaction costs and expenses incurred by CS, DPS or any member of their respective Groups in connection with the Plan of Separation set forth in Schedule 1.01(o) .
          “ Employee Matters Agreement ” shall mean the Employee Matters Agreement among CS and DPS and, solely for certain limited sections therein, Cadbury plc, substantially in the form of attached hereto as Exhibit 1.01(a) .

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          “ Exchange Act ” shall mean the Securities Exchange Act of 1934, as amended, and the rules and regulations promulgated thereunder, all as the same shall be in effect at the time that reference is made thereto.
          “ Form 10 ” shall mean the registration statement on Form 10 filed by DPS with the SEC in connection with the Distribution, and all amendments and supplements thereto.
          “ FSA ” shall mean the UK Financial Services Authority.
          “ Governmental Approvals ” shall mean any notice or report to be submitted to, or other filing to be made with, or any consent, registration, approval, permit or authorization to be obtained from, any Governmental Entity, in each case in connection with the Plan of Separation.
          “ Governmental Entity ” shall mean any nation or government, any state, municipality or other political subdivision thereof and any entity, body, agency, department, board, bureau or court, whether domestic, foreign or multinational, exercising executive, legislative, judicial, regulatory or administrative functions of or pertaining to government and any executive official thereof.
          “ Group ” shall mean the Cadbury plc Group or the DPS Group, as the context may require.
          “ Indemnifiable Loss ” shall mean any and all damages, losses, Liabilities, penalties, judgments, settlements, claims, payments, fines, interest, costs and expenses (including the costs and expenses of any and all Actions and demands, assessments, judgments, settlements and compromises relating thereto and the reasonable costs and expenses of attorneys’, accountants’, consultants’ and other professionals’ fees and expenses incurred in the investigation or defense thereof or the enforcement of rights hereunder), excluding special, consequential, indirect, punitive damages (other than special, consequential, indirect and/or punitive damages awarded to any third party against an indemnified party) and excluding Taxes. In addition, an “ Indemnifiable Loss ” shall not include any non-cash costs or charges, except to the extent such non-cash costs or charges result in a cash payment by the applicable Indemnitee.
          “ Information ” shall mean all information, whether or not patentable or copyrightable, in written, oral, electronic, visual or other tangible or intangible form, stored in any medium, including studies, reports, Records, instruments, surveys, discoveries, ideas, concepts, know-how, techniques, designs, specifications, drawings, blueprints, diagrams, models, prototypes, samples, flow charts, data, computer data, disks, diskettes, tapes, computer programs or other Software, marketing plans, customer names, communications by or to attorneys (including attorney-client privileged communications), memos and other materials prepared by attorneys or under their direction (including attorney work product), communications and materials otherwise related to or made or prepared in connection with or in preparation for any legal proceeding, and other technical, financial, employee or business information or data.
          “ Information Statement ” shall mean the Information Statement attached as an exhibit to the Form 10 sent to the holders of CS Ordinary Shares in connection with the Distribution, including any amendment or supplement thereto.

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          “ Insurance Administration ” shall mean, with respect to each Shared Policy, the accounting for premiums, retrospectively-rated premiums, defense costs, indemnity payments, deductibles and retentions, as appropriate, under the terms and conditions of each of the Shared Policies; and the reporting to excess insurance carriers of any losses or claims which may cause the per-occurrence, per claim or aggregate limits of any Shared Policy to be exceeded, and the distribution of Insurance Proceeds as contemplated by this Agreement.
          “ Insurance Proceeds ” shall mean those monies (i) received by an insured from an insurance carrier or (ii) paid by an insurance carrier on behalf of an insured, in either case net of any applicable premium adjustment, retrospectively-rated premium, deductible, retention, or cost of reserve paid or held by or for the benefit of such insured.
          “ Intellectual Property ” shall mean (i) patents and patent applications; (ii) Trademarks; (iii) copyrights and design rights, including registrations and applications for registration thereof; (iv) database rights; and (v) confidential and proprietary information, including trade secrets and know-how.
          “ Intercompany Balances ” shall mean the intercompany accounts receivable, accounts payable, loans and corporate cross-charges (other than current intercompany accounts receivables and accounts payable arising out of the ordinary course of business or any balances outstanding under any Continuing Arrangement), including the interest accrued thereon as of the date hereof, between any member of the DPS Group, on the one hand, and any member of the Cadbury plc Group, on the other hand, set forth in Schedule 1.01(p) .
          “ Law ” shall mean any applicable U.S., English or other federal, national, supranational, state, provincial, local or similar statute, law, ordinance, regulation, rule, code, order, requirement or rule of law (including common law).
          “ Liabilities ” shall mean any and all debts, liabilities, costs, expenses and obligations, whether accrued or fixed, absolute or contingent, matured or unmatured, reserved or unreserved, or determined or determinable, including those arising under any Law, Action, whether asserted or unasserted, or order, writ, judgment, injunction, decree, stipulation, determination or award entered by or with any Governmental Entity and those arising under any Contract or any fines, damages or equitable relief which may be imposed and including all costs and expenses related thereto.
          “ Listing Rules ” shall mean the Listing Rules of the UKLA.
          “ London Stock Exchange ” shall mean the London Stock Exchange plc.
          “ NYSE ” shall mean the New York Stock Exchange.
          “ Person ” shall mean any natural person, firm, individual, corporation, business trust, joint venture, association, company, limited liability company, partnership or other organization or entity, whether incorporated or unincorporated, or any Governmental Entity.
          “ Policies ” shall mean insurance policies and insurance Contracts of any kind (other than life and benefits policies or Contracts), including primary, excess and umbrella

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policies, comprehensive general liability policies, director and officer liability, fiduciary liability, automobile, aircraft, property and casualty, workers’ compensation and employee dishonesty insurance policies, bonds and self-insurance and captive insurance company arrangements, together with the rights, benefits and privileges thereunder.
          “ Prospectus ” shall mean the prospectus issued by Cadbury plc in relation to the admission by the UKLA of the Cadbury plc Ordinary Shares and the admission of the Cadbury plc Ordinary Shares to trading on the main market for listed securities of the London Stock Exchange, prepared, published and approved by, and filed with, the FSA in accordance with the Prospectus Rules.
          “ Prospectus Rules ” shall mean the Prospectus Rules of the FSA made under section 73A of the Financial Services and Markets Act 2000, as amended.
          “ Records ” shall mean any Contracts, documents, books, records or files.
          “ Required Consents ” shall mean the Consents set forth in Schedule 1.01(q) .
          “ Scheme ” shall mean the scheme of arrangement under Section 425 of the Companies Act 1985 between CS and the CS shareholders, with or subject to any modification, addition or condition approved or imposed by the Court pursuant to which the CS Ordinary Shares will be cancelled, CS will become a wholly-owned subsidiary of Cadbury plc and each holder of CS Ordinary Shares will be entitled to receive (i) [___] Cadbury plc Ordinary Shares for every [___] CS Ordinary Shares that such holder holds as of the Scheme Record Date and (ii) [___] Cadbury plc Beverages Shares for every [___] CS Ordinary Shares that such holder holds as of the Scheme Record Date.
          “ Scheme Record Date ” shall mean 6:00 p.m. Greenwich Mean Time or British Summer Time, as applicable to the time of year, on the date of the Court hearing to confirm the reduction of capital of CS provided under the Scheme.
          “ SEC ” shall mean the United States Securities and Exchange Commission or any successor agency.
          “ Securities Act ” shall mean the Securities Act of 1933, as amended, and the rules and regulations of the SEC thereunder, all as the same shall be in effect at the time that reference is made thereto.
          “ Security Interest ” shall mean any mortgage, security interest, pledge, lien, charge, claim, option, right to acquire, voting or other restriction, right-of-way, easement, encroachment, restriction on transfer, or other encumbrance of any nature whatsoever, excluding (i) restrictions on transfer under securities Laws and (ii) licenses of Intellectual Property.
          “ Shared Policies ” shall mean the Policies, current or past, which are owned or maintained by or on behalf of any member of the Cadbury plc Group or any member of the DPS Group which relate to one or more of the Cadbury plc Business and the Beverages Business, which are set forth in Schedule 1.01(r) .

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          “ Shared Policy Insured Claims ” shall mean those Liabilities that, individually or in the aggregate, are covered within the terms and conditions of any of the Shared Policies, whether or not subject to deductibles, co-insurance, uncollectibility or retrospectively-rated premium adjustments.
          “ Software ” shall mean all computer programs, applications and code (including source code and object code), and all media and documentation (including user manuals and training materials) relating to or embodying any of the foregoing or on which any of the foregoing are recorded.
          “ Subsidiary ” shall mean, with respect to any Person, (i) a corporation, 50% or more of the voting or capital stock of which is, as of the time in question, directly or indirectly owned by such Person and (ii) any other partnership, joint venture, association, joint stock company, trust, unincorporated organization or other entity in which such Person, directly or indirectly, owns 50% or more of the equity economic interest thereof or has the power to elect or direct the election of 50% or more of the members of the governing body of such entity or otherwise has control over such entity ( e.g., as the managing partner of a partnership).
          “ Tax ” shall have the meaning set forth in the Tax Sharing Agreement.
          “ Tax Return ” shall have the meaning set forth in the Tax Sharing Agreement.
          “ Tax Sharing Agreement ” shall mean the Tax Sharing and Indemnification Agreement among CS and DPS and, solely for certain limited sections therein, Cadbury plc, substantially in the form attached hereto as Exhibit 1.01(b) .
          “ Territory ” shall mean the countries listed across from the brands owned by or licensed to a member of the DPS Group as of the Distribution Date or otherwise Transferred to a member of the DPS Group after the Distribution Date pursuant to Section 2.04 , as set forth in Schedule 1.01(s) . For the avoidance of doubt, the Territory is specific as to each brand identified in Schedule 1.01(s) .
          “ Trademarks ” means trademarks, service marks, trade names, trade dress and Internet domain names, and registrations and applications for registration thereof, together with the goodwill associated therewith.
          “ Transaction Costs ” shall mean all out-of-pocket costs and expenses incurred by CS, DPS or any member of their respective Groups in connection with the Plan of Separation other than the DPS Transaction Costs.
          “ Transfer Agent ” shall mean Computershare Trust Company, N.A.
          “ Transfer Documents ” shall mean, collectively, the various Contracts and other documents heretofore entered into and to be entered into to effect the Transfer of Assets and the Assumption of Liabilities in the manner contemplated by this Agreement and the Plan of Separation, or otherwise relating to, arising out of or resulting from the transactions contemplated by this Agreement, which shall be, as applicable, in such form or forms as the applicable Parties thereto agree.

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          “ Transition Services Agreement ” shall mean the Transition Services Agreement between CS and DPS, substantially in the form attached hereto as Exhibit 1.01(c) .
          “ UK ” shall mean the United Kingdom of Great Britain and Northern Ireland.
          “ UKLA ” shall mean the FSA acting in its capacity as the competent authority for the purposes of Part VI of the Financial Services and Markets Act 2000, as amended.
     The following terms have the meanings set forth in the Sections set forth below:
         
Definition   Location  
“Agreement”
  Preamble
“Agreement Disputes”
    10.01  
“American Samoa Business”
    6.02 (d)
“AsiaPac Licensed Intellectual Property
    6.04 (c)
“Assume” or “Assumed”
    2.02  
“Audited Party”
    5.02 (d)
“Beverages Claims”
    8.10 (c)
“Beverages Names and Marks”
    6.02 (a)
“Cadbury Names and Marks”
    6.01 (a)
“Cadbury plc Claims”
    8.10 (c)
“Corporate Name”
    6.01 (b)
“Court”
    4.01 (a)
“Court Order”
    4.01 (b)
“CS”
  Recitals
“Domain Names Agreement”
    6.06  
“DPS”
  Preamble
“DPS Common Stock”
  Recitals
“DPS Licensed Intellectual Property
    6.04 (b)
“Escalation Notice”
    10.02 (a)
“Existing Stock”
    6.01 (c)
“Future Beverages Litigation Matter”
  8.10(b)(ii)
“Future Cadbury plc Litigation Matter”
    8.10 (b)(i)
“Future Joint Litigation Matters”
  8.10(b)(iii)
“Improvements”
    6.04 (b)
“Indemnifying Party”
    7.04 (b)
“Indemnitee”
    7.04 (b)
“Indemnity Payment”
    7.06 (a)
“Interim Financial Statements”
    5.02 (c)
“Internal Control Audit and Management Assessments”
    5.02 (b)
“Know-How Agreement”
    6.05 (a)
“Joint Cadbury plc and Beverages Claims”
    8.10 (c)
“Memorabilia”
    6.03  
“Other Party’s Auditors”
    5.02 (b)
“Party”
  Preamble
“Plan of Separation”
  Recitals

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Definition   Location  
“Reduction”
    4.01 (a)
“Shared Contract”
    2.01 (c)(i)
“Third Party Claim”
    7.04 (b)
“Third Party Proceeds”
    7.06 (a)
“Transfer”
    2.01 (a)(i)
          Section 1.02 Interpretation and Rules of Construction . In this Agreement, except to the extent otherwise provided or that the context otherwise requires:
     (a) when a reference is made in this Agreement to an Article, Section, Exhibit or Schedule, such reference is to an Article or Section of, or an Exhibit or Schedule to, this Agreement unless otherwise indicated;
     (b) the table of contents and headings for this Agreement are for reference purposes only and do not affect in any way the meaning or interpretation of this Agreement;
     (c) whenever the words “include,” “includes” or “including” are used in this Agreement, they are deemed to be followed by the words “without limitation”;
     (d) the words “hereof,” “herein” and “hereunder” and words of similar import, when used in this Agreement, refer to this Agreement as a whole and not to any particular provision of this Agreement;
     (e) all terms defined in this Agreement have the defined meanings when used in any Ancillary Agreement, or any certificate or other document made or delivered pursuant hereto, unless otherwise defined therein;
     (f) the definitions contained in this Agreement are applicable to the singular as well as the plural forms of such terms; and
     (g) references to a Person are also to its successors and permitted assigns.
ARTICLE II
THE SEPARATION
          Section 2.01 Transfer of Assets .
          (a) On or prior to the Demerger Effective Time and to the extent not already completed:
     (i) CS shall, on behalf of itself and the members of the Cadbury plc Group, as applicable, transfer, contribute, assign and convey or cause to be transferred, contributed, assigned and conveyed (“ Transfer ”) to DPS or another member of the DPS Group all of its and its Subsidiaries’ right, title and interest, if any and to the extent of such right, title and interest, in and to the Beverages Assets owned or held by a member of the Cadbury

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plc Group as of the Distribution Date, including taking the actions necessary to consummate the transactions set forth in Schedule 2.01(a) ; and
     (ii) DPS shall, on behalf of itself and the members of the DPS Group, as applicable, Transfer to CS or another member of the Cadbury plc Group all of its and its Subsidiaries’ right, title and interest, if any and to the extent of such right, title and interest, in and to the Cadbury plc Assets owned or held by a member of the DPS Group as of the Distribution Date, including taking the actions necessary to consummate the transactions set forth in Schedule 2.01(a) .
          (b) Unless otherwise agreed to by the Parties, each of CS and DPS shall be entitled to designate the Business Entity within such Party’s respective Group to which any Assets are to be Transferred pursuant to this Section 2.01 or Section 2.04 .
          (c) Without limiting the generality of the obligations set forth in Section 2.01(a) and 2.01(b) :
     (i) Unless the Parties otherwise agree or the benefits of any Contract described in this Section are expressly conveyed to the applicable Party pursuant to an Ancillary Agreement, to the extent any Contract is (1) a Cadbury plc Asset but inures in part to the benefit or burden of any member of the DPS Group or (2) a Beverages Asset but inures in part to the benefit or burden of any member of the Cadbury plc Group, including those contracts listed in Schedule 2.01(c) (each, a “ Shared Contract ”), such Shared Contract shall be assigned in part to the applicable member(s) of the applicable Group, if so assignable, or appropriately amended prior to, on or after the Demerger Effective Time, so that each Party or the members of their respective Groups shall be entitled to the rights and benefits, and shall Assume the related portion of any Liabilities, inuring to their respective businesses; provided , however , that (x) in no event shall any member of any Group be required to assign (or amend) any Shared Contract in its entirety or to assign a portion of any Shared Contract (including any Policy) which is not assignable (or cannot be amended) by its terms (including any terms imposing consents or conditions on an assignment where such consents or conditions have not been obtained or fulfilled) and (y) if any Shared Contract cannot be so partially assigned by its terms or otherwise, or cannot be amended or if such assignment or amendment would impair the benefit the Parties thereto derive from such Shared Contract, the Parties shall, and shall cause each of their respective Subsidiaries to, take such other reasonable and permissible actions to cause a member of the DPS Group or the Cadbury plc Group, as the case may be, to receive the benefit of that portion of each Shared Contract that relates to the Beverages Business or the Cadbury plc Business (to the extent so related) as if such Shared Contract had been assigned to (or amended to allow) a member of the applicable Group pursuant to this Section 2.01 and to bear the burden of the corresponding Liabilities (including any Liabilities that may arise by reason of such arrangement) as if such Liabilities had been Assumed by a member of the applicable Group pursuant to this Section 2.01 .
     (ii) Each of CS and DPS shall, and shall cause the respective members of its Group to, (A) treat for all Tax purposes the portion of each Shared

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Contract inuring to its respective businesses as Assets owned by, and/or Liabilities of, as applicable, such Party not later than the Demerger Effective Time and (B) neither report nor take any Tax position (on a Tax Return or otherwise) inconsistent with such treatment (in the case of clauses (A) and (B), unless required by Tax Law or any other Law or the good faith resolution of a contest or other proceeding relating to Taxes).
     (iii) Nothing in this Section 2.01(c) shall require any member of any Group to make any payment (except to the extent advanced, Assumed or agreed in advance to be reimbursed by any member of the other Group), incur any obligation or grant any concession for the benefit of any member of any other Group in order to effect any transaction contemplated by this Section 2.01(c) , in each case, other than an incidental payment, obligation or concession.
          (d) The Parties shall use their commercially reasonable efforts to obtain the Required Consents on or prior to the Distribution Date.
          Section 2.02 Assumption and Satisfaction of Liabilities . Except as otherwise specifically set forth in any Ancillary Agreement, from and after the Demerger Effective Time, (a) CS shall, or shall cause a member of the Cadbury plc Group to, accept, assume (or, as applicable, retain), perform, discharge and fulfill, in accordance with their respective terms (“ Assume ”), all of the Cadbury plc Liabilities and (b) DPS shall, or shall cause a member of the DPS Group to, Assume all the Beverages Liabilities, in each case, regardless of (i) when or where such Liabilities arose or arise, (ii) whether the facts upon which they are based occurred prior to, on or subsequent to the Demerger Effective Time, (iii) where or against whom such Liabilities are asserted or determined and (iv) whether arising from or alleged to arise from negligence, recklessness, violation of Law, fraud or misrepresentation by any member of the Cadbury plc Group or the DPS Group, as the case may be, or any of their past or present respective directors, officers, employees, agents, Subsidiaries or Affiliates.
          Section 2.03 Intercompany Balances .
          (a) All of the Intercompany Balances set forth on Schedule 1.01(p) shall, prior to or at the Demerger Effective Time, be repaid, settled or otherwise eliminated, by means of cash payments, a dividend, capital contribution, a combination of the foregoing or otherwise, as determined by CS.
          (b) Except as may be contemplated by this Agreement or any Ancillary Agreement and the transactions contemplated hereby and thereby, from [______], 2008 until the Distribution Date, DPS shall, and shall cause each member of the DPS Group to, manage its working capital in the ordinary course of business consistent with past practice.
          (c) As between the Parties (and the members of their respective Groups), all payments and reimbursements received after the Demerger Effective Time by any Party (or member of its Group) that relate to a Business, Asset or Liability of the other Party (or member of its Group) shall be held by such Party in trust for the use and benefit of the Party entitled thereto (at the expense of the Party entitled thereto) and, promptly upon receipt by such Party of any such payment or reimbursement, such Party shall pay or shall cause the applicable member

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of its Group to pay over to the applicable Party the amount of such payment or reimbursement without right of set-off, net of any costs, including Tax costs, to the Party making the payment.
          Section 2.04 Transfers Not Effected on or Prior to the Demerger Effective Time; Transfers Deemed Effective as of the Demerger Effective Time .
          (a) To the extent that any Transfers contemplated by this Agreement (other than any Transfer contemplated by Section 2.01(c) ) shall not have been consummated on or prior to the Demerger Effective Time, the Parties shall cooperate to effect such Transfers as promptly as practicable following the Demerger Effective Time. Nothing herein shall be deemed to require the Transfer of any Assets or the Assumption of any Liabilities which by their terms or operation of Law cannot be Transferred; provided , however , that the Parties and their respective Subsidiaries shall cooperate and use commercially reasonable efforts following the Distribution Date to seek to obtain any necessary Consents or Governmental Approvals for the Transfer of all Assets and the Assumption of all Liabilities contemplated to be Transferred and Assumed pursuant to this Agreement.
          (b) In the event that any such Transfer of Assets or Assumption of Liabilities has not been consummated, from and after the Demerger Effective Time (i) the Party whose Group retains such Asset shall thereafter hold, or cause the applicable member of its Group to hold, such Asset (at no net Tax cost to such Party or such member) for the use and benefit of the member of the other Group entitled thereto (at the expense of the member entitled thereto) to the extent related to such other Party’s business and (ii) the Party intended to Assume such Liability shall, or shall cause the applicable member of its Group to, pay or reimburse the member of the other Group retaining such Liability (at no net Tax cost to such retaining member) for all amounts paid or incurred in connection with the retention of such Liability to the extent related to such other Party’s business. In addition, the Party whose Group retains such Asset or Liability shall, insofar as reasonably possible and to the extent permitted by applicable Law, treat such Asset or Liability in the ordinary course of business in accordance with past practice and take such other actions as may be reasonably requested by the Party to whose Group such Asset is to be Transferred or by the Party whose Group will Assume such Liability in order to place such Party, insofar as reasonably possible, in the same position as if such Asset or Liability had been Transferred or Assumed as contemplated hereby and so that all the benefits and burdens relating to such Asset or Liability, including possession, use, risk of loss, potential for gain, and dominion, control and command over such Asset or Liability, are to inure from and after the Demerger Effective Time to the member or members of the Cadbury plc Group or the DPS Group entitled to the receipt of such Asset or required to Assume such Liability. In furtherance of the foregoing, the Parties agree that, as of the Demerger Effective Time, each Party shall be deemed to have acquired complete and sole beneficial ownership over all of the Assets, together with all rights, powers and privileges incident thereto, and shall be deemed to have Assumed in accordance with the terms of this Agreement all of the Liabilities, and all duties, obligations and responsibilities incident thereto, which such Party is entitled to acquire or required to Assume pursuant to the terms of this Agreement.
          (c) If and when the Consents, Governmental Approvals and/or conditions, the absence or non-satisfaction of which caused the deferral of Transfer of any Asset or deferral of the Assumption of any Liability pursuant to Section 2.04(a) , are obtained or satisfied, the

19


 

Transfer, assignment, Assumption or novation of the applicable Asset or Liability shall be effected in accordance with and subject to the terms of this Agreement and/or the applicable Ancillary Agreement.
          (d) The Person retaining any Asset or Liability due to the deferral of the Transfer of such Asset or the deferral of the Assumption of such Liability pursuant to Section 2.04(a) or otherwise shall not be obligated, in connection with the foregoing, to expend any money unless the necessary funds are advanced, assumed, or agreed in advance to be reimbursed by the Person entitled to such Asset or the Person intended to be subject to such Liability and at no net Tax cost to such retaining Person, other than reasonable attorneys’ fees and recording or similar fees, all of which shall be promptly reimbursed by the Person entitled to such Asset or the Person intended to be subject to such Liability.
          (e) Each of CS and DPS shall, and shall cause the members of its respective Group to, (i) treat for all Tax purposes (A) the deferred Assets as Assets having been Transferred to and owned by the Party entitled to such Assets not later than the Demerger Effective Time and (B) the deferred Liabilities as Liabilities having been Assumed and owed by the Person intended to be subject to such Liabilities not later than the Demerger Effective Time and (ii) neither report nor take any Tax position (on a Tax Return or otherwise) inconsistent with such treatment (in the case of clauses (i) and (ii), unless required by a Tax Law or any other Law or good faith resolution of a contest or proceeding relating to Taxes).
          (f) Nothing in this Section 2.04 shall be deemed to modify the terms of any Beverages IP Agreement entered into between any member of the DPS Group, on the one hand, and any member of the Cadbury plc Group on the other.
          Section 2.05 Transfer Documents . In connection with, and in furtherance of, the Transfer of Assets and the acceptance and Assumption of Liabilities contemplated by this Agreement, to the extent necessary, the Parties shall execute or cause to be executed, on or prior to the Demerger Effective Time, the Transfer Documents reasonably necessary to evidence the valid and effective Assumption by the applicable Party or the members of its Group of the Cadbury plc Liabilities or Beverages Liabilities, as applicable, and the valid Transfer to the applicable Party or member of such Party’s Group of all right, title and interest in and to the Cadbury plc Assets or the Beverages Asset, as applicable, to be Transferred hereunder.
          Section 2.06 Further Assurances .
          (a) In addition to and without limiting the actions specifically provided for elsewhere in this Agreement, including Section 2.04 , each of the Parties shall cooperate with each other and use (and will cause their respective Subsidiaries and Affiliates to use) commercially reasonable efforts, on and after the Demerger Effective Time, to take, or to cause to be taken, all actions, and to do, or to cause to be done, all things reasonably necessary on its part under applicable Law or contractual obligations to consummate and make effective the transactions contemplated by this Agreement and the Ancillary Agreements.
          (b) Without limiting the foregoing, on and after the Demerger Effective Time, each Party shall cooperate with the other Parties, and without any further consideration, but at

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the expense of the requesting Party from and after the Demerger Effective Time, to execute and deliver, or use commercially reasonable efforts to cause to be executed and delivered, all instruments, including instruments of Transfer, and to make all filings with, and to obtain all Consents and/or Governmental Approvals, any permit, license, Contract, indenture or other instrument (including any Consents or Governmental Approvals), and to take all such other actions as such Party may reasonably be requested to take by the other Party from time to time, consistent with the terms of this Agreement and the Ancillary Agreements, in order to effectuate the provisions and purposes of this Agreement and the Ancillary Agreements and the Transfers of the applicable Assets and the assignment and Assumption of the applicable Liabilities and the other transactions contemplated hereby and thereby.
          Section 2.07 Replacement of Guarantors and Obligors .
          (a) DPS shall (with the reasonable cooperation of CS) use its commercially reasonable efforts to have any member of the Cadbury plc Group removed as guarantor of or obligor for any Beverages Liability, including in respect of those guarantees and obligations set forth in Schedule 2.07(a) , to the extent that they relate to Beverages Liabilities.
          (b) On or prior to the Demerger Effective Time, to the extent required to obtain a release from a guaranty or obligation for any Beverages Liability of any member of the Cadbury plc Group, a member of the DPS Group, as applicable, shall either (i) execute a guaranty agreement in the form of the existing guaranty or such other form as is agreed to by the relevant Parties to such guaranty agreement or (ii) execute an amendment to the agreement giving rise to such obligation in such form as is necessary to obtain such release, except to the extent that such existing guaranty or amendment contains representations, covenants or other terms or provisions either (1) with which DPS would be reasonably unable to comply or (2) which would be reasonably expected to be breached.
          (c) If DPS is unable to obtain, or to cause to be obtained, any such required removal as set forth in clause (a) and (b) of this Section 2.07 , (i) the relevant DPS Group beneficiary and DPS shall, and shall cause the members of the DPS Group to, indemnify and hold harmless the Cadbury plc Group guarantor or obligor for any Indemnifiable Loss arising from or relating thereto (in accordance with the provisions of ARTICLE VII ) and shall or shall cause one of its Affiliates, as agent or subcontractor for such guarantor or obligor to pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder.
          (d) CS shall (with the reasonable cooperation of DPS) use its commercially reasonable efforts to have any member of the DPS Group removed as guarantor of or obligor for any Cadbury plc Liability, including in respect of the guarantees or obligations set forth in Schedule 2.07(d) , to the extent that they relate to Cadbury plc Liabilities.
          (e) On or prior to the Demerger Effective Time, to the extent required to obtain a release from a guaranty or obligation for any Cadbury plc Liability of any member of the DPS Group, a member of the Cadbury plc Group, as applicable, shall either (i) execute a guaranty agreement in the form of the existing guaranty or such other form as is agreed to by the relevant Parties to such guaranty agreement or (ii) execute an amendment to the agreement

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giving rise to such obligation in such form as is necessary to obtain such release, except to the extent that such guaranty or amendment contains representations, covenants or other terms or provisions either (1) with which CS would be reasonably unable to comply or (2) which would be reasonably expected to be breached.
          (f) If CS is unable to obtain, or to cause to be obtained, any such required removal as set forth in clause (d) and (e) of this Section 2.07 , (i) the relevant Cadbury plc Group beneficiary and CS shall, and shall cause the other members of the Cadbury plc Group to, indemnify and hold harmless the DPS Group guarantor or obligor for any Indemnifiable Loss arising from or relating thereto (in accordance with the provisions of ARTICLE VII ) and shall or shall cause one of its Affiliates, as agent or subcontractor for such guarantor or obligor to pay, perform and discharge fully all the obligations or other Liabilities of such guarantor or obligor thereunder.
          Section 2.08 Disclaimer of Representations and Warranties . EACH OF CS (ON BEHALF OF ITSELF AND EACH MEMBER OF THE CADBURY PLC GROUP) AND DPS (ON BEHALF OF ITSELF AND EACH MEMBER OF THE DPS GROUP) UNDERSTANDS AND AGREES THAT, EXCEPT AS EXPRESSLY SET FORTH HEREIN, IN ANY ANCILLARY AGREEMENT OR IN ANY CONTINUING ARRANGEMENT, NO PARTY TO THIS AGREEMENT, ANY ANCILLARY AGREEMENT, ANY CONTINUING ARRANGEMENT OR ANY OTHER AGREEMENT OR DOCUMENT CONTEMPLATED BY THIS AGREEMENT, ANY ANCILLARY AGREEMENTS, ANY CONTINUING ARRANGEMENTS OR OTHERWISE, IS REPRESENTING OR WARRANTING IN ANY WAY AS TO THE ASSETS, BUSINESSES, INFORMATION OR LIABILITIES CONTRIBUTED, TRANSFERRED OR ASSUMED AS CONTEMPLATED HEREBY OR THEREBY, AS TO ANY CONSENTS OR GOVERNMENTAL APPROVALS REQUIRED IN CONNECTION HEREWITH OR THEREWITH, AS TO THE VALUE OR FREEDOM FROM ANY SECURITY INTERESTS OF, OR ANY OTHER MATTER CONCERNING, ANY ASSETS OF SUCH PARTY, OR AS TO THE ABSENCE OF ANY DEFENSES OR RIGHT OF SET-OFF OR FREEDOM FROM COUNTERCLAIM WITH RESPECT TO ANY ACTION OR OTHER ASSET, INCLUDING ACCOUNTS RECEIVABLE, OF ANY PARTY, OR AS TO THE LEGAL SUFFICIENCY OF ANY CONTRIBUTION, ASSIGNMENT, DOCUMENT, CERTIFICATE OR INSTRUMENT DELIVERED HEREUNDER TO CONVEY TITLE TO ANY ASSET OR THING OF VALUE UPON THE EXECUTION, DELIVERY AND FILING HEREOF OR THEREOF. EXCEPT AS MAY EXPRESSLY BE SET FORTH HEREIN OR IN ANY ANCILLARY AGREEMENT OR CONTINUING ARRANGEMENT, ALL SUCH ASSETS ARE BEING TRANSFERRED ON AN “AS IS,” “WHERE IS” BASIS (AND, IN THE CASE OF ANY REAL PROPERTY, BY MEANS OF A QUITCLAIM OR SIMILAR FORM DEED OR CONVEYANCE) AND THE RESPECTIVE TRANSFEREES SHALL BEAR THE ECONOMIC AND LEGAL RISKS THAT (I) ANY CONVEYANCE SHALL PROVE TO BE INSUFFICIENT TO VEST IN THE TRANSFEREE GOOD TITLE, FREE AND CLEAR OF ANY SECURITY INTEREST AND (II) ANY NECESSARY CONSENTS OR GOVERNMENTAL APPROVALS ARE NOT OBTAINED OR THAT ANY REQUIREMENTS OF LAWS OR JUDGMENTS ARE NOT COMPLIED WITH.

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ARTICLE III
CERTAIN ACTIONS AT OR PRIOR TO THE DISTRIBUTION
          Section 3.01 Certificate of Incorporation; Bylaws . On or prior to the Distribution Date, all necessary actions shall be taken to adopt the form of Certificate of Incorporation and Bylaws filed by DPS with the SEC as exhibits to the Form 10.
          Section 3.02 Directors . On or prior to the Distribution Date, CS shall take all necessary actions to cause the board of directors of DPS to consist of the individuals identified in the Information Statement as directors of DPS.
          Section 3.03 Resignations . On or prior to the Distribution Date, (i) CS shall cause all its employees and any employees of any member of the Cadbury plc Group (excluding any employees of any member of the DPS Group) to resign, effective as of the Distribution Date, from all positions as officers or directors of any member of the DPS Group in which they serve and (ii) DPS shall cause all its employees and any employees of any member of the DPS Group to resign, effective as of the Distribution Date, from all positions as officers or directors of any members of the Cadbury plc Group.
          Section 3.04 Ancillary Agreements . On or prior to the Distribution Date, each of CS and DPS shall enter into, and/or (where applicable) shall cause a member or members of their respective Group to enter into, the Ancillary Agreements and any other Contracts in respect of the Distribution reasonably necessary or appropriate in connection with the transactions contemplated hereby and thereby.
ARTICLE IV
THE DISTRIBUTION
          Section 4.01 The Distribution . Subject to Sections 4.04 and 4.05 :
          (a) Promptly following the sanction by the High Court of Justice of England and Wales (the “ Court ”) of the Scheme, Cadbury plc shall apply to the Court to approve a reduction in capital pursuant to Section 135 of the Companies Act 1985 (the “ Reduction ”) under which the share capital of Cadbury plc shall be reduced by decreasing the nominal value of each Cadbury plc Ordinary Share from [___] to [___] pence and the Cadbury plc Beverages Shares will be cancelled in their entirety.
          (b) Promptly after receipt of the order (the “ Court Order ”) from the Court approving the Reduction, Cadbury plc shall file the Court Order at Companies House.
          (c) On the Distribution Date, DPS shall issue to each holder of a Cadbury plc Beverages Share [___] share[s] of DPS Common Stock for each [___] Cadbury plc Beverages Share[s] held by such shareholder and the shares of DPS Common Stock held by [___] shall be cancelled. No action by any such shareholder shall be necessary for such shareholder (or such shareholder’s designated transferee or transferees) to receive the applicable number of shares of (and, if applicable, cash in lieu of any fractional shares) DPS Common Stock such shareholder is

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entitled to in the Distribution. The Transfer Agent shall credit the appropriate class and number of such shares of DPS Common Stock to book entry accounts for each such holder or designated transferee or transferees of such holder of DPS Common Stock.
          Section 4.02 Fractional Shares . Shareholders holding a number of shares of Cadbury plc Beverages Shares, on the Distribution Record Date, that would entitle such shareholders to receive less than one whole share of DPS Common Stock in the applicable Distribution will receive cash in lieu of fractional shares. Fractional shares of DPS Common Stock will not be distributed in the Distribution nor credited to book-entry accounts. The Transfer Agent shall, as soon as practicable after the applicable Distribution Date, (a) determine the number of whole shares and fractional shares of DPS Common Stock allocable to each holder of record or beneficial owner of Cadbury plc Beverages Shares as of close of business on the Distribution Record Date, (b) aggregate all such fractional shares into whole shares and sell the whole shares obtained thereby in open market transactions, in each case, at then prevailing trading prices on behalf of holders who would otherwise be entitled to fractional share interests and (c) distribute to each such holder, or for the benefit of each such beneficial owner, such holder or owner’s ratable share of the net proceeds of such sale, based upon the average gross selling price per share of DPS Common Stock after making appropriate deductions for any amount required to be withheld for United States federal income tax purposes. DPS shall bear the cost of brokerage fees incurred in connection with these sales of fractional shares, which sales shall occur as soon after the applicable Distribution Date as practicable and as determined by the Transfer Agent. Neither CS nor DPS or the Transfer Agent will guarantee any minimum sale price for the fractional shares of DPS Common Stock. Neither CS nor DPS will pay any interest on the proceeds from the sale of fractional shares. The Transfer Agent will have the sole discretion to select the broker-dealers through which to sell the aggregated fractional shares and to determine when, how and at what price to sell such shares. Neither the Transfer Agent nor the broker-dealers through which the aggregated fractional shares are sold will be Affiliates of CS or DPS.
          Section 4.03 Actions in Connection with the Distribution .
          (a) DPS shall file such amendments and supplements to the Form 10 as CS may reasonably request and such amendments as may be necessary in order to cause the same to become and remain effective as required by Law, including filing such amendments and supplements to the Form 10 as may be required by the SEC or federal, state or foreign securities Laws. A member of the Cadbury plc Group, on behalf of DPS, shall mail to the holders of CS Ordinary Shares and CS ADRs, at such time on or prior to the applicable Distribution Date as CS shall determine, the Information Statement included in the Form 10, as well as any other information concerning DPS, its business, operations and management, the Plan of Separation and such other matters as CS shall reasonably determine are necessary and as may be required by Law.
          (b) DPS shall cooperate with CS in preparing, filing with the SEC and causing to become effective a registration statement or amendments thereof which are required to reflect the establishment of, or amendments to, any employee benefit and other plans necessary or appropriate in connection with the Plan of Separation or other transactions contemplated by this Agreement and the Ancillary Agreements. Promptly after receiving a request from CS, to the

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extent requested, DPS shall prepare and, in accordance with applicable Law, file with the SEC any such documentation that CS determines is necessary or desirable to effectuate the Distribution, and CS and DPS shall each use commercially reasonable efforts to obtain all necessary approvals from the SEC with respect thereto as soon as practicable.
          (c) DPS shall prepare and file, and shall use commercially reasonable efforts to have approved and made effective, an application for the original listing of the DPS Common Stock to be distributed in the Distribution on the NYSE, subject to official notice of distribution.
          Section 4.04 Distribution Date . CS shall, in its sole discretion, determine the Distribution Date and all terms of the Distribution, including the form, structure and terms of any transactions and/or offerings to effect the Distribution and the timing of and conditions to the consummation thereof. In addition, regardless of whether the conditions to the consummation of the Distribution set forth in Section 4.05 have been satisfied or waived, CS may, in accordance with Section 11.01 , at any time and from time to time until the completion of the Distribution, decide to modify or change the terms of the Distribution, including by accelerating or delaying the timing of the consummation of all or part of the Distribution.
          Section 4.05 Conditions to Distribution . Subject to Section 4.04 , the consummation of the Distribution shall be subject to the satisfaction or waiver of the following conditions which satisfaction or waiver shall be determined by CS in its sole discretion and which conditions are for the sole benefit of the Cadbury plc Group and shall not give rise to or create any duty on the part of CS or the board of directors of CS to waive or not waive any such condition:
          (a) The Form 10 shall have been declared effective by the SEC, with no stop order in effect with respect thereto, and the Information Statement shall have been mailed to the holders of CS Ordinary Shares;
          (b) The DPS Common Stock to be delivered in the Distribution shall have been approved for listing on the NYSE, subject to official notice of issuance;
          (c) Any Governmental Approvals and any Required Consents shall have been obtained and be in full force and effect;
          (d) The Scheme shall have been sanctioned by the Court and office copies of the Scheme Court Orders shall have been registered by the UK Registrar of Companies at Companies House;
          (e) The Cadbury plc Ordinary Shares shall have been (i) admitted to the official list of the UKLA and (ii) admitted to trading on the London Stock Exchange’s main market for listed Securities;
          (f) Cadbury plc shall have received the Court Order approving the Reduction and such Court Order shall have been delivered to the UK Registrar of Companies and been registered by him;
          (g) No order, injunction or decree issued by any Governmental Entity of

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competent jurisdiction or other legal restraint or prohibition preventing the consummation of the Distribution or any of the transactions related thereto, including the transfers of Assets and Assumption of Liabilities contemplated by this Agreement, shall be in effect;
          (h) CS shall have completed the contribution/transfer of the Beverages Business to DPS;
          (i) The financing transactions described in the Information Statement as having occurred prior to the Distribution shall have been consummated on or prior to the Distribution;
          (j) There shall not have occurred an event or development that, in the opinion of the board of directors of CS, in its sole and absolute discretion, would result in the Distribution having a material adverse effect on CS or any of its Subsidiaries or CS’ shareholders; and
          (k) The Ancillary Agreements shall have been entered into by the applicable Parties.
          Section 4.06 Consent to the Reduction . DPS acknowledges that Cadbury plc is proposing to undertake the Reduction and DPS, on behalf of itself and each member of the DPS Group, (i) shall as soon as reasonably practicable after the date of this Agreement provide Cadbury plc with an executed letter of consent to the Reduction in the form attached as Exhibit 4.06 and agrees that a copy of this letter may be presented to the Court as part of Cadbury plc’s application for confirmation by the Court of the Reduction; and (ii) undertakes that to the extent further consent is requested by Cadbury plc in order to effect the Reduction, DPS shall (and shall procure that any member of the DPS Group shall) give consent promptly on terms reasonably acceptable to Cadbury plc and, for the avoidance of doubt, such consents shall not be conditional on the provision of any third party guarantee or the deposit of any funds in any bank or escrow account or any other security, fact, event or thing. This consent is (and any consent given after the date of this letter shall be) irrevocable.
ARTICLE V
CERTAIN COVENANTS
          Section 5.01 Non-Solicitation of Employees . During the period ending on the 18-month anniversary of the Distribution Date, none of the Parties or any member of their respective Groups shall solicit for employment or interfere with or attempt to interfere with any officers, employees, representatives or agents of any member of the other Group, or induce or attempt to induce any of them to leave the employ of the other Group or violate the terms of their contracts, or any employment arrangements, with the other Group; provided , however , that the foregoing will not prohibit (x) any advertising in publication or media of general circulation including trade journals or similar media or hiring any officer, employee, representative or agent who responds to such advertisement or (y) the soliciting or hiring of any officers, employees, representatives or agents of any member of the other Group who are offered a position following

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the termination of employment by the other Group.
          Section 5.02 Auditors and Audits; Annual and Quarterly Financial Statements and Accounting .
          (a) DPS shall use its commercially reasonable efforts to cause its auditors to complete its audit for the year ending December 31, 2008 such that the auditor will date its opinion of the audited 2008 annual financial statements on the same date that Cadbury plc’s auditors date their opinion on Cadbury plc’s audited annual financial statements, such that Cadbury plc is able to meet its timetable for the printing, filing and public dissemination of Cadbury plc’s 2008 annual financial statements. In addition, DPS shall use its commercially reasonable efforts to cause its auditors to comply with the processes and procedures required by Cadbury plc Group’s auditors to permit Cadbury plc Group’s auditors to opine on the 2008 audited financial statements of Cadbury plc.
          (b) Each Party shall provide, or provide access to the other Party on a timely basis, all information reasonably required to meet its schedule for the preparation, printing, filing, and public dissemination of its 2008 annual financial statements and for management’s assessment of the effectiveness of its disclosure controls and procedures and its internal control over financial reporting in accordance with Items 307 and 308, respectively, of Regulation S-K and, to the extent applicable to such Party, its auditor’s audit of its internal control over financial reporting and management’s assessment thereof in accordance with Section 404 of the Sarbanes-Oxley Act of 2002 and the SEC’s and Public Company Accounting Oversight Board’s rules and auditing standards thereunder, if required (such assessments and audit being referred to as the “ Internal Control Audit and Management Assessments ”). Such information shall be provided in the form, time and manner reasonably requested by CS, which shall not be materially different than the form, time and manner required by CS prior to the Distribution Date pursuant to the CS Group Reporting Manual in effect as of the Distribution Date. Without limiting the generality of the foregoing, each Party will provide all required financial and other information with respect to itself and its Subsidiaries to its auditors in a sufficient and reasonable time and in sufficient detail to permit its auditors to take all steps and perform all reviews necessary to provide sufficient assistance to the other Party’s auditors (each such other Party’s auditors, collectively, the “ Other Party’s Auditors ”) with respect to information to be included or contained in such other Party’s annual financial statements and to permit the Other Party’s Auditors and management to complete the Internal Control Audit and Management Assessments, if required.
          (c) Each Party shall provide, or provide access to the other Party on a timely basis, all information reasonably required to meet its schedule for the preparation, printing, filing, and public dissemination of its financial results for the period ending June 30, 2008 (the “ Interim Financial Statements ”) and for its Internal Control Audit and Management Assessments, if required. Such information shall be provided in the form, time and manner reasonably requested by CS, which shall not be materially different than the form, time and manner required by CS prior to the Distribution Date pursuant to the CS Group Reporting Manual in effect as of the Distribution Date. Without limiting the generality of the foregoing, each Party will provide all required financial and other information with respect to itself and its Subsidiaries to its auditors in a sufficient and reasonable time and in sufficient detail to permit its auditors to take all steps and perform all reviews necessary to provide sufficient assistance to the Other Party’s Auditors

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with respect to information to be included or contained in the Interim Financial Statements and to permit the Other Party’s Auditors and management to complete the Internal Control Audit and Management Assessments, if required.
          (d) Each Party shall authorize its respective auditors to make reasonably available to the Other Party’s Auditors both the personnel who performed or are performing the annual audits of such audited Party (each such Party with respect to its own audit, the “ Audited Party ”) and work papers related to the annual audits of such Audited Party, in all cases within a reasonable time prior to such Audited Party’s auditors’ opinion date, so that the Other Party’s Auditors are able to perform the procedures they reasonably consider necessary to take responsibility for the work of the Audited Party’s auditors as it relates to their auditors’ report on such other Party’s financial statements, all within sufficient time to enable such other Party to meet its timetable for the printing, filing and public dissemination of its annual financial statements. Each Party shall make reasonably available to the Other Party’s Auditors and management its personnel and Records in a reasonable time prior to the Other Party’s Auditors’ opinion date and other Party’s management’s assessment date so that the Other Party’s Auditors and other Party’s management are able to perform the procedures they reasonably consider necessary to conduct the Internal Control Audit and Management Assessments.
          (e) To the extent it relates to a pre-Distribution Date period, (i) each of the Parties hereto shall give the other Party hereto as much prior notice as is reasonably practicable of any changes in, or proposed determination of, its accounting estimates from those in effect as of immediately prior to the Distribution Date or of any other action with regard to its accounting estimates or previously reported financial results which may affect the other Party’s financial results, (ii) each of the Parties hereto will consult with the other and, if requested by the Party contemplating such changes, with the Other Party’s Auditors and (iii) unless required by generally accepted accounting principles or a reasonable interpretation thereof by either Party’s auditors, Law or a Governmental Entity, neither party shall make such determination or changes which would affect the other Party’s previously reported financial results without prior consent, which shall not be unreasonably withheld. Further, each Party will give the other Party prompt notice of any amendments or restatements of accounting statements with respect to pre-Distribution Date periods, and will provide the other Party with access as provided in Section 5.02(c) hereof as promptly as possible such that the other Party will be able to satisfy its financial reporting requirements.
          (f) In the event either Cadbury plc or DPS is the subject of any SEC, FSA or other Governmental Entity’s comment, review or investigation (formal or informal) relating to a period prior to the Distribution Date and which in any way relates to the other Party or the other Party’s public filings, such Party shall provide the other Party with a copy of any comment or notice of such review or investigation and shall give the other Party a reasonable opportunity to be involved in responding to such comment, review or investigation, and such other Party shall cooperate with such Party in connection with responding to such comment, review or investigation.
          (g) Any Information exchanged pursuant to this Section 5.02 is subject to Section 8.06 .

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          Section 5.03 CS Obligations . DPS and Cadbury plc agree that Cadbury plc shall not, and shall cause CS not to, take any actions that would materially and adversely impact the ability of CS to fulfill its obligations under this Agreement; provided that Cadbury plc may at any time following the Distribution Date require CS to assign to Cadbury plc all of CS’ rights and obligations under this Agreement in substitution for compliance by Cadbury plc and CS with the aforementioned obligation in this Section 5.03, and upon such assignment, Cadbury plc shall assume all of CS’ obligations under this Agreement.
ARTICLE VI
INTELLECTUAL PROPERTY MATTERS
          Section 6.01 Cadbury Names and Marks .
          (a) DPS hereby acknowledges that all right, title and interest in and to the “Cadbury” name, together with all variations and acronyms thereof and all Trademarks and other identifiers of source or goodwill containing or incorporating any of the foregoing (the “ Cadbury Names and Marks ”), are owned exclusively by the Cadbury plc Group, and that, except as expressly provided below, any and all right of the DPS Group to use the Cadbury Names and Marks shall terminate as of the Demerger Effective Time and shall immediately revert to the Cadbury plc Group, along with any and all goodwill associated therewith. DPS acknowledges that (i) the Beverages Assets shall not include any Cadbury Names and Marks, and (ii) it has no rights, and is not acquiring any rights, to use the Cadbury Names and Marks, except as expressly provided herein.
          (b) DPS shall, as soon as practicable after the Distribution Date, but in no event later than 10 Business Days thereafter, cause each member of the DPS Group to file amended certificates of incorporation with the appropriate Governmental Entities changing its corporate name, “doing business as” name, trade name and any other similar corporate identifier (each, a “ Corporate Name ”) to a Corporate Name that does not contain any Cadbury Names and Marks and to supply promptly any additional information, documents and materials that may be requested by CS with respect to such filings.
          (c) The DPS Group shall, for a period of 15 months after the Distribution Date, be entitled to use, solely in connection with the operation of the Beverages Business as operated immediately prior to the Demerger Effective Time, all of their existing stocks of product packaging, signs, letterheads, business cards, invoice stock, advertisements and promotional materials (other than Internet or intranet websites and web pages), inventory and other documents and materials (“ Existing Stock ”) containing the Cadbury Names and Marks, after which 15-month period DPS shall cause each member of the DPS Group to remove or obliterate all Cadbury Names and Marks from such Existing Stock or cease using such Existing Stock; provided that the Cadbury Names and Marks shall be removed from (i) all of the DPS Group’s Internet websites and web pages within three months following the Distribution Date and (ii) all of the DPS Group’s intranet websites and web pages within three months following the Distribution Date.

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          (d) Following the Distribution Date, except as expressly provided in this Agreement, (i) no other right to use the Cadbury Names and Marks is granted by the Cadbury plc Group to DPS or the DPS Group, whether by implication or otherwise, and (ii) nothing hereunder permits DPS or any member of the DPS Group to use the Cadbury Names and Marks on or in connection with any documents, materials, products or services. DPS shall ensure that all use of the Cadbury Names and Marks by the DPS Group as provided in this Section 6.01 shall be only with respect to goods and services of a level of quality equal to or greater than the quality of goods and services with respect to which the Cadbury Names and Marks were used in the Beverages Business prior to the Distribution Date. Any and all goodwill generated by the use of the Cadbury Names and Marks under this Section 6.01 shall inure solely to the benefit of the Cadbury plc Group. In no event shall DPS or any member of the DPS Group use the Cadbury Names and Marks in any manner that may damage or tarnish the reputation of the Cadbury plc Group, or the goodwill associated with the Cadbury Names and Marks.
          (e) DPS agrees that the Cadbury plc Group shall not have any responsibility for claims by third parties arising out of, or relating to, the use by the DPS Group of any Cadbury Names and Marks after the Distribution Date. DPS shall indemnify and hold harmless CS and its Affiliates, and their respective officers, directors, employees, agents, successors and assigns from any and all such claims that may arise out of the use of any Cadbury Names and Marks by DPS or any member of the DPS Group (i) in accordance with the terms and conditions of this Section 6.01 , other than such claims that the Cadbury Names and Marks infringe the Intellectual Property rights of any third party, or (ii) in violation of or outside the scope permitted by this Section 6.01 . Notwithstanding anything in this Agreement to the contrary, including Section 10.02(f) , DPS hereby acknowledges that CS, in addition to any other remedies available to it for any breach or threatened breach of this Section 6.01 , shall be entitled to seek a preliminary injunction, temporary restraining order or other equivalent relief restraining DPS and any member of the DPS Group from any such breach or threatened breach.
          (f) Notwithstanding anything in this Agreement to the contrary, and without limiting the rights otherwise granted in this Section 6.01 , DPS and the DPS Group shall have the right, at all times after the Distribution Date, to (i) keep records and other historical or archived documents containing or referencing the Cadbury Names and Marks, (ii) use the Cadbury Names and Marks to the extent required by or permitted as a fair use under applicable Law, and (iii) refer to the historical fact that the DPS Group previously conducted the Beverages Business under the Cadbury Names and Marks.
          Section 6.02 Beverages Names and Marks .
          (a) For a period of 15 months after the Distribution Date, the Cadbury plc Group shall be entitled to use, solely in connection with the continued operation of the Cadbury plc Business, all of their Existing Stock containing any Trademark included in the Beverages Intellectual Property and/or Beverages Assets, any variation or acronym thereof, or any Trademark or other identifier of source or goodwill containing, incorporating or associated with any such Trademark (collectively, the “ Beverages Names and Marks ”); provided that the Beverages Names and Marks shall be removed from (i) all of the Cadbury plc Group’s Internet websites and web pages within three months following the Distribution Date and (ii) all of the Cadbury plc Group’s intranet websites and web pages within three months following the

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Distribution Date. For the avoidance of doubt, (i) “Beverages Names and Marks” does not include any Trademark owned by or licensed to the Cadbury plc Group as of or following the Distribution Date and (ii) nothing in this Section 6.02 shall be deemed to limit or modify in any way any rights of the Cadbury plc Group in or to any Intellectual Property (other than the Beverages Names and Marks) or under any agreement relating to Intellectual Property to which any member of the Cadbury plc Group is or becomes a party or beneficiary.
          (b) Following the Distribution Date, except as expressly provided in this Agreement, (i) no other right to use the Beverages Names and Marks is granted by DPS or the DPS Group to the Cadbury plc Group, whether by implication or otherwise, and (ii) nothing hereunder permits the Cadbury plc Group to use the Beverages Names and Marks on or in connection with any documents, materials, products or services. CS shall ensure that all use of the Beverages Names and Marks as provided in this Section 6.02 shall be only with respect to goods and services of a level of quality equal to or greater than the quality of goods and services with respect to which the Beverages Names and Marks were used in the businesses of the Cadbury plc Group prior to the Distribution Date. Any and all goodwill generated by the use of the Beverages Names and Marks under this Section 6.02 shall inure solely to the benefit of the DPS Group following the Distribution Date. In no event shall the Cadbury plc Group use the Beverages Names and Marks in any manner that may damage or tarnish the reputation of DPS or the DPS Group or the goodwill associated with the Beverages Names and Marks.
          (c) CS agrees that DPS and the DPS Group shall not have any responsibility for claims by third parties arising out of, or relating to, the use by the Cadbury plc Group of any Beverages Names and Marks after the Distribution Date. CS shall, and shall cause each of the members of the Cadbury plc Group to, shall indemnify and hold harmless DPS and the DPS Group, and their respective Affiliates, officers, directors, employees, agents, successors and assigns, from any and all such claims that may arise out of the Cadbury plc Group’s use of any Beverages Names and Marks after the Distribution Date (i) in accordance with the terms and conditions of this Section 6.02 , other than such claims that the Beverages Names and Marks infringe the Intellectual Property rights of any third party or (ii) in violation of or outside the scope permitted by this Section 6.02 . Notwithstanding anything in this Agreement to the contrary, including Section 10.02(f) , CS hereby acknowledges that DPS, in addition to any other remedies available to it for any breach or threatened breach of this Section 6.02 , shall be entitled to seek a preliminary injunction, temporary restraining order or other equivalent relief restraining the Cadbury plc Group from any such breach or threatened breach.
          (d) Notwithstanding anything in this Agreement to the contrary, and without limiting the rights otherwise granted in this Section 6.02 , the Cadbury plc Group shall have the right, at all times after the Distribution Date, to (i) keep records and other historical or archived documents containing or referencing the Beverages Names and Marks, (ii) use the Beverages Names and Marks to the extent required by or permitted as a fair use under applicable Law, (iii) refer to the historical fact that the members of the Cadbury plc Group previously conducted their respective businesses under the Beverages Names and Marks, (iv) use and sublicense the Beverages Names and Marks in connection with the Cadbury plc Group’s business of manufacturing, distributing, selling, marketing and promoting carbonated and non-carbonated beverages and other food products throughout American Samoa (the “ American Samoa Business ”), (v) use their Existing Stock, web pages and Internet and intranet websites containing

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any Beverages Names and Marks in connection with the Cadbury plc Group’s business of manufacturing, distributing, selling, marketing and promoting carbonated and non-carbonated beverages and other food products throughout the AsiaPac Territory and (vi) use the “Schweppes” name in any and all jurisdictions outside of the United States, Canada and Mexico as or as part of any Corporate Name; provided that, no later than 10 Business Days after the Distribution Date, CS shall use commercially reasonable efforts to file amended organizational documents with the appropriate Governmental Entities changing the Corporate Name of any Affiliate organized in any jurisdiction in the United States, Canada and Mexico to a Corporate Name that does not contain the “Schweppes” name and to supply promptly any additional information, documents and materials that may be requested by DPS with respect to such filings.
          Section 6.03 Memorabilia . As of the Distribution Date, any and all photographs, artwork and similar objects and other physical assets owned by the DPS Group or the Cadbury plc Group that relate to the history or historical activities of the Beverages Business (“ Memorabilia ”) shall be deemed to be owned, as between CS and DPS, by (i) CS to the extent located on the premises of any member of the Cadbury plc Group and (ii) DPS to the extent located on the premises of any member of the DPS Group. DPS hereby grants the Cadbury plc Group from the Distribution Date a worldwide, transferable, perpetual, royalty-free, irrevocable (with right to sub-license) license to use any Memorabilia: (a) in documenting, memorializing and (if desired) use in marketing its history; and (b) to the extent necessary to comply with the obligations of the Cadbury plc Group under Section 18.14 of that certain Amended and Restated Sale and Purchase Agreement by and between CS and Sapphire European Beverages Limited (among others), dated as of January 30, 2006.
          Section 6.04 Additional Licenses .
          (a) Effective as of the Distribution Date, CS hereby grants to DPS, solely for the benefit of each member of the DPS Group, an exclusive, perpetual, irrevocable, royalty-free license (with the right to grant sub-licenses) of the design known as the “modern egg” bottle design for use solely in the Territory; provided that DPS shall, and shall procure that each member of the DPS Group shall, only use such design in relation to beverages sold under the “Schweppes” brand and for no other purpose. DPS shall indemnify and hold harmless CS and its Affiliates, officers, directors, employees, agents, successors and assigns from any and all claims that may arise out of the DPS’ or the DPS Group’s exercise of any rights granted under, or breach of, this Section 6.04(a) .
          (b) Effective as of the Distribution Date, DPS hereby grants, and shall cause the DPS Group to grant, to the Cadbury plc Group a perpetual, non-exclusive, transferable, royalty-free right and license (with the right to grant sublicenses) in, to and under any and all copyrights and design rights owned by or licensed to, to the extent permitted, the DPS Group as of the Distribution Date in product packaging (including bottles), signs, business cards, letterheads, invoice stock, advertisements and promotional materials and inventory (the “ DPS Licensed Intellectual Property ”), to use the DPS Licensed Intellectual Property in connection with the operation following the Distribution Date of the Cadbury plc Group’s business of manufacturing, distributing, selling, marketing and promoting carbonated and non-carbonated beverages and other food products throughout the AsiaPac Territory and American Samoa, to the extent of any existing use or good faith plans to use as of February 1, 2008 in the AsiaPac

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Territory or American Samoa. The foregoing license includes the right for the Cadbury plc Group to make, and have made on their behalf, modifications, enhancements, derivative works and improvements (“ Improvements ”) to the DPS Licensed Intellectual Property, and as between the Parties to this Agreement, any and all such Improvements shall be owned by a member of the Cadbury plc Group without a duty of accounting or disclosure to DPS or the DPS Group.
          (c) Effective as of the Distribution Date, CS hereby grants, and shall cause the Cadbury plc Group to grant, to the DPS Group a perpetual, non-exclusive, transferable, royalty-free right and license (with the right to grant sublicenses) in, to and under any and all copyrights and design rights owned by or licensed to, to the extent permitted, the Cadbury plc Group conducting its beverages business in the AsiaPac Territory and American Samoa as of the Distribution Date in product packaging (including bottles), signs, business cards, letterheads, invoice stock, advertisements and promotional materials and inventory (the “ AsiaPac Licensed Intellectual Property ”), to use the AsiaPac Licensed Intellectual Property in connection with the operation of the Beverages Business by the DPS Group following the Distribution Date, to the extent of any existing use or good faith plans to use as of February 1, 2008 in the Territory. The foregoing license includes the right for the DPS Group to make, and have made on their behalf, Improvements to the AsiaPac Licensed Intellectual Property, and as between the Parties to this Agreement, any and all such Improvements shall be owned by DPS without a duty of accounting or disclosure to a member of the Cadbury plc Group.
          Section 6.05 Know-How Agreement .
          (a) Effective as of the Distribution Date, CS, DPS and the DPS Group shall enter into a know-how agreement substantially in the form attached hereto as Exhibit 6.06(a) (the “ Know-How Agreement ”).
          (b) At CS’ request, following the Distribution Date, DPS shall reasonably cooperate with CS and negotiate in good faith to obtain an assignment and novation in favor of DPS of CS’ rights and obligations under (i) that certain know-how agreement entered into by and among CS, The Coca-Cola Company and Atlantic Industries, dated as of July 29, 1999, as amended, and (ii) that certain know-how agreement entered into by and among CS and Sapphire European Beverages Limited (among others), dated as of February 2, 2006.
          Section 6.06 Domain Names Agreement .
          Effective as of the Distribution Date, CS and DPS shall enter into a domain names agreement substantially in the form attached hereto as Exhibit 6.07 (the “ Domain Names Agreement ”).
ARTICLE VII
INDEMNIFICATION
          Section 7.01 Release of Pre-Distribution Claims .
          (a) Except (i) as provided in Section 7.01(b) , (ii) as may be otherwise expressly provided in this Agreement or any Ancillary Agreement and (iii) for any matter with

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respect to which any Party is entitled to indemnification or contribution pursuant to this ARTICLE VII , each Party, on behalf of itself and each member of its respective Group, its and their respective Affiliates and all Persons who at any time prior to the Demerger Effective Time were shareholders (other than the public shareholders of CS), directors, officers, agents or employees of it or any member of its Group (in their respective capacities as such), in each case do hereby remise, release and forever discharge the other Party and the other members of such other Party’s Group, their respective Affiliates and all Persons who at any time prior to the Demerger Effective Time were shareholders, directors, officers, agents or employees of any member of such other Party (in their respective capacities as such), in each case from any and all Liabilities whatsoever, whether at Law or in equity (including any right of contribution), whether arising under any Contract, by operation of Law or otherwise, existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or alleged to have failed to occur or any conditions, in each case, existing on or before the Demerger Effective Time, including in connection with the Plan of Separation and all other activities to implement the Distribution and any of the other transactions contemplated hereunder and under the Ancillary Agreements.
          (b) Nothing contained in Section 7.01(a) shall release any Person from:
     (i) any Liability Assumed, Transferred or allocated to a Party or a member of such Party’s Group pursuant to or contemplated by, or any other Liability of any member of such Group arising under, this Agreement or any Ancillary Agreement;
     (ii) any Liability for the sale or receipt of goods or property or services purchased, obtained or used in the ordinary course of business by a member of one Group from a member of the other Group prior to the Demerger Effective Time;
     (iii) any Liability (other than the Intercompany Balances settled pursuant to Section 2.03 ) for unpaid amounts for products or services or refunds owing on products or services due for work done by a member of one Group at the request or on behalf of a member of the other Group;
     (iv) any Liability provided in or resulting from any other Contract or understanding that is entered into after the Demerger Effective Time between a Party (and/or a member of such Party’s Group), on the one hand, and the other Party (and/or a member of such Party’s Group), on the other hand;
     (v) any Liability with respect to the Continuing Arrangements;
     (vi) any Liability that the Parties have with respect to indemnification or contribution pursuant to this Agreement or otherwise for claims brought against the Parties by third Persons, which Liability shall be governed by the provisions of this ARTICLE VII and, if applicable, the appropriate provisions of the Ancillary Agreements;
     (vii) any Liability relating to any agreements, arrangements, commitments or understandings to which any Person other than the Parties and their respective Affiliates is a Party (it being understood that to the extent that the rights and obligations of the Parties and the members of their respective Groups under any such Contracts constitute Beverages Assets or Beverages Liabilities or Cadbury plc Assets or Cadbury plc

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Liabilities, such Contracts shall be assigned or retained pursuant to ARTICLE II ); or
     (viii) any Liability relating to agreements, arrangements, commitments or understandings to which any non-wholly-owned Subsidiary of CS or DPS, as the case may be, is a Party.
          (c) Neither Party shall permit any member of its Group to make any claim or demand, or commence any Action asserting any claim or demand, including any claim of contribution or any indemnification, against the other Party or any member of the other Party’s Group, or any other Person released pursuant to Section 7.01(a) , with respect to any Liabilities released pursuant to Section 7.01(a) .
          (d) It is the intent of each Party, pursuant to the provisions of this Section 7.01 , to provide for a full and complete release and discharge of all Liabilities existing or arising from all acts and events occurring and all conditions existing on or before the Demerger Effective Time, whether known or unknown, between or among any Party (and/or a member of such Party’s Group), on the one hand, and the other Party (and/or a member of such Party’s Group), on the other hand (including any contractual agreements or arrangements existing or alleged to exist between or among any such members on or before the Demerger Effective Time), except as specifically set forth in Section 7.01(a) and Section 7.01(b) . At any time, at the reasonable request of the other Party, each Party shall cause each member of its respective Group to execute and deliver releases reflecting the provisions hereof.
          (e) For the avoidance of doubt, neither Party shall have any Liability to the other Party in the event that any information exchanged or provided to the other Party pursuant to this Agreement (but excluding any such information included in a Disclosure Document) which is an estimate or forecast, or which is based on an estimate or forecast, is found to be inaccurate.
          Section 7.02 Indemnification by CS . Except as otherwise set forth in any provision of this Agreement or any Ancillary Agreement or Continuing Arrangement, following the Demerger Effective Time, CS shall and shall cause the other members of the Cadbury plc Group to indemnify, defend and hold harmless the Beverages Indemnitees from and against any and all Indemnifiable Losses of the Beverages Indemnitees to the extent arising out of, by reason of or otherwise in connection with (i) the Cadbury plc Liabilities or alleged Cadbury plc Liabilities, (ii) any breach by any member of the Cadbury plc Group of any of the Shared Contracts, (iii) with respect to statements or omissions made or occurring after the Demerger Effective Time, any misstatement or alleged misstatement of a material fact contained in any document filed with the SEC or the FSA by any member of the DPS Group pursuant to the Securities Act, the Exchange Act, the Prospectus Rules or the Listing Rules, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only (A) to the extent that those Liabilities are caused by any misstatement or omission or alleged misstatement or omission in any information that is furnished in writing to any member of the DPS Group by any member of the Cadbury plc Group after the Demerger Effective Time, (B) if such member of the Cadbury plc Group has been informed in writing in advance that such information will be used in such filing and (C) if the information used by a member of the DPS Group in any such filing is not materially different to the information furnished by a member of the Cadbury plc Group, or (iv) any

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breach by CS or any member of the Cadbury plc Group of any provision of this Agreement or any Ancillary Agreement or Continuing Arrangement unless such Ancillary Agreement or Continuing Arrangement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder.
          Section 7.03 Indemnification by DPS . Except as otherwise specifically set forth in any provision of this Agreement or any Ancillary Agreement, following the Demerger Effective Time, DPS shall and shall cause the other members of the DPS Group to indemnify, defend and hold harmless the Cadbury plc Indemnitees from and against any and all Indemnifiable Losses of the Cadbury plc Indemnitees to the extent arising out of, by reason of or otherwise in connection with (i) the Beverages Liabilities or any alleged Beverages Liabilities, (ii) any breach by any member of the DPS Group of any of the Shared Contracts, (iii) with respect to statements or omissions made or occurring after the Demerger Effective Time, any misstatement or alleged misstatement of a material fact contained in any document filed with the SEC or the FSA by any member of the Cadbury plc Group pursuant to the Securities Act, the Exchange Act, the Prospectus Rules or the Listing Rules, or any omission or alleged omission to state therein a material fact required to be stated therein or necessary to make the statements therein, in light of the circumstances under which they were made, not misleading, in each case to the extent, but only (A) to the extent that those Liabilities are caused by any misstatement or omission or alleged misstatement or omission in any information that is furnished in writing to any member of the Cadbury plc Group by any member of the DPS Group after the Demerger Effective Time, (B) if such member of the DPS Group has been informed in writing in advance that such information will be used in such filing and (C) if the information used by a member of the Cadbury plc Group in any such filing is not materially different to the information furnished by a member of the DPS Group, or (iv) any breach by DPS or any member of the DPS Group of any provision of this Agreement or any Ancillary Agreement or Continuing Arrangement unless such Ancillary Agreement or Continuing Arrangement expressly provides for separate indemnification therein, in which case any such indemnification claims shall be made thereunder.
          Section 7.04 Procedures for Indemnification .
          (a) An Indemnitee shall give the Indemnifying Party notice of any matter that an Indemnitee has determined has given, or reasonably anticipates could give rise to, a right of indemnification under this Agreement (other than a Third Party Claim which shall be governed by Section 7.04(b) ), within 30 days of such determination, stating the amount of the Indemnifiable Loss claimed, if known, and method of computation thereof, and containing a reference to the provisions of this Agreement in respect of which such right of indemnification is claimed by such Indemnitee or arises; provided , however , that the failure to provide such notice shall not release the Indemnifying Party from any of its obligations except to the extent the Indemnifying Party shall have been actually materially prejudiced as a result of such failure.
          (b) If an Action is made against a Cadbury plc Indemnitee or a Beverages Indemnitee (each, an “ Indemnitee ”) by any Person who is not a Party or a member of a Group of a Party (a “ Third Party Claim ”) as to which such Indemnitee is or may be entitled to indemnification pursuant to this Agreement, such Indemnitee shall notify the other Party which is or may be required pursuant to this ARTICLE VII or pursuant to any Ancillary Agreement or Continuing Arrangement to make such indemnification (the “ Indemnifying Party ”) in writing, and in reasonable detail, of the Third Party Claim promptly (and in any event within 30 days)

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after receipt by such Indemnitee of written notice of the Third Party Claim; provided , however , that the failure to provide notice of any such Third Party Claim pursuant to this sentence shall not release the Indemnifying Party from any of its obligations except to the extent the Indemnifying Party shall have been actually materially prejudiced as a result of such failure. Thereafter, the Indemnitee shall deliver to the Indemnifying Party, promptly after the Indemnitee’s receipt thereof (and in any event within 10 Business Days), copies of all notices and documents (including court papers) received by the Indemnitee relating to the Third Party Claim.
          (c) An Indemnifying Party shall be entitled (but shall not be required) to assume and control the defense of any Third Party Claim, at such Indemnifying Party’s own cost and expense and by such Indemnifying Party’s own counsel that is reasonably acceptable to the applicable Indemnitees, if it gives notice of its intention to do so to the applicable Indemnitees within 30 days of the receipt of notice of the Third Party Claim from such Indemnitees. After notice from an Indemnifying Party to an Indemnitee of its election to assume the defense of a Third Party Claim, such Indemnitee shall have the right to employ separate counsel and to participate in (but not control) the defense, compromise, or settlement thereof, at its own expense and, in any event, shall cooperate with the Indemnifying Party in such defense and make available to the Indemnifying Party, at the Indemnifying Party’s expense, all witnesses, pertinent Information and materials in such Indemnitee’s possession or under such Indemnitee’s control relating thereto as are reasonably required by the Indemnifying Party.
          (d) If an Indemnifying Party elects not to assume responsibility for defending a Third Party Claim, or fails to notify an Indemnitee of its election as provided in Section 7.04(c) , such Indemnitee may defend such Third Party Claim at the cost and expense of the Indemnifying Party. If the Indemnitee is conducting the defense against any such Third Party Claim, the Indemnifying Party shall cooperate with the Indemnitee in such defense and make available to the Indemnitee, at the Indemnifying Party’s expense, all witnesses, pertinent Information, material in such Indemnifying Party’s possession or under such Indemnifying Party’s control relating thereto as are reasonably required by the Indemnitee.
          (e) If the Indemnifying Party has assumed the defense of the Third Party Claim in accordance with the terms of this Agreement, no Indemnitee may settle or compromise any Third Party Claim without the consent of the Indemnifying Party.
          (f) In the case of a Third Party Claim, no Indemnifying Party shall consent to entry of any judgment or enter into any settlement of the Third Party Claim without the consent of the Indemnitee; provided that consent from the Indemnitee shall not be required if such settlement contains a full and unconditional release of the Indemnitee and does not permit any injunction, declaratory judgment, other order or other non-monetary relief to be entered, directly or indirectly, against any Indemnitee.
          (g) Except as may otherwise be specifically provided for in the Ancillary Agreements and except as set forth in Sections 10.02 (d) and (f) hereof, the indemnification provisions of this ARTICLE VII shall be the sole and exclusive remedy of the Parties for any failure by the other Party to perform and comply with any covenants and agreements in this Agreement and any other dispute, controversy or claim (whether arising in contract, tort or

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otherwise) that may arise out of or relate to, or arise under or in connection with, this Agreement or any Ancillary Agreement or Continuing Arrangement, or the transactions contemplated hereby or thereby (including all actions taken in furtherance of the transactions contemplated hereby or thereby on or prior to the Demerger Effective Time), between or among any member of the Cadbury plc Group, on the one hand, and any member of the DPS Group, on the other hand.
          Section 7.05 Cooperation in Defense and Settlement . CS and DPS agree that, from and after the Demerger Effective Time, if an Action is commenced by a third party (or any member of either Party’s respective Group) with respect to which one or both Parties (or any member of either Party’s respective Group) is a nominal defendant and/or such Action is otherwise not a Liability allocated to such named Party under this Agreement or any Ancillary Agreement or Continuing Arrangement, then the other Party shall use commercially reasonable efforts to cause such nominal defendant to be removed from such Action.
          Section 7.06 Indemnification Obligations Net of Insurance Proceeds and Other Amounts .
          (a) Any Indemnifiable Loss subject to indemnification or contribution pursuant to this ARTICLE VII will be calculated (i) net of Insurance Proceeds received by the Indemnitee that actually reduce the amount of the Indemnifiable Loss, and (ii) net of any proceeds received by the Indemnitee from any third party for indemnification for such Liability that actually reduce the amount of the Indemnifiable Loss (“ Third Party Proceeds ”). If an Indemnitee receives a payment required by this Agreement from an Indemnifying Party in respect of any Indemnifiable Loss (an “ Indemnity Payment ”) and subsequently receives Insurance Proceeds or Third Party Proceeds, then the Indemnitee will pay to the Indemnifying Party an amount equal to the excess of the Indemnity Payment received over the amount of the Indemnity Payment that would have been due if the Insurance Proceeds or Third Party Proceeds had been received, realized or recovered before the Indemnity Payment was made.
          (b) Any insurer that would otherwise be obligated to pay any claim shall not be relieved of the responsibility with respect thereto or, solely by virtue of the indemnification and contributions provisions hereof, have any subrogation rights with respect thereto. The Indemnitee shall use reasonable best efforts to seek to collect or recover any third party Insurance Proceeds and any Third Party Proceeds (other than Insurance Proceeds under an arrangement where future premiums are adjusted to reflect prior claims in excess of prior premiums) to which the Indemnitee is entitled in connection with any Indemnifiable Loss for which the Indemnitee seeks contribution or indemnification pursuant to this ARTICLE VII (it being understood that the obligation to use reasonable best efforts to collect or recover any third party Insurance Proceeds or Third Party Proceeds shall not require the Indemnitee to commence any litigation proceedings against any such third party); provided that the Indemnitee’s inability to collect or recover any such Insurance Proceeds or Third Party Proceeds shall not limit the Indemnifying Party’s obligations hereunder.
          (c) CS and DPS agree that any indemnification payment made pursuant to this ARTICLE VII shall be paid free and clear of any Tax deduction or withholding. If any deduction or withholding is required by applicable Law to be made from any indemnification

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payment made pursuant to this ARTICLE VII , the amount of the payment will be increased by such additional amount as is necessary to ensure that the net amount received by the Indemnitee (after taking account of all such deductions and withholdings) is equal to the amount which it would have received had the payment in question not been subject to any deductions or withholdings. Notwithstanding the foregoing, the Parties agree to use commercially reasonable efforts (to the extent such efforts will not result in materially adverse consequences to a Party) to mitigate or avoid such deductions and withholdings.
          (d) Any indemnification payment made under this ARTICLE VII will be subject to adjustment for certain net Tax benefits and net Tax costs attributable to such indemnification payment (including gross-up) and to amounts indemnified against as provided in the Tax Sharing Agreement.
          Section 7.07 Additional Matters; Survival of Indemnities .
          (a) The indemnity and contribution agreements contained in this ARTICLE VII shall remain operative and in full force and effect, regardless of (i) any investigation made by or on behalf of any Indemnitee; (ii) any knowledge prior to the date hereof by the Indemnitee of Indemnifiable Losses for which it might be entitled to indemnification or contribution hereunder; and (iii) any termination of this Agreement.
          (b) The rights and obligations of each Party and their respective Indemnitees under this ARTICLE VII shall survive the sale or other Transfer by any Party or its respective Subsidiaries of any Assets or businesses or the assignment by it of any Liabilities.
ARTICLE VIII
ACCESS TO RECORDS; ACCESS TO INFORMATION; LEGAL AND OTHER MATTERS
          Section 8.01 Provision of Corporate Records . Other than in circumstances in which indemnification is or may be sought pursuant to ARTICLE VII (in which event the provisions of such Article will govern), and subject to appropriate restrictions for privileged or Confidential Information:
          (a) After the Distribution Date until the earlier of (i) the seventh anniversary of the Distribution Date or (ii) the date on which CS is entitled to destroy Information related to the period prior to the Distribution Date pursuant to its record retention policies, upon the prior written request by DPS for specific and identified Information which relates to (i) DPS (or a member of its Group) or the conduct of the Beverages Business prior to the Distribution Date, or (ii) any Ancillary Agreement or Continuing Arrangement to which CS and DPS (or any member of their respective Groups) are parties, CS shall provide, as soon as reasonably practicable following the receipt of such request, appropriate copies of such documents (or the originals thereof if the Party making the request has a reasonable need for such originals) in the possession or control of CS or any of its Affiliates or Subsidiaries, but only to the extent such

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items so relate and are not already in the possession or control of the requesting Party. CS shall notify DPS at least 90 days in advance of destroying any such Information in order to provide DPS the opportunity to access such Information in accordance with this Section 8.01(a) and if DPS fails to request that such Information be delivered to them, at their expense, within 90 days after receipt of such notice, CS may destroy such Information.
          (b) After the Distribution Date until the earlier of (i) the seventh anniversary of the Distribution Date or (ii) the date on which DPS is entitled to destroy Information related to the period prior to the Distribution Date pursuant to its record retention policies, upon the prior written request by CS for specific and identified Information which relates to (i) CS (or a member of its Group) or the conduct of the Cadbury plc Business, prior to the Distribution Date, or (ii) any Ancillary Agreement or Continuing Arrangement to which DPS and CS (or a member of their respective Groups) are parties, as applicable, DPS shall provide, as soon as reasonably practicable following the receipt of such request, appropriate copies of such documents (or the originals thereof if the Party making the request has a reasonable need for such originals) in the possession or control of DPS or any of its Subsidiaries, but only to the extent such items so relate and are not already in the possession or control of the requesting Party. DPS shall notify CS at least 90 days in advance of destroying any such Information in order to provide CS the opportunity to access such Information in accordance with this Section 8.01(b) and if CS fails to request that such Information be delivered to them, at their expense, within 90 days after receipt of such notice, DPS may destroy such Information.
          Section 8.02 Access to Information . Other than in circumstances in which indemnification is sought pursuant to ARTICLE VII (in which event the provisions of such Article will govern), from the Distribution Date and for so long as any access is required pursuant to Section 8.01 , each of CS and DPS shall afford to the other and its authorized accountants, counsel and other designated representatives reasonable access during normal business hours, subject to appropriate restrictions for privileged or Confidential Information and to preserve the completeness and integrity of the Information, to the personnel, properties, and Information of such Party and its Subsidiaries insofar as such access is reasonably required by the other Party and relates to (x) such other Party or the conduct of its business prior to the Demerger Effective Time or (y) any Ancillary Agreement or Continuing Arrangement. Nothing in this Section 8.02 shall require any Party to violate any agreement with any third party regarding the confidentiality of Confidential Information relating to that third party or its business; provided , however , that in the event that a Party is required to disclose any such Information, such Party shall use commercially reasonable efforts to seek to obtain such third party Consent to the disclosure of such Information.
          Section 8.03 Disposition of Information .
          (a) Each Party acknowledges that Information in its or in a member of its Group’s possession, custody or control as of the Demerger Effective Time may include Information owned by the other Party or a member of such Party’s Group and not related to (i) its Group or its business or (ii) any Ancillary Agreement to which it or any member of its Group is a Party.
          (b) Notwithstanding such possession, custody or control, such Information

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shall remain the property of such other Party or member of such other Party’s Group. Each Party agrees (i) that any such Information is to be treated as Confidential Information of the Party or Parties to which it relates and handled in accordance with Section 8.07 (except that such Information will not be used for any purpose other than a purpose permitted under this Agreement) and (ii) following a reasonable request from the other Party, subject to applicable Law, use commercially reasonable efforts within a reasonable time to (1) purge such Information from its databases, files and other systems and not retain any copy of such Information (including, if applicable, by transferring such Information to the Party to which such Information belongs), or (2) if such purging is not practicable, to encrypt or otherwise make unreadable or inaccessible such Information.
          Section 8.04 Witness Services . At all times from and after the Distribution Date, each of CS and DPS shall use its commercially reasonable efforts to make available to the other, upon reasonable written request, its and any member of its Group’s officers, directors, employees and agents as witnesses to the extent that (i) such Persons may reasonably be required to testify in connection with the prosecution or defense of any Action in which the requesting Party may from time to time be involved (except for claims, demands or Actions between members of each Group) and (ii) there is no conflict of interest in the underlying Action between the requesting Party and CS and DPS, as applicable; provided that the existence of a claim for indemnification under ARTICLE VII shall not in and of itself be deemed a conflict of interest. A Party providing a witness to the other Party under this Section shall be entitled to receive from the recipient of such services, upon the presentation of invoices therefor, payments for such amounts, relating to disbursements and other out-of-pocket expenses (which shall not include the costs of salaries and benefits of employees who are witnesses or any pro rata portion of overhead or other costs of employing such employees which would have been incurred by such employees’ employer regardless of the employees’ service as witnesses), as may be reasonably incurred and properly paid under applicable Law.
          Section 8.05 Reimbursement; Other Matters . Except to the extent otherwise contemplated by this Agreement, any Ancillary Agreement or any Continuing Arrangement, a Party providing Information or access to Information to the other Party under this ARTICLE VIII shall be entitled to receive from the recipient, upon the presentation of invoices therefor, payments for such amounts, relating to supplies, disbursements and other out-of-pocket expenses, as may be reasonably incurred in providing such Information or access to such Information.
          Section 8.06 Confidentiality . Notwithstanding any termination of this Agreement, the Parties shall hold, and shall cause each of the members of their respective Groups to hold, and shall each cause their respective officers, employees, agents, consultants, representatives and advisors to hold, in strict confidence, and not to disclose or release or use, without the prior written consent of the other Party, any and all Confidential Information concerning the other Party; provided that the Parties may disclose, or may permit disclosure of, Confidential Information (i) to their respective auditors, attorneys, financial advisors, bankers and other appropriate consultants and advisors who have a need to know such Information and are informed of their obligation to hold such Information confidential to the same extent as is applicable to the Parties and in respect of whose failure to comply with such obligations, the applicable Party will be responsible, (ii) if the Parties or any member of their respective Groups

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are required or compelled to disclose any such Confidential Information by judicial or administrative process or by other requirements of Law or stock exchange rule, (iii) as required in connection with any legal or other proceeding by one Party against the other Party, or (iv) as necessary in order to permit a Party to prepare and disclose its financial statements, Tax Returns or other required disclosures. Notwithstanding the foregoing, in the event that any demand or request for disclosure of Confidential Information is made pursuant to clause (ii) above, each Party, shall promptly notify the other of the existence of such request or demand and shall provide the other a reasonable opportunity to seek an appropriate protective order or other remedy, which such Parties will cooperate in obtaining. In the event that such appropriate protective order or other remedy is not obtained, the Party whose Confidential Information is required to be disclosed shall or shall cause the other Party to furnish, or cause to be furnished, only that portion of the Confidential Information that is legally required to be disclosed and shall take commercially reasonable steps to ensure that confidential treatment is accorded such Information.
          Section 8.07 Privileged Matters .
          (a) The Parties recognize that certain legal and other professional services (both internal and external) have been and will be provided prior to and after the Distribution Date and have been and will be rendered for the collective benefit of each of the members of the Cadbury plc Group and the DPS Group, and that each of the members of the Cadbury plc Group and the DPS Group should be deemed to be the client with respect to such services for the purposes of asserting all privileges which may be asserted under applicable Law; provided that with respect to such services the Parties agree as follows:
     (i) the Parties shall not be entitled to assert privilege with respect to such legal and other professional services provided prior to the Distribution Date against the other Party or any member of the other Party’s Group;
     (ii) CS shall be entitled, on behalf of itself or any member of the Cadbury plc Group, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information to the extent relating to the Cadbury plc Business, whether or not the privileged information is in the possession of or under the control of CS or DPS. CS shall also be entitled, on behalf of itself or any member of the Cadbury plc Group, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information that relates solely to the subject matter of any claims constituting Cadbury plc Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated against or by any member of the Cadbury plc Group, whether or not the privileged information is in the possession of or under the control of CS or DPS;
     (iii) DPS shall be entitled, on behalf of itself or any member of the DPS Group, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged information to the extent relating to the Beverages Business, whether or not the privileged information is in the possession of or under the control of CS or DPS. DPS shall also be entitled, on behalf of itself or any member of the DPS Group, in perpetuity, to control the assertion or waiver of all privileges in connection with privileged

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information that relates solely to the subject matter of any claims constituting Beverages Liabilities, now pending or which may be asserted in the future, in any lawsuits or other proceedings initiated against or by any member of the DPS Group, whether or not the privileged information is in the possession of or under the control of CS or DPS; and
     (iv) the Parties shall have a shared privilege, with equal right to assert or waive, subject to the restrictions in this Section 8.07 , with respect to all privileges not allocated pursuant to the terms of Section 8.07(a)(ii) and (iii) . All privileges relating to any claims, proceedings, litigation, disputes, or other matters which involve members of both the Cadbury plc Group and the DPS Group in respect of which such Parties retain any responsibility or Liability under this Agreement, shall be subject to a shared privilege among them.
          (b) No Party may waive any privilege which could be asserted under any applicable Law, and in which the other Party has a shared privilege, without the consent of the other Party, which shall not be unreasonably withheld or delayed or as provided in Section 8.07(c) or Section 8.07(d) below. Consent shall be in writing, or shall be deemed to be granted unless written objection is made within 10 Business Days after notice upon the other Party requesting such consent.
          (c) In the event of any litigation or dispute between or among the Parties, or any members of their respective Groups, either Party may waive a privilege in which the other Party or member of such Group has a shared privilege, without obtaining the consent of the other Party; provided that such waiver of a shared privilege shall be effective only as to the use of Information with respect to the litigation or dispute between the relevant Parties and/or the applicable members of their respective Group’s, and shall not operate as a waiver of the shared privilege with respect to third parties.
          (d) If a dispute arises between or among the Parties or any member of their respective Groups regarding whether a privilege should be waived to protect or advance the interest of any Party, each Party agrees that it shall negotiate in good faith, shall endeavor to minimize any prejudice to the rights of the other Party, and shall not unreasonably withhold consent to any request for waiver by another Party. Each Party specifically agrees that it will not withhold consent to waiver for any purpose except to protect its own legitimate interests.
          (e) Upon receipt by any Party or by any member of a Party’s Group of any subpoena, discovery, court order or other request which arguably calls for the production or disclosure of Information subject to a shared privilege or as to which another Party has the sole right hereunder to assert a privilege, or if any Party obtains knowledge that any of its or any member of its Group’s current or former directors, officers, agents or employees have received any subpoena, discovery or other requests which arguably calls for the production or disclosure of such privileged Information, such Party shall promptly notify the other Party of the existence of the request and shall provide the other Party a reasonable opportunity to review the Information and to assert any rights it or they may have under this Section 8.07 or otherwise to prevent the production or disclosure of such privileged Information.
          Section 8.08 Ownership of Information .

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          (a) Any information owned by one Party or any of its Subsidiaries that is provided to a requesting Party pursuant to this ARTICLE VIII shall be deemed to remain the property of the providing Party. Unless specifically set forth herein, nothing contained in this Agreement shall be construed as granting or conferring rights of license or otherwise in any such information.
          (b) Any Information provided by or on behalf of or made available by or on behalf of the other Party hereto pursuant to this ARTICLE VIII shall be on an “as is,” “where is” basis and no Party is making any representation or warranty with respect to such Information or the completeness thereof.
          Section 8.09 Other Agreements . Except as otherwise provided in Section 8.06 , Sections 8.01 through 8.08 and 8.10 shall not apply with respect to Information, Records, actions and other matters relating to Tax matters, all of which shall be governed by the Tax Sharing Agreement.
          Section 8.10 Control of Legal Matters .
          (a) General. (i) On or prior to the Distribution Date, CS shall assume (or, as applicable, retain), or cause the applicable member of the Cadbury plc Group to assume (or, as applicable, retain) control of each of the Cadbury plc Litigation Matters, and CS shall use its reasonable best efforts to have a member of the Cadbury plc Group substituted for any member of the DPS Group named as a defendant in any such Cadbury plc Litigation Matters; provided , however , that no member of the Cadbury plc Group shall be required to make any such effort if the removal of any member of the DPS Group would jeopardize insurance coverage or rights to indemnification from third parties applicable to such Cadbury plc Litigation Matters.
     (ii) On or prior to the Distribution Date, DPS shall assume (or, as applicable, retain), or cause the applicable member of the DPS Group to assume (or, as applicable, retain) control of each of the Beverages Litigation Matters, and DPS shall use its reasonable best efforts to have a member of the DPS Group substituted for any member of the Cadbury plc Group named as a defendant in any such Beverages Litigation Matters; provided , however , that no member of the DPS Group shall be required to make any such effort if the removal of any member of the Cadbury plc Group would jeopardize insurance coverage or rights to indemnification from third parties applicable to such Beverages Litigation Matters.
          (b) Except as provided in Section 8.10(a) , after the Distribution Date, the Parties hereto agree that with respect to all Actions commenced against any member of the Cadbury plc Group, any member of the DPS Group or members of both Groups relating to events that take place before, on or after the Distribution Date, such demands, claims or Actions shall be controlled by:
     (i) A member of the Cadbury plc Group, if such Action relates solely to the Cadbury plc Assets, Cadbury plc Liabilities or Cadbury plc Business (as the Cadbury plc Business is conducted after the Distribution Date) (a “ Future Cadbury plc Litigation Matter ”), and CS shall use its reasonable best efforts to have a member of the Cadbury

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plc Group substituted for any member of the DPS Group which may be named as a defendant in such Future Cadbury plc Litigation Matter; provided , however , that no member of the Cadbury plc Group shall be required to make any such effort if the removal of any member of the DPS Group would jeopardize insurance coverage or rights to indemnification from third parties applicable to such Future Cadbury plc Litigation Matter;
     (ii) A member of the DPS Group, if such claim, demand or Action relates solely to the Beverages Assets, Beverages Liabilities or Beverages Business (as the Beverages Business is conducted after the Distribution Date) (a “ Future Beverages Litigation Matter ”), and DPS shall use its reasonable best efforts to have a member of the DPS Group substituted for any member of the Cadbury plc Group which may be named as a defendant in such Future Beverages Litigation Matter; provided , however , that no member of the DPS Group shall not be required to make any such effort if the removal of any member of the Cadbury plc Group would jeopardize insurance coverage or rights to indemnification from third parties applicable to such Future Beverages Litigation Matter; and
     (iii) Except as provided in subparagraphs (i) or (ii) above, or as may be otherwise agreed by DPS and CS, a member of each of the DPS Group and the Cadbury plc Group jointly if (A) members of both Groups jointly operate or operated at the relevant time the Business to which such Action relates or such Action relates to both the Cadbury plc Assets, Cadbury plc Liabilities or Cadbury plc Business and the Beverages Assets, Beverages Liabilities or Beverages Business, (B) an Action arises from or relates to any Disclosure Document or any other document filed with any Governmental Authority (including the SEC or the FSA) at or prior to the Distribution Date by CS, Cadbury plc or DPS in connection with the Distribution, (C) an Action is brought by or on behalf of the current or former stockholders of CS, Cadbury plc or DPS and relates to any filing by CS, Cadbury plc or DPS with the SEC or the FSA other than those described in clause (B), (D) an Action is brought by any person against CS, Cadbury plc or DPS with respect to the Distribution, (the matters in clauses (A) through (D) being “ Future Joint Litigation Matters ”); provided , however , that no member of either Group may settle a Future Joint Litigation Matter without the prior written consent of the members of the other Group named or involved in such Future Joint Litigation Matter, which consent shall not be unreasonably withheld or delayed; provided further that either party may settle a Future Joint Litigation matter if such settlement is for money only and provides a full release from any liability under such Future Joint Litigation Matter for the other party and, as applicable, the members of the other party’s Group.
          (c) Claims Against Third Parties. Actions by any member of either Group against third parties, and any proceeds or other benefits that may be received as a result of such Actions and any Liabilities arising out of or resulting from such Actions, that are (i) listed in Schedule 8.10(c)(i) or that relate to the Cadbury plc Business and not to the Beverages Business shall be the property of the applicable member of the Cadbury plc Group (“ Cadbury plc Claims ”), (ii) listed in Schedule 8.10(c)(ii) or that relate to the Beverages Business and not to the Cadbury plc Business shall be the property of the applicable member of the DPS Group (“ Beverages Claims ”), and (iii) listed in Schedule 8.10(c)(iii) or that relate to both the Cadbury

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plc Business and the Beverages Business shall be the property of, and shall be shared by, CS and DPS in proportion to their respective interests (“ Joint Cadbury plc and Beverages Claims ”).
          (d) Retention of Counsel. The parties hereto agree that attorneys who have worked for any member of the Cadbury plc Group or any member of the DPS Group prior to the Distribution Date are not conflicted from representing any members of the Cadbury plc Group or the DPS Group, except to the extent such representation is adverse to a member of the other Group.
          (e) Notice to Third Parties; Service of Process; Cooperation.
     (i) To the extent necessary, to effectuate the provisions in this Agreement, CS and DPS shall cause the members of their respective Groups to promptly notify their respective agents for service of process and all other necessary parties, including plaintiffs and courts and shall provide instructions for proper service of legal process and other documents.
     (ii) Each Party shall, and shall cause the members of its respective Groups to, attempt in good faith to not accept service on behalf of any member of the other Party’s Group, and shall, and shall cause the members of their respective Groups to, use their reasonable best efforts to deliver to each other any legal process or other documents incorrectly delivered to them or their agents as soon as possible following receipt.
          (f) Nothing in this Section 8.10 shall effect in any way the indemnification provisions in ARTICLE VII or the allocation of Liabilities between the Parties under this Agreement.
ARTICLE IX
INSURANCE
          Section 9.01 Policies and Rights Included Within Assets . The Beverages Assets shall include (i) any and all rights of an insured Party under each of the Beverages Shared Policies, subject to the terms of such Beverages Shared Policies and any limitations or obligations of DPS contemplated by this ARTICLE IX , specifically including rights of indemnity and the right to be defended by or at the expense of the insurer, with respect to all alleged wrongful acts, claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses incurred or claimed to have been incurred prior to the Distribution Date by any Party in connection with the conduct of the Beverages Business or, to the extent any claim is made against DPS or any of its Subsidiaries or conduct of the Cadbury plc Business, and which alleged wrongful acts, claims, suits, actions, proceedings, injuries, losses, liabilities, damages and expenses may arise out of an insured or insurable event, occurrence or wrongful act under one or more of such Beverages Shared Policies; provided , however , that nothing in this clause shall be deemed to constitute (or to reflect) an assignment of such Beverages Shared Policies, or any of them, to DPS, and (ii) the Beverages Policies.

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          Section 9.02 Administration; Other Matters .
          (a) Administration. Except as otherwise provided in Section 9.02 hereof, from and after the Demerger Effective Time, CS shall be responsible for (i) Insurance Administration of the Shared Policies; and (ii) Claims Administration under such Shared Policies with respect to Cadbury plc Liabilities and (iii) reasonable oversight of Claims Administration by DPS under such Shared Policies with respect to Beverages Liabilities; provided that the retention of such responsibilities by CS is in no way intended to limit, inhibit or preclude any right to insurance coverage for any Shared Policy Insured Claim of a named insured under such Policies as contemplated by the terms of this Agreement; provided further that CS’ retention of the administrative responsibilities for the Shared Policies shall not relieve the Party submitting any Shared Policy Insured Claim of the primary responsibility for reporting such Shared Policy Insured Claim accurately, completely and in a timely manner or of such Party’s authority to settle any such Shared Policy Insured Claim within any period permitted or required by the relevant Policy. CS may discharge its administrative responsibilities under this Section 9.02 by contracting for the provision of services by independent parties. Each of the applicable Parties shall pay any costs relating to defending its respective Shared Policy Insured Claims under Shared Policies to the extent such costs including defense, out-of-pocket expenses, and direct and indirect costs of employees or agents of CS related to Claims Administration and Insurance Administration are not covered under such Policies.
          (b) Claims Under Shared Policies. Where Beverages Liabilities are specifically covered under the same Shared Policy for periods prior to the Distribution Date, or where such Shared Policies cover claims made after the Distribution Date with respect to an occurrence or wrongful act prior to the Distribution Date, then from and after the Distribution Date, DPS may claim coverage for Shared Policy Insured Claims under such Shared Policy as and to the extent that such insurance is available up to the full extent of the applicable limits of liability of such Shared Policy (and may receive any Insurance Proceeds with respect thereto as contemplated by Section 9.02(c) hereof), subject to the terms of this Section 9.02 . Except as set forth in this Section 9.02 , no member of the Cadbury plc Group or the DPS Group, as applicable, shall be liable to a member of the other Party’s Group for claims not reimbursed by insurers for any reason not within the control of a member of the Cadbury plc Group or the DPS Group, as the case may be, including coinsurance provisions, deductibles, quota share deductibles, self-insured retentions, bankruptcy or insolvency of an insurance carrier, Shared Policy limitations or restrictions, any coverage disputes, any failure to timely claim by a member of the Cadbury plc Group or the DPS Group or any defect in such claim or its processing. It is expressly understood that the foregoing shall not limit any Party’s liability to the other Party for indemnification pursuant to ARTICLE VII .
          (c) Allocation of Insurance Proceeds. Except as otherwise provided in Section 9.02 , Insurance Proceeds received with respect to claims, costs and expenses under the Shared Policies shall be paid to or on behalf of CS, which shall thereafter administer the Shared Policies by paying the Insurance Proceeds, as appropriate, to CS with respect to Cadbury plc Liabilities and to DPS with respect to Beverages Liabilities, net of the reasonable, documented out-of-pocket costs incurred by CS in administering the applicable claim (it being understood that such costs shall fairly reflect the costs to CS of providing such administrative services, including the costs incurred by CS in respects of any increased premiums resulting from any such claims on such Shared Policy and a reasonable allocation for salary, wages, benefits, Taxes and other expenses directly attributable thereto and without any markup for profit). CS will provide documentation of any reasonable out-of-pocket costs incurred at the time of payment of the allocable portions of the indemnity costs and Insurance Proceeds to DPS. Payment

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of the allocable portions of indemnity costs of Insurance Proceeds resulting from such Policies will be made by CS to the appropriate Party upon receipt from the insurance carrier. Each Party agrees to obtain for itself and each member of its Group insurance policies (in forms and amounts determined by that Party), which shall be effective as of the Distribution Date, to cover any Cadbury plc Liabilities or Beverages Liabilities, as applicable, that exceed the Insurance Proceeds available from such Shared Policies. Each of the Parties agrees to use commercially reasonable efforts to maximize available coverage under those Shared Policies applicable to it, and to take all commercially reasonable steps to recover from all other responsible parties in respect of an Shared Policy Insured Claim to the extent coverage limits under a Shared Policy have been exceeded or would be exceeded as a result of such Shared Policy Insured Claim (it being understood that the obligation to use commercially reasonable efforts to recover from all other responsible parties in respect of a Shared Policy Insured Claim shall not require any Party to commence any litigation proceedings against any such other responsible party).
          Section 9.03 Agreement for Waiver of Conflict and Shared Defense . In the event that Shared Policy Insured Claims of both Parties exist relating to the same occurrence, the Parties shall jointly defend and waive any conflict of interest necessary to the conduct of the joint defense. Nothing in this ARTICLE IX shall be construed to limit or otherwise alter in any way the obligations of the Parties to this Agreement, including those created by this Agreement, by operation of Law or otherwise.
ARTICLE X
DISPUTE RESOLUTION
          Section 10.01 Disputes . Except as otherwise specifically provided in any Ancillary Agreement or Continuing Arrangement (the terms of which, to the extent so provided therein, shall govern the resolution of disputes, controversies or claims that are the subject of such Ancillary Agreement or Continuing Arrangement), the procedures for discussion, negotiation and arbitration set forth in this ARTICLE X shall apply to all disputes, controversies or claims (whether arising in contract, tort or otherwise) that may arise out of or relate to, or arise under or in connection with, this Agreement or any Ancillary Agreement or Continuing Arrangement, or the transactions contemplated hereby or thereby (including all actions taken in furtherance of the transactions contemplated hereby or thereby on or prior to the Demerger Effective Time), between or among any member of the Cadbury plc Group, on the one hand, and any member of the DPS Group, on the other hand (collectively, “ Agreement Disputes ”).
          Section 10.02 Dispute Resolution .
          (a) CS and DPS will use their respective commercially reasonable efforts to resolve expeditiously any Agreement Dispute on a mutually acceptable negotiated basis. In furtherance of the foregoing, any member of the DPS Group or the Cadbury plc Group involved in an Agreement Dispute may deliver a notice (an “ Escalation Notice ”) demanding an in-person meeting involving senior level management representatives of Cadbury plc and DPS (or, if CS and DPS agree, of the appropriate strategic business unit or division within each such entity). A copy of any such Escalation Notice shall be given to the Chief Legal Officer of each of Cadbury

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plc and DPS (which copy shall state that it is an Escalation Notice pursuant to this Section 10.02 ). Any agenda, location or procedures for such discussions or negotiations between CS and DPS may be established by CS and DPS from time to time; provided , however , that the representatives of Cadbury plc and DPS shall use their reasonable efforts to meet within 30 days of the Escalation Notice.
          (b) If the senior level management representatives of Cadbury plc and DPS are not able to resolve the Agreement Dispute within 30 days after the date of receipt of the Escalation Notice (or such shorter time as is necessary to avoid immediate irreparable injury), then the Agreement Dispute shall be submitted to the chief executive officers of both Cadbury plc and DPS.
          (c) If CS and DPS are not able to resolve the Agreement Dispute through the processes set forth in subsections (a) and (b) of this Section 10.02 within 60 days after the date of the Escalation Notice, such Agreement Dispute shall be determined, at the request of either CS or DPS by arbitration, which shall be conducted (i) by three arbitrators, consisting of one arbitrator appointed by CS, one arbitrator appointed by DPS and a third arbitrator appointed by the two arbitrators appointed by CS and DPS or, if the arbitrators appointed by CS and DPS cannot agree on a third arbitrator, the third arbitrator shall be appointed by the chief executive officers of both CS and DPS, and (ii) in accordance with the Commercial Rules of the American Arbitration Association (except with respect to the selection of arbitrators) in effect at the time of filing of the demand for arbitration.
          (d) The decision of the arbitrators (which, notwithstanding any other provision of this Agreement to the contrary, may include an order to specifically perform any provision of this Agreement) shall be final and binding upon the Parties hereto, and the expense of the arbitration (including the award of attorneys’ fees to the prevailing party) shall be paid as the arbitrators determine. The decision of the arbitrators shall be executory, and judgment thereon may be entered by any court of competent jurisdiction. The seat of the arbitration shall be New York, New York.
          (e) The existence of, and any discussions, negotiations, arbitrations or other proceedings relating to, any Agreement Dispute shall be considered by each Party hereto as Confidential Information until such time as a judgment thereon is entered in a court of competent jurisdiction.
          (f) Notwithstanding anything contained in this Agreement to the contrary, no member of the DPS Group and no member of the Cadbury plc Group shall have the right to institute judicial proceedings against the other Party or any Person acting by, through or under such other Party, in order to enforce the instituting Party’s rights hereunder, except that any such member shall be permitted to seek an injunction in aid of arbitration with respect to an Agreement Dispute to preserve the status quo during the pendency of any arbitration proceeding pursuant to paragraph (c) of this Section 10.02 . All judicial proceedings arising out of or relating to this Agreement shall be heard and determined exclusively in any New York state or federal court sitting in the Borough of Manhattan in The City of New York.

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          Section 10.03 Continuity of Service and Performance . Unless otherwise agreed in writing, the Parties will continue to provide service and honor all other commitments under this Agreement and each Ancillary Agreement during the course of dispute resolution pursuant to the provisions of this ARTICLE X with respect to all matters not subject to such Agreement Dispute.
ARTICLE XI
TERMINATION
          Section 11.01 Termination . This Agreement may be terminated and the Distribution may be abandoned at any time prior to the Distribution Date by and in the sole discretion of CS.
          Section 11.02 Effect of Termination . In the event of termination of this Agreement in accordance with Section 11.01 , this Agreement shall forthwith become void and there shall be no Liability on the part of either Party hereto.
          Section 11.03 Amendment . This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, the Parties hereto or (b) by a waiver in accordance with Section 11.04 .
          Section 11.04 Waiver . Either Party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other Party and (b) waive compliance with any of the agreements of the other Party or conditions to such Party’s obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the Party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of either Party hereto to assert any of its rights hereunder shall not constitute a waiver of any of such rights.
ARTICLE XII
MISCELLANEOUS
          Section 12.01 Limitation of Liability . IN NO EVENT SHALL ANY MEMBER OF THE CADBURY PLC GROUP OR THE DPS GROUP BE LIABLE TO ANY MEMBER OF THE DPS GROUP OR THE CADBURY PLC GROUP, RESPECTIVELY, FOR ANY SPECIAL, CONSEQUENTIAL, INDIRECT, INCIDENTAL OR PUNITIVE DAMAGES OR LOST PROFITS, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY (INCLUDING NEGLIGENCE) ARISING IN ANY WAY OUT OF THIS AGREEMENT OR ANY ANCILLARY AGREEMENT, WHETHER OR NOT SUCH PARTY HAS BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES; PROVIDED , HOWEVER , THAT THE FOREGOING LIMITATIONS SHALL NOT LIMIT EACH PARTY’S

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INDEMNIFICATION OBLIGATIONS FOR LIABILITIES TO THIRD PARTIES AS SET FORTH IN ARTICLE VII .
          Section 12.02 Expenses . Notwithstanding anything in this Agreement or in any Ancillary Agreement to the contrary, all DPS Transaction Costs shall be borne by DPS and all Transaction Costs shall be borne by CS.
          Section 12.03 Notices . All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by facsimile or registered or certified mail (postage prepaid, return receipt requested) to the respective Parties hereto at the following addresses (or at such other address for a Party as shall be specified in a notice given in accordance with this Section 12.03 ):
  (a)   if to Cadbury plc or CS:
 
      Cadbury plc
25 Berkeley Square
London W1J 6HB
Facsimile: 44-20-7830-5015
Attention: Henry Udow, Esq.
                   Chief Legal Officer
 
      with a copies to:
 
      Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022-6069
Telecopy: (212) 848-7179
Attention: Creighton O’M. Condon, Esq.
                    Scott Petepiece, Esq.
 
      and
 
      Slaughter and May
One Bunhill Row
London EC1Y 8YY
Facsimile: 44-20-7090-5000
Attention: Tim Boxell
 
  (b)   if to DPS:
 
      5301 Legacy Drive
Plano, TX 75024
Facsimile: (972) 673-8130
Attention: James L. Baldwin, Jr.
                   General Counsel

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          Section 12.04 Public Announcements . Following the Demerger Effective Time, neither Party to this Agreement shall make, or cause to be made, any press release or public announcement in respect of this Agreement or the transactions contemplated by this Agreement without the prior written consent of the other Party unless otherwise required by Law or applicable stock exchange regulation, and the Parties to this Agreement shall cooperate as to the timing and contents of any such press release or public announcement. The Parties shall use commercially reasonable efforts to agree on the timing and content of any announcement or communication relating to the financial results and/or results of operations of the quarters ending March 31, 2008 and June 30, 2008 for DPS and the period ending June 30, 2008 for Cadbury plc.
          Section 12.05 Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to either Party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the Parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible.
          Section 12.06 Entire Agreement . This Agreement, the Ancillary Agreements and the Transfer Documents constitute the entire agreement of the Parties hereto and their Affiliates with respect to the subject matter hereof and thereof and supersede all prior agreements and undertakings, both written and oral, between the Parties hereto with respect to the subject matter hereof and thereof.
          Section 12.07 Assignment . This Agreement may not be assigned by a Party hereto without the consent of the other Party hereto; provided that a merger shall not be deemed to be an assignment under this Agreement; and provided further , that any Party may assign this Agreement or any of its rights and obligations hereunder to one or more Affiliates of such Party without the consent of the other Party provided that no such assignment shall relieve the assignor of any of its obligations hereunder.
          Section 12.08 Parties in Interest . This Agreement shall be binding upon and inure solely to the benefit of the Parties hereto and their respective successors and permitted assigns, and nothing herein, express or implied (including the provisions of ARTICLE VII relating to indemnified parties), is intended to or shall confer upon any other Person any legal or equitable right, benefit or remedy of any nature whatsoever under or by reason of this Agreement.
          Section 12.09 Currency . Unless otherwise specified in this Agreement, all references to currency, monetary values and dollars set forth herein means United States dollars and all payments hereunder shall be made in United States dollars unless otherwise mutually agreed upon by the Parties.
          Section 12.10 Tax Matters . Except as otherwise specifically provided herein, this Agreement (including ARTICLE VII (other than Section 7.06 )) shall not govern Tax matters,

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which shall be governed by the Tax Sharing Agreement.
          Section 12.11 Employee Matters . Except as otherwise provided herein and not inconsistent with the Employee Matters Agreement, this Agreement shall not govern any employee matters, which shall be exclusively governed by the Employee Matters Agreement.
          Section 12.12 Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York.
          Section 12.13 Waiver of Jury Trial . EACH OF THE PARTIES HERETO HEREBY WAIVES TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW ANY RIGHT IT MAY HAVE TO A TRIAL BY JURY WITH RESPECT TO ANY LITIGATION DIRECTLY OR INDIRECTLY ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT. EACH OF THE PARTIES HERETO HEREBY (A) CERTIFIES THAT NO REPRESENTATIVE, AGENT OR ATTORNEY OF THE OTHER PARTY HAS REPRESENTED, EXPRESSLY OR OTHERWISE, THAT SUCH OTHER PARTY WOULD NOT, IN THE EVENT OF LITIGATION, SEEK TO ENFORCE THE FOREGOING WAIVER AND (B) ACKNOWLEDGES THAT IT HAS BEEN INDUCED TO ENTER INTO THIS AGREEMENT AND THE TRANSACTIONS CONTEMPLATED BY THIS AGREEMENT, AS APPLICABLE, BY, AMONG OTHER THINGS, THE MUTUAL WAIVERS AND CERTIFICATIONS IN THIS SECTION 12.13 .
          Section 12.14 Survival of Covenants . Except as expressly set forth in any Ancillary Agreement, the covenants and agreements contained in this Agreement and each Ancillary Agreement, and Liability for the breach of any obligations contained herein or therein, shall survive the Distribution Date and shall remain in full force and effect.
          Section 12.15 Counterparts . This Agreement may be executed and delivered (including by facsimile transmission or portable document format (“ .pdf ”)) in counterparts, and by the different Parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.
[ Remainder of page intentionally left blank ]

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          IN WITNESS WHEREOF, the Parties hereto have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
         
  CADBURY SCHWEPPES PLC
 
 
  By      
    Name:      
    Title:      
 
  DR PEPPER SNAPPLE GROUP, INC.
 
 
  By      
    Name:      
    Title:      
 
  CADBURY PLC, solely for the purposes of
Sections 4.01(a) and (b) and Section 5.03
 
 
  By:      
    Name:      
    Title:      
 

 

 

Exhibit 10.1
FORM OF TRANSITION SERVICES AGREEMENT
     This Transition Services Agreement (“ Agreement ”) is entered into this [       ] day of [            ], 2008, between Cadbury Schweppes plc, a United Kingdom public limited company (“ Cadbury ”), and Dr Pepper Snapple Group, Inc., a Delaware corporation (“ DPS ”).
RECITALS
     WHEREAS, the board of directors of Cadbury has determined that it is in the best interests of Cadbury and its shareholders to separate Cadbury into two separate, publicly traded companies, which shall operate the Cadbury plc Business and the Beverages Business, respectively (the “ Separation ”); and
     WHEREAS, Cadbury plc, a United Kingdom public limited company, and DPS have entered into a Separation and Distribution Agreement (the “ Separation Agreement ”), dated as of [                      ], 2008, which sets forth, among other things, the assets, liabilities, rights and obligations of each of the parties thereto following the Separation; and
     WHEREAS, in connection with the Separation, Cadbury will continue to provide, or cause to be provided, to DPS, and DPS will continue to provide, or cause to be provided, to Cadbury, certain services for a limited period of time after the Separation pursuant to this Agreement.
     NOW, THEREFORE, in consideration of the mutual covenants contained herein, the signatories covenant and agree as follows:
ARTICLE 1
DEFINITIONS
      Section 1.1. Capitalized terms used herein and not otherwise defined herein shall have the meanings set forth in the Separation Agreement. The following terms used herein shall have the following meanings:
     “ Affiliate ” shall have the meaning set forth in the Separation Agreement and for purposes of this Agreement, shall refer to Cadbury’s Affiliates or DPS’ Affiliates, as the case may be, post-Separation.
     “ Cadbury Providing Party ” shall have the meaning set forth in Section 5.2.
     “ Cadbury Receiving Party ” shall have the meaning set forth in Section 5.6.
     “ Cadbury Services ” shall have the meaning set forth in Section 2.1.
     “ Confidential Information ” shall have the meaning set forth in Section 2.5(a).

 


 

     “ Consents ” shall have the meaning set forth in Section 2.3.
     “ Disclosing Party ” shall have the meaning set forth in Section 2.5(a).
     “ DPS Providing Party” shall have the meaning set forth in Section 5.5.
     “ DPS Receiving Party ” shall have the meaning set forth in Section 5.3.
     “ DPS Services ” shall have the meaning set forth in Section 2.2.
     “ Force Majeure Event ” shall have the meaning set forth in Section 9.1.
     “ Incoming Service Fee ” shall have the meaning set forth in Section 4.1.
     “ Indemnified Party ” shall have the meaning set forth in Section 7.3.
     “ Indemnifying Party ” shall have the meaning set forth in Section 7.3.
     “ Outgoing Service Fee ” shall have the meaning set forth in Section 4.1.
     “ Providing Party ” shall have the meaning set forth in Section 3.2.
     “ Receiving Party ” shall have the meaning set forth in Section 3.2.
     “ Recipient ” shall have the meaning set forth in Section 2.5(a).
     “ Representatives ” shall have the meaning set forth in Section 2.5(a).
     “ SAS ” shall have the meaning set forth in Section 5.3.
     “ Senior Managers ” shall mean the individuals appointed by the Chief Legal Officers of each party hereto.
     “ Services ” shall have the meaning set forth in Section 2.2.
     “ Transition Representative ” shall mean Thomas Whitten, in the case of Cadbury, and Angie Wallander, in the case of DPS, or their respective replacements or designees.
     “ VAT ” shall have the meaning set forth in Section 4.1(c).
ARTICLE 2
DESCRIPTION OF SERVICES; STANDARD OF PERFORMANCE
      Section 2.1. On the terms and subject to the conditions contained herein, Cadbury shall provide, or cause to be provided, to DPS and its Affiliates the services identified in Schedule A hereto, as such Schedule A may be from time to time supplemented or modified in accordance with the provisions of this Agreement (the “ Cadbury Services ”).

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      Section 2.2. On the terms and subject to the conditions contained herein, DPS shall provide, or cause to be provided, to Cadbury and its Affiliates the services identified in Schedule B hereto, as such Schedule B may be from time to time supplemented or modified in accordance with the provisions of this Agreement (the “ DPS Services ”, and together with Cadbury Services, the “ Services ”).
      Section 2.3. Each party shall, and shall cause its respective Affiliates to, provide the Services in a commercially reasonable manner and with reasonable skill and care. Notwithstanding the foregoing, the standard of care for provision of the Services shall in all material respects be no less than the level of care, skill and quality as are currently being provided to and by such party and its Affiliates and have been provided in the preceding twelve months, provided that, in the case where the Services are not currently being provided, each party shall provide the Services in a commercially reasonable manner and with reasonable skill and care. The relevant measurement of performance of the Services shall be the measurement metrics, if any, currently used by DPS and its Affiliates or by Cadbury and its Affiliates, as the case may be. Cadbury and DPS shall, and shall cause each of its Affiliates that is a Providing Party to, use commercially reasonable efforts to cooperate with each other in all matters relating to the provision of the Services. With respect to actions taken by the Receiving Party in connection with the Services received, the Receiving Party shall use the Services in a commercially reasonable manner in compliance with all applicable Laws. The Providing Party hereby grants the Receiving Party a license under all of its Intellectual Property used in the performance of Services solely to the extent required for the Receiving Party to receive the Services hereunder.
      Section 2.4. Cadbury and DPS shall each use its (and shall cause its applicable Affiliates to use their) reasonable best efforts to obtain all required consents, licenses or approvals necessary to perform the Services (the “ Consents ”) (that have not already been procured prior to the Distribution Date) as soon as reasonably practicable following the date hereof; provided that, each party shall notify the other in writing of any terms to which a proposed Consent is to be subject and shall use its reasonable best efforts to agree with the relevant third party any reasonable amendments to a proposed Consent requested by Cadbury or DPS, as the case may be. If the parties are unable to obtain any required Consents, the parties shall negotiate in good faith reasonable modifications of the Services so that such Consents are not required.
      Section 2.5. (a) Each party recognizes that in the performance of its obligations under this Agreement, or as a result of the parties’ ongoing relationship pursuant to this Agreement, non-public, confidential and/or proprietary information (“ Confidential Information ”) belonging or relating to the other party or its Affiliates (each, a “ Disclosing Party ”), including Confidential Information regarding the Services may be disclosed or become known to the other party or its Affiliates or its officers, directors, controlling persons, employees, lenders, agents, representatives, accountants and counsel (collectively, “ Representatives ”) (each, a “ Recipient ”). Each party acknowledges that all Confidential Information disclosed in connection with the provision of Services remains the property of the Disclosing Party. Unless otherwise expressed in writing to the other party, information, including any information expressed orally, that is exchanged between the parties or their respective Affiliates in connection with the performance of their respective obligations under this Agreement shall be

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presumed to be Confidential Information. Each party shall, and shall cause its Affiliates and Representatives to, keep the Disclosing Party’s Confidential Information confidential and take such precautions with respect to the Disclosing Party’s Confidential Information as it normally takes with its own non-public, confidential and/or proprietary information, which shall be no less than a reasonable standard of care under the circumstances. This obligation shall not apply to:
     (i) information that, at the time of disclosure, is in the public domain or generally known in the industry, other than as a result of a breach by the other party or its Affiliates or Representatives of any of the provisions of this Agreement or of any other duty of confidentiality owed to the other party or its Recipients;
     (ii) information that, after disclosure to the Recipient hereunder, is published or otherwise becomes part of the public domain or generally known in the industry through no fault of the party (or such party’s Recipients) to whom the information was disclosed;
     (iii) information that a party can demonstrate through its records was in its lawful possession or the lawful possession of a Recipient at the time such party received such information (except for Confidential Information regarding DPS or its Affiliates in Cadbury’s possession or Confidential Information regarding Cadbury or its Affiliates in the possession of Representatives that are transferred to DPS or its Affiliates, each of which shall continue to be confidential); and
     (iv) information that may be received by a Recipient in good faith from a source other than the Disclosing Party, which source either has no duty of confidentiality to such other party or, if such source does have a duty of confidentiality, the Recipient of such Confidential Information was unaware of or had no reasonable basis for knowing thereof (provided that, if a Recipient later becomes aware or reasonably should know of such duty, this exception shall no longer apply).
     (b) Each party shall inform any and all of its Recipients that receive Confidential Information of a Disclosing Party of the confidential and proprietary nature of such Confidential Information and shall inform such Recipients that such Confidential Information is to be kept strictly proprietary and confidential pursuant to the terms of this Agreement. Each party shall explain to each such Recipient his or her responsibilities and obligations under this Section 2.5, and shall establish commercially reasonable procedures to ensure that the Confidential Information is properly protected and monitored for purposes of adhering to the terms of this Section 2.5. Except to the extent otherwise specifically provided in this Section 2.5, the Confidential Information will be kept confidential by each party and its Recipients. Each party agrees to be responsible for any breach of this Section 2.5 by any of its Recipients.
     (c) Each party and its Recipients shall maintain, however, the right to disclose the Confidential Information of a Disclosing Party if required to do so by Law, subpoena or other legal process, provided that, in the case of any such potential disclosure pursuant to this Section 2.5(c), the Recipient shall provide the Disclosing Party with prompt notice of such requirement and shall use its reasonable best efforts to keep and assist the Disclosing Party in keeping it confidential by all appropriate means, and shall, to the extent reasonably practical, afford the

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Disclosing Party the opportunity to contest the disclosure obligation and cooperate with any Recipients in seeking any such protective order or other appropriate legal remedy, in each case, at the Disclosing Party’s request and expense. If a Recipient finds it necessary to disclose any Confidential Information, such Person will disclose only that portion of the Confidential Information that it is advised in writing by counsel is legally required to be disclosed and will use its reasonable best efforts, at the Disclosing Party’s request and expense, to ensure that all Confidential Information so disclosed will be accorded confidential treatment.
     (d) Upon termination of this Agreement for any reason, no Recipient shall disclose nor make any further use of a Disclosing Party’s Confidential Information and upon written request shall immediately return or destroy all such Confidential Information as shall be in written or other tangible form (including all copies thereof), provided , however , that each party shall be entitled to retain one record copy in its legal department, to be held in strict confidence, subject to the above exceptions; and provided , further , that if such Confidential Information is destroyed, upon written request, shall certify the same to the Disclosing Party.
     (e) The parties acknowledge that in the event of any breach or threatened breach of this Agreement pertaining to Confidential Information, the non-breaching party will not have an adequate remedy at law and may suffer irreparable injury as a result of any such breach. Therefore, in the event of any such breach or threatened breach, the non-breaching party shall, in addition to any other remedies available at law or in equity, be entitled to specific performance, without posting bond or other security.
      Section 2.6. The Transition Representatives shall meet regularly in person, telephonically, or as they otherwise agree at least monthly for the first year following the date hereof, to discuss any issues arising under this Agreement and the need for any modifications or additions hereto.
      Section 2.7. Subject to Section 2.8, except with respect to any services of the type described on Schedule D, if either party can demonstrate that, by virtue of the transactions contemplated by the Separation Agreement, either party requires a service not currently provided for under this Agreement that was provided by or to a member of the Cadbury and its Affiliates by or to DPS and its Affiliates, as the case may be, in the twenty-four (24) month period prior to the Distribution Date, the parties shall cooperate and endeavor in good faith to modify and supplement the schedules to this Agreement (including any other attachments thereto, if any) to accurately identify those services, and to specify the manner and term in which such services shall be performed and, as appropriate, to enter into ancillary transition services agreements addressing the provision of certain critical services or the provision of the Services in certain jurisdictions (including price calculated pursuant to Section 4), in order to refine and further effect the understandings set forth in this Agreement. Unless otherwise so agreed, in no event shall any such modification or supplement to the schedules (other than the election by a party to identify a Service which it does not elect to receive and for which service fees shall not be payable) or the execution of any ancillary agreements result in any change in the fees for the Services.
      Section 2.8. Where a service that was provided by a third party to Cadbury or its Affiliates (including DPS and its Affiliates) prior to the Distribution Date is not otherwise

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provided for in this Agreement and is reasonably required by DPS or Cadbury to continue DPS’ or Cadbury’s remaining businesses, as applicable, in substantially the same manner as that carried on in the twenty-four month period prior to the Distribution Date, Cadbury or DPS, as applicable, will provide such assistance as is reasonable under the circumstances so as to enable the other party to put in place similar arrangements with such third party.
      Section 2.9. Except as otherwise specified in this Agreement, all costs and expenses, including fees and disbursements of counsel, financial advisors and accountants, incurred in connection with this Agreement and the transactions contemplated by this Agreement shall be paid by the party incurring such costs and expenses.
      Section 2.10. Subject to Section 2.3 of this Agreement, the Cadbury Providing Party and DPS Providing Party (each, as defined below), as applicable, shall be responsible for selecting and supervising in good faith the personnel who will perform any particular Cadbury Service or DPS Service, respectively, and performing all administrative services with respect to such personnel, including establishing compensation structure and work load balancing.
      Section 2.11. Cadbury and DPS shall, or shall cause their respective Affiliates to, make available on a timely basis to the Providing Party all information reasonably requested by such Providing Party to enable it to provide the Services and provide reasonable access to the Providing Party of such party’s premises to the extent necessary for the purpose of providing the Services.
ARTICLE 3
PERIOD OF SERVICES: TERM
      Section 3.1. The parties agree that, except as otherwise designated in this Agreement, all services covered by this Agreement shall terminate on the date indicated on Schedule A or Schedule B , as applicable, unless earlier terminated by the Receiving Party upon such prior written notice as set forth on Schedule A or Schedule B , as applicable, or pursuant to Section 3.2(c) of this Agreement or extended by the mutual written agreement of the Providing Party and Receiving Party. This Agreement shall terminate when the terms for all Services have terminated; provided, however, that Sections 2.5, 2.9 and Articles 5, 7, 8 and 9 shall survive any such termination; provided further that Sections 5.4 and 5.7 shall continue for one year only.
      Section 3.2. (a) Each party shall, or shall cause its Affiliate that is providing the Services hereunder (a “ Providing Party ”) to, cooperate in a commercially reasonable manner with the party receiving the Services hereunder (a “ Receiving Party ”) to facilitate the transfer of responsibility for the Services to the Receiving Party or its designee. Each party shall use its commercially reasonable efforts to: (i) assume performance of the Services within shorter time periods than those specified on Schedule A or Schedule B , as applicable, and (ii) make or obtain any approvals, permits and licenses and implement such systems as may be necessary for such party to provide the Services independently as soon as reasonably practicable following the Distribution Date.

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     (b) As soon as reasonably practicable following the termination of this Agreement or the discontinuation of any Services, the Providing Party shall deliver to the Receiving Party, at the Receiving Party’s expense, copies of any books, records, data and reports reasonably requested by the Receiving Party in connection with such Services. Subject to the requirements of any applicable Laws, each Receiving Party agrees to keep any information it receives pursuant to this Section 3.2(b) that relates to a Disclosing Party confidential in accordance with Section 2.5.
     (c) Notwithstanding anything to the contrary in this Agreement, a party may terminate any Service or all Services immediately upon notice to the other party in the event of a material breach of this Agreement by the breaching party that is not cured within thirty (30) days following written notice from the non-breaching party.
ARTICLE 4
COMPENSATION; PAYMENT TERMS
      Section 4.1. (a) DPS shall pay to Cadbury a fee for each Service that is provided to DPS and its Affiliates hereunder (collectively, the “ Incoming Service Fee ”) and Cadbury shall pay to DPS a fee for each Service that is provided to Cadbury and its Affiliates hereunder (collectively, the “ Outgoing Service Fee ”). The costs for each Service (the “ Costs ”) shall be the actual direct cost incurred by the Providing Party in performing such Service, calculated as set forth on Schedule C , which shall include a reasonable allocation for overhead salary, wages, benefits, taxes and other expenses attributable thereto (but shall exclude, for the avoidance of doubt, any overhead expenses for branding, marketing and other similar expenses) and without any markup for profit, calculated in a manner consistent with past custom and practice of the Providing Party with respect to such Service (or Cadbury Schweppes SBS, Inc. in the case of the Services which were not historically provided by the Providing Party); provided , however , that such Costs shall be adjusted to reflect any termination or expiration of any Transition Service pursuant to Article 3 of this Agreement.
     (b) The Incoming Service Fee and the Outgoing Service Fee shall include all out-of-pocket charges and costs of performing the Services hereunder, including, without limitation, license fees, royalties or provider services fees.
     (c) The fees payable by a Receiving Party to a Providing Party shall, in each case, be taken to be exclusive of any value added Taxes, sales Taxes, or similar Taxes (“ VAT ”) properly chargeable in respect of the transactions hereunder, and an amount equal to such Taxes so chargeable shall, subject to receipt of a valid VAT receipt or invoice in accordance with Section 4.1(f) below, be paid by the Receiving Party to the Providing Party in addition to the fees otherwise payable under this Agreement.
     (d) In the event that applicable Law requires that any amount in respect of Taxes be withheld from any payment by a Receiving Party to a Providing Party under this Agreement, the Receiving Party shall withhold the required amounts and pay such withheld amounts over to the applicable Governmental Authority in accordance with the requirements of the applicable Law, and any amount so withheld and paid over shall be treated as having been paid to the

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Providing Party, and the Receiving Party shall not be required to pay any additional amount as a result of or in respect of such withholding.
     (e) In each case where an amount in respect of VAT is payable by the Receiving Party in respect of a service provided by the Providing Party, DPS or Cadbury (as the case may be) shall ensure that the Providing Party shall furnish in a timely manner a valid VAT receipt or invoice to the Receiving Party in the form and manner required by Law to allow the Receiving Party or, as the case may be, any of its affiliates to recover such Tax to the extent allowable by Law.
     (f) Except in the event the Receiving Party disputes a charge, the Receiving Party shall pay, or cause payment to be made to, the Providing Party, within 30 days of receipt of a reasonably detailed written invoice from the Providing Party, for the Cost of each Service rendered hereunder, which invoice shall be delivered by the Providing Party to Cadbury or DPS, as applicable, by the 30th day of each month for the Services provided during the preceding month. Payments shall be made by wire transfer to an account designated in writing from time to time by Cadbury or DPS, as applicable.
ARTICLE 5
ACCESS TO RECORDS
      Section 5.1. During the term of this Agreement, each party shall, for the lesser of a period of seven years after the Distribution Date or a period specified by such party’s record retention policies, retain the books and records of each party and their respective Affiliates relating to the Services provided hereunder in accordance with the record retention policies of such party; provided , however , that each party shall notify the other party at least 60 days in advance of destroying any such books and records in order to provide the other party the opportunity to access such books and records and if the other party fails to request that such books and records be delivered to them at the requesting party’s expense, within 60 days after receipt of such notice, each party may destroy such books and records.
      Section 5.2. Subject to Section 2.5 above, Cadbury shall provide, or cause to be provided, to DPS and its Representatives reasonable access to the books, records (including, but not limited to, records and documentation referred to in Section 5.1), premises, systems and personnel of each Providing Party of Cadbury (a “ Cadbury Providing Party ”) to permit DPS to audit Cadbury’s or a Cadbury Providing Party’s compliance with this Agreement, provided that this right of access is exercised with reasonable prior notice and DPS uses its reasonable efforts to cause as little disruption as is reasonably possible to the performance of the Services and Cadbury Providing Party’s other businesses, provided further that DPS may only undertake two such audits per calendar year.
      Section 5.3. In addition to the rights set out in Section 5.2, Cadbury shall comply and shall cause each Cadbury Providing Party to comply with any reasonable request of DPS, including any review in accordance with the Statement of Auditing Standards No. 70 (Type 11) (the “ SAS ”), of any third party service provider of Cadbury for information relating to the Services that may be required by DPS or any Receiving Party of DPS (a “ DPS Receiving

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Party ”) to enable them to comply with the Sarbanes-Oxley Act of 2002 (and any resultant, similar or replacement legislation, rules or guidance).
      Section 5.4. If, based upon any audit performed in accordance with Sections 5.2 or 5.3, there has been either an overcharge or undercharge for the costs of the Services, then Cadbury Providing Party or DPS, as the case may be, will promptly reimburse or pay to the other Party such difference. All the costs of any audit conducted under Sections 5.2 or 5.3 shall be borne by DPS.
      Section 5.5. Subject to Section 2.5 above, DPS shall provide, or cause to be provided, to Cadbury and its Representatives reasonable access to the books, records (including, but not limited to, records and documentation referred to in Section 5.1), premises, systems and personnel of the Providing Party of DPS (the “ DPS Providing Party ”) to permit Cadbury to audit DPS’ or a DPS Providing Party’s compliance with this Agreement, provided that this right of access is exercised with reasonable prior notice and Cadbury uses its reasonable efforts to cause as little disruption as is reasonably possible to the performance of the Services and DPS Providing Party’s other businesses, provided further that Cadbury may only undertake two such audits per calendar year.
      Section 5.6. In addition to the rights set out in Section 5.5, DPS shall comply and shall cause each relevant DPS Providing Party to comply with any reasonable request of Cadbury, including any review in accordance with the SAS, of any third party service provider of DPS for information relating to the Services that may be required by Cadbury or any Receiving Party of Cadbury (a “ Cadbury Receiving Party ”) to enable them to comply with the Sarbanes-Oxley Act of 2002 (and any resultant, similar or replacement legislation, rules or guidance).
      Section 5.7. If, based upon any audit performed in accordance with Sections 5.5 or 5.6, there has been either an overcharge or undercharge for the costs of the Services, then DPS Providing Party or Cadbury, as the case may be, will promptly reimburse or pay to the other Party such difference. All the costs of any audit conducted under Sections 5.5 and 5.6 shall be borne by Cadbury.
ARTICLE 6
ASSIGNMENT
      Section 6.1. Except as otherwise provided in this Article 6, neither party shall assign its rights or obligations under this Agreement, or any part hereof, without the prior written consent of the other party (which consent shall not be unreasonably withheld). Either party may, at its election, assign its rights and corresponding obligations under this Agreement in whole or in one or more parts to any one or more of its Affiliates so long as such assigning party agrees to remain fully obligated for the performance of the terms and provisions of this Agreement as they relate to the Services being assigned.
      Section 6.2. Notwithstanding anything to the contrary in this Agreement, a party shall be entitled to assign its rights and/or obligations under this Agreement in whole or in

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part to an unrelated party in one or more locations in connection with the sale, transfer or other disposal by it or any of its Affiliates of its business or operations that receives and/or provides the Services under this Agreement in such location and this Agreement shall thereafter be read and construed as if it were a separate and independent contract between the unrelated party and the party hereto as regarding the services and facilities to be received and/or provided under this Agreement in such locations. Notwithstanding the foregoing, in the event a party assigns its rights and/or obligations hereunder upon a sale or transfer to an unrelated party as set forth above, (a) such transferor shall be entitled to continue to receive the Services (other than the Services that are the subject of such assignment) from the other party in accordance with the terms of this Agreement following any such assignment, and the other party shall have no right to terminate this Agreement as a result of such assignment, and (b) no such assignment shall relieve the transferor of any obligations hereunder in the event that such transferee fails to perform in any manner or breaches this Agreement.
      Section 6.3. Any attempted or purported assignment in violation of this Section 6 shall be null and void ab initio. In the event of a permitted assignment hereunder, this Agreement shall be binding upon and shall inure to the benefit of the parties and their respective successors and permitted assigns.
ARTICLE 7
LIMITATION ON LIABILITY; THIRD PARTY CLAIMS
      Section 7.1. Except with respect to damages included in an award against an Indemnified Party (as defined herein) resulting from a Third Party Claim for which such party is indemnified hereunder, in no event shall either party or its respective Representatives and Affiliates have any liability whether in contract or tort (including negligence and strict liability) or otherwise, at law or equity, for loss of profit, diminution in value, loss of goodwill, claims of customers, or consequential, incidental or punitive damages or other special damages as a result of, provision of or failure to provide the services under the terms of this Agreement. Subject to such other remedies permitted by Section 2.5 above and except as specifically provided in the previous sentence or in the event of bad faith or willful misconduct of such party, the maximum liability of each party and its Representatives and Affiliates to, and the sole remedy of, the other party or its Affiliates or Representatives for any act or failure to act in connection herewith (including but not limited to, the performance or breach of this Agreement) shall be the greater of (i) a refund of price paid for the particular Service, (ii) such other party’s incremental cost of performing the Service itself or (iii) such other party’s incremental cost of obtaining the Service from a third party.
      Section 7.2. EXCEPT AS OTHERWISE EXPRESSLY PROVIDED IN THIS AGREEMENT (INCLUDING SECTION 2.3), AND WITHOUT LIMITING ANY REPRESENTATIONS OR WARRANTIES IN THE SEPARATION AGREEMENT, THE PARTIES MAKE NO EXPRESS REPRESENTATIONS OR WARRANTIES WITH RESPECT TO THE SERVICES, AND NO REPRESENTATION OR WARRANTY SHALL BE IMPLIED UNDER THIS AGREEMENT OR AT LAW, INCLUDING, WITHOUT LIMITATION, RELIABILITY, ACCURACY, SUITABILITY, COMPLETENESS, WARRANTY OF

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MERCHANTABILITY OR WARRANTY OF FITNESS FOR A PARTICULAR PURPOSE, AS TO THE SERVICES TO BE PERFORMED HEREUNDER.
      Section 7.3. Subject to the limitations set forth in Section 7.1, each party (the “ Indemnifying Party ”) agrees that it shall protect, indemnify and hold the other party and its Affiliates and their Representatives (each, the “ Indemnified Party ”) harmless from and against all Indemnifiable Losses and shall defend such party at the Indemnifying Party’s expense (to the extent of any Third Party Claims) in any Action for injuries to or death of any Person or Persons or loss of or damage to the property of any Person or Persons whomsoever (including without limitation the agents and employees of the Indemnified Party) or infringement of any Person’s or Persons’ Intellectual Property arising out of the actions of the Indemnifying Party, or its Representatives, in connection with or as a result of this Agreement or the performance of the Indemnifying Party’s Services, the unauthorized use by the Indemnifying Party of the Services or other obligations hereunder.
      Section 7.4. The Indemnified Party shall give the Indemnifying Party prompt notice of any indemnifiable Action asserted against it.
      Section 7.5. Except with respect to any Third Party Claims, the receipt by a Receiving Party or its Affiliates of the Services shall be an unqualified acceptance of, and a waiver by, the Receiving Party and its Affiliates of their rights to make any claim (other than based on gross negligence or fraud) with respect to such Services unless the Receiving Party gives written notice of the claim to the Providing Party within the later of (i) sixty (60) days after receipt of the Service by the Receiving Party or its Affiliates or (ii) thirty (30) days after the date on which the Receiving Party became, or should have become, aware of the facts, events, occurrences or circumstances underlying such claim; provided , that, in no event shall the Receiving Party be entitled to give notice of a claim more than one (1) year after receipt of the Service by the Receiving Party or its Affiliates.
ARTICLE 8
DISPUTE RESOLUTION
      Section 8.1. Prior to the initiation of formal dispute resolution procedures, the parties shall first attempt to resolve any dispute arising out of or in connection with this Agreement or the transactions contemplated hereby informally, as follows:
     (a) The parties shall first attempt in good faith to resolve all disputes on a local level and shall attempt to initiate such efforts within two Business Days after receipt of notice of any such dispute. If the parties are unable to resolve a dispute in an amount of time that either party deems reasonable under the circumstances, such party may refer the dispute for resolution to the Senior Managers pursuant to the provisions of Section 8.1(b).
     (b) Within five Business Days of a notice under Section 8.1(a) referring a dispute for resolution by Senior Managers, the Transition Representatives (or other employees of the parties) shall each prepare and provide to the Senior Managers of each party summaries of the relevant information and background of the dispute, along with any appropriate supporting

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documentation. The designated Senior Managers will confer as often as they deem reasonably necessary in order to gather and exchange information, discuss the dispute and negotiate in good faith, in an effort to resolve the dispute without the need for any formal proceedings.
     (c) Formal proceedings for the resolution of a dispute pursuant to Section 8.2 may not be initiated until at least ten Business Days after the receipt by a party of a notice under Section 8.1(a) referring a dispute to Senior Managers.
      Section 8.2. All disputes arising out of or in connection with this Agreement and the transactions contemplated hereby which cannot be resolved through the procedures described herein or therein shall be finally resolved solely and exclusively by means of arbitration to be conducted in English in the City of New York. The arbitration shall be conducted by a sole arbitrator appointed by agreement of the parties, or failing such agreement, under the Commercial Rules of the American Arbitration Association and the arbitration will proceed under such Rules. The decision of the arbitrator shall be final, conclusive and binding upon the parties, and a judgment upon the award may be obtained and entered in any federal or state court of competent jurisdiction. The parties agree that any arbitration shall be kept confidential and any element of such arbitration (including but not limited to any pleadings, briefs or other documents submitted or exchanged, any testimony or other oral submissions, and any awards) shall not be disclosed beyond the arbitral tribunal, the parties, their counsel and any Person necessary to conduct the arbitration, except as may be required in recognition and enforcement proceedings, if any, or in order to satisfy disclosure obligations imposed by any applicable Law. The parties agree to cooperate in providing each other with all discovery, including but not limited to the exchange of documents and depositions of parties and non-parties, reasonably related to the issues in the arbitration. If the parties are unable to agree on any matter relating to such discovery, any such difference shall be determined by the arbitrator. The parties also agree to submit to the non-exclusive personal jurisdiction of the federal and state courts sitting in New York, New York, for the limited purpose of enforcing this arbitration agreement (including, where appropriate, issuing injunctive relief) or any award resulting from arbitration pursuant to this Section 8.2. The parties agree that the arbitration proceeding described in this Section 8.2 is the sole and exclusive manner in which the parties may resolve disputes arising out of or in connection with this Agreement; provided , however , that the parties expressly agree that nothing herein shall prevent the parties from applying to a court having jurisdiction over any of the parties hereto for provisional, injunctive or interim relief to preserve the status quo or otherwise to prevent irreparable harm to a party pending the outcome of arbitration. The prevailing party in any arbitration shall be entitled to attorneys’ fees and costs and the non-prevailing party shall be responsible for all expenses of the arbitration.
      Section 8.3. If there is a dispute between the parties, each party shall continue to perform all of their obligations under this Agreement (including the obligations in dispute).
ARTICLE 9
MISCELLANEOUS
      Section 9.1. Force Majeure . (a) The obligations of Cadbury or DPS and their respective Affiliates, as the Providing Party, shall be suspended during the period, but only to the

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extent that Cadbury or DPS and their respective Affiliates, as the case may be, is prevented or hindered from complying therewith by any of the following causes beyond its reasonable control: (i) acts of God, (ii) weather, fire or explosion, (iii) war, invasion, riot, domestic insurrection, acts of terrorism or other civil unrest, (iv) national or regional emergency, (v) shortage of adequate power or transportation facilities, or (vi) any other event which is beyond the reasonable control of the Providing Party (each, a “ Force Majeure Event ”). In such event, the Providing Party shall give notice of suspension as soon as reasonably practicable to the other stating the date and extent of such suspension and the cause thereof, and such Providing Party shall resume the performance of such obligations as soon as reasonably practicable after the removal of the cause.
     (b) During the duration of a Force Majeure Event, the affected party shall use commercially reasonable efforts to avoid, mitigate, remedy or remove such Force Majeure Event (including the expenditure of reasonable sums), and shall use commercially reasonable efforts to resume its performance under this Agreement with the least practicable delay.
           Section 9.2. Independent Contractor . The parties and each of their respective Affiliates shall each be an independent contractor in the performance of its obligations hereunder and not as the agent of the Receiving Party in performing Services, and no employee of a Providing Party performing Services shall be considered an employee of the Receiving Party. No third party, including any employee of any party or any of such party’s Affiliates, shall have or acquire any rights by reason of this Agreement.
           Section 9.3. Public Announcement . None of the parties hereto shall make, or cause to be made, any press release or public announcement in respect of this Agreement or the services contemplated hereby or otherwise communicate with any news media without the prior written consent of the other party (unless otherwise required by Law or applicable stock exchange regulation), and the parties hereto shall cooperate as to the timing and contents of any such press release, public announcement or communication.
           Section 9.4. Notices . All notices, requests, claims, demands and other communications hereunder shall be in writing and shall be given or made (and shall be deemed to have been duly given or made upon receipt) by delivery in person, by an internationally recognized overnight courier service, by facsimile or registered or certified mail (postage prepaid, return receipt requested) to the respective parties hereto at the following addresses (or at such other address for a party as shall be specified in a notice given in accordance with this Section 9.4):
          if to Cadbury:
     
Cadbury Schweppes plc
25 Berkeley Square
London W1J 6HB
Facsimile:
  44-20-7830-5015
Attention:
  Henry Udow, Esq.
 
  Chief Legal Officer

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with a copy to:
 
   
Cadbury Adams USA
389 Interpace Parkway
Parsippany, NJ 07054
Facsimile:
  (973) 909-3976
Attention:
  Thomas Whitten
 
   
if to DPS:
 
   
5301 Legacy Drive, 3 rd Floor
Plano, TX 75024
Facsimile:
  (972) 673-8130
Attention:
  James L. Baldwin, Jr.
 
  General Counsel
 
   
with a copy to:
 
   
Dr Pepper Snapple Group, Inc.
5301 Legacy Drive
Plano, TX 75024
Facsimile:
  (972) 673-8130
Attention:
  Angie Wallander
      Section 9.5. Governing Law . This Agreement shall be governed by, and construed in accordance with, the laws of the State of New York, without giving effect to the choice of law or conflicts of law principles that would cause the application of the laws of any other jurisdiction.
      Section 9.6. Counterparts . This Agreement may be executed and delivered (including by facsimile transmission or portable document format (“.pdf”)) in one or more counterparts, and by the different parties hereto in separate counterparts, each of which when executed shall be deemed to be an original, but all of which taken together shall constitute one and the same agreement.
      Section 9.7. Headings . The headings contained in this Agreement are for reference purposes only and shall not in any way affect the meaning or interpretation of this Agreement.
      Section 9.8. Modifications . This Agreement contains the entire understanding and agreement between the parties hereto as to the services being performed hereunder. It may not be amended or modified except by a written instrument executed by the parties hereto.

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      Section 9.9. Cumulative Effect . The rights and obligations of the parties under this Agreement shall be cumulative to and not exclusive of the rights and obligations of the parties contained in the Separation Agreement.
      Section 9.10. Interpretation . All references in this Agreement to “ Cadbury ” or “ DPS ” or a “ party ” shall be deemed to include such party’s Affiliates unless the context requires otherwise. All references in this Agreement to “services to be supplied” or similar language shall be defined to include “facilities to be provided” unless the context requires otherwise. To the extent that this Agreement purports to impose any obligation on the Affiliates of a party, such party shall cause its Affiliates to fulfill such obligation.
      Section 9.11. Insurance . As regards employees, agents or representatives of a Providing Party who shall be performing the Services on or at properties of a Receiving Party, the Receiving Party will be designated as an additional insured under the Providing Party’s liability insurance.
      Section 9.12. Amendment . This Agreement may not be amended or modified except (a) by an instrument in writing signed by, or on behalf of, Cadbury and DPS or (b) by a waiver in accordance with Section 9.13.
      Section 9.13. Waiver . Either party to this Agreement may (a) extend the time for the performance of any of the obligations or other acts of the other party, (b) waive any inaccuracies in the representations and warranties of the other party contained herein or in any document delivered by the other party pursuant hereto or (c) waive compliance with any of the agreements of the other party or conditions to such party’s obligations contained herein. Any such extension or waiver shall be valid only if set forth in an instrument in writing signed by the party to be bound thereby. Any waiver of any term or condition shall not be construed as a waiver of any subsequent breach or a subsequent waiver of the same term or condition, or a waiver of any other term or condition of this Agreement. The failure of either party hereto to assert any of its rights hereunder shall not constitute a waiver of any of such rights.
      Section 9.14. Severability . If any term or other provision of this Agreement is invalid, illegal or incapable of being enforced by any Law or public policy, all other terms and provisions of this Agreement shall nevertheless remain in full force and effect for so long as the economic or legal substance of the transactions contemplated by this Agreement is not affected in any manner materially adverse to either party hereto. Upon such determination that any term or other provision is invalid, illegal or incapable of being enforced, the parties hereto shall negotiate in good faith to modify this Agreement so as to effect the original intent of the parties as closely as possible in an acceptable manner in order that the transactions contemplated by this Agreement are consummated as originally contemplated to the greatest extent possible.
      Section 9.15. No Additional Rights . Except as expressly provided in this Agreement, the parties agree that this Agreement shall not grant to either party any additional rights to the other party’s proprietary information, technology or know-how.
[ Remainder of the page intentionally left blank ]

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     IN WITNESS WHEREOF, Cadbury and DPS have caused this Agreement to be executed as of the date first written above by their respective officers thereunto duly authorized.
         
  CADBURY SCHWEPPES PLC
 
 
  By:      
    Name:      
    Title:      
 
  DR PEPPER SNAPPLE GROUP, INC.
 
 
  By:      
    Name:      
    Title:      

 

 

Exhibit 10.3
FORM OF EMPLOYEE MATTERS AGREEMENT
among
CADBURY PLC
CADBURY SCHWEPPES, PLC
and
DR PEPPER SNAPPLE GROUP, INC.
Dated as of [          ], 2008

 


 

TABLE OF CONTENTS
                 
            PAGE  
       
 
       
ARTICLE 1
       
 
       
SCOPE AND DEFINITIONS
       
 
       
Section 1.01  
Scope
    4  
Section 1.02  
Definitions
    4  
Section 1.03  
Interpretation
    7  
       
 
       
ARTICLE 2
       
 
       
ASSIGNMENT OF EMPLOYEES
       
 
       
Section 2.01  
Active Employees
    7  
Section 2.02  
Former Employees
    8  
Section 2.03  
Employment Law Obligations
    8  
Section 2.04  
Employee Records
    9  
       
 
       
ARTICLE 3
       
 
       
EQUITY COMPENSATION PLANS
       
 
       
ARTICLE 4
       
 
       
EMPLOYEE STOCK PURCHASE PLAN
       
 
       
ARTICLE 5
       
 
       
GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES
       
 
       
Section 5.01  
General Principle
    11  
Section 5.02  
Establishment of DPSG Plans
    12  
Section 5.03  
Transfer of Assets and Liabilities
    12  
Section 5.04  
Service Credit
    12  
Section 5.05  
Plan Administration
    13  
       
 
       
ARTICLE 6
       
 
       
U.S. PENSION PLAN SPIN-OFF
       
 
       
Section 6.01  
General Principle
    14  
Section 6.02  
Determination and Transfer of Initial Transfer Amount
    14  
Section 6.03  
Determination of the Final Pension Transfer Amount
    15  

i


 

                 
            PAGE  
       
 
       
Section 6.04  
True-Up Adjustment
    16  
Section 6.05  
Form and Selection of Assets to be Transferred
    16  
       
 
       
ARTICLE 7
       
 
       
U.S. 401(K) PLAN
       
 
       
Section 7.01  
General Principle
    16  
Section 7.02  
Transfer of Accounts
    17  
Section 7.03  
Funding of 2008 Matching Contribution
    17  
       
 
       
ARTICLE 8
       
 
       
U.S. WELFARE BENEFIT PLANS
       
 
       
Section 8.01  
General Principles
    18  
Section 8.02  
Establishment of DPSG Plans
    18  
Section 8.03  
Insurance Contracts
    19  
Section 8.04  
Third Party Vendors
    19  
       
 
       
ARTICLE 9
       
 
       
FRINGE BENEFIT AND OTHER U.S. PLANS AND PROGRAMS
       
 
       
ARTICLE 10
       
 
       
WORKERS COMPENSATION AND UNEMPLOYMENT COMPENSATION
       
 
       
ARTICLE 11
       
 
       
COMPENSATION MATTERS AND GENERAL BENEFIT AND EMPLOYEE MATTERS
       
 
       
Section 11.01  
Restrictive Covenants in Employment and Other Agreements
    20  
Section 11.02  
Severance
    20  
Section 11.03  
Accrued Vacation Days Off
    21  
Section 11.04  
Leaves of Absence
    21  
Section 11.05  
Cadbury Obligations
    21  
       
 
       
ARTICLE 12
       
 
       
CANADIAN EMPLOYEE MATTERS
       
 
       
ARTICLE 13
       
 
       
GENERAL PROVISIONS

ii


 

                 
            PAGE  
       
 
       
Section 13.01  
Preservation of Rights to Amend
    21  
Section 13.02  
Confidentiality
    21  
Section 13.03  
Administrative Complaints/Litigation
    21  
Section 13.04  
Reimbursement and Indemnification
    22  
Section 13.05  
Costs of Compliance with Agreement
    22  
       
 
       
ARTICLE 14
       
 
       
MISCELLANEOUS
       
 
       
Section 14.01  
Notices
    22  
Section 14.02  
Amendments; No Waivers
    23  
Section 14.03  
Successors and Assigns
    24  
Section 14.04  
Governing Law
    24  
Section 14.05  
Counterparts; Effectiveness; Third-Party Beneficiaries
    24  
Section 14.06  
Entire Agreement
    24  
Section 14.07  
Jurisdiction
    24  
Section 14.08  
Waiver of Jury Trial
    25  
Section 14.09  
Severability
    25  
Section 14.10  
Survival
    25  
Section 14.11  
Captions
    25  
Section 14.12  
Specific Performance
    25  
Section 14.13  
Mutual Drafting
    26  
Section 14.14  
Operating Committee
    26  
Section 14.15  
Consent to the Reduction
    26  
Section 14.16  
Effect if Separation Does Not Occur
    26  
Section 14.17  
Corporate Authorization
    26  

iii


 

EMPLOYEE MATTERS AGREEMENT
          THIS EMPLOYEE MATTERS AGREEMENT dated as of [          ], 2008 among Cadbury Schweppes, plc, a United Kingdom public limited company incorporated in England and Wales with the registered number 0052457 and whose registered office is at 25 Berkeley Square, London W1J 6HB (“ Cadbury ”), Dr Pepper Snapple Group, Inc., a Delaware corporation (“ DPSG ”) and, solely for the purposes of Section 11.05, Cadbury plc, a United Kingdom public limited company incorporated in England and Wales with the registered number 06497379 and whose registered office is at 25 Berkeley Square, London W1J 6HB (“ Cadbury plc ”). Each of Cadbury and DPSG is sometimes referred to herein as a “ Party ” and together, as the “ Parties ”.
RECITALS
          WHEREAS, Cadbury, Cadbury plc and DPSG have entered into a Separation and Distribution Agreement as of the date hereof (the “ Separation Agreement ”) pursuant to which Cadbury will distribute on a pro rata basis to the holders of Cadbury’s Common Stock, par value $0.01 per share (“ Cadbury Common Stock ”), without any consideration being paid by such holders, all of the outstanding shares of Common Stock, par value $0.01 per share of DPSG (“ DPSG Common Stock ”) then owned by Cadbury (the “ Distribution ”).
          WHEREAS, in connection with the Separation, Cadbury, Cadbury plc and DPSG desire to enter into this Employee Matters Agreement as a complement to the Separation Agreement.
          NOW THEREFORE, in consideration of the mutual covenants contained herein and in the Separation Agreement, Cadbury, Cadbury plc and DPSG hereto agree as follows:
ARTICLE 1
SCOPE AND DEFINITIONS
          Section 1.01 Scope . Notwithstanding anything to the contrary contained herein (i) this Agreement shall not apply with respect to any Employee whose primary employer within the Cadbury Group or DPSG Group is or was an entity domiciled in Mexico and (ii) the terms of this Agreement shall apply only to the extent relevant with respect to the appropriate treatment of any Employee whose primary employer within the Cadbury Group or DPSG Group is or was an entity domiciled in a country other than Canada or the U.S (including Puerto Rico). For the avoidance of doubt, any relevant portions of this Agreement shall apply with respect to the Employees listed on Schedule 1.01(i) hereof (who are Employees who are or have been located outside the U.S., but are or have been covered under U.S. compensation and benefit plans and arrangements).
          Section 1.02 Definitions . Unless otherwise defined herein, each capitalized term shall have the meaning specified for such term in the Separation Agreement. As used in this Agreement:
          “ Agreement ” means this Employee Matters Agreement together with those parts of the Separation Agreement referenced herein, all Schedules hereto and all amendments, modifications and changes hereto and thereto.

 


 

          “ Business Day ” means any day, other than a Saturday, a Sunday or a day on which banks in New York, New York are authorized or obligated by law to close.
          “ Cadbury 401(k) Plan ” means the Cadbury Adams Holdings LLC Employees’ Savings Incentive Plan.
          “ Cadbury Business Employee ” means any individual who is, immediately prior to the Distribution, employed by Cadbury or any of its Subsidiaries or Affiliates and is not a DPSG Business Employee.
          “ Cadbury Committee ” shall mean the Remuneration Committee of the Board of Directors of Cadbury.
          “ Cadbury ESPP ” means the Cadbury Employee Stock Purchase Plan.
          “ Cadbury Non-ERISA U.S. Benefit Arrangement ” means any Non-ERISA U.S. Benefit Arrangement sponsored or maintained by Cadbury.
          “ Cadbury Pension Plan ” means the Cadbury Adams Holdings LLC Personal Pension Account Plan, the Cadbury Adams Holdings LLC Supplemental Executive Retirement Plan and the Cadbury Adams Holdings LLC Pension Equalization Plan.
          “ Cadbury Pension and Welfare Benefit Plan ” means any Pension Plan or Welfare Plan sponsored or maintained by Cadbury or a Cadbury Subsidiary.
          “ Cadbury Retiree Medical Plan ” means that portion of the Cadbury Health and Welfare Benefits Plan that provides post-employment medical benefits beyond those required to be provided pursuant to COBRA. This includes the Cadbury Schweppes $25,000 Retiree Health Plan and the Cadbury Schweppes Retiree Health Plan.
          “ Cadbury Subsidiary ” means any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are expected to be directly or indirectly owned by Cadbury immediately after the Distribution.
          “ COBRA ” means the Consolidated Omnibus Budget Reconciliation Act of 1985, as codified at Part 6 of Subtitle B of Title I of ERISA and at Section 4980B of the Code, as amended.
          “ Code ” means the U.S. Internal Revenue Code of 1986, as amended.
          “ Demerger Effective Time ” shall have the meaning set forth in Section 1.01 of the Separation Agreement.

 


 

          “ DPSG Business Employee ” means any individual who is, immediately prior to the Distribution, employed by DPSG or any of their respective Subsidiaries. A DPSG Business Employee may not be a Cadbury Business Employee.
          “ DPSG Non-ERISA U.S. Benefit Arrangement ” means any Non-ERISA U.S. Benefit Arrangement sponsored or maintained by DPSG.
          “ DPSG Pension and Welfare Benefit Plan ” means any Pension Plan or Welfare Plan sponsored or maintained by DPSG or a DPSG Subsidiary.
          “ DPSG Subsidiary ” means any entity of which securities or other ownership interests having ordinary voting power to elect a majority of the board of directors or other persons performing similar functions are expected to be directly or indirectly owned by DPSG immediately after the Distribution.
          “ Employee ” means any Cadbury Business Employee or Former Cadbury Employee or DPSG Business Employee or Former DPSG Employee.
          “ ERISA ” means the U.S. Employee Retirement Income Security Act of 1974, as amended.
          “ FMLA ” means the U.S. Family Medical Leave Act, as amended.
          “ Former DPSG Employees ” has the meaning set forth in Section 2.02(c).
          “ Former Cadbury Employees ” has the meaning set forth in Section 2.02(b).
          “ IRS ” means the U.S. Internal Revenue Service.
          “ Non-ERISA U.S. Benefit Arrangement ” means any contract, agreement, policy, practice, program, plan, trust or arrangement, other than a Pension Plan or Welfare Plan, providing for benefits, perquisites or compensation of any nature to any Employee, or to any family member, dependent or beneficiary of any such Employee, including, without limitation, disability, severance, health, dental, life, accidental death and dismemberment, travel and accident, tuition reimbursement, vacation, sick, personal or bereavement days, holidays, retirement, deferred compensation, profit sharing, bonus, stock-based compensation or other forms of incentive compensation.
          “ Pension Plan ” means any pension plan as defined in Section 3(2) of ERISA, without regard to Section 4(b)(4) or 4(b)(5) of ERISA.
          “ Welfare Plan ” means any employee welfare plan as defined in Section 3(1) of ERISA, without regard to Section 4(b)(4) of ERISA.
          “ WARN ” means the U.S. Workers Adjustment Retraining and Notification Act, as amended and any applicable state or local law equivalent.

 


 

          Section 1.03 Interpretation . In this Agreement, unless the context clearly indicates otherwise:
     (a) words used in the singular include the plural and words used in the plural include the singular;
     (b) references to any Person include such Person’s successors and assigns but, if applicable, only if such successors and assigns are permitted by this Agreement, and a reference to such Person’s “Affiliates” shall be deemed to mean such Person’s Affiliates following the Distribution;
     (c) references to any gender include the other gender;
     (d) accounting terms used herein shall have the meanings historically ascribed to them by Cadbury and its Subsidiaries, including DPSG, in its and their internal accounting and financial policies and procedures in effect prior to the date of this Agreement;
     (e) if there is any conflict between the provisions of the Separation Agreement and this Agreement, the provisions of this Agreement shall control with respect to the subject matter hereof; if there is any conflict between the provisions of the body of this Agreement and the Schedules hereto, the provisions of the body of this Agreement shall control unless explicitly stated otherwise in such Schedule;
     (f) the titles to Articles and headings of Sections contained in this Agreement have been inserted for convenience of reference only and shall not be deemed to be a part of or to affect the meaning or interpretation of this Agreement; and
     (g) unless otherwise specified in this Agreement, all references to dollar amounts herein shall be in respect of lawful currency of the United States.
ARTICLE 2
ASSIGNMENT OF EMPLOYEES
          Section 2.01 Active Employees .
     (a)  DPSG Business Employees . Except as otherwise set forth in this Agreement, effective not later than the Distribution Date, the employment of each DPSG Business Employee who is employed by Cadbury or a Cadbury Subsidiary shall be assigned and transferred to DPSG or a DPSG Subsidiary. As of the Distribution Date, DPSG shall and shall cause each DPSG Subsidiary to continue the employment of each DPSG Business Employee who is employed by DPSG or a DPSG Subsidiary.
     (b)  Cadbury Business Employees . Effective not later than the Distribution Date, the employment of each Cadbury Business Employee who is employed by DPSG or a DPSG Subsidiary shall be assigned and transferred to Cadbury or a Cadbury Subsidiary. As of the Distribution Date, Cadbury shall and shall cause each Cadbury Subsidiary to continue the

 


 

employment of each Cadbury Business Employee who is employed by Cadbury or a Cadbury Subsidiary.
     (c)  At-Will Status . Notwithstanding the above or any other provision of this Agreement, nothing in this Agreement shall create any obligation on the part of Cadbury, DPSG or any of their respective Affiliates to continue the employment of any employee for any definite period following the Distribution Date or to change the employment status of any employee from “ at will, ” to the extent such employee is an “ at will ” employee under applicable law.
     (d)  Severance . The Distribution and the assignment, transfer or continuation of the employment of employees in connection therewith shall not be deemed a severance of employment of any employee for purposes of any plan, policy, practice or arrangement of Cadbury, DPSG or any of their respective Subsidiaries, except as otherwise provided herein.
          Section 2.02 Former Employees .
     (a)  General Principal . Except as otherwise provided in this Agreement, each former employee of Cadbury or any Cadbury Subsidiary or DPSG or any DPSG Subsidiary as of the Distribution Date will be considered a former employee of the business as to which his or her duties were primarily related immediately prior to his or her termination of employment with all of Cadbury, DPSG and their respective Affiliates.
     (b)  Former Cadbury Employees . For these purposes, former employees of Cadbury and the Cadbury Subsidiaries shall be deemed to include all employees who, as of their last day of employment with all of Cadbury, DPSG and their respective Affiliates, had employment duties primarily related to the Cadbury Business (collectively, the “ Former Cadbury Employees ”).
     (c)  Former DPSG Employees . Except with respect to those individuals set forth on Schedule 2.02(c), former employees of DPSG and the DPSG Subsidiaries shall be deemed to include all employees who, as of their last day of employment with all of Cadbury, DPSG and their respective Affiliates, had employment duties primarily related to the DPSG Business (collectively, the “ Former DPSG Employees ”).
          Section 2.03 Employment Law Obligations .
     (a)  WARN Act . Cadbury and the Cadbury Subsidiaries shall be responsible for providing any necessary WARN notice (and meeting any similar state law notice requirements) with respect to any termination of any Cadbury Business Employee. DPSG and the DPSG Subsidiaries shall be responsible for providing any necessary WARN notice (and meeting any similar state law notice requirements) with respect to any termination of any DPSG Business Employee; provided , however , that Cadbury and the Cadbury Subsidiaries shall be responsible for providing any necessary WARN notice (and any similar state law notice requirements) to any DPSG Business Employee or any governmental authority in connection with any transfer of the employment of any DPSG Business Employee from a Cadbury Group entity to a DPSG Group entity in contemplation of the Distribution.

 


 

     (b)  Compliance With Employment Laws . On and after the Distribution Date (i) Cadbury and the Cadbury Subsidiaries shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of the Cadbury Business Employees and the treatment of the Former Cadbury Employees in respect of their former employment with Cadbury and its Affiliates and (ii) DPSG and the DPSG Subsidiaries shall be responsible for adopting and maintaining any policies or practices, and for all other actions and inactions, necessary to comply with employment-related laws and requirements relating to the employment of the DPSG Business Employees and the treatment of the Former DPSG Employees in respect of their former employment with DPSG and their respective Affiliates.
          Section 2.04 Employee Records .
     (a)  Records Relating to Cadbury Business Employees and Former Cadbury Employees . All records and data in any form relating to Cadbury Business Employees and Former Cadbury Employees shall be the property of Cadbury, except that data pertaining to such an employee and relating to any period that such employee was employed by DPSG or a DPSG Subsidiary prior to the Distribution shall be jointly owned by Cadbury and DPSG.
     (b)  Records Relating to DPSG Business Employees and Former DPSG Employees . All records and data in any form relating to DPSG Business Employees and Former DPSG Employees shall be the property of DPSG, except that data pertaining to such an employee and relating to any period that such employee was employed by Cadbury, DPSG or any of their respective Subsidiaries prior to the Distribution shall be jointly owned by Cadbury and DPSG.
     (c)  Sharing of Records . The Parties shall use their respective reasonable commercial efforts to provide each other such records and information only as necessary or appropriate to carry out their obligations under applicable law (including, without limitation, any relevant privacy protection laws or regulations in any applicable jurisdictions), this Agreement or the Separation Agreement or the Transition Services Agreement, or for the purposes of administering their respective employee benefit plans and policies. Subject to applicable law, all information and records regarding employment and personnel matters of DPSG Business Employees and Former DPSG Employees shall be accessed, retained, held, used, copied and transmitted after the Distribution Date by DPSG in accordance with all laws and policies relating to the collection, storage, retention, use, transmittal, disclosure and destruction of such records. The Parties shall reimburse each other for any reasonable costs incurred in copying or transmitting any records requested pursuant to this Section 2.04.
     (d)  Access to Records . To the extent consistent with this Agreement and any applicable privacy protection laws or regulations, access to such records after the Distribution Date will be provided to Cadbury and DPSG in accordance with the Separation Agreement. In addition, notwithstanding anything to the contrary, Cadbury shall retain reasonable access to those records necessary for Cadbury’s continued administration of any plans or programs on behalf of Employees after the Distribution Date, provided that such access shall be limited to individuals who have a job-related need to access such records. Cadbury shall also retain copies of all restrictive covenant agreements with any DPSG Business Employee or Former DPSG Employee in which Cadbury has a valid business interest.

 


 

     (e)  Maintenance of Records . With respect to retaining, destroying, transferring, sharing, copying and permitting access to all such information, Cadbury and DPSG shall each comply with all applicable laws, regulations and internal policies, and each Party shall indemnify and hold harmless the other Party from and against any and all liability, claims, actions, and damages that arise from a failure (by the indemnifying party or its agents) to so comply with all applicable laws, regulations and internal policies applicable to such information.
     (f)  No Access to Computer Systems or Files . Except as set forth in the Separation Agreement or the Transition Services Agreement, no provision of this Agreement shall give either Party direct access to the computer systems or other files, records or databases of the other Party, unless specifically permitted by the owner of such systems, files, records or databases.
     (g)  Relation to Separation Agreement . The provisions of this Section 2.04 shall be in addition to, and not in derogation of, the provisions of the Separation Agreement governing Confidential Information and access to and use of employees, information and records, including Sections of the Separation Agreement.
     (h)  Confidentiality . Except as otherwise set forth in this Agreement, all records and data relating to Employees shall, in each case, be subject to the confidentiality provisions of the Separation Agreement.
     (i)  Cooperation . DPSG and Cadbury and their respective Affiliates shall use reasonable commercial efforts to cooperate to share, retain and maintain data and records that are necessary or appropriate to further the purposes of this Section 2.04 and for each other to administer their respective benefit plans to the extent consistent with this Agreement and applicable law. Except as provided under the Transition Services Agreement, neither DPSG nor Cadbury shall charge the other any fee for such cooperation. The parties agree to cooperate as long as is reasonably necessary to further the purposes of this Section 2.04.
ARTICLE 3
EQUITY COMPENSATION PLANS
[ Reserved ]
ARTICLE 4
EMPLOYEE STOCK PURCHASE PLAN
          DPSG Business Employees and Former DPSG Employees shall be treated for purposes of the Cadbury ESPP as “good leavers” as of the Distribution Date and shall be entitled to receive benefits in accordance with the provisions of the Cadbury ESPP; provided , however , that Cadbury may take such actions as it deems appropriate with respect to the shares of DPSG and shares of Cadbury. DPSG Business Employees shall not contribute to the Cadbury ESPP after the Distribution Date, unless they shall become employed by Cadbury following the Distribution Date.

 


 

ARTICLE 5
GENERAL PRINCIPLES FOR ALLOCATION OF LIABILITIES
          Section 5.01 General Principle .
     (a)  Cessation of Participation in Cadbury Pension and Welfare Benefit Plans and Non-ERISA U.S. Benefit Arrangements . Cadbury and DPSG shall take any and all action as shall be necessary or appropriate so that participation in Cadbury Pension and Welfare Benefit Plans and Cadbury Non-ERISA U.S. Benefit Arrangements by all DPSG Business Employees and Former DPSG Employees shall terminate in connection with the Distribution as and when provided under this Agreement (or if not specifically provided under this Agreement, as of the close of business on the Distribution Date) and DPSG and each DPSG Subsidiary shall cease to be a participating employer under the terms of such Cadbury Pension and Welfare Benefit Plans and Cadbury Non-ERISA U.S. Benefit Arrangements as of such time.
          Except as otherwise agreed below, DPSG shall have all liabilities and all assets relating to employee benefits for DPSG Business Employees and Former DPSG Employees and Cadbury shall have all liabilities and all assets relating to employee benefits for Cadbury Business Employees and Former Cadbury Employees.
     (b)  Assumption of Certain Obligations by DPSG Group . Except as otherwise provided in this Agreement, effective on or before the Distribution Date, DPSG shall assume or continue the sponsorship of, and none of Cadbury or any Cadbury Subsidiary shall have any further liability for or under, the following agreements, obligations and liabilities, and DPSG shall indemnify Cadbury and the Cadbury Subsidiaries, and the officers, directors, and employees of each, and hold them harmless with respect to such agreements, obligations or liabilities:
     (i) Agreements entered into between Cadbury, its Subsidiaries or Affiliates and DPSG Business Employees and Former DPSG Employees;
     (ii) Agreements entered into between Cadbury, its Subsidiaries or Affiliates and independent contractors providing services primarily to the DPSG Business;
     (iii) All collective bargaining agreements, collective agreements, trade union, or works council agreements entered into between Cadbury, its Subsidiaries or Affiliates and any union, works council, or other body representing only DPSG Business Employees and Former DPSG Employees;
     (iv) All wages, salary, incentive compensation, commissions and bonuses payable to DPSG Business Employees and Former DPSG Employees on or after the Distribution Date, without regard to when such wages, salary, incentive compensation, commissions and bonuses are or may have been earned;
     (v) All moving expenses and obligations related to relocation, repatriation, transfers, or similar items incurred by or owed to DPSG Business Employees and Former DPSG Employees;

 


 

     (vi) All immigration-related, visa, work application, or similar rights, obligations and liabilities related to DPSG Business Employees; and
     (vii) All liabilities and obligations whatsoever of the DPSG Business with respect to claims made by or with respect to DPSG Business Employees and Former DPSG Employees or any other persons who at any time prior to the Distribution Date had employment duties primarily related to the DPSG Business relating to any employee benefit plan, program or policy not otherwise retained or assumed by Cadbury pursuant to this Agreement, including such liabilities relating to actions or omissions of or by DPSG or any officer, director, employee or agent thereof prior to the Distribution Date.
          Section 5.02 Establishment of DPSG Plans . Except as otherwise provided in this Agreement, sponsorship of Cadbury benefit plans that cover solely DPSG Business Employees and Former DPSG Employees shall be transferred to DPSG on or before the Distribution Date. Cadbury benefit plans that cover DPSG Business Employees and Former DPSG Employees and that also cover Cadbury Business Employees and/or Former Cadbury Employees shall be split into two separate plans, one covering DPSG Business Employees and Former DPSG Employees and one covering Cadbury Business Employees and/or Former Cadbury Employees, and sponsorship of the plans covering DPSG Business Employees and Former DPSG Employees shall be transferred to DPSG on or before the Distribution Date.
          Section 5.03 Transfer of Assets and Liabilities . To the extent necessary to effectuate the foregoing, DPSG and Cadbury shall, in compliance with applicable law, transfer assets (if any) and liabilities of any such benefit plans to each other, including under the following plans:
CBI Holdings Inc. Health & Welfare Benefits Plan
CBI Holdings Inc. Premium Payment Plan
CBI Holdings Inc. Flexible Spending Account Plan
CBI Holdings Inc. Dependent Care Spending Account Plan
CBI Holdings Inc. Severance Pay Plan
Dr Pepper Bottling Company of Texas, ETAL Occupational Injury Benefit Plan
Cadbury Adams Holdings LLC Personal Pension Account Plan
Cadbury Adams Holdings LLC Pension Equalization Plan
Cadbury Adams Holdings LLC Supplemental Savings Plan
Cadbury Adams Holdings LLC Supplemental Executive Retirement Plan
Cadbury Adams Holdings LLC Supplemental Incentive Plan
          Section 5.04 Service Credit .
     (a)  Service for Eligibility and Vesting . Except as otherwise provided in any other provision of this Agreement (i) for purposes of participation, eligibility and vesting under the DPSG Pension and Welfare Benefit Plans, DPSG shall, and shall cause the DPSG Subsidiaries to, give to each DPSG Business Employee and Former DPSG Employee service credit for any employment with Cadbury or any Cadbury Affiliate prior to the Distribution Date to the extent that such service is taken into account pursuant to the terms of the comparable Cadbury plan and (ii) for purposes of participation, eligibility and vesting under the Cadbury Pension and Welfare

 


 

Benefit Plans, Cadbury shall, and shall cause the Cadbury Subsidiaries to, give to each Cadbury Business Employee and Former Cadbury Employee service credit for any employment with DPSG or any DPSG Affiliate prior to the Distribution Date (to the extent available to employees generally).
     (b)  Service for Benefit Purposes . Except as otherwise provided in any other provision of this Agreement (i) for purposes of benefit levels and accruals, post-retirement welfare benefit contribution rates and benefit commencement entitlements under the DPSG Pension and Welfare Benefit Plans, DPSG shall, and shall cause the DPSG Subsidiaries to, give to each DPSG Business Employee and Former DPSG Employee service credit for any employment with Cadbury or any Cadbury Affiliate prior to the Distribution Date to the extent that such service is taken into account pursuant to the terms of the comparable Cadbury plan and (ii) for purposes of benefit levels and accruals, post-retirement welfare benefit contribution rates and benefit commencement entitlements under the Cadbury Pension and Welfare Benefit Plans, Cadbury shall, and shall cause the Cadbury Subsidiaries to, give to each Cadbury Business Employee and Former Cadbury Employee service credit for any employment with DPSG or any DPSG Affiliate prior to the Distribution Date (to the extent available to employees generally).
     (c)  Evidence of Prior Service . Notwithstanding anything to the contrary, but subject to applicable law, upon reasonable request by one Party to the other Party, the first Party will provide to the other copies of any records available to the first Party to document such service, plan participation and membership and cooperate with the first Party to resolve any discrepancies or obtain any missing data for purposes of determining benefit eligibility, participation, vesting and calculation of benefits with respect to such DPSG Business Employees and Former DPSG Employees.
          Section 5.05 Plan Administration .
     (a)  Transition Services . DPSG will administer Cadbury’s benefit programs for a transitional period under the terms of the Transition Services Agreement. The Parties agree to enter into a business associate agreement in connection with such Transition Services Agreement, which shall be set forth as Appendix 1 to this Agreement.
     (b)  Administration . DPSG shall, and shall cause the DPSG Subsidiaries to, administer its benefit plans in a manner that does not jeopardize the tax favored status of the tax favored benefit plans maintained by Cadbury and the Cadbury Subsidiaries. Cadbury shall, and shall cause the Cadbury Subsidiaries to, administer its benefit plans in a manner that does not jeopardize the tax favored status of the tax favored benefit plans maintained by DPSG and the DPSG Subsidiaries.
     (c)  Participant Elections and Beneficiary Designations . All participant elections and beneficiary designations made under any Cadbury benefit plan prior to the date as of which assets or liabilities relating to that plan are transferred to DPSG shall continue in effect under any plan maintained by DPSG or any DPSG Subsidiary to which liabilities are transferred pursuant to this Agreement until such time as the participant changes his or her elections or beneficiary designations in accordance with the procedures of the relevant plan, as the case may be.

 


 

ARTICLE 6
U.S. PENSION PLAN SPIN-OFF
          Section 6.01 General Principle . Effective on or before the Distribution Date, DPSG shall establish and adopt a defined benefit pension benefit plan and trust (the “ DPSG Pension Plan ”) intended to be qualified under Code Section 401(a) and containing provisions that will provide to each DPSG Business Employee and Former DPSG Employee (and each alternate payee or beneficiary of such person) (the “ DPSG Pension Beneficiaries ”) benefits identical to those accrued with respect to such person under the Cadbury Pension Plan as of December 31, 2007 (the “ Pension Measurement Date ”). On or before the Distribution Date, Cadbury shall (i) determine the Initial Transfer Amount (as defined below) and (ii) cause assets equal to the Initial Transfer Amount (adjusted as provided below) to be transferred to the trust under the DPSG Pension Plan in the form described below (the “ Initial Transfer ”). As of the date of such transfer of the Initial Transfer Amount (the “ Initial Transfer Date ”), DPSG shall commence making the required benefit payments under the terms of the DPSG Pension Plan and shall assume all liabilities with respect to the payment of benefits previously accrued by the DPSG Pension Beneficiaries under the Cadbury Pension Plan. A DPSG Business Employee shall not accrue benefits under the Cadbury Pension Plan after the date on which such employee becomes eligible to participate under the DPSG Pension Plan, unless such DPSG Pension Beneficiary shall become employed by Cadbury or a Cadbury Subsidiary after such date. A Cadbury Business Employee shall not accrue benefits under the DPSG Pension Plan, unless such Cadbury Business Employee shall become employed by DPSG or a DPSG Subsidiary. Following the Initial Transfer Date (i) an enrolled actuary appointed by Cadbury (the “ Cadbury Actuary ”) shall determine the Final Pension Transfer Amount (as defined below) and (ii) a True-Up Adjustment shall be made with respect to the Cadbury Pension Plan and the DPSG Pension Plan, as provided below. The Parties shall use reasonable commercial efforts to cause the determination of the Final Pension Transfer Amount and the True-Up Adjustment to be completed as reasonably promptly as practicable, subject to the time frames established under Section 6.03, but in no event later than December 31, 2008. Before or promptly after the date hereof, Cadbury and DPSG shall file requests with the IRS for qualification determination letters under Code Section 401(a) with respect to the Cadbury Pension Plan and the DPSG Pension Plan and shall take any and all reasonable action, including the adoption of any amendments requested by the IRS, as shall be necessary to obtain such determination letters. The transfers hereunder shall occur prior to, but subject to the subsequent receipt of, favorable determination letters issued by the IRS with respect to the Cadbury Pension Plan and DPSG Pension Plan, copies of which shall be shared among Cadbury and DPSG promptly upon issuance.
          Section 6.02 Determination and Transfer of Initial Transfer Amount . On or before the Distribution Date, with the assistance of the Cadbury Actuary, Cadbury shall establish and communicate to DPSG the amount equal to 90% of the estimated asset transfer amount calculated as of January 1, 2008 in accordance with Code Section 414(l) but based on January 1,2007 census data and November 30, 2007 trust assets as attributable to benefits accrued by DPSG Pension Beneficiaries under the Cadbury Pension Plan as of the Pension Measurement Date, adjusted for contributions, distributions, trust gains and losses, payments and other appropriate items occurring between the Pension Measurement Date and the Initial Transfer Date, all as estimated in good faith by Cadbury (the “ Initial Transfer Amount ”). Following the

 


 

determination of the Initial Transfer Amount by Cadbury, Cadbury shall cause to be transferred from the trust under the Cadbury Pension Plan to the trust under the DPSG Pension Plan assets having an aggregate Value (as defined below) equal to the Initial Transfer Amount. Such assets shall be in the form of cash, securities and other property, determined in accordance with the provisions below.
          Section 6.03 Determination of the Final Pension Transfer Amount .
     (a)  Calculation of the Cadbury Actuary . Following the Distribution Date, the Cadbury Actuary shall determine the Final Pension Transfer Amount, which shall be equal to the amount required to be transferred from the Cadbury Pension Plan to the DPSG Pension Plan in respect of the assumption by the DPSG Pension Plan of the benefit obligations of the Cadbury Pension Plan of benefits accrued by the DPSG Pension Beneficiaries as of the Pension Measurement Date, as determined in accordance with Section 414(l) of the Code and the regulations thereunder and the actuarial assumptions and methods set forth in Schedule 6.03 hereof, as appropriately adjusted to reflect the following amounts arising after the Pension Measurement Date and before the True-Up Adjustment: (A) any distributions and contributions made in respect of the DPSG Pension Beneficiaries, (B) administrative expenses of the Cadbury Pension Plan reasonably allocable to the DPSG Pension Beneficiaries, (C) earnings realized by the Cadbury Pension Plan allocable to the DPSG Pension Beneficiaries, (D) the net gain or loss (realized and unrealized) of the Cadbury Pension Plan allocable to the DPSG Pension Beneficiaries and (E) other appropriate items. Cadbury and DPSG shall each be responsible for the funding of their respective pension plans. It is anticipated that each pension plan will have underfunding under ERISA Section 4044. Each party shall be responsible for funding such underfunding under their respective pension plan. Promptly upon determination of the Final Pension Transfer Amount, Cadbury shall cause the Cadbury Actuary to provide to DPSG a written statement of the Final Pension Transfer Amount, a summary of the calculation of such amount (the “ Pension Statement ”) and a written statement that the sum of the Initial Transfer Amount and the Final Pension Transfer Amount satisfies the requirements of Section 414(l) of the Code.
     (b)  Resolution of Differences . Cadbury shall provide DPSG with all information reasonably necessary to review the calculation of the Final Pension Transfer Amount in all material respects and to verify that such calculations have been performed in a manner consistent with the terms of this Agreement. The determination of the Final Pension Transfer Amount by the Cadbury Actuary shall be final, conclusive and binding for all purposes under this Agreement, unless DPSG provides to Cadbury, within thirty (30) days after receipt of the Pension Statement, a written objection prepared by an enrolled actuary retained by DPSG setting forth in detail a reasonable basis for the conclusion that the Final Pension Transfer Amount set forth in the Pension Statement is understated by an amount in excess of 5%. Upon receipt of such objection, Cadbury and DPSG shall make a good faith attempt to resolve their dispute as to the Final Pension Transfer Amount. Should such dispute remain unresolved for more than thirty (30) days, Cadbury and DPSG shall promptly select and appoint a third enrolled actuary who is mutually satisfactory to both Parties. The third actuary shall recalculate the Final Pension Transfer Amount and if such recalculated amount exceeds the Final Pension Transfer Amount set forth in the Pension Statement by more than 5%, then such recalculated amount shall serve as the Final Pension Transfer Amount for all purposes under this Agreement. If such recalculated

 


 

amount does not exceed the Final Pension Transfer Amount set forth in the Pension Statement by more than 5%, then for all purposes under this Agreement the Final Pension Transfer Amount shall be the Final Pension Transfer Amount as set forth in the Pension Statement. The recalculation of such third party actuary shall be completed within thirty (30) days of the retention of such third party actuary and shall be conclusive as to any dispute with respect to the Final Pension Transfer Amount, except as set forth in Section 6.05 below. The cost of such third party actuary shall be divided equally between Cadbury and DPSG. Each Party shall be responsible for the cost of its own actuary.
          Section 6.04 True-Up Adjustment . The following transfer shall be made promptly after the date that the Final Pension Transfer Amount is determined as set forth above: (A) if the Final Pension Transfer Amount exceeds the Initial Transfer Amount, Cadbury shall promptly cause to be transferred from the Cadbury Pension Plan trust to the DPSG Pension Plan trust assets having a Value equal to such excess and (B) if the Initial Transfer Amount exceeds the Final Pension Transfer Amount, DPSG shall promptly cause to be transferred from the DPSG Pension Plan trust to the Cadbury Pension Plan trust assets having a Value equal to such excess.
          Section 6.05 Form and Selection of Assets to be Transferred . The assets to be transferred in the Initial Transfer and the True-Up Adjustment Assets will be transferred in-kind or in cash pro rata from each investment manager under the transferring plan in a manner that represents, as closely as commercially practical, a pro rata portion of each asset and position held by the manager as of the date of such transfer, except that reasonable adjustments shall be made where Cadbury determines such transfers cannot reasonably be made by the Cadbury Pension Plan due to investment manager account minimums or where other considerations prevent such pro rata transfers or render such pro rata transfers impractical. For purposes of the Agreement, the “ Value ” of all pension assets shall be the value of such assets as determined in good faith by Cadbury based on all relevant information known to Cadbury at the time of such determination, including the most recent account statements or schedules of asset values provided to Cadbury by any service providers maintaining or overseeing any such assets or any investment vehicles which represent or hold the relevant plan assets. Cadbury shall select the assets to be transferred and provide a schedule of such assets to DPSG 14 days prior to the transfer of such assets. DPSG shall communicate to Cadbury any objection to the schedule of the assets to be transferred promptly, and upon receipt by Cadbury of such objection, Cadbury and DPSG shall make a good faith attempt to resolve their dispute as to the assets to be transferred within the period remaining prior to the transfer of the assets. Should such dispute remain unresolved upon the asset transfer date, the assets shall be transferred in accordance with the schedule provided by Cadbury. Any assets that are liquidated prior to transfer shall be reduced by the asset liquidation expenses actually incurred.
ARTICLE 7
U.S. 401(K) PLAN
          Section 7.01 General Principle . Effective on or before the Distribution Date, DPSG shall establish and adopt a qualified employee cash or deferred arrangement under Code Section 401(k) (the “ DPSG 401(k) Plan ”) intended to be qualified under Code Section 401(a) and containing provisions that will provide benefits for each DPSG Business Employee and

 


 

Former DPSG Employee (and each beneficiary and alternate payee of such person) (the “ DPSG DC Plan Beneficiaries ”) identical to those in effect for the DPSG DC Plan Beneficiaries as of the date of transfer of assets and liabilities with respect to such plan (as described below). Before or as soon as reasonably practicable after the Distribution Date, the assets and liabilities relating to the DPSG DC Plan Beneficiaries under the Cadbury 401(k) Plan and shall be transferred to the DPSG 401(k) Plan. DPSG Business Employees shall not make or receive additional contributions under the Cadbury 401(k) Plan after the effective date of the DPSG 401(k) Plan, unless such DPSG Business Employee shall become employed by Cadbury or a Cadbury Subsidiary after such date. A Cadbury Business Employee shall not participate in the DPSG 401(k) Plan after the effective date of the DPSG 401(k) Plan, unless such Cadbury Business Employee shall become employed by DPSG or a DPSG Subsidiary after such date.
          Section 7.02 Transfer of Accounts . Effective before or as soon as practical following the Distribution Date, but in no event later than six months following the Distribution Date, Cadbury shall cause to be transferred from trusts under the Cadbury 401(k) Plan to the trust under the DPSG 401(k) Plan the aggregate amount that is credited to the accounts of the DPSG DC Plan Beneficiaries (disregarding any participant loans from the plans) as of the date of transfer, but not less than or more than permitted by law, as determined by Cadbury. The transfer shall be an in-kind transfer, subject to the reasonable consent of the trustee of the DPSG 401(k) Plan and shall include the transfer of the aggregate assets held in the accounts relating to each DPSG DC Plan Beneficiary under the Cadbury 401(k) Plan and any participant loan notes held under such plans. Any assets that are liquidated prior to transfer shall be reduced by the asset liquidation expenses, such as commissions or early withdrawal penalties, actually incurred. Cadbury shall cause the DPSG 401(k) Plan to allocate the portion of any forfeiture account under the Cadbury 401(k) Plan that relates to forfeiture by Former DPSG Employees consistent with Cadbury’s past practice regarding allocation of forfeitures under the Cadbury 401(k) Plan. Before or promptly after the date hereof, Cadbury and DPSG shall file requests with the IRS for qualification determination letters under Code Section 401(a) and 401(k) (as applicable) with respect to the Cadbury 401(k) Plan and DPSG 401(k) Plan and shall take any and all reasonable actions, including the adoption of amendments requested by the IRS, as shall be necessary to obtain such determination letters. The transfers under this Section 7.02 shall occur prior to, but subject to the subsequent receipt of favorable determination letters issued by the IRS with respect to the Cadbury 401(k) Plan and DPSG 401(k) Plan, copies of which shall be shared among Cadbury and DPSG promptly upon issuance.
          Section 7.03 Funding of 2008 Matching Contribution . DPSG shall fund and allocate the full amount of any 2008 matching contribution accrued under the terms of the Cadbury 401(k) Plan to eligible DPSG DC Plan Beneficiaries under the DPSG 401(k) Plan within the time permitted by law (determined based on the terms of the Cadbury 401(k) Plan immediately prior to the transfer to the DPSG 401(k) Plan as if the transfer to the DPSG 401(k) Plan did not occur, but paid and contributed by DPSG to the DPSG 401(k) Plan).

 


 

ARTICLE 8
U.S. WELFARE BENEFIT PLANS
          Section 8.01 General Principles. Except as provided below, on or about the Distribution Date, liabilities relating to DPSG Business Employees and Former DPSG Employees shall be transferred to newly established DPSG welfare benefit plans that shall contain the same benefit provisions as in effect for DPSG Business Employees and Former DPSG Employees immediately prior to such date, and DPSG Business Employees and Former DPSG Employees shall cease to participate in the Cadbury welfare benefit plans. Welfare benefit plans include health, welfare, and wellness benefits plans (including, medical, dental, prescription drug and vision benefits, life insurance, accidental death and disability insurance, business travel accident insurance, disability (STD and LTD), long term care, flexible spending accounts, severance, Employee Assistance Plan, and similar types of plans). DPSG Business Employees and Former DPSG Employees shall not participate in Cadbury welfare benefit plans following the effective date of the DPSG plans described in this Section 8.01, unless they shall become employed by Cadbury after such date. Cadbury Business Employees and Former Cadbury Employees shall not participate in any DPSG welfare benefit plans following the effective date of such plans, unless they shall become employed by DPSG after such date.
          Section 8.02 Establishment of DPSG Plans .
     (a)  General Rule . DPSG Business Employees and Former DPSG Employees shall cease to participate in the Cadbury welfare benefit plans on or about the Distribution Date.
     (b)  Treatment of Claims Incurred . DPSG shall assume and shall be responsible for the liability for payment of all covered claims (including medical, dental, life insurance and long-term disability) and eligible expenses incurred by any DPSG Business Employee and beneficiaries thereof under the Cadbury Welfare Plans and Cadbury Non-ERISA U.S. Benefit Arrangements prior to the Distribution Date, and Cadbury shall not be responsible for any liability with respect to any such claims or expenses.
     (c)  Credit for Deductibles and Other Limits . With respect to each DPSG Business Employee and Former DPSG Employee, and each covered dependent, beneficiary, or other related party of such individual (the “ DPSG Welfare Plan Participants ”), the DPSG welfare benefit plans will give credit in the year of the Distribution Date for any amount paid under the comparable type Cadbury plan by such DPSG Welfare Plan Participant in the year of the Distribution Date toward deductibles, out-of-pocket maximum, or other, similar limitations to the extent such amounts are taken into account under the comparable type Cadbury plan. For purposes of any life-time maximum out-of-pocket limit on expenses paid by a covered participant, the DPSG welfare plans will recognize any expenses incurred by a DPSG Welfare Plan Participant prior to the Distribution to the same extent such expenses would be recognized in respect of an active plan participant under the comparable type Cadbury plan.
     (d)  COBRA . Effective as of the date of cessation of participation in the Cadbury welfare benefit plans by the DPSG Business Employees and Former DPSG Employees (as provided above), DPSG shall assume and satisfy all requirements under COBRA with respect to

 


 

all DPSG Business Employees and Former DPSG Employees and their qualified beneficiaries, including for individuals who are already receiving benefits as of such date under COBRA.
     (e)  Disabled Persons . The Parties intend that any Employee who has, prior to the Distribution Date, become eligible to receive any long-term disability benefits pursuant to any third-party insurance policy applicable under any welfare benefit plan shall continue to be eligible to receive such benefits in accordance with the terms of such plan and policy.
     Section 8.03 Insurance Contracts . To the extent any Cadbury welfare benefit plan is funded through the purchase of an insurance contract or is subject to any stop loss contract, Cadbury and DPSG will cooperate and use their reasonable commercial efforts to “ clone ” such insurance contracts for DPSG and to maintain any pricing discounts or other preferential terms for both Cadbury and DPSG through the end of the term of the Transition Services Agreement. Neither party shall be liable for failure to obtain such pricing discounts or other preferential terms for DPSG. The cost of “ cloning ”, including any increases in premiums, charges or administrative fees relating to DPSG Business Employees and Former DPSG Employees shall be the obligation of DPSG. Each party shall be responsible for any additional premiums, charges or administrative fees that such party may incur pursuant to this Section 8.03.
     Section 8.04 Third Party Vendors . Except as provided below, to the extent any Cadbury welfare benefit plan is administered by a third-party vendor, Cadbury and DPSG will cooperate and use their reasonable commercial efforts to “ clone ” any contract with such third-party vendor for DPSG and to maintain any pricing discounts or other preferential terms for both Cadbury and DPSG. Neither party shall be liable for failure to obtain such pricing discounts or other preferential terms for DPSG. The cost of “ cloning ”, including any increases in premiums, charges or administrative fees relating to DPSG Business Employees and Former DPSG Employees shall be the obligation of DPSG. Each party shall be responsible for any additional premiums, charges or administrative fees that such party may incur pursuant to this Section 8.04.
ARTICLE 9
FRINGE BENEFIT AND OTHER U.S. PLANS AND PROGRAMS
     Except as otherwise provided under this Agreement, effective as of the Distribution Date, DPSG Business Employees and Former DPSG Employees shall not be eligible to participate in any plan, policy or arrangement of Cadbury or a Cadbury Subsidiary providing fringe benefits to employees or former employees.
ARTICLE 10
WORKERS COMPENSATION AND UNEMPLOYMENT COMPENSATION
     DPSG shall have and assume the obligations for all claims and liabilities relating to workers compensation and unemployment compensation benefits for all DPSG Business Employees and Former DPSG Employees. Cadbury shall have and assume the obligations for all claims and liabilities relating to workers compensation and unemployment compensation benefits for all Cadbury Business Employees and Former Cadbury Employees. DPSG and

 


 

Cadbury shall make reasonable commercial efforts to provide that workers compensation and unemployment insurance costs are not adversely affected for either of them by reason of the Distribution.
ARTICLE 11
COMPENSATION MATTERS AND GENERAL BENEFIT AND EMPLOYEE
MATTERS
          Section 11.01 Restrictive Covenants in Employment and Other Agreements . To the fullest extent permitted by the agreements and applicable law, Cadbury shall assign, or cause its Affiliates to assign, to DPSG or one of its Affiliates as designated by DPSG all agreements containing restrictive covenants (including but not limited to confidentiality and non-competition provisions) between Cadbury (or a Cadbury Affiliate) and a DPSG Business Employee, with such assignment to be effective no later than the Distribution Date. To the extent that assignment of such agreements is not permitted, following the Distribution, DPSG and its Subsidiaries and Affiliates shall be considered to be successors to Cadbury and its Subsidiaries and Affiliates for purposes of, and third-party beneficiaries with respect to, all agreements containing restrictive covenants (including but not limited to confidentiality and non-competition provisions) between Cadbury (or a Cadbury Subsidiary or Affiliate) and DPSG Business Employees and between Cadbury (or a Cadbury Subsidiary or Affiliate) and Cadbury Employees whom DPSG reasonably determines have substantial knowledge of the DPSG Business, such that each of Cadbury, DPSG and their respective Subsidiaries and Affiliates shall all enjoy the rights and benefits under such agreements (including, without limitation, rights and benefits as a third-party beneficiary), with respect to such Party’s and its respective Subsidiaries’ and Affiliates’ business operations; provided , however , that (a) in no event shall Cadbury be permitted to enforce the restrictive covenant agreements against DPSG Business Employees for action taken in their capacity as employees of DPSG or its Subsidiaries, and (b) in no event shall DPSG be permitted to enforce the restrictive covenants agreements of Cadbury Business Employees for action taken in their capacity as employees of Cadbury or its Subsidiaries.
          Section 11.02 Severance . (a) Effective as of the Distribution Date, DPSG may establish one or more severance plans and policies with respect to DPSG Business Employees as DPSG deems appropriate in its discretion. Cadbury shall have no liability or obligation under any Cadbury severance plan or policy with respect to DPSG Business Employees who remain employed or whose employment terminates on or after the Distribution Date.
     (b) Following the Distribution Date, DPSG shall assume and shall be responsible for administering all payments and benefits under the applicable Cadbury severance policies or any termination agreements with Former DPSG Employees whose employment has terminated prior to the Distribution Date for an eligible reason under such policies or in accordance with such agreements.
     (c) It is not intended that any DPSG Business Employee will be eligible for termination or severance payments or benefits from Cadbury or its Subsidiaries or Affiliates as a result of the transfer or change of employment from Cadbury to DPSG or their respective Subsidiaries or Affiliates. Notwithstanding the preceding sentence, in the event that any such

 


 

termination or severance payments or benefits become payable on account of such transfer, change or the refusal of a DPSG Business Employee to accept employment with DPSG, DPSG shall indemnify Cadbury, and its Subsidiaries and Affiliates, for the amount of such termination or severance payments or benefits.
          Section 11.03 Accrued Vacation Days Off . DPSG shall recognize and assume all liability for all vacation, holiday, sick leave, flex days, personal days and Paid-Time Off, including banked time accrued by DPSG Business Employees as of the Distribution Date and DPSG shall credit each DPSG Business Employee with such accrual.
          Section 11.04 Leaves of Absence . DPSG will continue to apply the leave of absence policies maintained by Cadbury to inactive DPSG Business Employees who are on an approved leave of absence as of the Distribution Date. Leaves of absence taken by DPSG Business Employees prior to the Distribution Date shall be deemed to have been taken as employees of DPSG.
          Section 11.05 Cadbury Obligations . DPSG and Cadbury plc agree that Cadbury plc shall not, and shall cause Cadbury not to, take any actions that would materially and adversely impact the ability of Cadbury to fulfill its obligations under this Agreement; provided that Cadbury plc may at any time following the Distribution Date require Cadbury to assign to Cadbury plc all of Cadbury’s rights and obligations under this Agreement in substitution for compliance by Cadbury plc and Cadbury with the aforementioned obligation in this Section 11.05, and upon such assignment, Cadbury plc shall assume all of Cadbury’s obligations under this Agreement.
ARTICLE 12
CANADIAN EMPLOYEE MATTERS
     The treatment of employee matters with respect to an Employee whose primary employer within the Cadbury Group or the DPSG Group is or was an entity domiciled in Canada shall be set forth as Appendix 2 to this Agreement.
ARTICLE 13
GENERAL PROVISIONS
          Section 13.01 Preservation of Rights to Amend . The rights of Cadbury or DPSG to amend or terminate any plan, program, or policy referred to herein shall not be limited in any way by this Agreement.
          Section 13.02 Confidentiality . Each Party agrees that any information conveyed or otherwise received by or on behalf of a Party in conjunction herewith is confidential and is subject to the terms of the confidentiality provisions set forth in the Separation Agreement.
          Section 13.03 Administrative Complaints/Litigation . Except as otherwise provided in this Agreement, as of and after the Distribution Date, DPSG shall assume, and be

 


 

solely liable for, the handling, administration, investigation and defense of actions, including, without limitation, ERISA, occupational safety and health, employment standards, union grievances, wrongful dismissal, discrimination or human rights and unemployment compensation claims, asserted at any time against Cadbury, or DPSG or their respective Affiliates by any DPSG Business Employee or Former DPSG Employee (including any dependent or beneficiary of any such Employee) or any other person, to the extent such actions or claims arise out of or relate to employment or the provision of services (whether as an employee, contractor, consultant, or otherwise) to or with the DPSG Business. To the extent that any legal action relates to a putative or certified class of plaintiffs, which includes both Cadbury Business Employees (or Former Cadbury Employees) and DPSG Business Employees (or Former DPSG Employees) and such action involves employment or benefit plan related claims, reasonable costs and expenses incurred by the Parties in responding to such legal action shall be allocated among the Parties equitably in proportion to a reasonable assessment of the relative proportion of Cadbury Business Employees (or Former Cadbury Employees) and DPSG Business Employees (or Former DPSG Employees) included in or represented by the putative or certified plaintiff class. The procedures contained in the indemnification and related litigation cooperation provisions of the Separation Agreement shall apply with respect to each Party’s indemnification obligations under this Section 13.03.
          Section 13.04 Reimbursement and Indemnification . The Parties hereto agree to reimburse each other, within 60 days of receipt from the other Party of reasonable verification, for all costs and expenses which each may incur on behalf of the other as a result of any of the Welfare Plans, Pension Plans and Non-ERISA U.S. Benefit Arrangements and, as contemplated by Section 11.02, any termination or severance payments or benefits. All liabilities retained, assumed or indemnified against by DPSG pursuant to this Agreement, and all liabilities retained, assumed or indemnified against by Cadbury pursuant to this Agreement, shall in each case be subject to the indemnification provisions of the Separation Agreement. Notwithstanding anything to the contrary, no provision of this Agreement shall require DPSG or any DPSG Subsidiary to pay or reimburse to Cadbury or any Cadbury Affiliate any benefit-related cost item that DPSG or any DPSG Subsidiary has previously paid or reimbursed to Cadbury or any Cadbury Affiliate.
          Section 13.05 Costs of Compliance with Agreement . Except as otherwise provided in this Agreement or any other Distribution document, each Party shall pay its own expenses in fulfilling its obligations under this Agreement.
ARTICLE 14
MISCELLANEOUS
          Section 14.01 Notices . Any notice, instruction, direction or demand under the terms of this Agreement required to be in writing shall be duly given upon delivery, if delivered by hand, facsimile transmission, or mail, to the following addresses:
  (a)   If to Cadbury

 


 

      25 Berkeley Square
London W1J 6HB
Facsimile: 44-20-7830-5015
Attention: Henry Udow, Esq.
                    Chief Legal Officer
 
      With a copy to:
 
      Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022-6069
Telecopy: 212-848-6069
Attention: Creighton O’M. Condon, Esq.
 
  (b)   If to Cadbury plc:
 
      25 Berkeley Square
London W1J 6HB
Facsimile: 44-20-7830-5015
Attention: Henry Udow, Esq.
                    Chief Legal Officer
 
      With a copy to:
 
      Shearman & Sterling LLP
599 Lexington Avenue
New York, NY 10022-6069
Telecopy: 212-848-6069
Attention: Creighton O’M. Condon, Esq.
 
  (b)   If to DPSG to:
 
      5301 Legacy Drive
Plano, TX 75024
Facsimile: 972-673-8130
Attention: James. L. Baldwin, Jr.
                    General Counsel
          or to such other addresses or telecopy numbers as may be specified by like notice to the other Party. All such notices, requests and other communications shall be deemed given, (a) when delivered in person or by courier or a courier services, (b) if sent by facsimile transmission (receipt confirmed) on a Business Day prior to 5 p.m. in the place of receipt, on the date of transmission (or, if sent after 5 p.m., on the following Business Day) or (c) if mailed by certified mail (return receipt requested), on the date specified on the return receipt.
          Section 14.02 Amendments; No Waivers . From and after the Distribution, any provision of this Agreement may be amended or waived if, and only if, such amendment or

 


 

waiver is in writing and signed, in the case of an amendment, by Cadbury and DPSG, or in the case of a waiver, by the Party against whom the waiver is to be effective.
     (a) No failure or delay by any Party in exercising any right, power or privilege hereunder shall operate as a waiver thereof nor shall any single or partial exercise thereof preclude any other or further exercise thereof or the exercise of any other right, power or privilege. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law.
          Section 14.03 Successors and Assigns . The provisions of this Agreement shall be binding upon and inure to the benefit of the Parties hereto and their respective successors and permitted assigns; provided that neither Party may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the consent of the other Party hereto. If any Party or any of its successors or permitted assigns (i) shall consolidate with or merge into any other Person and shall not be the continuing or surviving corporation or entity of such consolidation or merger or (ii) shall transfer all or substantially all of its properties and assets to any Person, then, and in each such case, proper provisions shall be made so that the successors and assigns of such Party shall assume all of the obligations of such Party under the Separation Agreement.
          Section 14.04 Governing Law . This Agreement shall be construed in accordance with and governed by the law of the State of New York, without regard to the conflicts of laws rules thereof.
          Section 14.05 Counterparts; Effectiveness; Third-Party Beneficiaries . This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Neither this Agreement nor any provision hereof is intended to confer any rights, benefits, remedies, obligations, or liabilities hereunder upon any Person other than the parties hereto and their respective successors and permitted assigns. No Employee or other current or former employee of Cadbury or DPSG or any Subsidiary or Affiliate of either (or his/her spouse, dependent or beneficiary), or any other person not a party to this Agreement, shall be entitled to assert any claim hereunder. Without limiting the foregoing, the provisions of this Agreement are not intended to, nor shall they confer upon any Person other than the Parties hereto any right or expectation as to the adoption, amendment, maintenance, continuation, operation or funding of any employee benefit plan, policy or arrangement.
          Section 14.06 Entire Agreement . This Agreement and the other Distribution documents constitute the entire understanding of the parties with respect to the subject matter hereof and thereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter hereof and thereof. Regardless of anything else contained herein, the parties do not intend for this Agreement to amend any employee benefit plans or arrangements.
          Section 14.07 Jurisdiction . Any Action seeking to enforce any provision of, or based on any matter arising out of or in connection with, this Agreement or the transactions

 


 

contemplated hereby may be brought in the United States District Court for the Southern District of New York or any other New York State court sitting in New York County, and each of the Parties hereby consents to the jurisdiction of such courts (and of the appropriate appellate courts therefrom) in any such suit, action or proceeding and irrevocably waives, to the fullest extent permitted by law, any objection which it may now or hereafter have to the laying of the venue of any such suit, action or proceeding in any such court or that any such suit, action or proceeding which is brought in any such court has been brought in an inconvenient forum. Process in any such suit, action or proceeding may be served on any Party anywhere in the world, whether within or without the jurisdiction of any such court. Without limiting the foregoing, each Party agrees that service of process on such Party as provided in Section 14.01 shall be deemed effective service of process on such Party.
          Section 14.08 Waiver of Jury Trial . The parties hereto hereby irrevocably waive any and all right to trial by jury in any legal proceeding arising out of or related to this Agreement or the transactions hereby contemplated.
          Section 14.09 Severability . If any one or more of the provisions contained in this Agreement should be declared invalid, illegal or unenforceable in any respect, the validity, legality and enforceability of the remaining provisions contained in this Agreement shall not in any way be affected or impaired thereby so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any Party. Upon such a declaration, the Parties shall modify this Agreement so as to effect the original intent of the Parties as closely as possible in an acceptable manner so that the transactions contemplated hereby are consummated as originally contemplated to the fullest extent possible.
          Section 14.10 Survival . All covenants and agreements of the Parties contained in this Agreement shall survive the Distribution Date indefinitely, unless a specific survival or other applicable period is expressly set forth herein.
          Section 14.11 Captions . The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof.
          Section 14.12 Specific Performance . Each Party to this Agreement acknowledges and agrees that damages for a breach or threatened breach of any of the provisions of this Agreement would be inadequate and irreparable harm would occur. In recognition of this fact, each Party agrees that, if there is a breach or threatened breach, in addition to any damages, the other nonbreaching Party to this Agreement, without posting any bond, shall be entitled to seek and obtain equitable relief in the form of specific performance, temporary restraining order, temporary or permanent injunction, attachment, or any other equitable remedy which may then be available to obligate the breaching Party (i) to perform its obligations under this Agreement or (ii) if the breaching Party is unable, for whatever reason, to perform those obligations, to take any other actions as are necessary, advisable or appropriate to give the other Party to this Agreement the economic effect which comes as close as possible to the performance of those obligations (including, but not limited to, transferring, or granting liens on, the assets of the breaching Party to secure the performance by the breaching Party of those obligations).

 


 

          Section 14.13 Mutual Drafting . This Agreement shall be deemed to be the joint work product of Cadbury and DPSG and any rule of construction that a document shall be interpreted or construed against a drafter of such document shall not be applicable.
          Section 14.14 Operating Committee .
     (a) The parties shall use an operating committee (the “ Operating Committee ”) to implement the terms of this Agreement. Each of Cadbury and DPSG shall appoint two employees to the Operating Committee and designate one of such employees to be such party’s lead representative (each, a “ Lead Representative ”) for the purpose of fielding queries from representatives of the relevant Group concerning the implementation and ongoing operation of this Agreement. In addition, the Lead Representatives shall have such other functions and responsibilities as may be determined by the Operating Committee from time to time. The Operating Committee will oversee the implementation and ongoing operation of this Agreement and shall attempt in good faith to resolve disputes between the parties. Each of the parties shall have the right to (i) replace one or more of its Operating Committee members at any time with employees or officers with comparable knowledge, expertise and decision-making authority and (ii) designate an alternative Lead Representative.
     (b) The Operating Committee shall act by a majority vote of its members. If the Operating Committee fails to make a decision, resolve a dispute or agree upon any necessary action, the unresolved matters shall be handled by the dispute resolution procedures contained in the Separation Agreement.
     (c) During the term of this Agreement, the full Operating Committee shall meet at such times as may be required by either Lead Representative. Meetings of the Operating Committee may be in person or via teleconference and shall be convened and held in accordance with such procedures as the Operating Committee may determine from time to time.
           Section 14.15. Consent to the Reduction . DPSG acknowledges that Cadbury plc is proposing to undertake the Reduction and DPSG, on behalf of itself and each member of the DPSG Group, (i) shall as soon as reasonably practicable after the date of this Agreement provide Cadbury plc with an executed letter of consent to the Reduction in the form attached as Exhibit 4.06 to the Separation Agreement and agrees that a copy of such letter may be presented to the Court as part of Cadbury plc’s application for confirmation by the Court of the Reduction; and (ii) undertakes that to the extent further consent is requested by Cadbury plc in order to effect the Reduction, DPSG shall (and shall procure that any member of the DPSG Group shall) give consent promptly on terms reasonably acceptable to Cadbury plc and, for the avoidance of doubt, such consents shall not be conditional on the provision of any third party guarantee or the deposit of any funds in any bank or escrow account or any other security, fact, event or thing. This consent is (and any consent given after the date of this letter shall be) irrevocable.
           Section 14.16 Effect if Distribution Does Not Occur . Notwithstanding anything in this Agreement to the contrary, if the Separation Agreement or Transition Services Agreement is terminated prior to the Distribution Date, this Agreement shall be of no further force and effect.
           Section 14.17 Corporate Authorization . The officers of Cadbury and DPSG are hereby authorized, empowered and directed, in the name and on behalf of each of Cadbury and DPSG, respectively, to take or cause to be taken all such further action, to execute and deliver or cause to be executed and delivered all such further agreements, certificates, instruments and documents, to make or cause to be made all such filings with governmental or regulatory authorities, and to pay or cause to be paid all such fees and expenses, in each case which shall in such officers’ judgment be deemed necessary, proper or advisable to effect and carry out the intent of this Agreement, such determination to be evidenced conclusively by such officers’ execution and delivery thereof or taking of action in respect thereto.
          IN WITNESS WHEREOF, the Parties have caused this Agreement to be executed in their names by a duly authorized officer as of the date first written above.

 


 

         
  CADBURY SCHWEPPES, PLC
 
 
  By:      
    Name:      
    Title:      
 
  DR PEPPER SNAPPLE GROUP, INC.
 
 
  By:      
    Name:      
    Title:      
 
  CADBURY PLC, solely for the purposes of Section 11.05
 
 
  By:      
    Name:      
    Title:      
 

 

 

Exhibit 10.4
June 15, 2004
     
AGREEMENT:
  Dr Pepper/Seven-Up Bottling Group, Inc.
CROWN Cork & Seal USA, Inc (“Crown”) is pleased to offer the following Agreement for the supply of aluminum 12 ounce beverage cans and ends (“Containers”), 202/211 x 413, with standard soft drink specifications and printed with up to six color decoration. End units supplied shall be 202 diameter standard “LOE” or Crown’s 202 diameter “Super-End ® ” with complete conversion to “Super-End ® ” ends expected to take place not later than April 1, 2006, as described below.
TERM OF AGREEMENT: The term of the Agreement shall be for a period of * years beginning January 1, 2005 and extending through *. The Agreement shall be automatically renewed for an additional * year period (* through *); provided, however, *.
LOCATIONS & VOLUMES: Crown shall supply and Dr Pepper/Seven-Up agrees to purchase from Crown, *% of their can and end requirements (except for the end requirements at Vernon and Buena Park, CA and the * exception discussed below) for the following Dr Pepper/Seven-Up filling locations:
       
Location   Estimated Annual Volumes
Irving, TX
    *
Houston, TX
    *
Columbus, OH
    *
Vernon, CA
    *
Buena Park, CA
    *
       
Total Base Volume
    *
It is understood and agreed that at the Buena Park location, Crown’s can and end supply shall be less than *%, to the extent that Dr Pepper/Seven-Up fills Containers for *, and * designates an alternative can maker to supply its Container (can and end) requirements.
At the Vernon and Buena Park, CA locations, Crown shall supply a minimum of *% of the end requirements in 2005. Beginning January 1, 2006, Crown shall supply *% of both the can and end requirements at the Vernon and Buena Park locations (subject to the * can and end exception mentioned above) with conversion to “SuperEnd ® ” expected to be completed no later than April 1, 2006.
If any of the above can filling locations are closed and volume is moved to a replacement filling location, Crown shall have the right to supply such relocated Container volume at
 

*   Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

2

the replacement filling location pursuant to the terms of this Agreement. If Dr Pepper/Seven-Up acquires an additional can filling operation(s) during the term of this Agreement, Crown shall have the first right to supply such additional Container volume pursuant to the terms and conditions of this Agreement, but not to the extent that Dr Pepper/Seven Up is prohibited from awarding Crown such new volume as a result of prior existing contractual obligations.
PRICING: The current prices (as of October 1, 2004) for the cans and ends supplied by Crown are:
                 
    with SuperEnd ®     with LOE Ends  
12 ounce can bodies
  $*   $*
202 diameter ends
  $*   $*
 
           
Total Container
  $*   $*
In consideration of Dr Pepper/Seven-Up entering into this new five year Agreement, the selling prices will be * per thousand containers effective January 1, 2005 as follows:
                 
    With SuperEnd ®     with LOE Ends  
12 ounce can bodies
  $*   $*
202 diameter ends
  $*   $*
 
           
Total Container
  $*   $*
     The above “Base Prices” shall be adjusted beginning April 1, 2005 as described below. As of January 1, 2006, all 202 diameter “LOE” ends supplied under this agreement shall be sold at the “Super End ® ” end price shown above, provided that, Dr Pepper/Seven Up has committed to a mutually agreeable “Super End ® ” conversion schedule for the Vernon and Buena Park locations. Base coated can bodies require an upcharge of $* per thousand cans.
PAYMENT TERMS: Payments for Containers shall be due net * days from the date of invoice — no cash discounts will be allowed.
SUPER-ENDS ® : Conversion of the various Dr Pepper/Seven Up filling locations from “LOE” to “Super-End ® ” ends shall be completed on a mutually agreeable schedule. The goal of both parties is for all locations to be running “Super-End ® ” ends prior to April 1, 2006.
FREIGHT: The above prices include freight delivery costs to the various Dr Pepper/Seven Up filling locations. Dr Pepper/Seven Up may use its own fleet of trucks to pick-up cans and/or ends at the Crown manufacturing facilities and Crown shall give a freight allowance equal to its cost to deliver by commercial carrier. Crown intends to supply cans to the various Dr Pepper/Seven Up filling locations from the following can manufacturing facilities:
 
*   Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

3

     
Dr Pepper/Seven Up
  Crown’s Can Supply
Filling Locations
  Location (& Back-up)
 
   
Irving, TX
  *
Houston, TX
  *
Columbus, OH
  *
Vernon, CA
  *
Buena Park, CA
  *
PRICE CHANGES: During the term of this Agreement, the Base Prices shall be adjusted pursuant to the following four factors: *, as set forth below.
  (a)   * It is understood that * of the price adjustment factors *. The January 1, 2005 Base Prices reflect *. The Base Prices will be adjusted on April 1 st and October 1 st of each contract year (beginning April 1, 2005) to reflect *. The April 1 st adjustments will be based on *. The October 1 st adjustments will be based on *.
 
  (b)   * The Base Prices will be adjusted to reflect *.
 
  (c)   * On April 1 st of each contract year, *. The first such adjustment shall be April 1, 2005 and will reflect *.
 
  (d)   * In the event that *
 
*   Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

4

WAREHOUSING: During the term of this Agreement, Crown agrees to provide, at * to Dr Pepper/Seven-Up, warehouse storage space of * in the Los Angeles, CA area at a location that is mutually acceptable to both parties. Such warehouse space is to be appropriate for the storage of filled beverage cans and bottles.
*
8-OUNCE CAN SUPPLY: Provided that Crown is competitive in price and other terms and conditions of sale, Crown will be given the opportunity to supply Dr Pepper/Seven-Up’s requirements of 8-ounce aluminum (202/211 x 307) beverage cans and ends to the Dr Pepper/Seven-Up 8-ounce filling locations in Texas.
OTTUMWA, IOWA SUPPLY: Upon mutual agreement, Crown will be given the opportunity to supply the Dr Pepper/Seven-Up filling location in Ottumwa, Iowa with its requirements of 12-ounce aluminum beverage Containers pursuant to the terms and conditions of this Agreement.
WARRANTIES: All of Crown’s standard container warranties and other terms and conditions of sale shall apply to the cans and ends supplied under this Agreement.
CONFIDENTIALITY: Dr Pepper/Seven-Up and Crown agree to maintain strict confidentiality regarding the contents of this Agreement including pricing and all other terms set forth herein.
PREVIOUS AGREEMENTS: This new Agreement shall supersede and replace any previous agreement between the parties including the Sales Agreement dated December 18, 1997 in its entirety (including the paragraph 8 reference to employees or consultants).
 
*   Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

5

If you are in agreement with the terms and conditions as set forth above, please sign in the space provided below and return one original copy to Crown.
         
CROWN Cork & Seal USA, Inc.
 
   
By:   /s/     
  (Authorized Representative)     
       
 
DR PEPPER / SEVEN-UP BOTTLING GROUP, INC.
 
   
By:   /s/     
Title:        
       
 

 

 

Exhibit 10.5
August 25, 2005
     
AMENDMENT #1
  Dr Pepper/Seven Up Bottling Group, Inc.
CROWN Cork & Seal USA, Inc (“Crown”) is pleased to offer to Dr Pepper/Seven-Up Bottling Group, Inc. (“Dr Pepper/Seven Up”) this first Amendment to the June 15, 2004 Agreement between Crown and Dr Pepper/Seven Up for the supply of aluminum 12 ounce beverage cans and ends (“Containers”). The purpose of this Amendment is to include additional Dr Pepper/Seven Up filling locations into the Agreement and to revise certain other provisions of the Agreement as described below:
TERM OF AGREEMENT: The term of the Agreement shall be extended for an additional * period for a total of * years beginning January 1, 2005 through *. *.
LOCATIONS & VOLUMES: In addition to the Dr Pepper/Seven Up filling locations included in the current Agreement, Crown shall supply and Dr Pepper/Seven Up agrees to purchase from Crown, *% of their Consumer requirements for the following Dr Pepper/Seven Up filling locations beginning January 1, 2006:
     
Location   Estimated Annual Volumes
Ottumwa, IA
  *
Northlake, IL
  *
Holland, MI
  *
 
   
Total Additional Volume
  *
If any of the Dr Pepper/Seven Up can filling locations supplied under the Agreement as amended herein are closed and volume is moved to a replacement filling location, Crown shall have the right to supply such relocated Container volume at the replacement filling location pursuant to the terms of the Agreement. If Dr Pepper/Seven-Up acquires an additional can filling operation(s) during the term of the amended Agreement, Crown shall have the first right to supply such additional Container volume pursuant to the terms and conditions of the Agreement, but not to the extent that Dr Pepper/Seven Up is prohibited from awarding Crown such new volume as a result of prior existing contractual obligations.
PRICING: The current prices under the Agreement (as of April 1, 2005) for the cans and ends supplied by Crown are:
         
    with SuperEnd ®   with LOE Ends
12 ounce can bodies
  $*   $*
202 diameter ends
  $*   $*
 
       
Total Container   $*   $*
 
*Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

2

* the selling prices * will be * effective January 1, 2006 as follows:
         
    With SuperEnd ®   with LOE Ends
12 ounce can bodies
  $*   $*
202 diameter ends
  $*   $*
 
       
Total Container
  $*   $*
The above “Base Prices” shall be adjusted as described in the Agreement. As of January 1, 2006, any 202 diameter “LOE” ends supplied under the amended Agreement shall be sold at the “Super End ® ” end price shown above, provided that , Dr Pepper/Seven Up has committed to a mutually agreeable “Super End ® ” conversion schedule for each of the filling locations involved. Base coated can bodies require an upcharge of * per thousand cans.
PAYMENT TERMS: As in the current Agreement, payments for Containers supplied under the amended Agreement shall be due net * days from the date of invoice—no cash discounts will be allowed.
SUPER-ENDS ® : Conversion of the various Dr Pepper/Seven Up filling locations from “LOE” to “Super-End ® ” ends shall be completed on a mutually agreeable schedule. The goal of both parties is for all locations to be running “Super-End ® ” ends prior to April 1, 2006.
FREIGHT: The above prices include freight delivery costs to the various Dr Pepper/Seven Up filling locations. Dr Pepper/Seven Up may use its own fleet of trucks to pick-up cans and/or ends at the Crown manufacturing facilities and Crown shall give a freight allowance equal to its cost to deliver by commercial carrier. Crown intends to supply can bodies to the various Dr Pepper/Seven Up filling locations from the following can manufacturing facilities:
     
Dr Pepper/Seven Up   Crown's Can Supply
Filling Locations   Location (& Back-up)
 
   
Ottumwa, IA
  *
Northlake, IL
  *
Holland, MI
  *
Crown agrees to establish warehouses, at mutually agreeable locations, for the purpose of storing can bodies that will be available for pick-up by Dr Pepper/Seven Up trucks for delivery to the above filling locations. Freight pick-up allowances from these warehouse locations will be available to Dr Pepper/Seven Up and shall be no less than *.
 
*Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

3

PRICE CHANGES: During the term of the amended Agreement, the Base Prices shall be adjusted pursuant to the provisions of the current Agreement.
ALUMINUM SUPPLY ALTERNATIVES: During the term of the amended Agreement, Crown agrees to cooperate with Dr Pepper/Seven Up in providing alternatives to *. Such alternatives may include *. Dr Pepper/Seven Up acknowledges full responsibility for any additional costs associated with such alternative * and understands that there is a period of time required to reposition from one * to another.*
CADBURY SCHWEPPES: Upon receipt of Dr Pepper/Seven Up’s written request at any time during the term of this Agreement, Crown shall supply Containers to Cadbury Schweppes Americas Beverages, Inc. or one of its affiliates (“CSAB”) in the United States under the same terms and conditions contained herein including, but not limited to, the prices offered under this Agreement, provided Crown has sufficient production capacity and subject to a price adjustment based upon *. The parties shall meet at the earliest opportunity to determine the volume, specifications, locations and timing for shipment of Containers to CSAB. Dr Pepper/Seven Up shall have no obligation, at any time, to exercise the option described above.
*
*
 
*Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

4

CONFIDENTIALITY: Dr Pepper/Seven-Up and Crown agree to maintain strict confidentiality regarding the contents of this Amendment including pricing and all other terms set forth herein.
OTHER TERMS AND CONDITIONS: Except as specifically modified by this Amendment, all other terms and conditions of the Agreement shall remain in full force and effect.
(Signature page follows.)


 

5

If you are in agreement with the provisions of this Amendment as set forth above, please sign in the space provided below and return one original copy to Crown.
         
CROWN Cork & Seal USA, Inc.    
 
       
By:
  /s/    
 
       
 
       
Title:
       
 
 
 
   
 
       
 
       
DR PEPPER / SEVEN UP BOTTLING GROUP, INC.    
 
       
By:
  /s/    
 
       
 
       
Title:
       
 
 
 
   

 

Exhibit 10.6
     
CROWN Beverage Packaging USA
One Crown Way
Philadelphia, PA 19154-4599
tel: 215-698-5100
  (CROWN LOGO)
     June 21, 2006
     
AMENDMENT #2
  Cadbury Schweppes Bottling Group, Inc.
CROWN Cork & Seal USA, Inc (“Crown”) is pleased to offer this Amendment #2 to the June 15, 2004 Agreement (as previously amended on August 25, 2005) between Crown and Dr Pepper/Seven Up Bottling Group, Inc. (“Dr Pepper/Seven Up”) now known as Cadbury Schweppes Bottling Group Inc. (“Cadbury”) for the supply of aluminum 12 ounce beverage cans and ends (“Containers”). The purpose of this Amendment #2 is to include additional Cadbury filling locations into the Agreement and to revise certain other provisions of the Agreement as described below:
LOCATIONS & VOLUMES: In addition to the Cadbury filling locations included in the current Agreement (as previously amended), Crown shall supply and Cadbury agrees to purchase from Crown, *% of their Container requirements for the following Cadbury filling locations beginning Monday, July 17, 2006:
         
Location   Estimated Annual Volumes  
Denver, CO
  *
Louisville, KY
  *
 
     
Total Additional Volume
  *
If any of the Cadbury can filling locations supplied under the Agreement as amended herein are closed and volume is moved to a replacement filling location, Crown shall have the right to supply such relocated Container volume at the replacement filling location pursuant to the terms of the Agreement.
CROWN Cork & Seal USA, Inc.
      (PAPER RECYCLED LOGO)
 
*Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

2

PRICING: The current prices under the amended Agreement (as of April 1, 2006) for the cans and ends supplied by Crown are:
                 
    with SuperEnd ®     with LOE Ends  
12 ounce can bodies
  $*   $*
202 diameter ends
  $*   $*
 
           
Total Container
  $*   $*
* the selling prices * will be * as follows:
                 
    With SuperEnd ®     with LOE Ends  
12 ounce can bodies
  $*   $*
202 diameter ends
  $*   $*
 
           
Total Container
  $*   $*
*
The above “Base Prices” shall be adjusted as described in the amended Agreement. Base coated can bodies require an upcharge of * per thousand cans.
PAYMENT TERMS: As in the current Agreement, payments for Containers supplied under the amended Agreement shall be due net * days from the date of invoice - no cash discounts will be allowed.
SUPER-ENDS ® : Conversion of the Denver and Louisville filling locations from “LOE” to “Super-End ® ” ends shall be completed on a mutually agreeable schedule; however, such conversions shall be completed no later than December 31, 2006. * agrees to * required to convert the Denver and Louisville locations to Super-End ®. Seamer overhaul and repair costs *.
 
     
* Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

3

FREIGHT: The above prices include freight delivery costs to the various Cadbury filling locations. Cadbury may use its own fleet of trucks to pick-up cans and/or ends at the Crown manufacturing facilities and Crown shall give a freight allowance equal to its cost to deliver by commercial carrier. Crown intends to supply can bodies to the various Cadbury filling locations from the following can manufacturing facilities:
         
Cadbury
      Crown’s Can Supply
Filling Locations
      Location (& Back-up)
 
       
 
       
Denver, CO
      *
Louisville, KY
      *
PRICE CHANGES: The Base Prices shall be adjusted pursuant to the provisions of the current amended Agreement *.
CONFIDENTIALITY: Cadbury and Crown agree to maintain strict confidentiality regarding the contents of this Amendment #2 including pricing and all other terms set forth herein.
OTHER TERMS AND CONDITIONS: Except as specifically modified by this Amendment #2, all other terms and conditions of the amended Agreement shall remain in full force and effect
 
     
* Confidential treatment has been requested. The redacted material has been separately filed with the Commission.
(Signature page follows.)


 

4

If you are in agreement with the provisions of this Amendment #2 as set forth above, please sign in the space provided below and return one original copy to Crown.
             
CROWN Cork & Seal USA, Inc.    
 
           
By:
  /s/    
         
 
Title:        
         
 
           
 
           
CADBURY SCHWEPPES BOTTLING GROUP, INC.    
 
           
By:
  /s/    
         
 
Title:        
         

 

 

Exhibit 10.7
April 4, 2007
     
AMENDMENT #3
  Cadbury Schweppes Bottling Group, Inc.
CROWN Cork & Seal USA, Inc (“Crown”) is pleased to offer this Amendment #3 to the June 15, 2004 Agreement (as previously amended on August 25, 2005 and June 21, 2006) between Crown and Dr Pepper/Seven Up Bottling Group, Inc. (“Dr Pepper/Seven Up”) now known as Cadbury Schweppes Bottling Group, Inc. (“Cadbury”) for the supply of aluminum 12-ounce beverage cans and ends (“Containers”). The purpose of this Amendment #3 is to include additional Cadbury filling locations, add aluminum 8-ounce cans to the Agreement, and to revise certain other provisions of the Agreement as described below:
LOCATIONS & VOLUMES: In addition to the Cadbury filling locations included in the current Agreement (as previously amended), Crown shall supply and Cadbury agrees to purchase from Crown, *% of their 8-ounce and 12-ounce Container requirements for the following Cadbury filling locations beginning on or approximately *:
         
Location   Estimated Annual Volumes
             Sacramento, CA
  *   12-ounce
             Sacramento, CA
  *   8-ounce
             Ottumwa, IA
  *   8-ounce
             Irving, TX
  *   8-ounce
 
       
 
       
Total Additional Volume   *    
If any of the Cadbury can filling locations supplied under the Agreement as amended herein are closed and volume is moved to a replacement filling location, Crown shall have the right to supply such relocated Container volume at the replacement filling location pursuant to the terms of the Agreement.
PRICING: The initial base prices for Containers to be supplied by Crown pursuant to this Amendment #3 (effective January 1, 2007) are:
     
Sacramento, CA:   12-ounce cans
    with LOE End
 
   
          12-ounce can bodies
  $*
          Aluminum adjustment
  $*
 
   
          Total can body price
  $*
 
   
          202 dia. LOE ends
  $*
          Aluminum adjustment
  $*
 
   
          Total LOE end price
  $*
 
   
          Total 12-oz Container
  $*
 
     
* Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

2
     
Sacramento, CA:   8-ounce cans
    with LOE End
8-ounce can bodies
  $*
Freight charge
  $*
Aluminum adjustment
  $*
 
   
Total can body price
  $*
End units for the 8-ounce Containers at Sacramento shall be priced *.
     
Ottumwa, IA and Irving, TX:   8-ounce cans
    with SuperEnds
8-ounce can bodies
  $*
Aluminum adjustment
  $*
 
   
Total can body price
  $*
End units for the 8-ounce Containers at Ottumwa and Irving shall be priced*.
PAYMENT TERMS: As in the current Agreement, payments for Containers supplied under this Amendment #3 shall be due net * days from the date of invoice—no cash discounts will be allowed.
SUPER-ENDS ® : Conversion of the Sacramento, CA filling location from “LOE” to “Super-End ® ” ends shall be completed on a mutually agreeable schedule *. * agrees to * required to convert the Sacramento location to Super-End ® . Seamer overhaul and repair costs are *. Upon conversion to SuperEnd ® , the end prices at Sacramento shall be adjusted to reflect the SuperEnd ® savings of $* per thousand ends.
FREIGHT: The above prices include freight delivery costs to the various Cadbury filling locations. Cadbury may use its own fleet of trucks to pick-up cans and/or ends at the Crown manufacturing facilities and Crown shall give a freight allowance equal to its cost to deliver by commercial carrier. Crown intends to supply can bodies to the various Cadbury filling locations from the following can manufacturing facilities:
     
Cadbury   Crown’s Can Supply
Filling Locations   Location (& Back-up)
 
Sacramento, CA 12-oz
  *
Sacramento, CA 8-oz
  *
Ottumwa, IA 8-oz
  *
Irving, TX 8-oz
  *
 
     
* Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

3
PRICE CHANGES: The initial base prices shall be adjusted pursuant to the provisions of the current amended Agreement except for the following:
  1)   During the year 2007, price adjustments for * 12-ounce can bodies and all 202 diameter end units at the Sacramento location shall be based on a *.
 
  2)   * of all 8-ounce can bodies at Ottumwa, Irving and Sacramento shall be based on *. The first quarter 2007 invoice prices for 8-ounce can bodies shall reflect *. At the end of each calendar quarter, a reconciliation shall be performed reflecting * multiplied by the number of 8-ounce cans purchased by Cadbury during each of those months.
*
*
*
CONFIDENTIALITY: Cadbury and Crown agree to maintain strict confidentiality regarding the contents of this Amendment #3 including pricing and all other terms set forth herein.
OTHER TERMS AND CONDITIONS: Except as specifically modified by this Amendment #3, all other terms and conditions of the amended Agreement shall remain in full force and effect.
 
     
* Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

4
If you are in agreement with the provisions of this Amendment #3 as set forth above, please sign in the space provided below and return one original copy to Crown.
             
CROWN Cork & Seal USA, Inc.        
 
           
By:
  /s/        
 
           
 
Title:
           
 
           
 
           
CADBURY SCHWEPPES BOTTLING GROUP, INC     .  
 
           
By:
  /s/        
 
           
 
Title:
           
 
           
 

Exhibit 10.8
     September 27, 2007
       
AMENDMENT #4   Cadbury Schweppes Bottling Group, Inc.
CROWN Cork & Seal USA, Inc (“Crown”) is pleased to offer this Amendment #4 to the June 15, 2004 Agreement (as previously amended on August 25, 2005, June 21, 2006, and April 4, 2007) between Crown and Dr Pepper/Seven Up Bottling Group, Inc. (“Dr Pepper/Seven Up”) now known as Cadbury Schweppes Bottling Group, Inc. (“Cadbury”) for the supply of aluminum 12-ounce beverage cans and ends (“Containers”). The purpose of this Amendment #4 is to include additional Cadbury filling locations to the Agreement and to revise certain other provisions of the Agreement as described below:
LOCATIONS & VOLUMES: In addition to the Cadbury filling locations included in the current Agreement (as previously amended), Crown shall supply and Cadbury agrees to purchase from Crown, *% of their 12-ounce Container requirements for the following Cadbury filling locations beginning on or approximately *:
                 
Location   Estimated Annual Volumes  
Miami, FL
  *   12-ounce
Jacksonville, FL
  *   12-ounce
 
             
Total Additional Volume
  *   *
If any of the Cadbury can filling locations supplied under the Agreement as amended herein are closed and volume is moved to a replacement filling location, Crown shall have the right to supply such relocated Container volume at the replacement filling location pursuant to the terms of the Agreement.
PRICING: The initial base prices for Containers to be supplied by Crown pursuant to this Amendment #4 (effective October 1, 2007) are:
         
    12-ounce cans    
Miami & Jacksonville, FL   with LOE Ends    
12-ounce can bodies
  $*    
Aluminum adjustment
  $*  
 
       
Total can body price
  $*    
 
       
202 dia. LOE ends
  $*    
Aluminum adjustment
  $*  
 
       
Total LOE end price
  $*    
 
       
Total 12-oz Container
  $*  
*
The above price for 12-ounce can bodies includes a *.
 
     
* Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

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PAYMENT TERMS: As in the current Agreement, payments for Containers supplied under this Amendment #4 shall be due net * days from the date of invoice — no cash discounts will be allowed.
SUPER-ENDS ® : Conversion of the Miami and Jacksonville filling locations from “LOE” to “Super-End ® ” ends shall be completed on a mutually agreeable schedule *. * agrees to * required to convert each location to Super-End ® . Seamer overhaul and repair costs are *. The Super-End ® price savings versus LOE ends has been included in the LOE pricing shown above.
FREIGHT: The above prices include freight delivery costs to the various Cadbury filling locations and are based on direct shipments with no local warehousing. Cadbury may use its own fleet of trucks to pick-up cans and/or ends at the Crown manufacturing facilities and Crown shall give a freight allowance equal to its cost to deliver by commercial carrier. Crown intends to supply can bodies to the various Cadbury filling locations from the following can manufacturing facilities:
     
Cadbury   Crown’s Can Supply
Filling Locations   Location (& Back-up)
 
   
Miami, FL 12-oz
  *
Jacksonville, FL 12-oz
  *
PRICE CHANGES: The initial base prices described above shall be adjusted pursuant to the provisions of the current amended Agreement except for the following:
  1)   Effective *, the 12-ounce can body price at Miami and Jacksonville shall be * per thousand cans.
  2)   Beginning October 1, 2007, price adjustments for * at Miami and Jacksonville shall be based *. The fourth quarter 2007 invoice prices shall reflect *. At the end of each calendar quarter, a reconciliation shall be performed reflecting * multiplied by the number of cans and ends purchased by Cadbury during each of the months in the quarter at the Miami and Jacksonville locations.
*
 
*   Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

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*
*
ARTWORK CHARGES: * involved with the transfer of the Miami and Jacksonville Container volume to Crown from the previous supplier.
CONFIDENTIALITY: Cadbury and Crown agree to maintain strict confidentiality regarding the contents of this Amendment #4 including pricing and all other terms set forth herein.
OTHER TERMS AND CONDITIONS: Except as specifically modified by this Amendment #4, all other terms and conditions of the amended Agreement shall remain in full force and effect.
(Signature page follows.)
 
*   Confidential treatment has been requested. The redacted material has been separately filed with the Commission.


 

4

If you are in agreement with the provisions of this Amendment #4 as set forth above, please sign in the space provided below and return one original copy to Crown.
         
CROWN Cork & Seal USA, Inc.    
 
       
By:
  /s/    
 
       
Title:
       
 
       
 
       
 
       
CADBURY SCHWEPPES BOTTLING GROUP, INC.    
 
       
By:
  /s/    
 
       
Title:
       
 
       

 

 

Exhibit 10.9
[LICENSOR]
FORM OF DR PEPPER LICENSE AGREEMENT FOR
BOTTLES, CANS AND PRE-MIX
         
STATE OF TEXAS
  }   No.                           
COUNTY OF COLLIN
  }    
     THIS AGREEMENT is made and entered into by and between [Licensor], a corporation with its principal offices located in Plano, Texas (hereinafter called “Licensor”), and
 
(hereinafter called “Licensee”).
WITNESSETH:
     WHEREAS, Licensor is engaged in the manufacture and sale of a bottler’s concentrate for the production of that certain drink known as “Dr Pepper”, and identified by that certain registered trademark owned by Licensor, and
     WHEREAS, Licensee desires to secure a license from Licensor to manufacture, sell and distribute under Licensor’s trademark that certain drink “Dr Pepper”, in bottles, cans and in pre-mix containers (i.e., the pre-mix containers used for the soft drink finished beverage that is sold by the Licensee to the foodservice industry in bulk form and in which the syrup for the making of the beverage is mixed with water, gas and other ingredients at the bottler’s place of business and is then placed in containers and such containers placed for dispensing at various locations and sold to the consuming public by automatic or manual dispensing in separate or individual drinks) only, within that certain territory described in Exhibit “A” attached hereto, and not elsewhere, said Exhibit “A” being a part hereof for all purposes.
     NOW, THEREFORE, for and in consideration of the mutual benefits and provisions herein set out, Licensor does hereby grant unto Licensee the non-exclusive right and license to manufacture under Licensor’s trademark within the territory described in Exhibit “A” attached hereto, that certain drink known as “Dr Pepper”, and the exclusive right and license to sell and distribute said drink under said trademark within the said territory described in Exhibit “A” attached hereto, and no other (which territory shall be indivisible), in bottles, cans and pre-mix containers only, which bottles, cans and pre-mix containers are to be those distinctive bottles, cans and pre-mix containers as may be approved from time to time by Licensor and none other (hereinafter collectively referred to as the “Dr Pepper Trademarked Products”), and to use the trademark on the bottled and canned drink and in advertising for and in said territory, and Licensor does hereby agree that such non-exclusive and exclusive right and license shall continue so long as Licensor, or its successors or assigns, shall continue the manufacture of such Dr Pepper bottler’s concentrate, unless sooner terminated under the provisions hereinafter set out, this said grant or license being subject to the following terms, conditions and covenants, to-wit:
     1. Licensor shall furnish Licensee Dr Pepper bottler’s concentrate pursuant to orders received hereinafter from Licensee or Licensor.
     2. Licensor guarantees the quality of Dr Pepper bottler’s concentrate to be pure, wholesome and otherwise as represented.

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     3. Licensor shall furnish to Licensee authority to purchase at Licensee’s own expense all approved Dr Pepper trademarked items, including but not limited to crowns, bottles, cans and cases.
     4. Terms —
  a.   Each order of concentrate is to be sent to Licensor at its main office in Plano, Texas, or at such other place as Licensor may direct. Each purchase of Dr Pepper bottler’s concentrate must be paid for before another purchase will be shipped. In any event, each purchase must be paid for within ___(___) days of date of invoice. Prices and terms shall be subject to change without notice, and Licensee shall pay Licensor’s then prevailing price at the time of each sale.
 
  b.   Shipments of all concentrate made hereunder may, at Licensor’s option, be delivered to Licensee from delivery equipment operated by Licensor; provided, however, when delivery is not made by Licensor’s delivery equipment, freight will be prepaid to Licensee’s production facility.
 
  c.   Title to all merchandise shipped by common carrier passes to Licensee at the time he accepts the shipment.
 
  d.   All accounts whatsoever owing Licensor are payable in money of the United States of America at Plano, Texas, or at such other place as Licensor may direct; and if not paid at maturity, shall bear interest at the highest rate legally allowable until paid. There will be an additional ___percent (___%) of the total amount due if placed in the hands of an attorney for collection, or if collected through bankruptcy or probate court.
 
  e.   Failure to pay when due any indebtedness owing Licensee to Licensor shall, in addition to any other grounds for termination that may exist, entitle Licensor, at its option, to terminate this contract in any manner provided under this Agreement.
 
  f.   While it is the obligation of Licensee to return to Licensor any empty drums or other returnable containers used in shipping Dr Pepper concentrate under this Agreement, any such returnable container which Licensee receives but does not return to Licensor in a condition suitable for use as a container for Licensor’s products shall be paid for by Licensee at the then current replacement cost for such returnable containers.
 
  g.   Licensor shall not be required to fill any unreasonable order for Dr Pepper concentrate. Licensor shall be required to fill orders only in due and orderly manner of procedure and in a reasonable length of time, in the light of its plant capacity, and all of its customers’ demands.
 
  h.   Licensee shall order from time to time only such quantities as are reasonably necessary to keep a smoothly running operation, but shall not build up unnecessary or unreasonable inventory of Dr Pepper concentrate.
     5. Licensee shall manufacture, bottle, can, label and package the Dr Pepper Trademarked Products in quantities sufficient to fully meet the demand therefore in all accounts and channels in the Territory in which the Products, or any products which are competitive to the Products, are sold. In the event that Licensee is asked to manufacture Dr Pepper Trademarked Products for or on behalf of any other Dr Pepper licensed bottler, then in any such event Licensee shall report that request to Licensor as soon as possible, and in any event by no later than one week after such request is made of Licensee, and in no event may Licensee produce or ship Dr Pepper Trademarked Products to any other Dr Pepper Licensee without Licensor’s prior written consent. Upon Licensor’s request, Licensee shall provide all reports and records as may be reasonably requested by Licensor related to such manufacture.

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     Should Licensee, for any reason, not engage in the manufacture of any or all of the package forms of Dr Pepper Trademarked Product authorized by this Agreement, Licensor approves the purchase by Licensee of such package form(s) from other sources approved by Licensor, and Licensee may buy such package form(s) from such other sources approved by Licensor, upon terms of sale and prices determined by Licensee and the supplying source; Provided, however, that Licensor is not responsible to Licensee to supply such package form(s) of Dr Pepper Trademarked Product initially or on a continuing basis, and provided further that Licensee shall comply with all other requirements of this Agreement to the same extent as if Licensee had itself manufactured such Dr Pepper Trademarked Product.
     6. Licensee agrees to purchase all Dr Pepper concentrate used in the performance of this Agreement from Licensor; and all Dr Pepper concentrate purchased by Licensee shall be used in the performance of this Agreement.
     7. Licensee agrees, with reference to plant, machinery, production and product, as follows:
  a.   To install all necessary and required production machinery and equipment (including water treating equipment), and to add such plant, machinery and equipment as often and in such amounts as shall be necessary and required by Licensor, acting in good faith; and to maintain all such machinery and equipment at all times in first class condition so as to produce a perfect product.
 
  b.   In the production of the perfect finished product, to comply strictly with and conform to all of the specifications respectively current from time to time as furnished by Licensor; and to furnish samples of the finished drink, bottled and canned Dr Pepper, and water, as required from time to time by Licensor, such samples to be sent to Licensor at Licensee’s expense.
 
  c.   At all times to maintain Licensee’s plant, machinery and the entire premises in a very high state of cleanliness and sanitation; and, in addition, at all times to comply with all pure food laws, sanitary and public health laws and regulations in carrying on the operations hereunder.
 
  d.   To allow the inspection of Licensee’s plant and premises, and all materials used in the manufacturing of Dr Pepper, at all reasonable times by the representatives of Licensor.
 
  e.   To identify products with the date the products were manufactured. As to non-canned products, such identification shall be on the package for the products, and as to canned products, such identification shall be on the outer portion of the containers.
 
  f.   Licensee agrees to indemnify and hold Licensor harmless from any and all claims alleging injury, illness, death or damage arising out of the manufacture, storage or sale of Dr Pepper Trademarked Products by Licensee.
     8. Licensee agrees diligently to emphasize the sale and use of Dr Pepper with the purpose of making Dr Pepper a leading drink; and to use the distinctive, authorized Dr Pepper trademarked bottles, cans, crowns and cartons, as approved by Licensor, for Dr Pepper Trademarked Products only; and to use the distinctive, authorized Dr Pepper trademarked cases in the sale and distribution of Dr Pepper. Licensee agrees and obligates himself to identify delivery trucks, auto equipment, his plant and uniforms used by Licensee prominently with Dr Pepper approved trademark identification.
     9. Licensee at all times agrees not to sell Dr Pepper Trademarked Products outside the said licensed territory and not to sell such product knowingly to any purchaser who intends to place such product for sale outside the said licensed territory, and to refrain from using or

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authorizing the use of Dr Pepper trademarked items or equipment for any purpose outside of his said Dr Pepper licensed territory; and to refrain from acquiring or using Dr Pepper marked bottles, cans or cases of other Dr Pepper bottlers without their consent. If any Dr Pepper Trademarked Products manufactured or distributed by the Licensee are found outside of the territory as defined in Exhibit “A” (excluding any other geographic territory, if any, which is properly licensed to Licensee by Licensor pursuant to another Dr Pepper license agreement) without the prior written approval of Licensor, then Licensee shall be deemed to have transshipped such Dr Pepper Trademarked Products and shall be deemed to be a “Transshipping Bottler.”
     Licensor may impose upon any Transshipping Bottler a charge for each case of Dr Pepper Trademarked Products transshipped by such bottler. Licensee agrees to be bound by Licensor’s Transshipment Control Program in effect during the term of this Agreement. The current Transshipment Control Program is attached as Exhibit “D” . Licensor reserves the right to change the terms of the Transshipment Control Program from time to time upon thirty (30) days’ written notice to Licensee. The per-case amount of such charge shall be determined by Licensor as set forth in the Transshipment Control Program. Licensor and Licensee agree that the amount of such charge shall be deemed to reflect the damages to Licensor, the Offended Bottler and the bottling system. For purposes of this Agreement, “Offended Bottler” shall mean a bottler in any Territory into which any Dr Pepper Trademarked Products are transshipped.
     Notwithstanding the foregoing, Licensor agrees that Licensee may sell Dr Pepper Trademarked Products to any and all airlines, railroads, and bus lines and companies engaged in selling food products to such passenger transportation companies for use in enroute passenger feeding and for no other purpose, provided that such airlines, railroads, bus lines, or companies engaged in selling food products to such passenger transportation companies place the products on the airplane, railroad car or bus within Licensee’s territory.
     In the event Licensee declines, or is unable to service transportation, membership warehouse club stores, mass merchandisers, U.S. Military, oceangoing vessels, Federal or State prisons, and other similar accounts within Licensee’s territory, Licensor reserves the right for itself and any other Licensed Bottler to present national sales programs to, arrange to ship Products to, and to service all such accounts, and by electing to do so, Licensor shall not be deemed to have waived any of its other rights or remedies under this Agreement.
     Licensee agrees that he will not solicit nor sell Dr Pepper Trademarked Products to any person or firm which may locate supplies of said drink at a central location for the purpose of redistribution to retail sales outlets of its own or otherwise, prior to the sale to the consuming public. Nothing herein shall prohibit Licensee from storing Dr Pepper Trademarked Product in locations other than its manufacturing plant, provided that such locations are under control of Licensee as a part of its bottling operation and as a convenience to its serving the territory described in Exhibit “A” , and prior to Licensee’s actual sale to retail outlets in said territory.
     Licensee shall indemnify and save harmless the Licensor against all loss, costs or damage resulting to Licensor from Licensee’s violation of this Article “9”.
     10. Licensee agrees to refrain from manufacturing, selling, dealing in or handling, directly or indirectly:
  a.   Any product as a substitute for, or in imitation of, or an adulteration of Dr Pepper;
 
  b.   Under the name or trademark of Dr Pepper, any product as a substitute for, or in imitation; of, or an adulteration of Dr Pepper;
 
  c.   Any product other than Dr Pepper (except such other product of Licensor as Licensee may also be licensed to manufacture and distribute) under any such name or in any such manner as might lead the customer to believe that such other product was that certain drink known as Dr Pepper; and
 
  d.   Any product that could be confused with Dr Pepper or that could be used unfairly with Dr Pepper.

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     The determination made by Licensor in good faith that any such product is a substitute for, or in imitation of, or an adulteration of, Dr Pepper, or is calculated to lead the customer to believe that it is a product of Licensor when it is not a product of Licensor, or that any product is confusing with Dr Pepper or is being used unfairly with Dr Pepper, shall be final and binding upon Licensee.
     11. Licensee agrees:
  a.   At all times to aggressively, loyally and faithfully promote the sale of Dr Pepper Trademarked Products throughout every part of Licensee’s territory; to solicit continuously all dealers and other sales outlets therein in a systematic and businesslike manner through the use of sales techniques and such other personnel of Licensee’s own organization as Licensee may find necessary; and to develop an increase in the volume of sales of Dr Pepper Trademarked Products satisfactory to Licensor.
 
  b.   At all times to provide adequate Dr Pepper delivery, vending and dispensing equipment to supply satisfactorily the demand for Dr Pepper Trademarked Products in said territory, and to this end to add to such equipment as often and in such amounts as shall be necessary and required by Licensor, acting in good faith.
 
  c.   At all times to have on hand an ample supply of those distinctive, trademarked, Dr Pepper bottles, cans and pre-mix containers to supply satisfactorily the demand for Dr Pepper Trademarked Products in said territory, and to this end to add to such supply of bottles, cans and pre-mix containers in such sizes and quantities as shall be necessary to meet consumer demand and as required by Licensor, acting in good faith.
 
  d.   Licensee shall secure and pay for vehicle liability, public liability, products liability and commercial general liability insurance policies protecting Licensor, Licensee, and all of Licensee’s Affiliates under which or through which Licensee does business in connection with this Agreement. All such policies shall be in form and substance, and with insurance companies carrying an A. M. Best rating of “A -” (A minus) or better with a financial rating of “7” or higher, as shall be satisfactory to Licensor, and shall name Licensor as an additional insured. The vehicle liability, public liability, products liability and commercial general liability limits under such policies shall be written in such amounts as Licensor may designate from time to time, but in no event shall such limits be less than the following:
  1.   For commercial general liability, including contractual liability: $  per occurrence;
 
  2.   For product liability: $  per occurrence;
 
  3.   For vehicle liability: in the combined single limit of $  per occurrence for bodily injury and property damage; and
 
  4.   For employer’s liability: $  per occurrence.
     Upon execution of this Agreement, Licensee shall furnish Licensor with certificates from each insurance company issuing any of such insurance policies, which certificates shall indicate that Licensor is an additional insured under such policies, and that such policies shall remain in full force and effect and will not be canceled except upon thirty (30) days’ prior written notice to Licensor. In addition, Licensee and its Affiliates shall secure and pay for all such other insurance coverage as it may be required by law to secure. Licensee and its Affiliates shall maintain Worker’s Compensation coverage in the statutorily mandated values.
     The determination and judgement of Licensor as to whether or not this Article “11” is being complied with, when made in good faith, shall be sole, exclusive and final; and such

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determination by the Licensor that this Article “11” is not being complied with shall, in addition to any other grounds herein mentioned, be grounds for termination of this Agreement at the option of Licensor.
     12. Recognizing the importance and necessity of a vigorous and enthusiastic promotional and advertising program in the development of his licensed territory to its full potential, Licensee agrees regularly and consistently, and on a continuing basis, to advertise and promote Dr Pepper and to expend a reasonable and adequate sum each year in advertising and promotional campaigns which he undertakes and in those as planned and recommended by Licensor — including, but not limited to, any cooperative advertising arrangement Licensor may have in effect from time to time.
     In connection with such promotion and advertising, Licensee agrees to submit in writing to the Licensor at its main office, for written approval, all advertising matter, sales promotional schemes, novelties or devices, prior to the use thereof, which Licensee may plan to use in connection with the merchandising and advertising of Dr Pepper, unless it is the same as is then being used by the Licensor; or is set out in the then current Dr Pepper Bottler’s catalogue or other approved promotional material.
     13. During the term of this Agreement and through the calendar month following termination of this Agreement, Licensee shall provide Licensor, in the forms specified by Licensor (see EXHIBIT “F”), with the following full and complete, periodic reports:
  a.   Electronic monthly reports of total sales volume within the Territory, by sales reporting location, separated by direct store delivery (“DSD”) system, independent contractor/distributor system, and sales to other Licensed Bottlers. Sales shall be stated by Product, flavor and Authorized Container. Monthly sales to other Licensed Bottlers shall be separately stated, listing each Licensed Bottler and the amount of each Product and Authorized Container purchased thereby.
 
  b.   Licensee shall report all applicable volume information regarding qualified Fountain/Foodservice (“FFS”) national account customers electronically and in the prescribed format and frequency required by Licensor, which may change from time to time. Currently, the reporting frequency for local charge (“LC”) FFS volume shall be at least monthly, and frequency for national charge (“NC”) FFS volume shall be at least once per week (more frequent reports will be accepted if Licensee so prefers). Information to be reported shall include but is not limited to, the name and address of each account, the number of gallons of Fountain syrup purchased by each such account, by package and by Trademark (as defined hereinabove), with the volume of each of the Trademarks broken out separately. Licensee shall request new account customers be set up by Licensor so that Licensee may report all such information.
 
  c.   Specific sales information by channel, class of trade or by account, as may be reasonably requested by Licensor from time to time. Licensee agrees to supply such information within ten (10) days of such request.
 
  d.   The number of vending machines, glass door merchandisers, their location and volume throughput by package, by Product and Trademark on a monthly basis.
 
  e.   Monthly reports of total sales volume shall be sent on or before the fifth working day of the calendar month following the sales activity, or on such other day as may be reasonably specified by Licensor, and shall be sent to Licensor electronically in a format acceptable to Licensor.
 
  f.   Such other reports as may be reasonably requested by Licensor.

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GENERAL PROVISIONS
     14. Wherever in this License Agreement the singular is used, it shall include the plural; and wherever the masculine gender is used, it shall include the feminine, or neuter gender, as the case may be.
     15. Nothing herein is intended to create the relationship of employer and agent as between Licensor and Licensee, and Licensee is not an agent of Licensor, but is an independent contractor. Licensor shall never be liable for any debts, acts, obligations or torts of Licensee, its agents, servants or employees.
     16. Whenever performance by either party hereto of any of the obligations hereunder, other than the payment of money due, is substantially prevented by reason of an act of God, strikes, lockouts or other industrial or transportation disturbances, or any law, regulation or ordinance, or by reason of war or war conditions, performances thereof shall be excused during the continuation of the emergency and for a reasonable time thereafter. In addition, Licensor shall have the right in its own sole discretion and judgment to cut down or prorate its available product as it may deem fit and appropriate, and any such act of Licensor in any such event shall not constitute a breach of this Agreement.
     17. In granting this Agreement, Licensor relies to a very large extent upon the personal integrity, business acumen, skill and diligence, loyalty and cooperativeness of Licensee. If Licensee be a sole ownership or a partnership, any change made in the form or membership of Licensee’s business shall terminate this Agreement ipso facto, without prejudice, however, to his right to make application for another Dr Pepper Bottler’s License Agreement under his new business form or device. At the time of any such change, appropriate notice thereof shall be given by Licensee to Licensor at Licensor’s principal place of business, and such notice shall be accompanied by the surrender by Licensee of his Bottler’s License Agreement.
     If the Licensee be other than a natural person, Licensor, in addition to all other rights and remedies, including Licensor’s right to damages, shall have the right, on written notice to Licensee, to terminate this franchise on the happening of the following event: Any sale, transfer or other disposition of more than ten percent (10%) of the stock, or other evidence of ownership of Licensee, or Licensee’s parent, affiliate or other related organization.
     In no event may this Agreement or any interest therein, be sold, sub-let, mortgaged, pledged, assigned or transferred in any manner whatsoever by Licensee, and in no event may this Agreement or any interest therein, be transferred by operation of law.
     18. If Licensee should file a Petition in Bankruptcy or is hereafter adjudicated a bankrupt under the laws of the United States, or any other government or of any state or if any Petition for Reorganization under any bankruptcy law is filed by or against the Licensee during the life of this Agreement, or if Licensee enters into a composition for creditors, this Agreement shall immediately ipso facto cease and terminate, and Licensee shall have no further rights hereunder. Likewise, if Licensee is a partnership and one or more of the partners is adjudicated a bankrupt under the bankruptcy laws of the United States or any state or nation, or if any Petition for Reorganization under any bankruptcy law is filed by or against one or more of the partners, or if Licensee enters into a composition for creditors, then in any of such events this Amendment shall immediately ipso facto terminate. Furthermore, if Licensee shall become insolvent under any insolvent debtor law of any government or state, or shall become notoriously insolvent, even though not so adjudicated by any competent authority, or shall be placed in the hands of a receiver or Court-appointed liquidator or operator, or commit any act of bankruptcy or permit an attachment to be levied and remain on any of its equipment or plant for ten (10) days, then in any such event this Agreement may be terminated at the option of

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Licensor by giving written notice for such termination mailed to the address of the above-mentioned plant location. Failure on the part of Licensor to exercise such option shall not in anywise limit or affect the above provisions terminating this Agreement in case of bankruptcy, reorganization or other proceeding.
     Should Licensee’s business be placed in the hands of a receiver for any reason, then in any such event this Agreement may be terminated at the option of Licensor by giving written notice of such termination mailed to the address of the above-mentioned plant location.
     Should Licensee for any reason close his plant and cease doing business as a Dr Pepper bottler or canner, then in any such event this Agreement may be terminated at the option of Licensor by Licensor giving written notice of such termination mailed to the address of the above-mentioned plant location, but Licensor does not waive any such option or right, nor shall Licensor be estopped from asserting same, by any non-action hereunder.
     19. This Agreement is made exclusive in part for the reason that Dr Pepper Trademarked Products must be manufactured in strict accordance with the instructions and formula given the Licensee by the Licensor, or representatives of the Licensor, and sold under Licensor’s trademarks, and any violation of the same by Licensee will be regarded as a fraud upon the public, as well as upon the Licensor and as damaging to Licensor’s trademarks. The exclusive privilege thus granted to manufacture Dr Pepper Trademarked Products, and to sell Dr Pepper Trademarked Products under the Licensor’s trademarks, is for the protection of the public as well as Licensor, and to maintain the proper ingredients, proportions, and uniformity in the Trademarked Products, and to prevent foreign ingredients from being used therein.
     20. This Agreement is not intended to, nor shall it be construed, to give Licensee any right, title or interest in any of the trademarks, trade names, secret formula, advertising slogans or copyrighted materials belonging to Licensor, but only gives the Licensee the right to use any such trademarks, trade names, advertising matter or copyrighted material as a licensee, and then only to the extent and in the manner, time and places permitted herein and subject to all of the terms and conditions hereof, and only for so long as this Agreement remains in effect. This Agreement shall not in any way be construed to interfere with or limit the use of said Dr Pepper trademarks, trade names, slogans, labels, copyrighted material or advertising matter by the Licensor or Licensor’s other licensees or appointees in said territory or in any other territory, or by other duly licensed Dr Pepper bottlers in other territories or by the Licensor or its vendees and privies in the Dr Pepper post-mix business anywhere, including all Licensor’s vendees and privies in the sale of fountain vending syrup and in fountain trade business anywhere, even in the said licensed territory, it being understood that the privilege given Licensee herein is confined only to those certain Dr Pepper Trademarked Products in bottles and cans and pre-mix containers as are set forth and described in Exhibit “B” attached hereto and made a part hereof, and is confined to the territory described in Exhibit “A” .
     21. Human Rights and Ethical Trading, and the Environment . Licensor has adopted a Human Rights and Ethical Trading Policy, and an Environmental Policy. These policies are available at www.[ ].com and are incorporated herein by reference. Licensor and Licensee each agree to integrate these standards and commitments into the way we each run our businesses globally to address such concerns. Each Party hereby warrants and agrees to review and adhere to these policies, and to achieve high ethical and environmental standards and social responsibility in our respective business practices and production supplies.
     22. Except as may be provided expressly to the contrary in other provisions of this Agreement (in which event the specific provisions for termination shall control), the violation of any one or more of the terms of this Agreement by the Licensee, or the failure of Licensee within the exclusive judgment of the Licensor to comply faithfully with

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any of the duties or obligations of Licensee, as above set out, shall entitle Licensor, at its sole option and discretion, to terminate all or part of this Agreement as to all or part of the territory by giving written notice mailed to Licensee by registered or certified mail and addressed to Licensee’s above-mentioned place of business; and, upon notice being given of such termination as herein provided, this Agreement and all rights of Licensee hereunder shall be terminated and at an end, without the necessity of resorting to any court or other proceedings.
     The judgment and determination of Licensor, when made in good faith, as to the failure of Licensee to comply with any of the terms of this Agreement shall be and is hereby made conclusive and final. The failure of Licensor to exercise its option to forfeit or terminate all or part of this Agreement on account of any one or more breaches of any of the covenants or obligations to be performed by Licensee shall never operate or be construed as a waiver of such covenant or obligation, nor as a waiver or an estoppel to assert the rights to forfeit or terminate this Agreement for any contemporaneous or subsequent breaches of the same covenant, provision or agreement, or of any other of the covenants or agreements on the part of the Licensee.
     If termination by Court proceedings is resorted to, the giving of previous notice by mail shall not be necessary.
     23. Upon termination of all or part of this agreement for any cause and in any manner, any indebtedness which may then be owing by Licensee to Licensor shall become due and payable immediately.
     24. Upon the termination of this Agreement for any cause and in any manner:
  a.   Licensee shall immediately discontinue the use of the name or words “Dr Pepper” in connection with his corporate or other business name, as well as in any other manner or use whatsoever.
 
  b.   Licensee shall immediately discontinue the production and sale of the Dr Pepper Trademarked Products and any other item bearing the “Dr Pepper” trademark.
 
  c.   Licensee shall immediately surrender up this written Agreement by returning the same by registered or certified mail to Licensor at its main office.
 
  d.   Licensee shall only at the option of Licensor, and at the request of Licensor, turn over and deliver to Licensor or to such person as may be designated by Licensor, all unused Dr Pepper advertising matter in the possession of Licensee. Should Licensor exercise this option, it will pay for such advertising matter as is current (not obsolete) and in good condition, the price Licensor received therefor, taking into consideration Licensor’s contribution to any co-op marketing program that may have been used to purchase same; or, as to matter not obtained from Licensor, Licensor shall pay a price agreed upon by the parties hereto not in excess of the price paid by Licensee therefor.
 
  e.   Licensee shall resell to Licensor, at the same price at which it was sold to Licensee, any Dr Pepper concentrate then on hand in good merchantable condition (and for the repurchase of such, Licensor hereby obligates itself).
 
  f.   Licensee shall destroy immediately any Dr Pepper concentrate then on hand and not in good and merchantable condition in the presence of Licensor’s representative.
 
  g.   Licensor shall forthwith have the option to purchase from Licensee all or any part of the trademarked Dr Pepper bottles, cans, pre-mix containers, and cases which Licensee then has on hand. In the event said option to purchase is exercised, Licensee agrees to deliver over promptly to Licensor or assigns, all such bottles, cans, pre-mix containers, and cases upon tender of payment of the reasonable value thereof — less the full amount of any accounts that may be owed to Licensor by Licensee.

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     Furthermore, it is agreed that in the event any of Licensee’s returnable trademarked Dr Pepper bottles, cans, pre-mix containers, and/or cases are unredeemed in trade accounts in Licensee’s territory at the time of termination of this Agreement, Licensor or its assigns, at its option, may refund to any such trade account the deposit paid by him on said bottles, cans, pre-mix containers, and/or cases, and hold the redeemed properties for Licensee’s account. Thereafter within ten (10) days following receipt of notice that said properties are so held for him, Licensee will pick up said properties after first reimbursing the Licensor or its assigns for the deposits so refunded, together with reasonable compensation for picking up the same, and paying to Licensor the full amount of any accounts that may be owed to Licensor by Licensee. If reimbursement is not made and delivery taken by Licensee within such ten (10) days, Licensee agrees that title to such properties shall be deemed automatically transferred from Licensee to Licensor, or its assigns, without further act or instrument in consideration of the deposits refunded and pickup service rendered by Licensor, or its assigns.
     25. Should Licensee hold as licensee from Licensor any other license agreement or agreements, then upon any termination or cancellation of this Agreement, Licensee’s other license agreement or agreements shall ipso facto cease and terminate at the same time without the necessity of any further act or action or notice to be taken or given by either of the parties hereto.
     26. While Licensor agrees that it will not, during the existence of this Agreement, grant to any other party the right or license to sell, vend or distribute the Dr Pepper Trademarked Products in the territory covered by this License Agreement, it is further understood and expressly provided that Licensor shall not be obligated to prevent any third party from manufacturing, selling, vending or distributing Dr Pepper in bottles, cans, and/or in pre-mix form in the aforesaid territory, or be in any wise liable in damages to Licensee for failure to prevent any such act by any such third party.
     In the event of a dispute with respect to territorial boundaries between adjacent Licensees, Licensor shall have the right to decide such dispute in its sole discretion, and any such decision shall be final and binding upon the parties.
     27. It is understood and agreed that this License Agreement and Exhibits “A” to “E” attached hereto contain the complete and only agreement between the Licensor and Licensee with respect to the rights relating to the manufacturing and selling, as approved by Licensor, the Dr Pepper Trademarked Products as described in said Exhibit “B” pertaining to the licensed territory described in said Exhibit “A” ; and it cancels all and any previous licenses and agreements between the parties pertaining to said territory.
     28. It is fully understood and agreed that Licensee may terminate this Agreement at any time upon giving Licensor ninety (90) days written notice by registered or certified mail, and surrendering this License Agreement at the time of giving notice.
     29. This Agreement is subject to the approval of Licensor at its main office in Plano, Texas (or at such other place as its main office may be at a particular time), and shall not be in force and effect until it has been accepted and signed by Licensor, by the President or Vice President of Licensor, at its main office, after having been signed and executed properly by Licensee, and until it has been delivered to Licensee by manual delivery or by depositing by Licensor in the United States Mail in the city in which Licensor’s main office is situated, addressed to Licensee at its above-mentioned place of business.

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     30. This License Agreement shall not be altered or changed except in writing and any such alteration or change shall not be in full force and effect until it has been accepted and signed by Licensor, by the President or Vice President of Licensor, at its main office, after having been signed and executed properly by Licensee, and until it has been delivered to Licensee by manual delivery or by depositing by Licensor in the United States Mail in the city in which Licensor’s main office is situated, addressed to Licensee at its above-mentioned place of business.
     31. This Agreement is made at Plano, Texas, and shall be construed and interpreted in accordance with the laws of the State of Texas, and the remedies for its enforcement or breach are to be applied pursuant to and in accordance with said laws.
     In the event any provision of this Agreement shall be found contrary to law, such finding shall not in any way affect the other provisions of this Agreement which shall, notwithstanding, continue in full force and effect.
     WITNESS THE HANDS in duplicate of the Licensor and Licensee. The effective date of this Agreement shall be the                      day of                                           , 20___.
             
[LICENSOR],   [LICENSEE],
Licensor   Licensee
 
           
 
           
By:
      By:    
 
           
 
           
Title:
      Title:    
 
           
 
           
Date:
      Date:    
 
           

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EXHIBIT “A”
TERRITORY

12


 

EXHIBIT “B”
DR PEPPER TRADEMARKED PRODUCTS

13


 

EXHIBIT “C”
DR PEPPER LICENSE APPLICATION
See Attached
Or Not Applicable

14


 

EXHIBIT “D”
DR PEPPER TRANSSHIPMENT POLICY

15


 

EXHIBIT “E”
CADBURY SCHWEPPES AMERICAS BEVERAGES
ELECTRONIC CASE SALES REPORTING AGREEMENT

16

 

Exhibit 10.10
[LICENSOR]
FORM OF DR PEPPER FOUNTAIN CONCENTRATE AGREEMENT
     BY THIS AGREEMENT, [Licensor], Plano, Texas (“Company”) does hereby grant to the undersigned ________________________ (“Grantee”) the non-exclusive right to manufacture DR PEPPER fountain syrup, prepared according to specifications furnished by Company from DR PEPPER fountain concentrate acquired from Company, and to package, sell and distribute under the DR PEPPER trademark such syrup in Transfer Tanks, in five-gallon bag-in-box containers, and in one gallon containers only, as approved by Company and no other, only in the territory set out in the Dr Pepper Bottler’s License Agreement No. ______ and not elsewhere. Company reserves the right to manufacture and sell DR PEPPER fountain syrup in any form directly to any customer within said territory and the right to appoint others to do so. Company agrees to exercise the right to manufacture and sell Dr Pepper fountain syrup in any form directly to any customer only in the event that (1) any customer in the Territory refuses to take delivery from Grantee, or Grantee refuses to provide delivery to any customer in the Territory.
     Company will sell DR PEPPER fountain concentrate to Grantee. Grantee hereby further agrees:
     1. To use only those containers, bags, boxes, pumps, tubing/fittings, labels and closures approved by Company in the packaging of said syrup.
     2. To maintain a production facility in full compliance with all pure food, sanitation and public health laws. In the event that Grantee is asked to manufacture Dr Pepper products for or on behalf of any other Dr Pepper licensee, and/or in the event Grantee is asked to produce Dr Pepper concentrate or syrup for any other Dr Pepper licensee, then in any such event Grantee shall report that request to Company as soon as possible, and in any event by no later than one week after such request is made of Grantee, and in no event may Grantee produce or ship Dr Pepper concentrate to any other Dr Pepper licensee without Company’s prior written consent. Company reserves the right to determine, in its sole and absolute discretion, whether and when to approve or consent to allow Grantee to manufacture Dr Pepper products or concentrate for any other licensed Dr Pepper bottler, and Company reserves the right in its sole and absolute discretion to determine any terms or conditions pursuant to which or upon which any such consent may be conditioned or contingent. In the event that Grantee should decide or determine for any reason that it will stop manufacturing or producing any Dr Pepper trademarked product, including Dr Pepper concentrate and syrup, then in any such event Grantee shall provide to Company written notification at least six months prior to the date on which Grantee will stop such manufacturing or producing.
     3. To allow Company personnel to inspect from time to time all production facilities and all materials used in connection with this Agreement.

 


 

     4. To furnish Company, at Grantee’s expense, samples of the finished fountain syrup from time to time as required by Company.
     5. Not to sell DR PEPPER fountain syrup to any purchaser for sale or distribution by such purchaser outside of the territory set out in the said Dr Pepper Bottler’s License Agreement, without prior written approval from Company.
     6. That, except where this Agreement contains different terms, to abide by all of the terms and conditions of said Dr Pepper Bottler’s License Agreement.
     Any violation of any of the above terms shall be sufficient cause for Company to cancel this Agreement immediately. In addition, Company may also cancel this Agreement at any time and for any or no reason upon three (3) months prior written notice. In the event that sufficient cause does not exist which would otherwise entitle the Company to invoke its right to cancel the Agreement immediately, the cancellation shall be effective on the ninety-first (91 st ) day following the Company’s mailing or sending of its written notice of termination.
     Notwithstanding the foregoing, any termination of the said Dr Pepper Bottler’s License Agreement shall operate to terminate this Agreement effective automatically and at the same time as the termination of the said Dr Pepper Bottler’s License Agreement. However, this Agreement may be terminated, with or without sufficient cause, without terminating the said Dr Pepper Bottler’s License Agreement.
     WITNESS THE HANDS in duplicate of the parties this ___day of _______________, 20___.
             
[LICENSOR]   [BOTTLER]
        (City, State)
 
           
By
      By    
 
           
 
           
Title
      Title    
 
           

 

 

Exhibit 10.11
AGREEMENT
BETWEEN
CBI HOLDINGS INC.
AND
LARRY YOUNG
DATED AS OF OCTOBER 15, 2007

 


 

TABLE OF CONTENTS
         
        PAGE
1.
  DEFINITIONS.  
2.
  TERM.  
3.
  POSITION AND DUTIES.  
4.
  COMPENSATION.  
5.
  TERMINATION.  
6.
  COMPENSATION UPON TERMINATION OF EMPLOYMENT.  
7.
  FURTHER BENEFITS.   18 
8.
  RIGHT TO TERMINATE; SOURCE OF PAYMENTS.   18 
9.
  AMENDMENTS; WAIVER.   19 
10.
  BINDING AGREEMENT.   19 
11.
  ASSIGNMENT.   19 
12.
  NOTICES.   19 
13.
  ENTIRE AGREEMENT.   20 
14.
  CONFIDENTIALITY.   20 
15.
  NON-COMPETITION AND NON-SOLICITATION.   22 
16.
  JUDICIAL AMENDMENT.   23 
17.
  IRREPARABLE INJURY.   24 
18.
  HEADINGS.   24 
19.
  WITHHOLDING.   24 
20.
  OTHER PLANS.   25 
21.
  ARBITRATION.   25 
22.
  VALIDITY; APPLICABLE LAW.   26 

 


 

AGREEMENT
     This AGREEMENT (the “Agreement”) is made and entered into as of the 15th day of October, 2007, by and between CBI Holdings Inc. and Larry Young (“Executive”).
WITNESSETH:
     WHEREAS, Executive is employed as an officer of CBI Holdings Inc. or its subsidiaries (collectively “CBI”) and is devoting Executive’s ability, time, effort and energy to the affairs of CBI; and
     WHEREAS, CBI considers the continuance of a sound and vital management to be essential to protecting and enhancing the best interests of CBI and its shareholders; and
     WHEREAS, CBI desires to assure itself of retaining the services of Executive and to reward Executive for Executive’s valuable, dedicated service to CBI;
     WHEREAS, CBI and Executive are parties to an employment agreement dated as of May 1, 2006 (the “Prior Agreement”); and
     WHEREAS, the parties desire to amend and restate the Prior Agreement, generally effective as of October 15, 2007.
     NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, the parties hereto covenant and agree as follows:
     1.  DEFINITIONS .
     The following terms, as used herein, have the following meaning:
     (a) AIP . “AIP” shall mean the annual incentive plan in which Executive is entitled to participate, as such plan is in effect from time to time. References herein to Executive’s “Target AIP” shall mean Executive’s target annual bonus opportunity at such time; provided, however, that if at such time Executive’s target annual bonus opportunity

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under the AIP has not yet been set for the then current year, the target annual bonus opportunity in effect for Executive under the AIP for the immediately preceding year shall be used as the Executive’s target annual bonus opportunity. If Executive has been promoted to a band in CBI’s salary structure having a minimum higher target annual bonus opportunity under the AIP, but has not yet had his/her target annual bonus opportunity increased to the minimum target annual bonus opportunity applying to others at that band, such increased target annual bonus opportunity nonetheless shall be used to calculate the Executive’s Target AIP hereunder.
     (b) Cause . Termination for “Cause” shall mean termination by CBI of Executive’s employment for Executive’s:
     (i) willful failure to substantially perform Executive’s duties with CBI;
     (ii) breach of Executive’s duty of loyalty toward CBI;
     (iii) commission of an act of dishonesty toward CBI, theft of CBI’s corporate property, or usurpation of CBI’s corporate opportunities;
     (iv) unethical business conduct including any violation of law connected with Executive’s employment at CBI; or
     (v) conviction of any felony involving dishonest or immoral conduct.
     For purposes of this Section 1(b), an act or failure to act by Executive shall be considered “willful” only if Executive’s conduct was not in good faith and Executive lacked a reasonable belief that Executive’s act or omission was in the best interests of CBI.

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     (c) Code . “Code” shall mean the United States Internal Revenue Code of 1986, as amended.
     (d) Competitor . For purposes of this Agreement, “Competitor” means an individual, partnership, firm, corporation or other business organization or entity that materially competes with a significant business owned or operated by CBI, its parent companies, or affiliates as of the Date of Termination, the names of which shall be made available to Executive at the time of Executive’s separation from the CBI and upon reasonable request. As of the date of this Agreement, the definition of a Competitor includes, but is not limited to, the following businesses: The Coca-Cola Company, PepsiCo, Inc., Nestlé S.A., Kraft Foods Inc., Hershey Foods Corporation, Ferrero SpA, Mars, Incorporated, Groupe Danone S.A., and Wm. Wrigley Jr. Company. The list of companies set out above or provided to Executive shall be deemed to include all direct and indirect subsidiaries and divisions of these companies.
     (e) Date of Termination . “Date of Termination” shall mean the date Executive’s employment with CBI is terminated.
     (f) Disability or Disabled . “Disability” or “Disabled” shall mean Executive’s inability, because of incapacity due to physical or mental illness or injury and notwithstanding reasonable accommodation, to perform the essential functions of Executive’s position with CBI on a full-time basis for at least six consecutive months.
     (g) Equity Incentive Plans . “Equity Incentive Plans” shall mean any stock option, stock purchase or other stock incentive plan maintained by CBI Holdings Inc. or any parent or affiliated company.

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     (h) Good Reason . Termination for “Good Reason” shall mean a termination by Executive of Executive’s employment with CBI for any of the following reasons:
     (i) CBI’s failure to perform any of its material obligations under this Agreement;
     (ii) unless otherwise agreed or waived, notice of a proposed relocation by CBI of Executive’s principal place of employment to a site outside a fifty (50) mile radius of the current site of Executive’s principal place of employment; or
     (iii) the failure by a successor in interest to CBI to expressly assume CBI’s obligations under this Agreement.
     A termination by Executive for Good Reason may not occur unless the Executive has given notice to CBI within 90 days of Executive’s knowledge of the initial existence of a condition described in clauses (i) through (iii) above, and CBI shall have a period of at least thirty (30) days (the “Correction Period”) during which it may remedy the condition. If CBI remedies the condition within the Correction Period, Executive may not terminate for that Good Reason event.
     A termination for “Good Reason” may occur only within thirty (30) days following the expiration of the Correction Period.
     (i) Notice of Termination . “Notice of Termination” shall mean a notice that (i) indicates the specific termination provisions in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provisions so indicated, and (iii) is given in conformity with the provisions of Section 12 of this Agreement.

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     (j) Qualified Pension Plan . “Qualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate and which is intended to be qualified under Section 401(a) of the Code.
     (k) Nonqualified Pension Plan . “Nonqualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate, but only to the extent such plan is designed to provide benefits which would otherwise be provided in the Qualified Pension Plan but for the limitations of the Code.
     (l) Pension Plans . “Pension Plans” shall mean, collectively, the Qualified Pension Plans and the Nonqualified Pension Plans.
     (m) Without Cause . Termination “Without Cause” shall mean a termination by CBI of Executive’s employment for any reason other than death, Disability, or Cause.
     2.  TERM .
     The term of this Agreement shall commence on the date first set forth above , and shall continue thereafter for a period of ten (10) years, at which time it shall expire unless sooner terminated in accordance with the provisions of this Agreement or by mutual written agreement of the parties on such terms and conditions as such written agreement may specify.
     3.  POSITION AND DUTIES .
     (a) Executive shall serve in such executive capacity as CBI may determine from time to time and with such authority, duties and responsibilities as are commensurate with such position and as are typically performed by executives holding such position in business organizations of a size and nature similar to that of CBI, and

5


 

shall perform such other services for CBI and its affiliated companies as may be assigned to Executive from time to time by the Board of Directors of CBI and as are consistent with the position of an executive officer.
     (b) Executive shall devote substantially all of Executive’s business time and attention to the business and affairs of CBI and shall perform the duties set forth herein faithfully and diligently and to the best of Executive’s ability, experience and talents, acting solely in the best interest of CBI and subject to the lawful direction of the Board of Directors of CBI. Executive agrees to abide by all Bylaws, policies, practices, procedures and rules of CBI. During the term of this Agreement, Executive agrees not to be employed by or perform services for any other person, business or organization without the prior written consent of the Board of Directors of CBI; provided, however, (1) that nothing in this Section 3(b) shall prevent Executive from devoting a reasonable amount of time to charitable, municipal or public service work or service on the boards of directors of other companies so long as such work and service does not interfere with Executive’s employment pursuant to this Agreement or otherwise violate any term or provision of this Agreement and (2) that service on the board of directors of another company requires approval in writing in advance from the Chairman and Chief Executive Officer of Cadbury Schweppes plc or its successor.
     4.  COMPENSATION .
     As full compensation to Executive for the performance of the services hereunder and for Executive’s acceptance of the responsibilities described herein, CBI agrees to pay Executive and Executive agrees to accept the following salary and other benefits during the term of this Agreement and any extension hereof.

6


 

     (a) Base Salary . CBI shall pay Executive a base salary at an annualized rate equal to Executive’s current base salary as of the date hereof or at such higher rate as the Compensation Committee or Board of Directors of CBI may from time to time determine at their sole discretion, payable in accordance with the standard payroll practices of CBI. The base salary shall be subject to all applicable withholding and other taxes that Executive is obligated to pay or that CBI may be required by law to withhold from time to time.
     (b) Compensation and Benefit Programs . Executive shall be entitled to participate in all employee compensation and benefit plans, programs and practices of CBI or CBI’s parents or affiliates now or hereafter made generally available to CBI’s senior executives, as such programs may be in effect from time to time, including incentive compensation, equity compensation, health, welfare and retirement arrangements.
     (c) Expenses . Executive shall be entitled to receive proper reimbursement by CBI for all reasonable, out-of-pocket expenses incurred by Executive (in accordance with the policies and procedures established by CBI for its senior executives) in performing services under this Agreement, provided Executive submits reasonable documentation for such expenses.
     5.  TERMINATION .
     Subject to the provisions of Section 6, employment pursuant to the terms of this Agreement shall terminate upon the occurrence of any of the following events:
     (a) expiration of term;
     (b) written Notice of Termination by CBI;

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     (c) written Notice of Termination by Executive;
     (d) Executive’s death;
     (e) Executive’s Disability.
     6.  COMPENSATION UPON TERMINATION OF EMPLOYMENT .
     The following will apply upon termination of employment pursuant to the terms of this Agreement.
     (a) Termination Upon Expiration of Term . In the event this Agreement expires at the end of the term hereof in accordance with Section 2 and Executive’s employment is terminated by CBI on or after such expiration and termination, Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans, the AIP and CBI’s policies and practices. Executive’s rights under Equity Incentive Plans and any other similar plans in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (respectively), copies of which have been or will be made available to Executive. CBI shall have no further obligations to Executive under this Agreement.
     (b) Termination for Cause or Not for Good Reason . If during the term of this Agreement, Executive’s employment is terminated for Cause or if Executive effects termination other than for Good Reason, CBI shall pay Executive his or her full salary through the effective date of such termination at the rate in effect on the date CBI or Executive, as the case may be, notifies the other party of such termination, and CBI shall have no further obligations to Executive under this Agreement. In the event of such

8


 

termination, Executive shall not be entitled to receive any payment under the AIP for the year in which Executive’s Date of Termination occurs or any later year.
     (c) Termination Without Cause or for Good Reason . If CBI shall terminate Executive’s employment Without Cause during the term of this Agreement, or if Executive shall terminate Executive’s employment for Good Reason during the term of this Agreement, then Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans in which Executive is a Participant, the AIP and CBI’s policies and practices. CBI shall have no further obligations to Executive under this Agreement; provided, however, that, subject to the satisfaction of the conditions in Sections 6(f) and 6(g) hereof, and provided that Executive complies with the covenants of non-disclosure, non-solicitation and non-competition contained in Sections 14 and 15 of this Agreement, Executive shall be entitled to the payments and benefits specified in this Section 6(c). In the event of a breach by Executive of any of his obligations pursuant to Sections 14 or 15, CBI’s payment obligations pursuant to this Section 6(c) shall cease immediately as of the date of such breach, and CBI shall have no further obligations to Executive under this Agreement.
     (i) Salary . CBI shall pay to Executive an amount equal to Executive’s annual base salary. Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination.
     (ii) AIP . CBI shall pay to Executive an amount equal to Executive’s Target AIP award, as defined in Section 1(a). Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination. CBI shall also pay

9


 

to Executive his pro rata portion of his actual AIP award under the AIP for the year in which the Date of Termination occurs. Such payment shall be calculated in accordance with the AIP. Such pro rata amount shall be paid to Executive by CBI in a lump sum within two and one-half months following the end of the year in which the Date of Termination shall have occurred. The payments under this Section 6(c)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Date of Termination occurs or any later year. In addition to the foregoing, CBI shall pay Executive any accrued award Executive may have earned under the AIP for any CBI fiscal year prior to the Date of Termination which has not been paid.
     (iii) Continuation Payments . Subject to offset as provided in the last sentence of this Section 6(c)(iii), CBI shall pay Executive an amount equal to the aggregate of Executive’s annual base salary plus Executive’s Target AIP, as defined in Section 1(a), in effect on the Date of Termination. Such amount will be paid ratably by CBI to Executive within the regular payroll cycles during the 12 month period following the Date of Termination, unless such amount exceeds an amount (“Unrestricted Amount”) equal to two times the lesser of (A) the Executive’s annual compensation based on the annual rate of pay from CBI for the calendar year preceding the calendar year of the Date of Termination (adjusted for any increase in such annual rate of pay during the calendar year of the Date of Termination that was expected to continue indefinitely if the Executive had not terminated employment) and (B) the maximum amount that can be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code. If the

10


 

amount exceeds the Unrestricted Amount, then no more than the Unrestricted Amount may be paid in the six months following the Executive’s Date of Termination and the monthly pro rata payments shall be reduced to comply with this limitation. If the monthly payments are reduced to comply with such limitation, any amount not paid in the initial six months following the Date of Termination shall be paid in a lump sum six months and two days after the Date of Termination and thereafter the ratable payments shall continue through the remainder of the 12 month period following the Date of Termination. If Executive secures full time employment within such twelve (12) month period, then commencing on the date of such new employment, the payments under this Section 6(c)(iii) shall be offset by the base salary Executive earns from such new employer and the target annual bonus or other cash bonus established for Executive by such new employer, in each case pro-rated to reflect the amount of such new base salary and bonus which is allocable to the remainder of such twelve (12) month period, calculated by multiplying such award by a fraction, the numerator of which is the number of weeks commencing on the date of new employment through the end of such twelve (12) month period, and the denominator of which is 52.
     (iv) Benefit Plans . CBI shall continue Executive’s participation in the medical, dental and vision plans of CBI (or shall provide equivalent benefits) for a period of twelve (12) months following the Date of Termination at the same rates as an active employee or, if earlier, the commencement of equivalent benefits by Executive’s new employer; provided that if Executive shall die before the

11


 

expiration of the period during which CBI would be required to continue Executive’s participation in such plans, the participation of Executive’s surviving spouse and family in such plans shall continue throughout such period at the same rates as an active employee to Executive’s surviving spouse and family. Executive’s participation in CBI’s life and disability plans and Executive’s travel accident insurance under CBI’s group plan shall terminate on the Date of Termination. Following termination of coverage under any CBI benefit plan, Executive may continue coverage at Executive’s own expense if permitted by the terms of the applicable plan. At Executive’s option, Executive may continue medical coverage under COBRA at Executive’s own expense for the maximum period provided by COBRA, calculated from the Date of Termination, unless otherwise provided by law. Within sixty (60) days of the Date of Termination, Executive may, at Executive’s option, surrender Executive’s CBI company car or purchase such vehicle at a price equal to the greater of (i) 100% of its wholesale value, or (ii) the remaining lease payments; provided, that the price shall, in no event, be less than fair market value as of the Date of Termination of the company car as determined in good faith by CBI. Executive’s participation in CBI’s Employee Services Allowance (“ESA”) shall end on the Date of Termination, and no ESA payments regularly scheduled to be paid after the Date of Termination shall be paid to Executive.
     (v) Qualified Pension Plan . CBI shall pay Executive, in a lump sum within sixty (60) days of the Date of Termination, an amount equal to the difference, if any, between the present value of Executive’s accrued benefit,

12


 

whether or not vested, as of the Date of Termination under the Qualified Pension Plan, and the present value of the vested portion of such accrued benefit, with such difference to be calculated, to the extent relevant, using the actuarial assumptions and interest rates specified in the Qualified Pension Plan. The vested portion of such accrued benefit, if any, shall be paid in accordance with the provisions of the Qualified Pension Plan.
     (vi) Nonqualified Pension Plan . CBI shall pay Executive an amount equal to the lump sum which would have been payable under the Nonqualified Pension Plan had Executive (A) been completely vested in Executive’s full accrued benefit under the Nonqualified Pension Plan, (B) been eligible for normal retirement under the Nonqualified Pension Plan, and (C) retired as of the Date of Termination. Such benefit shall be calculated, to the extent relevant, using the actuarial assumptions specified in the Nonqualified Pension Plan. The payment under this Section 6(c)(vi) shall be paid within six months and two days of the Date of Termination, and shall be made in lieu of any and all payments otherwise due under the Nonqualified Pension Plan.
     (vii) Outplacement and Job Search Expenses . CBI will, at its expense, make available to Executive the services of an outplacement firm designated by CBI. In addition, CBI will reimburse Executive for reasonable out-of-pocket job search expenses incurred by Executive for a period of up to twelve (12) months following the Date of Termination, provided that such expenses shall not exceed $300 per month and shall be properly documented.

13


 

     (viii) Equity Incentive Plan; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (d) Termination Due to Death . The employment of Executive under this Agreement shall terminate upon Executive’s death. In the event of the death of Executive during the term of his employment hereunder, CBI shall have no further obligations to Executive under this Agreement, except that the estate or any other legal representative of Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay to Executive’s estate or other legal representatives the base salary as provided in Section 4(a) above, at the rate in effect at the time of Executive’s death through the end of the month in which Executive dies.
     (ii) AIP . CBI shall pay to Executive’s estate or other legal representative the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s death occurs. Such payment shall be calculated by multiplying such Target AIP award by a fraction, the numerator of which is the number of weeks in the applicable year which precedes the date of death and the denominator of which is 52. Such amount shall be paid by CBI in a lump sum within thirty (30) days of the date of death. The payments under this Section 6(d)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s death occurs.

14


 

     (iii) Equity Incentive Plans; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive’s estate or other legal representative all of the amounts and shall provide all benefits generally available under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (e) Termination Due to Disability . The employment of Executive under this Agreement shall be terminated on the date that Executive becomes Disabled, as determined by the written opinion of the licensed physician regularly attending Executive. If CBI disagrees with this opinion, CBI may, at its own expense, engage a second physician to examine Executive. If Executive’s physician and CBI’s physician agree in writing that Executive is or is not Disabled, their written opinion shall, except as otherwise set forth in this paragraph 6(e), be conclusive as to Executive’s Disability. If the physicians disagree as to Executive’s Disability, they shall select a third physician to make the determination, whose written opinion shall be conclusive and binding on the issue of Disability. The date of any written opinion conclusively finding Executive to be Disabled shall be the effective date of Disability for purposes of this paragraph 6(e). In the event of termination due to Disability, CBI shall have no further obligations to

15


 

Executive under this Agreement, except that Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay Executive the base salary as provided in Section 4(a) above at the rate in effect at the time Executive becomes Disabled through the end of the month in which Executive’s employment terminates due to Disability.
     (ii) AIP . CBI shall pay Executive the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s Disability occurs, computed as in Section 6(d)(ii) above but substituting Disability for death. The payments under this Section 6(e)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Disability occurs.
     (iii) Equity Incentive Plans . Executive’s right to exercise options under the Equity Incentive Plans shall be governed by the terms and conditions of the Equity Incentive Plans, copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive the amounts and shall provide all benefits generally available to similarly situated executives under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (f) Mitigation . Executive agrees to use reasonable efforts to secure other employment but shall not otherwise be required to mitigate the amount of any payment provided for in this Section 6; provided, however, that in the event Executive secures

16


 

other employment, any continuation payments otherwise due Executive shall be subject to offset as provided in Section 6(c)(iii) above.
     (g) Release of Claims . Any other provisions of this Agreement notwithstanding, Executive shall not be entitled to any compensation under Section 6(c)(i) through 6(c)(vii) hereof following termination of employment unless and until Executive shall have executed a release of all of Executive’s rights and claims (other than to compensation or other matters to which Executive is entitled under this Agreement following termination of employment) against CBI, its officers, directors, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates with respect to all matters relating to CBI or its parent companies, subsidiaries, or affiliates existing at the time of Executive’s execution of the release, and such release has become binding upon and irrevocable by the Executive. The release shall be in substantially the form of Exhibit A hereto, or such variation thereof as CBI reasonably determines to be necessary to comply with then applicable law or otherwise appropriate to secure a release of all the aforesaid rights and claims of Executive. If a release satisfactory to CBI has not become binding and irrevocable within sixty (60) days after the Date of Termination, the conditions of this Section 6(g) shall not be satisfied, the Executive shall not have any right to the compensation provided under Section 6(c)(i)-(vii), each of which is additional compensation to which the Executive would otherwise not be entitled, and CBI shall have no further obligations to Executive under this Agreement.

17


 

     (h) In the event that CBI subsequently determines that termination for Cause was warranted, CBI may cease payments and benefits hereunder and the Executive is required to repay to CBI each of the payments and benefits set forth in Section(c)(i)-(vii).
     7.  FURTHER BENEFITS .
     Upon termination of the employment of Executive, Executive shall accrue no further benefits under the Pension Plans and shall make no further contributions to any Pension Plan or other benefit plan permitting employee contributions.
     8.  RIGHT TO TERMINATE; SOURCE OF PAYMENTS .
     (a) Right to Terminate by CBI . CBI may terminate Executive’s employment at any time upon written notice to Executive subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (b) Right to Terminate by Executive . Executive may terminate his or her employment with CBI at any time for Good Reason or otherwise upon written notice to CBI, subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (c) Source of Payments . All payments provided for in this Agreement shall be paid in cash from the general funds of CBI or from any special or separate trust or fund to be established in connection herewith. To the extent that any person acquires a right to receive payments from CBI hereunder, whether or not any funds are segregated by CBI for such purpose, such right shall be no greater than the right of an unsecured creditor of CBI.

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     9.  AMENDMENTS; WAIVER .
     This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. The waiver by either party of compliance with the provisions of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such party. Notwithstanding the foregoing, CBI may amend this Agreement to the extent it determines in good faith that an amendment is necessary to comply with the requirements of Section 409A of the Code, provided that such amendment preserves, as near as possible, the economic benefits of the Agreement to both parties. The provisions of Sections 14, 15, 16, 17 and 21 shall survive termination of this Agreement.
     10.  BINDING AGREEMENT .
     This Agreement shall be binding upon and inure to the benefit of the parties hereto, any successors to the business of CBI, Executive’s heirs and the personal representatives of Executive’s estate.
     11.  ASSIGNMENT .
     This Agreement shall not be assigned by either Executive or CBI except that CBI may assign this Agreement to any successor in interest of CBI whether by merger, consolidation, purchase of assets or otherwise, provided, however, that in connection with such an assignment CBI will require a successor in interest to fully assume all of CBI’s obligations hereunder.
     12.  NOTICES .
     Any notice required or permitted hereunder shall be deemed sufficiently given if in writing and either personally delivered or sent by certified or registered mail, postage pre-paid,

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addressed to the party at the address set forth below or at such other address as the party may subsequently designate:
     
(a)
  Executive:
 
  Larry Young
 
  6910 Forest Glen
 
  Dallas, TX 75230
 
   
(b)
  CBI:
 
  CBI Holdings Inc.
 
  5301 Legacy Drive
 
  Plano, TX 75024
 
  Attn: General Counsel
 
   
copy to:
  Cadbury Schweppes plc
 
  25 Berkeley Square
 
  London, England W 1 X 6HT
 
  Attn: Chief Legal Officer and Company Secretary (Group)
Any such notice will be deemed given upon delivery, if delivered in person, or upon the date of mailing, if sent by certified or registered mail.
     13.  ENTIRE AGREEMENT .
     This Agreement supersedes any prior agreements or understandings, oral or written, with respect to the employment of Executive and constitutes the entire agreement with respect thereto. It cannot be changed or terminated orally and may be modified only by a subsequent written agreement executed by both parties hereto. In addition, the Executive will not be eligible to participate in any other severance pay plan, program or practice that may be adopted from time to time.
     14.  CONFIDENTIALITY .
     (a) Executive agrees and acknowledges that, during the term of this Agreement, CBI promises to provide and Executive will have access to and acquire certain trade secrets and confidential information of CBI and of corporations affiliated

20


 

with CBI that is not generally available to the public, and that such information constitutes valuable, special and unique property of CBI and its affiliates that, if disclosed, could put CBI or its affiliates at a competitive disadvantage (the “Confidential Information”). Such Confidential Information includes but is not limited to methods, techniques, specifications, devices, systems, designs, formulae, models, patents and trademarks, manuals, lists of customers and prospective customers, customer requirements, vendor information and relationships, price lists and other pricing information and analyses, data used to prepare bids, marketing plans and other market information and analyses, business, strategic and operating plans, financial statements and other financial information, training techniques, and other confidential and proprietary information and documents regarding the business of CBI and its affiliates.
     (b) As a material inducement to CBI to enter into this Agreement and to provide Executive the compensation and other consideration set forth herein, Executive agrees that, without the prior written consent of CBI, Executive will not, during or after the term of Executive’s employment with CBI, directly or indirectly use or disclose any such Confidential Information to any person or entity for any reason or purpose whatsoever, except as may be required by law or as may be required in the course of Executive’s performance of his or her duties at CBI.
     (c) Executive acknowledges and agrees that all files, records, documents, plans, specifications, equipment, information, computer files, and similar items and materials relating to CBI’s business shall remain the sole property of CBI and shall immediately be returned to CBI upon CBI’s request or upon the termination of this Agreement for any reason, and that Executive shall keep no copies thereof. The

21


 

provisions of this Section 14 shall survive the termination of this Agreement and shall be binding upon any successor or assign of Executive.
     15.  NON-COMPETITION AND NON-SOLICITATION .
     (a) Consideration . Executive acknowledges and agrees that Executive has received, and will continue to receive, substantial and valuable consideration for the agreements set forth in this Section, including but not limited to access to Confidential Information, which CBI hereby promises to provide to Executive; specialized training related to CBI’s services, business practices and Confidential Information; post-termination payments; and other compensation and benefits as described in this Agreement.
     (b) Non-Solicitation of Customers and Employees . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that during employment and for a period of twelve (12) months following the Date of Termination, whether for Executive’s own account or for the account of any other individual, partnership, firm, corporation or business organization, Executive shall not either directly or indirectly solicit or endeavor to entice away from CBI any person who is employed by or otherwise engaged to perform services for CBI (or its affiliates) or to interfere with the relationship of CBI (or its affiliates) with any person who then is a customer of CBI.
     (c) Non-Competition . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that, for a period of

22


 

twelve (12) months following the Date of Termination, Executive shall not become employed in an executive capacity by any Competitor of CBI within the United States, Canada or any other region in which CBI or its current or former affiliates operates or has operated and in which Executive has directly or indirectly rendered services during the last thirty-six (36) months of Executive’s employment and, further, Executive shall not provide services of a similar or comparable type and character to those provided by Executive to CBI during the last thirty-six (36) months of Executive’s employment with CBI, whether as an employee, officer, director, partner, shareholder, consultant or otherwise, to any Competitor of CBI within the United States, Canada or any region in which Cadbury Schweppes plc operates and in which Executive has rendered services during Executive’s employment; provided, however, that this Section 15 shall not prohibit Executive’s ownership, either directly or indirectly, of less than 1% of any class of publicly traded securities of any entity, and provided further that this Section 15 shall not prohibit Executive’s employment as an employee or officer or Executive’s performance of services as a consultant with any Competitor if Executive is not directly or indirectly involved in the aspects of such Competitor’s business that are competitive with CBI.
     16.  JUDICIAL AMENDMENT .
     Executive and CBI acknowledge the reasonableness of the agreements set forth in Sections 14 and 15 above and the reasonableness of the geographic area, duration of time and subject matter that are part of the covenant not to compete contained in Section 15(c). Executive further acknowledges that Executive’s skills are such that Executive can be gainfully employed in noncompetitive employment and that the agreement not to compete will in no manner prevent Executive from earning a living. Notwithstanding the foregoing, in the event it is judicially

23


 

determined that any of the limitations contained in Section 15 are unreasonable, illegal or offensive under any applicable law and may not be enforced as agreed herein, the parties agree that the unreasonable, illegal or offensive portions of Section 15, whether they relate to duration, area or subject matter, shall be and hereby are revised to conform with all applicable laws and that the Agreement, as modified, shall remain in full force and effect and shall not be rendered void or illegal.
     17.  IRREPARABLE INJURY .
     Executive acknowledges that CBI has invested substantial time, labor, skill and money in developing the Confidential Information to be provided to Executive. Executive further acknowledges that the Confidential Information to be provided to Executive, and the services Executive is to render to CBI, are such that any breach of the covenants contained in Sections 14 and 15 above by Executive would cause CBI irreparable harm and injury and would damage CBI in a way that could not be adequately compensated by monetary damages. Accordingly, the parties agree that CBI’s remedies may include a temporary restraining order, preliminary injunction, or other injunctive relief against any threatened or actual breach of Sections 14 or 15 by Executive. Executive acknowledges that this injunctive relief shall be in addition to any other legal or equitable relief to which CBI may otherwise be entitled under applicable law.
     18.  HEADINGS .
     The headings used in this Agreement are for convenience only and shall not be deemed to curtail or affect the meaning or construction of any provision under this Agreement.
     19.  WITHHOLDING .
     All payments or benefits to Executive under this Agreement shall be reduced by any amounts required to be withheld by CBI under applicable tax laws, including U.S. Federal, state,

24


 

or local income tax laws or similar laws then in effect as well as the laws of other countries while on international assignment. In the event new tax legislation results in additional taxation to the Executive or CBI which may be avoided by amendment to this Agreement with no material financial impact to Executive or CBI, then this Agreement shall be so amended by written agreement of the parties.
     20.  OTHER PLANS .
     Except as otherwise provided in this Agreement, the terms of the AIP, Pension Plans, Equity Incentive Plans and any other CBI option plan, bonus plan or benefit plan (as the same may be amended from time to time) or any agreements entered into pursuant to such plans, shall remain in full force and effect. Except as expressly provided herein, if there is any conflict between this Agreement and the Plans described above in this Section 20, the terms of the applicable Plan documents shall control.
     21.  ARBITRATION .
     Any controversy or claim, other than an action for injunctive or equitable relief for unfair competition or to enforce the confidentiality, noncompete or nonsolicitation provisions set forth in Sections 14 and 15, arising out of or relating to (a) this Agreement or the breach thereof, (b) Executive’s employment with CBI, or (c) the termination of Executive’s employment with CBI, (including but not limited to claims arising under applicable employment-related statutes, including without limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Rehabilitation Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the American Jobs Creation Act of 2004, or the Fair Labor Standards Act, applicable state fair employment practices statutes, and claims for retaliation arising under applicable workers’ compensation statutes; as well as

25


 

employment-related common-law tort claims, including without limitation claims for negligence, intentional torts, post-termination defamation (e.g., employment references), violation of privacy rights, fraud, misrepresentation, unjust enrichment, tortious interference and/or promissory estoppel), which is not settled by agreement among the parties shall be resolved by final and binding arbitration, to be held in a metropolitan area located within fifty (50) miles of the location at which Executive is employed, in accordance with the employment arbitration rules and procedures of the American Arbitration Association. Neither party shall initiate or prosecute any lawsuit in any way related to any claims; provided, however, that the provisions of this Section 21 do not limit Executive’s right to file an administrative charge with the Equal Employment Opportunity Commission. Judgment upon the award rendered may be entered and enforced in any court having jurisdiction thereof.
     22.  VALIDITY; APPLICABLE LAW .
     The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect, and the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State in which Executive is employed .

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     IN WITNESS WHEREOF, CBI has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto subscribed his or her name, all as of the day, month and year first above written.
                 
CBI Holdings Inc.       Executive    
 
               
By:
  /s/ H. Todd Stitzer       /s/ Larry Young    
 
               
 
            H. Todd Stitzer       Larry Young    
 
            Chief Executive Officer            

27


 

EXHIBIT “A”
GENERAL RELEASE
     This General Release (the “Release”) is executed as of this                      day of                      , 20___, by and between Larry Young (“Executive”) and CBI Holdings Inc. (“CBI”) for purposes of evidencing the covenants, obligations and undertakings of such parties set forth below.
     WHEREAS, CBI and Executive entered into an agreement of employment (the “Agreement”) dated October 15, 2007; and
     WHEREAS, Executive’s employment with CBI was terminated effective as of                      , 20___, pursuant to Paragraph 6(c) of the Agreement;
     NOW THEREFORE, as a condition to, and in consideration of, payment by CBI of the benefits specified in Paragraph 6(c) of the Agreement, Executive hereby agrees as follows:
     1. Executive, for himself and on behalf of Executive’s agents, attorneys, heirs, executors, administrators, successors and assigns, hereby irrevocably releases, acquits, discharges and forever forgives CBI, its past and present officers, directors, shareholders, representatives, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates, and all persons acting by, through, under or in concert with them, (the “Releasees”) from any and all claims, causes of action, suits, controversies, appeals, grievances, promises, agreements, damages, rights, debts, liabilities, costs, losses, personal injuries and any other compensation whatsoever, whether presently known or unknown, liquidated or unliquidated, matured or contingent, arising at any time through the date of the execution of this Agreement. This Release covers any and all claims, regardless of whether they arose in contract or in tort or are based upon statutes, laws or rules, regulations, common law principles or otherwise, and includes but is not limited to claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Pregnancy Discrimination Act, the Equal Pay Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, COBRA, the Occupational Safety and Health Act, or any other federal, state or local statute, law or regulation relating to employment; common-law claims for breach of contract, quantum meruit, reformation of contract, breach of implied covenant of good faith and fair dealing, debt, wrongful discharge, defamation, invasion of privacy, infliction of emotional distress, tortious interference, misrepresentation, fraud, conspiracy, negligence or gross negligence; and any other statutory or common-law cause of action, whether or not relating to Executive’s employment with CBI; provided, however, that this Release does not include any claims Executive may have to compensation or benefits to be provided to Executive following termination of Executive’s employment with CBI pursuant to Section 6(c) of the Agreement, any rights Executive may have (subject to the provisions of Section 6(c) of the Agreement) under any pension or benefit plan in which Executive was or is a participant, and any indemnification rights Executive may have under company bylaws or insurance.

A-1


 

     2. Executive covenants and agrees that, to the fullest extent permitted by law, Executive will not bring any legal action against any of the Releasees for any claim waived and released under this Release and represents and warrants that no such claim has been filed to date. Executive agrees that should any person, organization or other entity institute or file a civil action, suit or legal proceeding against the Releasees on Executive’s behalf involving any matter occurring at any time in the past up to and including the date on which Executive executes this Release, Executive shall not seek or accept any personal, equitable or monetary relief in such civil action, suit or legal proceeding.
     3. Executive agrees that the terms and conditions of this Release are confidential and that Executive will not, directly or indirectly, disclose the fact of or terms of this Release to anyone other than Executive’s attorney or tax advisor, except to the extent such disclosure may be required for accounting or tax reporting purposes or otherwise be required by law or direction of a court. Nothing in this provision shall be construed to prohibit Executive from disclosing this Release to the Equal Employment Opportunity Commission in connection with any complaint or charge submitted to that agency.
     4. Executive agrees not to make any comments relating to the Releasees that are critical, disparaging or derogatory or that may tend to injure the business of the Releasees and agrees not to encourage any person, corporation or entity to sue or not to do business with the Releasees.
     5. Effective as of the Termination Date, Executive hereby resigns from any and all positions as an officer or director of CBI or its affiliates and subsidiaries, and agrees to execute any documents required for the purpose of effecting such resignation.
     6. The provisions of this Release are severable. If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision. One or more waivers of a breach of any covenant, term or provision of this Release by any party shall not operate or be construed as a waiver of any subsequent breach of the same covenant, term or provision, nor shall it be construed as a waiver of any other then existing or subsequent breach of a different covenant, term or provision.
     7. This Release sets forth the entire agreement between CBI and Executive and supersedes any and all prior oral or written agreements or understandings concerning the subject matter of this Release. This Release may not be altered, amended or modified, except by a further written document signed by a duly authorized representative of CBI and Executive.
     8. This Release is made within the State of Texas and shall in all respects be interpreted, enforced and governed by the laws of the State of Texas.
     9. This Release shall be binding upon Executive, his heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of the Releasees and their respective administrators, representatives, successors and assigns.

A-2


 

     10. Executive acknowledges that this Release is in full settlement, satisfaction, and discharge of any and all claims, demands, actions, and causes of action released by Executive, and that it applies to all claims, whether known or unknown. Executive further acknowledges that the consideration to be provided pursuant to the Agreement upon execution of this Release represents amounts and benefits greater than Executive would be entitled to receive if Executive were not to execute this Release. Executive represents and warrants that Executive has full power and authority to enter into and execute this Release. Executive represents that Executive has carefully read and fully understands all the provisions of this Release, that Executive has been advised to consult with an attorney of Executive’s choice and has had the opportunity to do so, and that Executive is freely, knowingly and voluntarily entering into this Release without reliance on any representations of any kind or character not set forth herein.
     11. Executive acknowledges that Executive has been provided at least twenty-one (21) days after receipt of this Release to decide whether to sign the Release and be bound by its terms, and that Executive has considered the terms of this Release for at least twenty-one (21) days or knowingly and voluntarily waived Executive’s right to do so. Executive further acknowledges and understands that Executive has the right to revoke this Release for a period of seven (7) days after Executive has signed it.
     IN WITNESS WHEREOF, the parties hereto have executed this General Release as of the date first above written.

A-3

 

Exhibit 10.12
AGREEMENT
BETWEEN
CBI HOLDINGS INC.
AND
JOHN O. STEWART
DATED AS OF OCTOBER 13, 2007

 


 

TABLE OF CONTENTS
             
        PAGE
 
           
1.
  DEFINITIONS.     1  
2.
  TERM.     5  
3.
  POSITION AND DUTIES.     5  
4.
  COMPENSATION.     6  
5.
  TERMINATION.     7  
6.
  COMPENSATION UPON TERMINATION OF EMPLOYMENT.     8  
7.
  FURTHER BENEFITS.     18  
8.
  RIGHT TO TERMINATE; SOURCE OF PAYMENTS.     18  
9.
  AMENDMENTS; WAIVER.     19  
10.
  BINDING AGREEMENT.     19  
11.
  ASSIGNMENT.     19  
12.
  NOTICES.     19  
13.
  ENTIRE AGREEMENT.     20  
14.
  CONFIDENTIALITY.     20  
15.
  NON-COMPETITION AND NON-SOLICITATION.     22  
16.
  JUDICIAL AMENDMENT.     23  
17.
  IRREPARABLE INJURY.     24  
18.
  HEADINGS.     24  
19.
  WITHHOLDING.     24  
20.
  OTHER PLANS.     25  
21.
  ARBITRATION.     25  
22.
  VALIDITY; APPLICABLE LAW.     26  

 


 

AGREEMENT
     This AGREEMENT (the “Agreement”) is made and entered into as of the 13 th day of October, 2007, by and between CBI Holdings Inc. and John O. Stewart (“Executive”).
WITNESSETH:
     WHEREAS, Executive is employed as an officer of CBI Holdings Inc. or its subsidiaries (collectively “CBI”) and is devoting Executive’s ability, time, effort and energy to the affairs of CBI; and
     WHEREAS, CBI considers the continuance of a sound and vital management to be essential to protecting and enhancing the best interests of CBI and its shareholders; and
     WHEREAS, CBI desires to assure itself of retaining the services of Executive and to reward Executive for Executive’s valuable, dedicated service to CBI;
     WHEREAS, CBI and Executive are parties to an employment agreement dated as of November 6, 2006, (the “Prior Agreement”); and
     WHEREAS, the parties desire to amend and restate the Prior Agreement, generally effective as of October 13, 2007.
     NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, the parties hereto covenant and agree as follows:
     1.  DEFINITIONS .
     The following terms, as used herein, have the following meaning:
     (a) AIP . “AIP” shall mean the annual incentive plan in which Executive is entitled to participate, as such plan is in effect from time to time. References herein to Executive’s “Target AIP” shall mean Executive’s target annual bonus opportunity at such time; provided, however, that if at such time Executive’s target annual bonus opportunity

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under the AIP has not yet been set for the then current year, the target annual bonus opportunity in effect for Executive under the AIP for the immediately preceding year shall be used as the Executive’s target annual bonus opportunity. If Executive has been promoted to a band in CBI’s salary structure having a minimum higher target annual bonus opportunity under the AIP, but has not yet had his/her target annual bonus opportunity increased to the minimum target annual bonus opportunity applying to others at that band, such increased target annual bonus opportunity nonetheless shall be used to calculate the Executive’s Target AIP hereunder.
     (b) Cause . Termination for “Cause” shall mean termination by CBI of Executive’s employment for Executive’s:
     (i) willful failure to substantially perform Executive’s duties with CBI;
     (ii) breach of Executive’s duty of loyalty toward CBI;
     (iii) commission of an act of dishonesty toward CBI, theft of CBI’s corporate property, or usurpation of CBI’s corporate opportunities;
     (iv) unethical business conduct including any violation of law connected with Executive’s employment at CBI; or
     (v) conviction of any felony involving dishonest or immoral conduct.
     For purposes of this Section 1(b), an act or failure to act by Executive shall be considered “willful” only if Executive’s conduct was not in good faith and Executive lacked a reasonable belief that Executive’s act or omission was in the best interests of CBI.

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     (c) Code . “Code” shall mean the United States Internal Revenue Code of 1986, as amended.
     (d) Competitor . For purposes of this Agreement, “Competitor” means an individual, partnership, firm, corporation or other business organization or entity that materially competes with a significant business owned or operated by CBI, its parent companies, or affiliates as of the Date of Termination, the names of which shall be made available to Executive at the time of Executive’s separation from the CBI and upon reasonable request. As of the date of this Agreement, the definition of a Competitor includes, but is not limited to, the following businesses: The Coca-Cola Company, PepsiCo, Inc., Nestlé S.A., Kraft Foods Inc., Hershey Foods Corporation, Ferrero SpA, Mars, Incorporated, Groupe Danone S.A., and Wm. Wrigley Jr. Company. The list of companies set out above or provided to Executive shall be deemed to include all direct and indirect subsidiaries and divisions of these companies.
     (e) Date of Termination . “Date of Termination” shall mean the date Executive’s employment with CBI is terminated.
     (f) Disability or Disabled . “Disability” or “Disabled” shall mean Executive’s inability, because of incapacity due to physical or mental illness or injury and notwithstanding reasonable accommodation, to perform the essential functions of Executive’s position with CBI on a full-time basis for at least six consecutive months.
     (g) Equity Incentive Plans . “Equity Incentive Plans” shall mean any stock option, stock purchase or other stock incentive plan maintained by CBI Holdings Inc. or any parent or affiliated company.

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     (h) Good Reason . Termination for “Good Reason” shall mean a termination by Executive of Executive’s employment with CBI for any of the following reasons:
     (i) CBI’s failure to perform any of its material obligations under this Agreement;
     (ii) unless otherwise agreed or waived, notice of a proposed relocation by CBI of Executive’s principal place of employment to a site outside a fifty (50) mile radius of the current site of Executive’s principal place of employment; or
     (iii) the failure by a successor in interest to CBI to expressly assume CBI’s obligations under this Agreement.
     A termination by Executive for Good Reason may not occur unless the Executive has given notice to CBI within 90 days of Executive’s knowledge of the initial existence of a condition described in clauses (i) through (iii) above, and CBI shall have a period of at least thirty (30) days (the “Correction Period”) during which it may remedy the condition. If CBI remedies the condition within the Correction Period, Executive may not terminate for that Good Reason event.
     A termination for “Good Reason” may occur only within thirty (30) days following the expiration of the Correction Period.
     (i) Notice of Termination . “Notice of Termination” shall mean a notice that (i) indicates the specific termination provisions in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provisions so indicated, and (iii) is given in conformity with the provisions of Section 12 of this Agreement.

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     (j) Qualified Pension Plan . “Qualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate and which is intended to be qualified under Section 401(a) of the Code.
     (k) Nonqualified Pension Plan . “Nonqualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate, but only to the extent such plan is designed to provide benefits which would otherwise be provided in the Qualified Pension Plan but for the limitations of the Code.
     (l) Pension Plans . “Pension Plans” shall mean, collectively, the Qualified Pension Plans and the Nonqualified Pension Plans.
     (m) Without Cause . Termination “Without Cause” shall mean a termination by CBI of Executive’s employment for any reason other than death, Disability, or Cause.
     2.  TERM .
     The term of this Agreement shall commence on the date first set forth above , and shall continue thereafter for a period of ten (10) years, at which time it shall expire unless sooner terminated in accordance with the provisions of this Agreement or by mutual written agreement of the parties on such terms and conditions as such written agreement may specify.
     3.  POSITION AND DUTIES .
     (a) Executive shall serve in such executive capacity as CBI may determine from time to time and with such authority, duties and responsibilities as are commensurate with such position and as are typically performed by executives holding such position in business organizations of a size and nature similar to that of CBI, and

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shall perform such other services for CBI and its affiliated companies as may be assigned to Executive from time to time by the Board of Directors of CBI and as are consistent with the position of an executive officer.
     (b) Executive shall devote substantially all of Executive’s business time and attention to the business and affairs of CBI and shall perform the duties set forth herein faithfully and diligently and to the best of Executive’s ability, experience and talents, acting solely in the best interest of CBI and subject to the lawful direction of the Board of Directors of CBI. Executive agrees to abide by all Bylaws, policies, practices, procedures and rules of CBI. During the term of this Agreement, Executive agrees not to be employed by or perform services for any other person, business or organization without the prior written consent of the Board of Directors of CBI; provided, however, (1) that nothing in this Section 3(b) shall prevent Executive from devoting a reasonable amount of time to charitable, municipal or public service work or service on the boards of directors of other companies so long as such work and service does not interfere with Executive’s employment pursuant to this Agreement or otherwise violate any term or provision of this Agreement and (2) that service on the board of directors of another company requires approval in writing in advance from the Chairman and Chief Executive Officer of Cadbury Schweppes plc or its successor.
     4.  COMPENSATION .
     As full compensation to Executive for the performance of the services hereunder and for Executive’s acceptance of the responsibilities described herein, CBI agrees to pay Executive and Executive agrees to accept the following salary and other benefits during the term of this Agreement and any extension hereof.

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     (a) Base Salary . CBI shall pay Executive a base salary at an annualized rate equal to Executive’s current base salary as of the date hereof or at such higher rate as the Compensation Committee or Board of Directors of CBI may from time to time determine at their sole discretion, payable in accordance with the standard payroll practices of CBI. The base salary shall be subject to all applicable withholding and other taxes that Executive is obligated to pay or that CBI may be required by law to withhold from time to time.
     (b) Compensation and Benefit Programs . Executive shall be entitled to participate in all employee compensation and benefit plans, programs and practices of CBI or CBI’s parents or affiliates now or hereafter made generally available to CBI’s senior executives, as such programs may be in effect from time to time, including incentive compensation, equity compensation, health, welfare and retirement arrangements.
     (c) Expenses . Executive shall be entitled to receive proper reimbursement by CBI for all reasonable, out-of-pocket expenses incurred by Executive (in accordance with the policies and procedures established by CBI for its senior executives) in performing services under this Agreement, provided Executive submits reasonable documentation for such expenses.
     5.  TERMINATION .
     Subject to the provisions of Section 6, employment pursuant to the terms of this Agreement shall terminate upon the occurrence of any of the following events:
     (a) expiration of term;
     (b) written Notice of Termination by CBI;

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     (c) written Notice of Termination by Executive;
     (d) Executive’s death;
     (e) Executive’s Disability.
     6.  COMPENSATION UPON TERMINATION OF EMPLOYMENT .
     The following will apply upon termination of employment pursuant to the terms of this Agreement.
     (a) Termination Upon Expiration of Term . In the event this Agreement expires at the end of the term hereof in accordance with Section 2 and Executive’s employment is terminated by CBI on or after such expiration and termination, Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans, the AIP and CBI’s policies and practices. Executive’s rights under Equity Incentive Plans and any other similar plans in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (respectively), copies of which have been or will be made available to Executive. CBI shall have no further obligations to Executive under this Agreement.
     (b) Termination for Cause or Not for Good Reason . If during the term of this Agreement, Executive’s employment is terminated for Cause or if Executive effects termination other than for Good Reason, CBI shall pay Executive his or her full salary through the effective date of such termination at the rate in effect on the date CBI or Executive, as the case may be, notifies the other party of such termination, and CBI shall have no further obligations to Executive under this Agreement. In the event of such

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termination, Executive shall not be entitled to receive any payment under the AIP for the year in which Executive’s Date of Termination occurs or any later year.
     (c) Termination Without Cause or for Good Reason . If CBI shall terminate Executive’s employment Without Cause during the term of this Agreement, or if Executive shall terminate Executive’s employment for Good Reason during the term of this Agreement, then Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans in which Executive is a Participant, the AIP and CBI’s policies and practices. CBI shall have no further obligations to Executive under this Agreement; provided, however, that, subject to the satisfaction of the conditions in Sections 6(f) and 6(g) hereof, and provided that Executive complies with the covenants of non-disclosure, non-solicitation and non-competition contained in Sections 14 and 15 of this Agreement, Executive shall be entitled to the payments and benefits specified in this Section 6(c). In the event of a breach by Executive of any of his obligations pursuant to Sections 14 or 15, CBI’s payment obligations pursuant to this Section 6(c) shall cease immediately as of the date of such breach, and CBI shall have no further obligations to Executive under this Agreement.
     (i) Salary . CBI shall pay to Executive an amount equal to Executive’s annual base salary. Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination.
     (ii) AIP . CBI shall pay to Executive an amount equal to Executive’s Target AIP award, as defined in Section 1(a). Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination. CBI shall also pay

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to Executive his pro rata portion of his actual AIP award under the AIP for the year in which the Date of Termination occurs. Such payment shall be calculated in accordance with the AIP. Such pro rata amount shall be paid to Executive by CBI in a lump sum within two and one-half months following the end of the year in which the Date of Termination shall have occurred. The payments under this Section 6(c)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Date of Termination occurs or any later year. In addition to the foregoing, CBI shall pay Executive any accrued award Executive may have earned under the AIP for any CBI fiscal year prior to the Date of Termination which has not been paid.
     (iii) Continuation Payments . Subject to offset as provided in the last sentence of this Section 6(c)(iii), CBI shall pay Executive an amount equal to the aggregate of Executive’s annual base salary plus Executive’s Target AIP, as defined in Section 1(a), in effect on the Date of Termination. Such amount will be paid ratably by CBI to Executive within the regular payroll cycles during the 12 month period following the Date of Termination, unless such amount exceeds an amount (“Unrestricted Amount”) equal to two times the lesser of (A) the Executive’s annual compensation based on the annual rate of pay from CBI for the calendar year preceding the calendar year of the Date of Termination (adjusted for any increase in such annual rate of pay during the calendar year of the Date of Termination that was expected to continue indefinitely if the Executive had not terminated employment) and (B) the maximum amount that can be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code. If the

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amount exceeds the Unrestricted Amount, then no more than the Unrestricted Amount may be paid in the six months following the Executive’s Date of Termination and the monthly pro rata payments shall be reduced to comply with this limitation. If the monthly payments are reduced to comply with such limitation, any amount not paid in the initial six months following the Date of Termination shall be paid in a lump sum six months and two days after the Date of Termination and thereafter the ratable payments shall continue through the remainder of the 12 month period following the Date of Termination. If Executive secures full time employment within such twelve (12) month period, then commencing on the date of such new employment, the payments under this Section 6(c)(iii) shall be offset by the base salary Executive earns from such new employer and the target annual bonus or other cash bonus established for Executive by such new employer, in each case pro-rated to reflect the amount of such new base salary and bonus which is allocable to the remainder of such twelve (12) month period, calculated by multiplying such award by a fraction, the numerator of which is the number of weeks commencing on the date of new employment through the end of such twelve (12) month period, and the denominator of which is 52.
     (iv) Benefit Plans . CBI shall continue Executive’s participation in the medical, dental and vision plans of CBI (or shall provide equivalent benefits) for a period of twelve (12) months following the Date of Termination at the same rates as an active employee or, if earlier, the commencement of equivalent benefits by Executive’s new employer; provided that if Executive shall die before the

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expiration of the period during which CBI would be required to continue Executive’s participation in such plans, the participation of Executive’s surviving spouse and family in such plans shall continue throughout such period at the same rates as an active employee to Executive’s surviving spouse and family. Executive’s participation in CBI’s life and disability plans and Executive’s travel accident insurance under CBI’s group plan shall terminate on the Date of Termination. Following termination of coverage under any CBI benefit plan, Executive may continue coverage at Executive’s own expense if permitted by the terms of the applicable plan. At Executive’s option, Executive may continue medical coverage under COBRA at Executive’s own expense for the maximum period provided by COBRA, calculated from the Date of Termination, unless otherwise provided by law. Within sixty (60) days of the Date of Termination, Executive may, at Executive’s option, surrender Executive’s CBI company car or purchase such vehicle at a price equal to the greater of (i) 100% of its wholesale value, or (ii) the remaining lease payments; provided, that the price shall, in no event, be less than fair market value as of the Date of Termination of the company car as determined in good faith by CBI. Executive’s participation in CBI’s Employee Services Allowance (“ESA”) shall end on the Date of Termination, and no ESA payments regularly scheduled to be paid after the Date of Termination shall be paid to Executive.
     (v) Qualified Pension Plan . CBI shall pay Executive, in a lump sum within sixty (60) days of the Date of Termination, an amount equal to the difference, if any, between the present value of Executive’s accrued benefit,

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whether or not vested, as of the Date of Termination under the Qualified Pension Plan, and the present value of the vested portion of such accrued benefit, with such difference to be calculated, to the extent relevant, using the actuarial assumptions and interest rates specified in the Qualified Pension Plan. The vested portion of such accrued benefit, if any, shall be paid in accordance with the provisions of the Qualified Pension Plan.
     (vi) Nonqualified Pension Plan . CBI shall pay Executive an amount equal to the lump sum which would have been payable under the Nonqualified Pension Plan had Executive (A) been completely vested in Executive’s full accrued benefit under the Nonqualified Pension Plan, (B) been eligible for normal retirement under the Nonqualified Pension Plan, and (C) retired as of the Date of Termination. Such benefit shall be calculated, to the extent relevant, using the actuarial assumptions specified in the Nonqualified Pension Plan. The payment under this Section 6(c)(vi) shall be paid within six months and two days of the Date of Termination, and shall be made in lieu of any and all payments otherwise due under the Nonqualified Pension Plan.
     (vii) Outplacement and Job Search Expenses . CBI will, at its expense, make available to Executive the services of an outplacement firm designated by CBI. In addition, CBI will reimburse Executive for reasonable out-of-pocket job search expenses incurred by Executive for a period of up to twelve (12) months following the Date of Termination, provided that such expenses shall not exceed $300 per month and shall be properly documented.

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     (viii) Equity Incentive Plan; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (d) Termination Due to Death . The employment of Executive under this Agreement shall terminate upon Executive’s death. In the event of the death of Executive during the term of his employment hereunder, CBI shall have no further obligations to Executive under this Agreement, except that the estate or any other legal representative of Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay to Executive’s estate or other legal representatives the base salary as provided in Section 4(a) above, at the rate in effect at the time of Executive’s death through the end of the month in which Executive dies.
     (ii) AIP . CBI shall pay to Executive’s estate or other legal representative the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s death occurs. Such payment shall be calculated by multiplying such Target AIP award by a fraction, the numerator of which is the number of weeks in the applicable year which precedes the date of death and the denominator of which is 52. Such amount shall be paid by CBI in a lump sum within thirty (30) days of the date of death. The payments under this Section 6(d)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s death occurs.

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     (iii) Equity Incentive Plans; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive’s estate or other legal representative all of the amounts and shall provide all benefits generally available under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (e) Termination Due to Disability . The employment of Executive under this Agreement shall be terminated on the date that Executive becomes Disabled, as determined by the written opinion of the licensed physician regularly attending Executive. If CBI disagrees with this opinion, CBI may, at its own expense, engage a second physician to examine Executive. If Executive’s physician and CBI’s physician agree in writing that Executive is or is not Disabled, their written opinion shall, except as otherwise set forth in this paragraph 6(e), be conclusive as to Executive’s Disability. If the physicians disagree as to Executive’s Disability, they shall select a third physician to make the determination, whose written opinion shall be conclusive and binding on the issue of Disability. The date of any written opinion conclusively finding Executive to be Disabled shall be the effective date of Disability for purposes of this paragraph 6(e). In the event of termination due to Disability, CBI shall have no further obligations to

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Executive under this Agreement, except that Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay Executive the base salary as provided in Section 4(a) above at the rate in effect at the time Executive becomes Disabled through the end of the month in which Executive’s employment terminates due to Disability.
     (ii) AIP . CBI shall pay Executive the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s Disability occurs, computed as in Section 6(d)(ii) above but substituting Disability for death. The payments under this Section 6(e)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Disability occurs.
     (iii) Equity Incentive Plans . Executive’s right to exercise options under the Equity Incentive Plans shall be governed by the terms and conditions of the Equity Incentive Plans, copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive the amounts and shall provide all benefits generally available to similarly situated executives under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (f) Mitigation . Executive agrees to use reasonable efforts to secure other employment but shall not otherwise be required to mitigate the amount of any payment provided for in this Section 6; provided, however, that in the event Executive secures

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other employment, any continuation payments otherwise due Executive shall be subject to offset as provided in Section 6(c)(iii) above.
     (g) Release of Claims . Any other provisions of this Agreement notwithstanding, Executive shall not be entitled to any compensation under Section 6(c)(i) through 6(c)(vii) hereof following termination of employment unless and until Executive shall have executed a release of all of Executive’s rights and claims (other than to compensation or other matters to which Executive is entitled under this Agreement following termination of employment) against CBI, its officers, directors, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates with respect to all matters relating to CBI or its parent companies, subsidiaries, or affiliates existing at the time of Executive’s execution of the release, and such release has become binding upon and irrevocable by the Executive. The release shall be in substantially the form of Exhibit A hereto, or such variation thereof as CBI reasonably determines to be necessary to comply with then applicable law or otherwise appropriate to secure a release of all the aforesaid rights and claims of Executive. If a release satisfactory to CBI has not become binding and irrevocable within sixty (60) days after the Date of Termination, the conditions of this Section 6(g) shall not be satisfied, the Executive shall not have any right to the compensation provided under Section 6(c)(i)-(vii), each of which is additional compensation to which the Executive would otherwise not be entitled, and CBI shall have no further obligations to Executive under this Agreement.

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     (h) In the event that CBI subsequently determines that termination for Cause was warranted, CBI may cease payments and benefits hereunder and the Executive is required to repay to CBI each of the payments and benefits set forth in Section(c)(i)-(vii).
     7.  FURTHER BENEFITS .
     Upon termination of the employment of Executive, Executive shall accrue no further benefits under the Pension Plans and shall make no further contributions to any Pension Plan or other benefit plan permitting employee contributions.
     8.  RIGHT TO TERMINATE; SOURCE OF PAYMENTS .
     (a) Right to Terminate by CBI . CBI may terminate Executive’s employment at any time upon written notice to Executive subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (b) Right to Terminate by Executive . Executive may terminate his or her employment with CBI at any time for Good Reason or otherwise upon written notice to CBI, subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (c) Source of Payments . All payments provided for in this Agreement shall be paid in cash from the general funds of CBI or from any special or separate trust or fund to be established in connection herewith. To the extent that any person acquires a right to receive payments from CBI hereunder, whether or not any funds are segregated by CBI for such purpose, such right shall be no greater than the right of an unsecured creditor of CBI.

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     9.  AMENDMENTS; WAIVER .
     This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. The waiver by either party of compliance with the provisions of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such party. Notwithstanding the foregoing, CBI may amend this Agreement to the extent it determines in good faith that an amendment is necessary to comply with the requirements of Section 409A of the Code, provided that such amendment preserves, as near as possible, the economic benefits of the Agreement to both parties. The provisions of Sections 14, 15, 16, 17 and 21 shall survive termination of this Agreement.
     10.  BINDING AGREEMENT .
     This Agreement shall be binding upon and inure to the benefit of the parties hereto, any successors to the business of CBI, Executive’s heirs and the personal representatives of Executive’s estate.
     11.  ASSIGNMENT .
     This Agreement shall not be assigned by either Executive or CBI except that CBI may assign this Agreement to any successor in interest of CBI whether by merger, consolidation, purchase of assets or otherwise, provided, however, that in connection with such an assignment CBI will require a successor in interest to fully assume all of CBI’s obligations hereunder.
     12.  NOTICES .
     Any notice required or permitted hereunder shall be deemed sufficiently given if in writing and either personally delivered or sent by certified or registered mail, postage pre-paid,

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addressed to the party at the address set forth below or at such other address as the party may subsequently designate:
     
(a)
  Executive:
 
  John O. Stewart
 
  2727 Montreaux Drive
 
  Frisco, TX 75034
 
   
(b)
  CBI:
 
  CBI Holdings Inc.
 
  5301 Legacy Drive
 
  Plano, TX 75024
 
  Attn: General Counsel
 
   
copy to:
  Cadbury Schweppes plc
 
  25 Berkeley Square
 
  London, England W 1 X 6HT
 
  Attn: Chief Legal Officer and Company Secretary (Group)
Any such notice will be deemed given upon delivery, if delivered in person, or upon the date of mailing, if sent by certified or registered mail.
     13.  ENTIRE AGREEMENT .
     This Agreement supersedes any prior agreements or understandings, oral or written, with respect to the employment of Executive and constitutes the entire agreement with respect thereto. It cannot be changed or terminated orally and may be modified only by a subsequent written agreement executed by both parties hereto. In addition, the Executive will not be eligible to participate in any other severance pay plan, program or practice that may be adopted from time to time.
     14.  CONFIDENTIALITY .
     (a) Executive agrees and acknowledges that, during the term of this Agreement, CBI promises to provide and Executive will have access to and acquire certain trade secrets and confidential information of CBI and of corporations affiliated

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with CBI that is not generally available to the public, and that such information constitutes valuable, special and unique property of CBI and its affiliates that, if disclosed, could put CBI or its affiliates at a competitive disadvantage (the “Confidential Information”). Such Confidential Information includes but is not limited to methods, techniques, specifications, devices, systems, designs, formulae, models, patents and trademarks, manuals, lists of customers and prospective customers, customer requirements, vendor information and relationships, price lists and other pricing information and analyses, data used to prepare bids, marketing plans and other market information and analyses, business, strategic and operating plans, financial statements and other financial information, training techniques, and other confidential and proprietary information and documents regarding the business of CBI and its affiliates.
     (b) As a material inducement to CBI to enter into this Agreement and to provide Executive the compensation and other consideration set forth herein, Executive agrees that, without the prior written consent of CBI, Executive will not, during or after the term of Executive’s employment with CBI, directly or indirectly use or disclose any such Confidential Information to any person or entity for any reason or purpose whatsoever, except as may be required by law or as may be required in the course of Executive’s performance of his or her duties at CBI.
     (c) Executive acknowledges and agrees that all files, records, documents, plans, specifications, equipment, information, computer files, and similar items and materials relating to CBI’s business shall remain the sole property of CBI and shall immediately be returned to CBI upon CBI’s request or upon the termination of this Agreement for any reason, and that Executive shall keep no copies thereof. The

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provisions of this Section 14 shall survive the termination of this Agreement and shall be binding upon any successor or assign of Executive.
     15.  NON-COMPETITION AND NON-SOLICITATION .
     (a) Consideration . Executive acknowledges and agrees that Executive has received, and will continue to receive, substantial and valuable consideration for the agreements set forth in this Section, including but not limited to access to Confidential Information, which CBI hereby promises to provide to Executive; specialized training related to CBI’s services, business practices and Confidential Information; post-termination payments; and other compensation and benefits as described in this Agreement.
     (b) Non-Solicitation of Customers and Employees . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that during employment and for a period of twelve (12) months following the Date of Termination, whether for Executive’s own account or for the account of any other individual, partnership, firm, corporation or business organization, Executive shall not either directly or indirectly solicit or endeavor to entice away from CBI any person who is employed by or otherwise engaged to perform services for CBI (or its affiliates) or to interfere with the relationship of CBI (or its affiliates) with any person who then is a customer of CBI.
     (c) Non-Competition . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that, for a period of

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twelve (12) months following the Date of Termination, Executive shall not become employed in an executive capacity by any Competitor of CBI within the United States, Canada or any other region in which CBI or its current or former affiliates operates or has operated and in which Executive has directly or indirectly rendered services during the last thirty-six (36) months of Executive’s employment and, further, Executive shall not provide services of a similar or comparable type and character to those provided by Executive to CBI during the last thirty-six (36) months of Executive’s employment with CBI, whether as an employee, officer, director, partner, shareholder, consultant or otherwise, to any Competitor of CBI within the United States, Canada or any region in which Cadbury Schweppes plc operates and in which Executive has rendered services during Executive’s employment; provided, however, that this Section 15 shall not prohibit Executive’s ownership, either directly or indirectly, of less than 1% of any class of publicly traded securities of any entity, and provided further that this Section 15 shall not prohibit Executive’s employment as an employee or officer or Executive’s performance of services as a consultant with any Competitor if Executive is not directly or indirectly involved in the aspects of such Competitor’s business that are competitive with CBI.
     16.  JUDICIAL AMENDMENT .
     Executive and CBI acknowledge the reasonableness of the agreements set forth in Sections 14 and 15 above and the reasonableness of the geographic area, duration of time and subject matter that are part of the covenant not to compete contained in Section 15(c). Executive further acknowledges that Executive’s skills are such that Executive can be gainfully employed in noncompetitive employment and that the agreement not to compete will in no manner prevent Executive from earning a living. Notwithstanding the foregoing, in the event it is judicially

23


 

determined that any of the limitations contained in Section 15 are unreasonable, illegal or offensive under any applicable law and may not be enforced as agreed herein, the parties agree that the unreasonable, illegal or offensive portions of Section 15, whether they relate to duration, area or subject matter, shall be and hereby are revised to conform with all applicable laws and that the Agreement, as modified, shall remain in full force and effect and shall not be rendered void or illegal.
     17.  IRREPARABLE INJURY .
     Executive acknowledges that CBI has invested substantial time, labor, skill and money in developing the Confidential Information to be provided to Executive. Executive further acknowledges that the Confidential Information to be provided to Executive, and the services Executive is to render to CBI, are such that any breach of the covenants contained in Sections 14 and 15 above by Executive would cause CBI irreparable harm and injury and would damage CBI in a way that could not be adequately compensated by monetary damages. Accordingly, the parties agree that CBI’s remedies may include a temporary restraining order, preliminary injunction, or other injunctive relief against any threatened or actual breach of Sections 14 or 15 by Executive. Executive acknowledges that this injunctive relief shall be in addition to any other legal or equitable relief to which CBI may otherwise be entitled under applicable law.
     18.  HEADINGS .
     The headings used in this Agreement are for convenience only and shall not be deemed to curtail or affect the meaning or construction of any provision under this Agreement.
     19.  WITHHOLDING .
     All payments or benefits to Executive under this Agreement shall be reduced by any amounts required to be withheld by CBI under applicable tax laws, including U.S. Federal, state,

24


 

or local income tax laws or similar laws then in effect as well as the laws of other countries while on international assignment. In the event new tax legislation results in additional taxation to the Executive or CBI which may be avoided by amendment to this Agreement with no material financial impact to Executive or CBI, then this Agreement shall be so amended by written agreement of the parties.
     20.  OTHER PLANS .
     Except as otherwise provided in this Agreement, the terms of the AIP, Pension Plans, Equity Incentive Plans and any other CBI option plan, bonus plan or benefit plan (as the same may be amended from time to time) or any agreements entered into pursuant to such plans, shall remain in full force and effect. Except as expressly provided herein, if there is any conflict between this Agreement and the Plans described above in this Section 20, the terms of the applicable Plan documents shall control.
     21.  ARBITRATION .
     Any controversy or claim, other than an action for injunctive or equitable relief for unfair competition or to enforce the confidentiality, noncompete or nonsolicitation provisions set forth in Sections 14 and 15, arising out of or relating to (a) this Agreement or the breach thereof, (b) Executive’s employment with CBI, or (c) the termination of Executive’s employment with CBI, (including but not limited to claims arising under applicable employment-related statutes, including without limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Rehabilitation Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the American Jobs Creation Act of 2004, or the Fair Labor Standards Act, applicable state fair employment practices statutes, and claims for retaliation arising under applicable workers’ compensation statutes; as well as

25


 

employment-related common-law tort claims, including without limitation claims for negligence, intentional torts, post-termination defamation (e.g., employment references), violation of privacy rights, fraud, misrepresentation, unjust enrichment, tortious interference and/or promissory estoppel), which is not settled by agreement among the parties shall be resolved by final and binding arbitration, to be held in a metropolitan area located within fifty (50) miles of the location at which Executive is employed, in accordance with the employment arbitration rules and procedures of the American Arbitration Association. Neither party shall initiate or prosecute any lawsuit in any way related to any claims; provided, however, that the provisions of this Section 21 do not limit Executive’s right to file an administrative charge with the Equal Employment Opportunity Commission. Judgment upon the award rendered may be entered and enforced in any court having jurisdiction thereof.
     22.  VALIDITY; APPLICABLE LAW .
     The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect, and the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State in which Executive is employed .

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     IN WITNESS WHEREOF, CBI has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto subscribed his or her name, all as of the day, month and year first above written.
             
CBI Holdings Inc.       Executive
 
           
By:
  /s/ James L. Baldwin       /s/ John O. Stewart
 
           
 
  James L. Baldwin       John O. Stewart
 
  Executive Vice President        

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EXHIBIT “A”
GENERAL RELEASE
     This General Release (the “Release”) is executed as of this ___ day of ___, 20___, by and between John O. Stewart (“Executive”) and CBI Holdings Inc. (“CBI”) for purposes of evidencing the covenants, obligations and undertakings of such parties set forth below.
     WHEREAS, CBI and Executive entered into an agreement of employment (the “Agreement”) dated October 13, 2007; and
     WHEREAS, Executive’s employment with CBI was terminated effective as of ___, 20___, pursuant to Paragraph 6(c) of the Agreement;
     NOW THEREFORE, as a condition to, and in consideration of, payment by CBI of the benefits specified in Paragraph 6(c) of the Agreement, Executive hereby agrees as follows:
     1. Executive, for himself and on behalf of Executive’s agents, attorneys, heirs, executors, administrators, successors and assigns, hereby irrevocably releases, acquits, discharges and forever forgives CBI, its past and present officers, directors, shareholders, representatives, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates, and all persons acting by, through, under or in concert with them, (the “Releasees”) from any and all claims, causes of action, suits, controversies, appeals, grievances, promises, agreements, damages, rights, debts, liabilities, costs, losses, personal injuries and any other compensation whatsoever, whether presently known or unknown, liquidated or unliquidated, matured or contingent, arising at any time through the date of the execution of this Agreement. This Release covers any and all claims, regardless of whether they arose in contract or in tort or are based upon statutes, laws or rules, regulations, common law principles or otherwise, and includes but is not limited to claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Pregnancy Discrimination Act, the Equal Pay Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, COBRA, the Occupational Safety and Health Act, or any other federal, state or local statute, law or regulation relating to employment; common-law claims for breach of contract, quantum meruit, reformation of contract, breach of implied covenant of good faith and fair dealing, debt, wrongful discharge, defamation, invasion of privacy, infliction of emotional distress, tortious interference, misrepresentation, fraud, conspiracy, negligence or gross negligence; and any other statutory or common-law cause of action, whether or not relating to Executive’s employment with CBI; provided, however, that this Release does not include any claims Executive may have to compensation or benefits to be provided to Executive following termination of Executive’s employment with CBI pursuant to Section 6(c) of the Agreement, any rights Executive may have (subject to the provisions of Section 6(c) of the Agreement) under any pension or benefit plan in which Executive was or is a participant, and any indemnification rights Executive may have under company bylaws or insurance.

 


 

     2. Executive covenants and agrees that, to the fullest extent permitted by law, Executive will not bring any legal action against any of the Releasees for any claim waived and released under this Release and represents and warrants that no such claim has been filed to date. Executive agrees that should any person, organization or other entity institute or file a civil action, suit or legal proceeding against the Releasees on Executive’s behalf involving any matter occurring at any time in the past up to and including the date on which Executive executes this Release, Executive shall not seek or accept any personal, equitable or monetary relief in such civil action, suit or legal proceeding.
     3. Executive agrees that the terms and conditions of this Release are confidential and that Executive will not, directly or indirectly, disclose the fact of or terms of this Release to anyone other than Executive’s attorney or tax advisor, except to the extent such disclosure may be required for accounting or tax reporting purposes or otherwise be required by law or direction of a court. Nothing in this provision shall be construed to prohibit Executive from disclosing this Release to the Equal Employment Opportunity Commission in connection with any complaint or charge submitted to that agency.
     4. Executive agrees not to make any comments relating to the Releasees that are critical, disparaging or derogatory or that may tend to injure the business of the Releasees and agrees not to encourage any person, corporation or entity to sue or not to do business with the Releasees.
     5. Effective as of the Termination Date, Executive hereby resigns from any and all positions as an officer or director of CBI or its affiliates and subsidiaries, and agrees to execute any documents required for the purpose of effecting such resignation.
     6. The provisions of this Release are severable. If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision. One or more waivers of a breach of any covenant, term or provision of this Release by any party shall not operate or be construed as a waiver of any subsequent breach of the same covenant, term or provision, nor shall it be construed as a waiver of any other then existing or subsequent breach of a different covenant, term or provision.
     7. This Release sets forth the entire agreement between CBI and Executive and supersedes any and all prior oral or written agreements or understandings concerning the subject matter of this Release. This Release may not be altered, amended or modified, except by a further written document signed by a duly authorized representative of CBI and Executive.
     8. This Release is made within the State of Texas and shall in all respects be interpreted, enforced and governed by the laws of the State of Texas.
     9. This Release shall be binding upon Executive, his heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of the Releasees and their respective administrators, representatives, successors and assigns.

 


 

     10. Executive acknowledges that this Release is in full settlement, satisfaction, and discharge of any and all claims, demands, actions, and causes of action released by Executive, and that it applies to all claims, whether known or unknown. Executive further acknowledges that the consideration to be provided pursuant to the Agreement upon execution of this Release represents amounts and benefits greater than Executive would be entitled to receive if Executive were not to execute this Release. Executive represents and warrants that Executive has full power and authority to enter into and execute this Release. Executive represents that Executive has carefully read and fully understands all the provisions of this Release, that Executive has been advised to consult with an attorney of Executive’s choice and has had the opportunity to do so, and that Executive is freely, knowingly and voluntarily entering into this Release without reliance on any representations of any kind or character not set forth herein.
     11. Executive acknowledges that Executive has been provided at least twenty-one (21) days after receipt of this Release to decide whether to sign the Release and be bound by its terms, and that Executive has considered the terms of this Release for at least twenty-one (21) days or knowingly and voluntarily waived Executive’s right to do so. Executive further acknowledges and understands that Executive has the right to revoke this Release for a period of seven (7) days after Executive has signed it.
     IN WITNESS WHEREOF, the parties hereto have executed this General Release as of the date first above written.

 

 

Exhibit 10.13
AGREEMENT
BETWEEN
CBI HOLDINGS INC.
AND
RANDY GIER
DATED AS OF OCTOBER 15, 2007

 


 

TABLE OF CONTENTS
             
        PAGE  
1.  
DEFINITIONS
    1  
2.  
TERM
    5  
3.  
POSITION AND DUTIES
    5  
4.  
COMPENSATION
    6  
5.  
TERMINATION
    7  
6.  
COMPENSATION UPON TERMINATION OF EMPLOYMENT
    8  
7.  
FURTHER BENEFITS
    18  
8.  
RIGHT TO TERMINATE; SOURCE OF PAYMENTS
    18  
9.  
AMENDMENTS; WAIVER
    19  
10.  
BINDING AGREEMENT
    19  
11.  
ASSIGNMENT
    19  
12.  
NOTICES
    19  
13.  
ENTIRE AGREEMENT
    20  
14.  
CONFIDENTIALITY
    20  
15.  
NON-COMPETITION AND NON-SOLICITATION
    22  
16.  
JUDICIAL AMENDMENT
    23  
17.  
IRREPARABLE INJURY
    24  
18.  
HEADINGS
    24  
19.  
WITHHOLDING
    24  
20.  
OTHER PLANS
    25  
21.  
ARBITRATION
    25  
22.  
VALIDITY; APPLICABLE LAW
    26  

 


 

AGREEMENT
     This AGREEMENT (the “Agreement”) is made and entered into as of the 15th day of October, 2007, by and between CBI Holdings Inc. and Randy Gier (“Executive”).
WITNESSETH:
     WHEREAS, Executive is employed as an officer of CBI Holdings Inc. or its subsidiaries (collectively “CBI”) and is devoting Executive’s ability, time, effort and energy to the affairs of CBI; and
     WHEREAS, CBI considers the continuance of a sound and vital management to be essential to protecting and enhancing the best interests of CBI and its shareholders; and
     WHEREAS, CBI desires to assure itself of retaining the services of Executive and to reward Executive for Executive’s valuable, dedicated service to CBI;
     WHEREAS, CBI and Executive are parties to an employment agreement dated as of January 20, 2004 (the “Prior Agreement”); and
     WHEREAS, the parties desire to amend and restate the Prior Agreement, generally effective as of October 15, 2007.
     NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, the parties hereto covenant and agree as follows:
     1.  DEFINITIONS .
     The following terms, as used herein, have the following meaning:
     (a) AIP . “AIP” shall mean the annual incentive plan in which Executive is entitled to participate, as such plan is in effect from time to time. References herein to Executive’s “Target AIP” shall mean Executive’s target annual bonus opportunity at such time; provided, however, that if at such time Executive’s target annual bonus opportunity

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under the AIP has not yet been set for the then current year, the target annual bonus opportunity in effect for Executive under the AIP for the immediately preceding year shall be used as the Executive’s target annual bonus opportunity. If Executive has been promoted to a band in CBI’s salary structure having a minimum higher target annual bonus opportunity under the AIP, but has not yet had his/her target annual bonus opportunity increased to the minimum target annual bonus opportunity applying to others at that band, such increased target annual bonus opportunity nonetheless shall be used to calculate the Executive’s Target AIP hereunder.
     (b) Cause . Termination for “Cause” shall mean termination by CBI of Executive’s employment for Executive’s:
     (i) willful failure to substantially perform Executive’s duties with CBI;
     (ii) breach of Executive’s duty of loyalty toward CBI;
     (iii) commission of an act of dishonesty toward CBI, theft of CBI’s corporate property, or usurpation of CBI’s corporate opportunities;
     (iv) unethical business conduct including any violation of law connected with Executive’s employment at CBI; or
     (v) conviction of any felony involving dishonest or immoral conduct.
     For purposes of this Section 1(b), an act or failure to act by Executive shall be considered “willful” only if Executive’s conduct was not in good faith and Executive lacked a reasonable belief that Executive’s act or omission was in the best interests of CBI.

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     (c) Code . “Code” shall mean the United States Internal Revenue Code of 1986, as amended.
     (d) Competitor . For purposes of this Agreement, “Competitor” means an individual, partnership, firm, corporation or other business organization or entity that materially competes with a significant business owned or operated by CBI, its parent companies, or affiliates as of the Date of Termination, the names of which shall be made available to Executive at the time of Executive’s separation from the CBI and upon reasonable request. As of the date of this Agreement, the definition of a Competitor includes, but is not limited to, the following businesses: The Coca-Cola Company, PepsiCo, Inc., Nestlé S.A., Kraft Foods Inc., Hershey Foods Corporation, Ferrero SpA, Mars, Incorporated, Groupe Danone S.A., and Wm. Wrigley Jr. Company. The list of companies set out above or provided to Executive shall be deemed to include all direct and indirect subsidiaries and divisions of these companies.
     (e) Date of Termination . “Date of Termination” shall mean the date Executive’s employment with CBI is terminated.
     (f) Disability or Disabled . “Disability” or “Disabled” shall mean Executive’s inability, because of incapacity due to physical or mental illness or injury and notwithstanding reasonable accommodation, to perform the essential functions of Executive’s position with CBI on a full-time basis for at least six consecutive months.
     (g) Equity Incentive Plans . “Equity Incentive Plans” shall mean any stock option, stock purchase or other stock incentive plan maintained by CBI Holdings Inc. or any parent or affiliated company.

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     (h) Good Reason . Termination for “Good Reason” shall mean a termination by Executive of Executive’s employment with CBI for any of the following reasons:
     (i) CBI’s failure to perform any of its material obligations under this Agreement;
     (ii) unless otherwise agreed or waived, notice of a proposed relocation by CBI of Executive’s principal place of employment to a site outside a fifty (50) mile radius of the current site of Executive’s principal place of employment; or
     (iii) the failure by a successor in interest to CBI to expressly assume CBI’s obligations under this Agreement.
     A termination by Executive for Good Reason may not occur unless the Executive has given notice to CBI within 90 days of Executive’s knowledge of the initial existence of a condition described in clauses (i) through (iii) above, and CBI shall have a period of at least thirty (30) days (the “Correction Period”) during which it may remedy the condition. If CBI remedies the condition within the Correction Period, Executive may not terminate for that Good Reason event.
     A termination for “Good Reason” may occur only within thirty (30) days following the expiration of the Correction Period.
     (i) Notice of Termination . “Notice of Termination” shall mean a notice that (i) indicates the specific termination provisions in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provisions so indicated, and (iii) is given in conformity with the provisions of Section 12 of this Agreement.

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     (j) Qualified Pension Plan . “Qualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate and which is intended to be qualified under Section 401(a) of the Code.
     (k) Nonqualified Pension Plan . “Nonqualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate, but only to the extent such plan is designed to provide benefits which would otherwise be provided in the Qualified Pension Plan but for the limitations of the Code.
     (l) Pension Plans . “Pension Plans” shall mean, collectively, the Qualified Pension Plans and the Nonqualified Pension Plans.
     (m) Without Cause . Termination “Without Cause” shall mean a termination by CBI of Executive’s employment for any reason other than death, Disability, or Cause.
     2.  TERM .
     The term of this Agreement shall commence on the date first set forth above , and shall continue thereafter for a period of ten (10) years, at which time it shall expire unless sooner terminated in accordance with the provisions of this Agreement or by mutual written agreement of the parties on such terms and conditions as such written agreement may specify.
     3.  POSITION AND DUTIES .
     (a) Executive shall serve in such executive capacity as CBI may determine from time to time and with such authority, duties and responsibilities as are commensurate with such position and as are typically performed by executives holding such position in business organizations of a size and nature similar to that of CBI, and

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shall perform such other services for CBI and its affiliated companies as may be assigned to Executive from time to time by the Board of Directors of CBI and as are consistent with the position of an executive officer.
     (b) Executive shall devote substantially all of Executive’s business time and attention to the business and affairs of CBI and shall perform the duties set forth herein faithfully and diligently and to the best of Executive’s ability, experience and talents, acting solely in the best interest of CBI and subject to the lawful direction of the Board of Directors of CBI. Executive agrees to abide by all Bylaws, policies, practices, procedures and rules of CBI. During the term of this Agreement, Executive agrees not to be employed by or perform services for any other person, business or organization without the prior written consent of the Board of Directors of CBI; provided, however, (1) that nothing in this Section 3(b) shall prevent Executive from devoting a reasonable amount of time to charitable, municipal or public service work or service on the boards of directors of other companies so long as such work and service does not interfere with Executive’s employment pursuant to this Agreement or otherwise violate any term or provision of this Agreement and (2) that service on the board of directors of another company requires approval in writing in advance from the Chairman and Chief Executive Officer of Cadbury Schweppes plc or its successor.
     4.  COMPENSATION .
     As full compensation to Executive for the performance of the services hereunder and for Executive’s acceptance of the responsibilities described herein, CBI agrees to pay Executive and Executive agrees to accept the following salary and other benefits during the term of this Agreement and any extension hereof.

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     (a) Base Salary . CBI shall pay Executive a base salary at an annualized rate equal to Executive’s current base salary as of the date hereof or at such higher rate as the Compensation Committee or Board of Directors of CBI may from time to time determine at their sole discretion, payable in accordance with the standard payroll practices of CBI. The base salary shall be subject to all applicable withholding and other taxes that Executive is obligated to pay or that CBI may be required by law to withhold from time to time.
     (b) Compensation and Benefit Programs . Executive shall be entitled to participate in all employee compensation and benefit plans, programs and practices of CBI or CBI’s parents or affiliates now or hereafter made generally available to CBI’s senior executives, as such programs may be in effect from time to time, including incentive compensation, equity compensation, health, welfare and retirement arrangements.
     (c) Expenses . Executive shall be entitled to receive proper reimbursement by CBI for all reasonable, out-of-pocket expenses incurred by Executive (in accordance with the policies and procedures established by CBI for its senior executives) in performing services under this Agreement, provided Executive submits reasonable documentation for such expenses.
     5.  TERMINATION .
     Subject to the provisions of Section 6, employment pursuant to the terms of this Agreement shall terminate upon the occurrence of any of the following events:
     (a) expiration of term;
     (b) written Notice of Termination by CBI;

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     (c) written Notice of Termination by Executive;
     (d) Executive’s death;
     (e) Executive’s Disability.
     6.  COMPENSATION UPON TERMINATION OF EMPLOYMENT .
     The following will apply upon termination of employment pursuant to the terms of this Agreement.
     (a) Termination Upon Expiration of Term . In the event this Agreement expires at the end of the term hereof in accordance with Section 2 and Executive’s employment is terminated by CBI on or after such expiration and termination, Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans, the AIP and CBI’s policies and practices. Executive’s rights under Equity Incentive Plans and any other similar plans in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (respectively), copies of which have been or will be made available to Executive. CBI shall have no further obligations to Executive under this Agreement.
     (b) Termination for Cause or Not for Good Reason . If during the term of this Agreement, Executive’s employment is terminated for Cause or if Executive effects termination other than for Good Reason, CBI shall pay Executive his or her full salary through the effective date of such termination at the rate in effect on the date CBI or Executive, as the case may be, notifies the other party of such termination, and CBI shall have no further obligations to Executive under this Agreement. In the event of such

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termination, Executive shall not be entitled to receive any payment under the AIP for the year in which Executive’s Date of Termination occurs or any later year.
     (c) Termination Without Cause or for Good Reason . If CBI shall terminate Executive’s employment Without Cause during the term of this Agreement, or if Executive shall terminate Executive’s employment for Good Reason during the term of this Agreement, then Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans in which Executive is a Participant, the AIP and CBI’s policies and practices. CBI shall have no further obligations to Executive under this Agreement; provided, however, that, subject to the satisfaction of the conditions in Sections 6(f) and 6(g) hereof, and provided that Executive complies with the covenants of non-disclosure, non-solicitation and non-competition contained in Sections 14 and 15 of this Agreement, Executive shall be entitled to the payments and benefits specified in this Section 6(c). In the event of a breach by Executive of any of his obligations pursuant to Sections 14 or 15, CBI’s payment obligations pursuant to this Section 6(c) shall cease immediately as of the date of such breach, and CBI shall have no further obligations to Executive under this Agreement.
     (i) Salary . CBI shall pay to Executive an amount equal to nine (9) months of Executive’s annual base salary. Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination.
     (ii) AIP . CBI shall pay to Executive an amount equal to three-quarters (3/4) of Executive’s Target AIP award, as defined in Section 1(a). Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination.

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CBI shall also pay to Executive his pro rata portion of his actual AIP award under the AIP for the year in which the Date of Termination occurs. Such payment shall be calculated in accordance with the AIP. Such pro rata amount shall be paid to Executive by CBI in a lump sum within two and one-half months following the end of the year in which the Date of Termination shall have occurred. The payments under this Section 6(c)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Date of Termination occurs or any later year. In addition to the foregoing, CBI shall pay Executive any accrued award Executive may have earned under the AIP for any CBI fiscal year prior to the Date of Termination which has not been paid.
     (iii) Continuation Payments . Subject to offset as provided in the last sentence of this Section 6(c)(iii), CBI shall pay Executive an amount equal to the aggregate of nine (9) months of Executive’s annual base salary plus three-quarters (3/4) of Executive’s Target AIP, as defined in Section 1(a), in effect on the Date of Termination. Such amount will be paid ratably by CBI to Executive within the regular payroll cycles during the nine (9) month period following the Date of Termination, unless such amount exceeds an amount (“Unrestricted Amount”) equal to two times the lesser of (A) the Executive’s annual compensation based on the annual rate of pay from CBI for the calendar year preceding the calendar year of the Date of Termination (adjusted for any increase in such annual rate of pay during the calendar year of the Date of Termination that was expected to continue indefinitely if the Executive had not terminated employment) and (B) the maximum amount that can be taken into account under a qualified plan pursuant

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to Section 401(a)(17) of the Code. If the amount exceeds the Unrestricted Amount, then no more than the Unrestricted Amount may be paid in the six months following the Executive’s Date of Termination and the monthly pro rata payments shall be reduced to comply with this limitation. If the monthly payments are reduced to comply with such limitation, any amount not paid in the initial six months following the Date of Termination shall be paid in a lump sum six months and two days after the Date of Termination and thereafter the ratable payments shall continue through the remainder of the nine (9) month period following the Date of Termination. If Executive secures full time employment within such nine (9) month period, then commencing on the date of such new employment, the payments under this Section 6(c)(iii) shall be offset by the base salary Executive earns from such new employer and the target annual bonus or other cash bonus established for Executive by such new employer, in each case pro-rated to reflect the amount of such new base salary and bonus which is allocable to the remainder of such nine (9) month period, calculated by multiplying such award by a fraction, the numerator of which is the number of weeks commencing on the date of new employment through the end of such nine (9) month period, and the denominator of which is 52.
     (iv) Benefit Plans . CBI shall continue Executive’s participation in the medical, dental and vision plans of CBI (or shall provide equivalent benefits) for a period of nine (9) months following the Date of Termination at the same rates as an active employee or, if earlier, the commencement of equivalent benefits by Executive’s new employer; provided that if Executive shall die before the

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expiration of the period during which CBI would be required to continue Executive’s participation in such plans, the participation of Executive’s surviving spouse and family in such plans shall continue throughout such period at the same rates as an active employee to Executive’s surviving spouse and family. Executive’s participation in CBI’s life and disability plans and Executive’s travel accident insurance under CBI’s group plan shall terminate on the Date of Termination. Following termination of coverage under any CBI benefit plan, Executive may continue coverage at Executive’s own expense if permitted by the terms of the applicable plan. At Executive’s option, Executive may continue medical coverage under COBRA at Executive’s own expense for the maximum period provided by COBRA, calculated from the Date of Termination, unless otherwise provided by law. Within sixty (60) days of the Date of Termination, Executive may, at Executive’s option, surrender Executive’s CBI company car or purchase such vehicle at a price equal to the greater of (i) 100% of its wholesale value, or (ii) the remaining lease payments; provided, that the price shall, in no event, be less than fair market value as of the Date of Termination of the company car as determined in good faith by CBI. Executive’s participation in CBI’s Employee Services Allowance (“ESA”) shall end on the Date of Termination, and no ESA payments regularly scheduled to be paid after the Date of Termination shall be paid to Executive.
     (v) Qualified Pension Plan . CBI shall pay Executive, in a lump sum within sixty (60) days of the Date of Termination, an amount equal to the difference, if any, between the present value of Executive’s accrued benefit,

12


 

whether or not vested, as of the Date of Termination under the Qualified Pension Plan, and the present value of the vested portion of such accrued benefit, with such difference to be calculated, to the extent relevant, using the actuarial assumptions and interest rates specified in the Qualified Pension Plan. The vested portion of such accrued benefit, if any, shall be paid in accordance with the provisions of the Qualified Pension Plan.
     (vi) Nonqualified Pension Plan . CBI shall pay Executive an amount equal to the lump sum which would have been payable under the Nonqualified Pension Plan had Executive (A) been completely vested in Executive’s full accrued benefit under the Nonqualified Pension Plan, (B) been eligible for normal retirement under the Nonqualified Pension Plan, and (C) retired as of the Date of Termination. Such benefit shall be calculated, to the extent relevant, using the actuarial assumptions specified in the Nonqualified Pension Plan. The payment under this Section 6(c)(vi) shall be paid within six months and two days of the Date of Termination, and shall be made in lieu of any and all payments otherwise due under the Nonqualified Pension Plan.
     (vii) Outplacement and Job Search Expenses . CBI will, at its expense, make available to Executive the services of an outplacement firm designated by CBI. In addition, CBI will reimburse Executive for reasonable out-of-pocket job search expenses incurred by Executive for a period of up to nine (9) months following the Date of Termination, provided that such expenses shall not exceed $300 per month and shall be properly documented.

13


 

     (viii) Equity Incentive Plan; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (d) Termination Due to Death . The employment of Executive under this Agreement shall terminate upon Executive’s death. In the event of the death of Executive during the term of his employment hereunder, CBI shall have no further obligations to Executive under this Agreement, except that the estate or any other legal representative of Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay to Executive’s estate or other legal representatives the base salary as provided in Section 4(a) above, at the rate in effect at the time of Executive’s death through the end of the month in which Executive dies.
     (ii) AIP . CBI shall pay to Executive’s estate or other legal representative the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s death occurs. Such payment shall be calculated by multiplying such Target AIP award by a fraction, the numerator of which is the number of weeks in the applicable year which precedes the date of death and the denominator of which is 52. Such amount shall be paid by CBI in a lump sum within thirty (30) days of the date of death. The payments under this Section 6(d)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s death occurs.

14


 

     (iii) Equity Incentive Plans; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive’s estate or other legal representative all of the amounts and shall provide all benefits generally available under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (e) Termination Due to Disability . The employment of Executive under this Agreement shall be terminated on the date that Executive becomes Disabled, as determined by the written opinion of the licensed physician regularly attending Executive. If CBI disagrees with this opinion, CBI may, at its own expense, engage a second physician to examine Executive. If Executive’s physician and CBI’s physician agree in writing that Executive is or is not Disabled, their written opinion shall, except as otherwise set forth in this paragraph 6(e), be conclusive as to Executive’s Disability. If the physicians disagree as to Executive’s Disability, they shall select a third physician to make the determination, whose written opinion shall be conclusive and binding on the issue of Disability. The date of any written opinion conclusively finding Executive to be Disabled shall be the effective date of Disability for purposes of this paragraph 6(e). In the event of termination due to Disability, CBI shall have no further obligations to

15


 

Executive under this Agreement, except that Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay Executive the base salary as provided in Section 4(a) above at the rate in effect at the time Executive becomes Disabled through the end of the month in which Executive’s employment terminates due to Disability.
     (ii) AIP . CBI shall pay Executive the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s Disability occurs, computed as in Section 6(d)(ii) above but substituting Disability for death. The payments under this Section 6(e)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Disability occurs.
     (iii) Equity Incentive Plans . Executive’s right to exercise options under the Equity Incentive Plans shall be governed by the terms and conditions of the Equity Incentive Plans, copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive the amounts and shall provide all benefits generally available to similarly situated executives under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (f) Mitigation . Executive agrees to use reasonable efforts to secure other employment but shall not otherwise be required to mitigate the amount of any payment provided for in this Section 6; provided, however, that in the event Executive secures

16


 

other employment, any continuation payments otherwise due Executive shall be subject to offset as provided in Section 6(c)(iii) above.
     (g) Release of Claims . Any other provisions of this Agreement notwithstanding, Executive shall not be entitled to any compensation under Section 6(c)(i) through 6(c)(vii) hereof following termination of employment unless and until Executive shall have executed a release of all of Executive’s rights and claims (other than to compensation or other matters to which Executive is entitled under this Agreement following termination of employment) against CBI, its officers, directors, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates with respect to all matters relating to CBI or its parent companies, subsidiaries, or affiliates existing at the time of Executive’s execution of the release, and such release has become binding upon and irrevocable by the Executive. The release shall be in substantially the form of Exhibit A hereto, or such variation thereof as CBI reasonably determines to be necessary to comply with then applicable law or otherwise appropriate to secure a release of all the aforesaid rights and claims of Executive. If a release satisfactory to CBI has not become binding and irrevocable within sixty (60) days after the Date of Termination, the conditions of this Section 6(g) shall not be satisfied, the Executive shall not have any right to the compensation provided under Section 6(c)(i)-(vii), each of which is additional compensation to which the Executive would otherwise not be entitled, and CBI shall have no further obligations to Executive under this Agreement.

17


 

     (h) In the event that CBI subsequently determines that termination for Cause was warranted, CBI may cease payments and benefits hereunder and the Executive is required to repay to CBI each of the payments and benefits set forth in Section(c)(i)-(vii).
     7.  FURTHER BENEFITS .
     Upon termination of the employment of Executive, Executive shall accrue no further benefits under the Pension Plans and shall make no further contributions to any Pension Plan or other benefit plan permitting employee contributions.
     8.  RIGHT TO TERMINATE; SOURCE OF PAYMENTS .
     (a) Right to Terminate by CBI . CBI may terminate Executive’s employment at any time upon written notice to Executive subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (b) Right to Terminate by Executive . Executive may terminate his or her employment with CBI at any time for Good Reason or otherwise upon written notice to CBI, subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (c) Source of Payments . All payments provided for in this Agreement shall be paid in cash from the general funds of CBI or from any special or separate trust or fund to be established in connection herewith. To the extent that any person acquires a right to receive payments from CBI hereunder, whether or not any funds are segregated by CBI for such purpose, such right shall be no greater than the right of an unsecured creditor of CBI.

18


 

     9.  AMENDMENTS; WAIVER .
     This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. The waiver by either party of compliance with the provisions of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such party. Notwithstanding the foregoing, CBI may amend this Agreement to the extent it determines in good faith that an amendment is necessary to comply with the requirements of Section 409A of the Code, provided that such amendment preserves, as near as possible, the economic benefits of the Agreement to both parties. The provisions of Sections 14, 15, 16, 17 and 21 shall survive termination of this Agreement.
     10.  BINDING AGREEMENT .
     This Agreement shall be binding upon and inure to the benefit of the parties hereto, any successors to the business of CBI, Executive’s heirs and the personal representatives of Executive’s estate.
     11.  ASSIGNMENT .
     This Agreement shall not be assigned by either Executive or CBI except that CBI may assign this Agreement to any successor in interest of CBI whether by merger, consolidation, purchase of assets or otherwise, provided, however, that in connection with such an assignment CBI will require a successor in interest to fully assume all of CBI’s obligations hereunder.
     12.  NOTICES .
     Any notice required or permitted hereunder shall be deemed sufficiently given if in writing and either personally delivered or sent by certified or registered mail, postage pre-paid,

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addressed to the party at the address set forth below or at such other address as the party may subsequently designate:
     
(a)
  Executive:
 
  Randy Gier
 
  5205 Silver Lake Drive
 
  Plano, TX 75093
 
   
(b)
  CBI:
 
  CBI Holdings Inc.
 
  5301 Legacy Drive
 
  Plano, TX 75024
 
  Attn: General Counsel
 
   
copy to:
  Cadbury Schweppes plc
 
  25 Berkeley Square
 
  London, England W 1 X 6HT
 
  Attn: Chief Legal Officer and Company Secretary (Group)
Any such notice will be deemed given upon delivery, if delivered in person, or upon the date of mailing, if sent by certified or registered mail.
     13.  ENTIRE AGREEMENT .
     This Agreement supersedes any prior agreements or understandings, oral or written, with respect to the employment of Executive and constitutes the entire agreement with respect thereto. It cannot be changed or terminated orally and may be modified only by a subsequent written agreement executed by both parties hereto. In addition, the Executive will not be eligible to participate in any other severance pay plan, program or practice that may be adopted from time to time.
     14.  CONFIDENTIALITY .
     (a) Executive agrees and acknowledges that, during the term of this Agreement, CBI promises to provide and Executive will have access to and acquire certain trade secrets and confidential information of CBI and of corporations affiliated

20


 

with CBI that is not generally available to the public, and that such information constitutes valuable, special and unique property of CBI and its affiliates that, if disclosed, could put CBI or its affiliates at a competitive disadvantage (the “Confidential Information”). Such Confidential Information includes but is not limited to methods, techniques, specifications, devices, systems, designs, formulae, models, patents and trademarks, manuals, lists of customers and prospective customers, customer requirements, vendor information and relationships, price lists and other pricing information and analyses, data used to prepare bids, marketing plans and other market information and analyses, business, strategic and operating plans, financial statements and other financial information, training techniques, and other confidential and proprietary information and documents regarding the business of CBI and its affiliates.
     (b) As a material inducement to CBI to enter into this Agreement and to provide Executive the compensation and other consideration set forth herein, Executive agrees that, without the prior written consent of CBI, Executive will not, during or after the term of Executive’s employment with CBI, directly or indirectly use or disclose any such Confidential Information to any person or entity for any reason or purpose whatsoever, except as may be required by law or as may be required in the course of Executive’s performance of his or her duties at CBI.
     (c) Executive acknowledges and agrees that all files, records, documents, plans, specifications, equipment, information, computer files, and similar items and materials relating to CBI’s business shall remain the sole property of CBI and shall immediately be returned to CBI upon CBI’s request or upon the termination of this Agreement for any reason, and that Executive shall keep no copies thereof. The

21


 

provisions of this Section 14 shall survive the termination of this Agreement and shall be binding upon any successor or assign of Executive.
     15.  NON-COMPETITION AND NON-SOLICITATION .
     (a) Consideration . Executive acknowledges and agrees that Executive has received, and will continue to receive, substantial and valuable consideration for the agreements set forth in this Section, including but not limited to access to Confidential Information, which CBI hereby promises to provide to Executive; specialized training related to CBI’s services, business practices and Confidential Information; post-termination payments; and other compensation and benefits as described in this Agreement.
     (b) Non-Solicitation of Customers and Employees . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that during employment and for a period of twelve (12) months following the Date of Termination, whether for Executive’s own account or for the account of any other individual, partnership, firm, corporation or business organization, Executive shall not either directly or indirectly solicit or endeavor to entice away from CBI any person who is employed by or otherwise engaged to perform services for CBI (or its affiliates) or to interfere with the relationship of CBI (or its affiliates) with any person who then is a customer of CBI.
     (c) Non-Competition . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that, for a period of

22


 

twelve (12) months following the Date of Termination, Executive shall not become employed in an executive capacity by any Competitor of CBI within the United States, Canada or any other region in which CBI or its current or former affiliates operates or has operated and in which Executive has directly or indirectly rendered services during the last thirty-six (36) months of Executive’s employment and, further, Executive shall not provide services of a similar or comparable type and character to those provided by Executive to CBI during the last thirty-six (36) months of Executive’s employment with CBI, whether as an employee, officer, director, partner, shareholder, consultant or otherwise, to any Competitor of CBI within the United States, Canada or any region in which Cadbury Schweppes plc operates and in which Executive has rendered services during Executive’s employment; provided, however, that this Section 15 shall not prohibit Executive’s ownership, either directly or indirectly, of less than 1% of any class of publicly traded securities of any entity, and provided further that this Section 15 shall not prohibit Executive’s employment as an employee or officer or Executive’s performance of services as a consultant with any Competitor if Executive is not directly or indirectly involved in the aspects of such Competitor’s business that are competitive with CBI.
     16.  JUDICIAL AMENDMENT .
     Executive and CBI acknowledge the reasonableness of the agreements set forth in Sections 14 and 15 above and the reasonableness of the geographic area, duration of time and subject matter that are part of the covenant not to compete contained in Section 15(c). Executive further acknowledges that Executive’s skills are such that Executive can be gainfully employed in noncompetitive employment and that the agreement not to compete will in no manner prevent Executive from earning a living. Notwithstanding the foregoing, in the event it is judicially

23


 

determined that any of the limitations contained in Section 15 are unreasonable, illegal or offensive under any applicable law and may not be enforced as agreed herein, the parties agree that the unreasonable, illegal or offensive portions of Section 15, whether they relate to duration, area or subject matter, shall be and hereby are revised to conform with all applicable laws and that the Agreement, as modified, shall remain in full force and effect and shall not be rendered void or illegal.
     17.  IRREPARABLE INJURY .
     Executive acknowledges that CBI has invested substantial time, labor, skill and money in developing the Confidential Information to be provided to Executive. Executive further acknowledges that the Confidential Information to be provided to Executive, and the services Executive is to render to CBI, are such that any breach of the covenants contained in Sections 14 and 15 above by Executive would cause CBI irreparable harm and injury and would damage CBI in a way that could not be adequately compensated by monetary damages. Accordingly, the parties agree that CBI’s remedies may include a temporary restraining order, preliminary injunction, or other injunctive relief against any threatened or actual breach of Sections 14 or 15 by Executive. Executive acknowledges that this injunctive relief shall be in addition to any other legal or equitable relief to which CBI may otherwise be entitled under applicable law.
     18.  HEADINGS .
     The headings used in this Agreement are for convenience only and shall not be deemed to curtail or affect the meaning or construction of any provision under this Agreement.
     19.  WITHHOLDING .
     All payments or benefits to Executive under this Agreement shall be reduced by any amounts required to be withheld by CBI under applicable tax laws, including U.S. Federal, state,

24


 

or local income tax laws or similar laws then in effect as well as the laws of other countries while on international assignment. In the event new tax legislation results in additional taxation to the Executive or CBI which may be avoided by amendment to this Agreement with no material financial impact to Executive or CBI, then this Agreement shall be so amended by written agreement of the parties.
     20.  OTHER PLANS .
     Except as otherwise provided in this Agreement, the terms of the AIP, Pension Plans, Equity Incentive Plans and any other CBI option plan, bonus plan or benefit plan (as the same may be amended from time to time) or any agreements entered into pursuant to such plans, shall remain in full force and effect. Except as expressly provided herein, if there is any conflict between this Agreement and the Plans described above in this Section 20, the terms of the applicable Plan documents shall control.
     21.  ARBITRATION .
     Any controversy or claim, other than an action for injunctive or equitable relief for unfair competition or to enforce the confidentiality, noncompete or nonsolicitation provisions set forth in Sections 14 and 15, arising out of or relating to (a) this Agreement or the breach thereof, (b) Executive’s employment with CBI, or (c) the termination of Executive’s employment with CBI, (including but not limited to claims arising under applicable employment-related statutes, including without limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Rehabilitation Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the American Jobs Creation Act of 2004, or the Fair Labor Standards Act, applicable state fair employment practices statutes, and claims for retaliation arising under applicable workers’ compensation statutes; as well as

25


 

employment-related common-law tort claims, including without limitation claims for negligence, intentional torts, post-termination defamation (e.g., employment references), violation of privacy rights, fraud, misrepresentation, unjust enrichment, tortious interference and/or promissory estoppel), which is not settled by agreement among the parties shall be resolved by final and binding arbitration, to be held in a metropolitan area located within fifty (50) miles of the location at which Executive is employed, in accordance with the employment arbitration rules and procedures of the American Arbitration Association. Neither party shall initiate or prosecute any lawsuit in any way related to any claims; provided, however, that the provisions of this Section 21 do not limit Executive’s right to file an administrative charge with the Equal Employment Opportunity Commission. Judgment upon the award rendered may be entered and enforced in any court having jurisdiction thereof.
     22.  VALIDITY; APPLICABLE LAW .
     The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect, and the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State in which Executive is employed .

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     IN WITNESS WHEREOF, CBI has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto subscribed his or her name, all as of the day, month and year first above written.
                 
CBI Holdings Inc.       Executive    
 
               
By:
  /s/ James L. Baldwin       /s/ Randy Gier    
 
 
 
James L. Baldwin
     
 
Randy Gier
   
 
  Executive Vice President            

27


 

EXHIBIT “A”
GENERAL RELEASE
     This General Release (the “Release”) is executed as of this                      day of                                           , 20___, by and between Randy Gier (“Executive”) and CBI Holdings Inc. (“CBI”) for purposes of evidencing the covenants, obligations and undertakings of such parties set forth below.
     WHEREAS, CBI and Executive entered into an agreement of employment (the “Agreement”) dated October 15, 2007; and
     WHEREAS, Executive’s employment with CBI was terminated effective as of                                           , 20___, pursuant to Paragraph 6(c) of the Agreement;
     NOW THEREFORE, as a condition to, and in consideration of, payment by CBI of the benefits specified in Paragraph 6(c) of the Agreement, Executive hereby agrees as follows:
     1. Executive, for himself and on behalf of Executive’s agents, attorneys, heirs, executors, administrators, successors and assigns, hereby irrevocably releases, acquits, discharges and forever forgives CBI, its past and present officers, directors, shareholders, representatives, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates, and all persons acting by, through, under or in concert with them, (the “Releasees”) from any and all claims, causes of action, suits, controversies, appeals, grievances, promises, agreements, damages, rights, debts, liabilities, costs, losses, personal injuries and any other compensation whatsoever, whether presently known or unknown, liquidated or unliquidated, matured or contingent, arising at any time through the date of the execution of this Agreement. This Release covers any and all claims, regardless of whether they arose in contract or in tort or are based upon statutes, laws or rules, regulations, common law principles or otherwise, and includes but is not limited to claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Pregnancy Discrimination Act, the Equal Pay Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, COBRA, the Occupational Safety and Health Act, or any other federal, state or local statute, law or regulation relating to employment; common-law claims for breach of contract, quantum meruit, reformation of contract, breach of implied covenant of good faith and fair dealing, debt, wrongful discharge, defamation, invasion of privacy, infliction of emotional distress, tortious interference, misrepresentation, fraud, conspiracy, negligence or gross negligence; and any other statutory or common-law cause of action, whether or not relating to Executive’s employment with CBI; provided, however, that this Release does not include any claims Executive may have to compensation or benefits to be provided to Executive following termination of Executive’s employment with CBI pursuant to Section 6(c) of the Agreement, any rights Executive may have (subject to the provisions of Section 6(c) of the Agreement) under any pension or benefit plan in which Executive was or is a participant, and any indemnification rights Executive may have under company bylaws or insurance.

A-1


 

     2. Executive covenants and agrees that, to the fullest extent permitted by law, Executive will not bring any legal action against any of the Releasees for any claim waived and released under this Release and represents and warrants that no such claim has been filed to date. Executive agrees that should any person, organization or other entity institute or file a civil action, suit or legal proceeding against the Releasees on Executive’s behalf involving any matter occurring at any time in the past up to and including the date on which Executive executes this Release, Executive shall not seek or accept any personal, equitable or monetary relief in such civil action, suit or legal proceeding.
     3. Executive agrees that the terms and conditions of this Release are confidential and that Executive will not, directly or indirectly, disclose the fact of or terms of this Release to anyone other than Executive’s attorney or tax advisor, except to the extent such disclosure may be required for accounting or tax reporting purposes or otherwise be required by law or direction of a court. Nothing in this provision shall be construed to prohibit Executive from disclosing this Release to the Equal Employment Opportunity Commission in connection with any complaint or charge submitted to that agency.
     4. Executive agrees not to make any comments relating to the Releasees that are critical, disparaging or derogatory or that may tend to injure the business of the Releasees and agrees not to encourage any person, corporation or entity to sue or not to do business with the Releasees.
     5. Effective as of the Termination Date, Executive hereby resigns from any and all positions as an officer or director of CBI or its affiliates and subsidiaries, and agrees to execute any documents required for the purpose of effecting such resignation.
     6. The provisions of this Release are severable. If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision. One or more waivers of a breach of any covenant, term or provision of this Release by any party shall not operate or be construed as a waiver of any subsequent breach of the same covenant, term or provision, nor shall it be construed as a waiver of any other then existing or subsequent breach of a different covenant, term or provision.
     7. This Release sets forth the entire agreement between CBI and Executive and supersedes any and all prior oral or written agreements or understandings concerning the subject matter of this Release. This Release may not be altered, amended or modified, except by a further written document signed by a duly authorized representative of CBI and Executive.
     8. This Release is made within the State of Texas and shall in all respects be interpreted, enforced and governed by the laws of the State of Texas.
     9. This Release shall be binding upon Executive, his heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of the Releasees and their respective administrators, representatives, successors and assigns.

A-2


 

     10. Executive acknowledges that this Release is in full settlement, satisfaction, and discharge of any and all claims, demands, actions, and causes of action released by Executive, and that it applies to all claims, whether known or unknown. Executive further acknowledges that the consideration to be provided pursuant to the Agreement upon execution of this Release represents amounts and benefits greater than Executive would be entitled to receive if Executive were not to execute this Release. Executive represents and warrants that Executive has full power and authority to enter into and execute this Release. Executive represents that Executive has carefully read and fully understands all the provisions of this Release, that Executive has been advised to consult with an attorney of Executive’s choice and has had the opportunity to do so, and that Executive is freely, knowingly and voluntarily entering into this Release without reliance on any representations of any kind or character not set forth herein.
     11. Executive acknowledges that Executive has been provided at least twenty-one (21) days after receipt of this Release to decide whether to sign the Release and be bound by its terms, and that Executive has considered the terms of this Release for at least twenty-one (21) days or knowingly and voluntarily waived Executive’s right to do so. Executive further acknowledges and understands that Executive has the right to revoke this Release for a period of seven (7) days after Executive has signed it.
     IN WITNESS WHEREOF, the parties hereto have executed this General Release as of the date first above written.
                 
EXECUTIVE       CBI HOLDINGS INC.    
 
               
             
 
               
 
      By:        
 
               
 
               
 
      Its:        
 
               

A-3

 

Exhibit 10.14
AGREEMENT
BETWEEN
CBI HOLDINGS INC.
AND
JAMES J. JOHNSTON
DATED AS OF OCTOBER 15, 2007

 


 

TABLE OF CONTENTS
             
        PAGE
1.
  DEFINITIONS     1  
2.
  TERM     5  
3.
  POSITION AND DUTIES     5  
4.
  COMPENSATION     6  
5.
  TERMINATION     7  
6.
  COMPENSATION UPON TERMINATION OF EMPLOYMENT     8  
7.
  FURTHER BENEFITS     18  
8.
  RIGHT TO TERMINATE; SOURCE OF PAYMENTS     18  
9.
  AMENDMENTS; WAIVER     19  
10.
  BINDING AGREEMENT     19  
11.
  ASSIGNMENT     19  
12.
  NOTICES     19  
13.
  ENTIRE AGREEMENT     20  
14.
  CONFIDENTIALITY     20  
15.
  NON-COMPETITION AND NON-SOLICITATION     22  
16.
  JUDICIAL AMENDMENT     23  
17.
  IRREPARABLE INJURY     24  
18.
  HEADINGS     24  
19.
  WITHHOLDING     24  
20.
  OTHER PLANS     25  
21.
  ARBITRATION     25  
22.
  VALIDITY; APPLICABLE LAW     26  

 


 

AGREEMENT
     This AGREEMENT (the “Agreement”) is made and entered into as of the 15TH day of October, 2007, by and between CBI Holdings Inc. and James J. Johnston (“Executive”).
WITNESSETH:
     WHEREAS, Executive is employed as an officer of CBI Holdings Inc. or its subsidiaries (collectively “CBI”) and is devoting Executive’s ability, time, effort and energy to the affairs of CBI; and
     WHEREAS, CBI considers the continuance of a sound and vital management to be essential to protecting and enhancing the best interests of CBI and its shareholders; and
     WHEREAS, CBI desires to assure itself of retaining the services of Executive and to reward Executive for Executive’s valuable, dedicated service to CBI;
     WHEREAS, CBI and Executive are parties to an employment agreement dated as of May 8, 2007 (the “Prior Agreement”); and
     WHEREAS, the parties desire to amend and restate the Prior Agreement, generally effective as of October 15, 2007.
     NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, the parties hereto covenant and agree as follows:
     1.  DEFINITIONS .
     The following terms, as used herein, have the following meaning:
     (a) AIP . “AIP” shall mean the annual incentive plan in which Executive is entitled to participate, as such plan is in effect from time to time. References herein to Executive’s “Target AIP” shall mean Executive’s target annual bonus opportunity at such time; provided, however, that if at such time Executive’s target annual bonus opportunity

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under the AIP has not yet been set for the then current year, the target annual bonus opportunity in effect for Executive under the AIP for the immediately preceding year shall be used as the Executive’s target annual bonus opportunity. If Executive has been promoted to a band in CBI’s salary structure having a minimum higher target annual bonus opportunity under the AIP, but has not yet had his/her target annual bonus opportunity increased to the minimum target annual bonus opportunity applying to others at that band, such increased target annual bonus opportunity nonetheless shall be used to calculate the Executive’s Target AIP hereunder.
     (b) Cause . Termination for “Cause” shall mean termination by CBI of Executive’s employment for Executive’s:
     (i) willful failure to substantially perform Executive’s duties with CBI;
     (ii) breach of Executive’s duty of loyalty toward CBI;
     (iii) commission of an act of dishonesty toward CBI, theft of CBI’s corporate property, or usurpation of CBI’s corporate opportunities;
     (iv) unethical business conduct including any violation of law connected with Executive’s employment at CBI; or
     (v) conviction of any felony involving dishonest or immoral conduct.
     For purposes of this Section 1(b), an act or failure to act by Executive shall be considered “willful” only if Executive’s conduct was not in good faith and Executive lacked a reasonable belief that Executive’s act or omission was in the best interests of CBI.

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     (c) Code . “Code” shall mean the United States Internal Revenue Code of 1986, as amended.
     (d) Competitor . For purposes of this Agreement, “Competitor” means an individual, partnership, firm, corporation or other business organization or entity that materially competes with a significant business owned or operated by CBI, its parent companies, or affiliates as of the Date of Termination, the names of which shall be made available to Executive at the time of Executive’s separation from the CBI and upon reasonable request. As of the date of this Agreement, the definition of a Competitor includes, but is not limited to, the following businesses: The Coca-Cola Company, PepsiCo, Inc., Nestlé S.A., Kraft Foods Inc., Hershey Foods Corporation, Ferrero SpA, Mars, Incorporated, Groupe Danone S.A., and Wm. Wrigley Jr. Company. The list of companies set out above or provided to Executive shall be deemed to include all direct and indirect subsidiaries and divisions of these companies.
     (e) Date of Termination . “Date of Termination” shall mean the date Executive’s employment with CBI is terminated.
     (f) Disability or Disabled . “Disability” or “Disabled” shall mean Executive’s inability, because of incapacity due to physical or mental illness or injury and notwithstanding reasonable accommodation, to perform the essential functions of Executive’s position with CBI on a full-time basis for at least six consecutive months.
     (g) Equity Incentive Plans . “Equity Incentive Plans” shall mean any stock option, stock purchase or other stock incentive plan maintained by CBI Holdings Inc. or any parent or affiliated company.

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     (h) Good Reason . Termination for “Good Reason” shall mean a termination by Executive of Executive’s employment with CBI for any of the following reasons:
     (i) CBI’s failure to perform any of its material obligations under this Agreement;
     (ii) unless otherwise agreed or waived, notice of a proposed relocation by CBI of Executive’s principal place of employment to a site outside a fifty (50) mile radius of the current site of Executive’s principal place of employment; or
     (iii) the failure by a successor in interest to CBI to expressly assume CBI’s obligations under this Agreement.
     A termination by Executive for Good Reason may not occur unless the Executive has given notice to CBI within 90 days of Executive’s knowledge of the initial existence of a condition described in clauses (i) through (iii) above, and CBI shall have a period of at least thirty (30) days (the “Correction Period”) during which it may remedy the condition. If CBI remedies the condition within the Correction Period, Executive may not terminate for that Good Reason event.
     A termination for “Good Reason” may occur only within thirty (30) days following the expiration of the Correction Period.
     (i) Notice of Termination . “Notice of Termination” shall mean a notice that (i) indicates the specific termination provisions in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provisions so indicated, and (iii) is given in conformity with the provisions of Section 12 of this Agreement.

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     (j) Qualified Pension Plan . “Qualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate and which is intended to be qualified under Section 401(a) of the Code.
     (k) Nonqualified Pension Plan . “Nonqualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate, but only to the extent such plan is designed to provide benefits which would otherwise be provided in the Qualified Pension Plan but for the limitations of the Code.
     (l) Pension Plans . “Pension Plans” shall mean, collectively, the Qualified Pension Plans and the Nonqualified Pension Plans.
     (m) Without Cause . Termination “Without Cause” shall mean a termination by CBI of Executive’s employment for any reason other than death, Disability, or Cause.
     2.  TERM .
     The term of this Agreement shall commence on the date first set forth above , and shall continue thereafter for a period of ten (10) years, at which time it shall expire unless sooner terminated in accordance with the provisions of this Agreement or by mutual written agreement of the parties on such terms and conditions as such written agreement may specify.
     3.  POSITION AND DUTIES .
     (a) Executive shall serve in such executive capacity as CBI may determine from time to time and with such authority, duties and responsibilities as are commensurate with such position and as are typically performed by executives holding such position in business organizations of a size and nature similar to that of CBI, and

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shall perform such other services for CBI and its affiliated companies as may be assigned to Executive from time to time by the Board of Directors of CBI and as are consistent with the position of an executive officer.
     (b) Executive shall devote substantially all of Executive’s business time and attention to the business and affairs of CBI and shall perform the duties set forth herein faithfully and diligently and to the best of Executive’s ability, experience and talents, acting solely in the best interest of CBI and subject to the lawful direction of the Board of Directors of CBI. Executive agrees to abide by all Bylaws, policies, practices, procedures and rules of CBI. During the term of this Agreement, Executive agrees not to be employed by or perform services for any other person, business or organization without the prior written consent of the Board of Directors of CBI; provided, however, (1) that nothing in this Section 3(b) shall prevent Executive from devoting a reasonable amount of time to charitable, municipal or public service work or service on the boards of directors of other companies so long as such work and service does not interfere with Executive’s employment pursuant to this Agreement or otherwise violate any term or provision of this Agreement and (2) that service on the board of directors of another company requires approval in writing in advance from the Chairman and Chief Executive Officer of Cadbury Schweppes plc or its successor.
     4.  COMPENSATION .
     As full compensation to Executive for the performance of the services hereunder and for Executive’s acceptance of the responsibilities described herein, CBI agrees to pay Executive and Executive agrees to accept the following salary and other benefits during the term of this Agreement and any extension hereof.

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     (a) Base Salary . CBI shall pay Executive a base salary at an annualized rate equal to Executive’s current base salary as of the date hereof or at such higher rate as the Compensation Committee or Board of Directors of CBI may from time to time determine at their sole discretion, payable in accordance with the standard payroll practices of CBI. The base salary shall be subject to all applicable withholding and other taxes that Executive is obligated to pay or that CBI may be required by law to withhold from time to time.
     (b) Compensation and Benefit Programs . Executive shall be entitled to participate in all employee compensation and benefit plans, programs and practices of CBI or CBI’s parents or affiliates now or hereafter made generally available to CBI’s senior executives, as such programs may be in effect from time to time, including incentive compensation, equity compensation, health, welfare and retirement arrangements.
     (c) Expenses . Executive shall be entitled to receive proper reimbursement by CBI for all reasonable, out-of-pocket expenses incurred by Executive (in accordance with the policies and procedures established by CBI for its senior executives) in performing services under this Agreement, provided Executive submits reasonable documentation for such expenses.
     5.  TERMINATION .
     Subject to the provisions of Section 6, employment pursuant to the terms of this Agreement shall terminate upon the occurrence of any of the following events:
     (a) expiration of term;
     (b) written Notice of Termination by CBI;

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     (c) written Notice of Termination by Executive;
     (d) Executive’s death;
     (e) Executive’s Disability.
     6.  COMPENSATION UPON TERMINATION OF EMPLOYMENT .
     The following will apply upon termination of employment pursuant to the terms of this Agreement.
     (a) Termination Upon Expiration of Term . In the event this Agreement expires at the end of the term hereof in accordance with Section 2 and Executive’s employment is terminated by CBI on or after such expiration and termination, Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans, the AIP and CBI’s policies and practices. Executive’s rights under Equity Incentive Plans and any other similar plans in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (respectively), copies of which have been or will be made available to Executive. CBI shall have no further obligations to Executive under this Agreement.
     (b) Termination for Cause or Not for Good Reason . If during the term of this Agreement, Executive’s employment is terminated for Cause or if Executive effects termination other than for Good Reason, CBI shall pay Executive his or her full salary through the effective date of such termination at the rate in effect on the date CBI or Executive, as the case may be, notifies the other party of such termination, and CBI shall have no further obligations to Executive under this Agreement. In the event of such

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termination, Executive shall not be entitled to receive any payment under the AIP for the year in which Executive’s Date of Termination occurs or any later year.
     (c) Termination Without Cause or for Good Reason . If CBI shall terminate Executive’s employment Without Cause during the term of this Agreement, or if Executive shall terminate Executive’s employment for Good Reason during the term of this Agreement, then Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans in which Executive is a Participant, the AIP and CBI’s policies and practices. CBI shall have no further obligations to Executive under this Agreement; provided, however, that, subject to the satisfaction of the conditions in Sections 6(f) and 6(g) hereof, and provided that Executive complies with the covenants of non-disclosure, non-solicitation and non-competition contained in Sections 14 and 15 of this Agreement, Executive shall be entitled to the payments and benefits specified in this Section 6(c). In the event of a breach by Executive of any of his obligations pursuant to Sections 14 or 15, CBI’s payment obligations pursuant to this Section 6(c) shall cease immediately as of the date of such breach, and CBI shall have no further obligations to Executive under this Agreement.
     (i) Salary . CBI shall pay to Executive an amount equal to nine (9) months of Executive’s annual base salary. Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination.
     (ii) AIP . CBI shall pay to Executive an amount equal to three-quarters (3/4) of Executive’s Target AIP award, as defined in Section 1(a). Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination.

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CBI shall also pay to Executive his pro rata portion of his actual AIP award under the AIP for the year in which the Date of Termination occurs. Such payment shall be calculated in accordance with the AIP. Such pro rata amount shall be paid to Executive by CBI in a lump sum within two and one-half months following the end of the year in which the Date of Termination shall have occurred. The payments under this Section 6(c)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Date of Termination occurs or any later year. In addition to the foregoing, CBI shall pay Executive any accrued award Executive may have earned under the AIP for any CBI fiscal year prior to the Date of Termination which has not been paid.
     (iii) Continuation Payments . Subject to offset as provided in the last sentence of this Section 6(c)(iii), CBI shall pay Executive an amount equal to the aggregate of nine (9) months of Executive’s annual base salary plus three-quarters (3/4) of Executive’s Target AIP, as defined in Section 1(a), in effect on the Date of Termination. Such amount will be paid ratably by CBI to Executive within the regular payroll cycles during the nine (9) month period following the Date of Termination, unless such amount exceeds an amount (“Unrestricted Amount”) equal to two times the lesser of (A) the Executive’s annual compensation based on the annual rate of pay from CBI for the calendar year preceding the calendar year of the Date of Termination (adjusted for any increase in such annual rate of pay during the calendar year of the Date of Termination that was expected to continue indefinitely if the Executive had not terminated employment) and (B) the maximum amount that can be taken into account under a qualified plan pursuant

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to Section 401(a)(17) of the Code. If the amount exceeds the Unrestricted Amount, then no more than the Unrestricted Amount may be paid in the six months following the Executive’s Date of Termination and the monthly pro rata payments shall be reduced to comply with this limitation. If the monthly payments are reduced to comply with such limitation, any amount not paid in the initial six months following the Date of Termination shall be paid in a lump sum six months and two days after the Date of Termination and thereafter the ratable payments shall continue through the remainder of the nine (9) month period following the Date of Termination. If Executive secures full time employment within such nine (9) month period, then commencing on the date of such new employment, the payments under this Section 6(c)(iii) shall be offset by the base salary Executive earns from such new employer and the target annual bonus or other cash bonus established for Executive by such new employer, in each case pro-rated to reflect the amount of such new base salary and bonus which is allocable to the remainder of such nine (9) month period, calculated by multiplying such award by a fraction, the numerator of which is the number of weeks commencing on the date of new employment through the end of such nine (9) month period, and the denominator of which is 52.
     (iv) Benefit Plans . CBI shall continue Executive’s participation in the medical, dental and vision plans of CBI (or shall provide equivalent benefits) for a period of nine (9) months following the Date of Termination at the same rates as an active employee or, if earlier, the commencement of equivalent benefits by Executive’s new employer; provided that if Executive shall die before the

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expiration of the period during which CBI would be required to continue Executive’s participation in such plans, the participation of Executive’s surviving spouse and family in such plans shall continue throughout such period at the same rates as an active employee to Executive’s surviving spouse and family. Executive’s participation in CBI’s life and disability plans and Executive’s travel accident insurance under CBI’s group plan shall terminate on the Date of Termination. Following termination of coverage under any CBI benefit plan, Executive may continue coverage at Executive’s own expense if permitted by the terms of the applicable plan. At Executive’s option, Executive may continue medical coverage under COBRA at Executive’s own expense for the maximum period provided by COBRA, calculated from the Date of Termination, unless otherwise provided by law. Within sixty (60) days of the Date of Termination, Executive may, at Executive’s option, surrender Executive’s CBI company car or purchase such vehicle at a price equal to the greater of (i) 100% of its wholesale value, or (ii) the remaining lease payments; provided, that the price shall, in no event, be less than fair market value as of the Date of Termination of the company car as determined in good faith by CBI. Executive’s participation in CBI’s Employee Services Allowance (“ESA”) shall end on the Date of Termination, and no ESA payments regularly scheduled to be paid after the Date of Termination shall be paid to Executive.
     (v) Qualified Pension Plan . CBI shall pay Executive, in a lump sum within sixty (60) days of the Date of Termination, an amount equal to the difference, if any, between the present value of Executive’s accrued benefit,

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whether or not vested, as of the Date of Termination under the Qualified Pension Plan, and the present value of the vested portion of such accrued benefit, with such difference to be calculated, to the extent relevant, using the actuarial assumptions and interest rates specified in the Qualified Pension Plan. The vested portion of such accrued benefit, if any, shall be paid in accordance with the provisions of the Qualified Pension Plan.
     (vi) Nonqualified Pension Plan . CBI shall pay Executive an amount equal to the lump sum which would have been payable under the Nonqualified Pension Plan had Executive (A) been completely vested in Executive’s full accrued benefit under the Nonqualified Pension Plan, (B) been eligible for normal retirement under the Nonqualified Pension Plan, and (C) retired as of the Date of Termination. Such benefit shall be calculated, to the extent relevant, using the actuarial assumptions specified in the Nonqualified Pension Plan. The payment under this Section 6(c)(vi) shall be paid within six months and two days of the Date of Termination, and shall be made in lieu of any and all payments otherwise due under the Nonqualified Pension Plan.
     (vii) Outplacement and Job Search Expenses . CBI will, at its expense, make available to Executive the services of an outplacement firm designated by CBI. In addition, CBI will reimburse Executive for reasonable out-of-pocket job search expenses incurred by Executive for a period of up to nine (9) months following the Date of Termination, provided that such expenses shall not exceed $300 per month and shall be properly documented.

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     (viii) Equity Incentive Plan; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (d) Termination Due to Death . The employment of Executive under this Agreement shall terminate upon Executive’s death. In the event of the death of Executive during the term of his employment hereunder, CBI shall have no further obligations to Executive under this Agreement, except that the estate or any other legal representative of Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay to Executive’s estate or other legal representatives the base salary as provided in Section 4(a) above, at the rate in effect at the time of Executive’s death through the end of the month in which Executive dies.
     (ii) AIP . CBI shall pay to Executive’s estate or other legal representative the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s death occurs. Such payment shall be calculated by multiplying such Target AIP award by a fraction, the numerator of which is the number of weeks in the applicable year which precedes the date of death and the denominator of which is 52. Such amount shall be paid by CBI in a lump sum within thirty (30) days of the date of death. The payments under this Section 6(d)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s death occurs.

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     (iii) Equity Incentive Plans; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive’s estate or other legal representative all of the amounts and shall provide all benefits generally available under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (e) Termination Due to Disability . The employment of Executive under this Agreement shall be terminated on the date that Executive becomes Disabled, as determined by the written opinion of the licensed physician regularly attending Executive. If CBI disagrees with this opinion, CBI may, at its own expense, engage a second physician to examine Executive. If Executive’s physician and CBI’s physician agree in writing that Executive is or is not Disabled, their written opinion shall, except as otherwise set forth in this paragraph 6(e), be conclusive as to Executive’s Disability. If the physicians disagree as to Executive’s Disability, they shall select a third physician to make the determination, whose written opinion shall be conclusive and binding on the issue of Disability. The date of any written opinion conclusively finding Executive to be Disabled shall be the effective date of Disability for purposes of this paragraph 6(e). In the event of termination due to Disability, CBI shall have no further obligations to

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Executive under this Agreement, except that Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay Executive the base salary as provided in Section 4(a) above at the rate in effect at the time Executive becomes Disabled through the end of the month in which Executive’s employment terminates due to Disability.
     (ii) AIP . CBI shall pay Executive the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s Disability occurs, computed as in Section 6(d)(ii) above but substituting Disability for death. The payments under this Section 6(e)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Disability occurs.
     (iii) Equity Incentive Plans . Executive’s right to exercise options under the Equity Incentive Plans shall be governed by the terms and conditions of the Equity Incentive Plans, copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive the amounts and shall provide all benefits generally available to similarly situated executives under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (f) Mitigation . Executive agrees to use reasonable efforts to secure other employment but shall not otherwise be required to mitigate the amount of any payment provided for in this Section 6; provided, however, that in the event Executive secures

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other employment, any continuation payments otherwise due Executive shall be subject to offset as provided in Section 6(c)(iii) above.
     (g) Release of Claims . Any other provisions of this Agreement notwithstanding, Executive shall not be entitled to any compensation under Section 6(c)(i) through 6(c)(vii) hereof following termination of employment unless and until Executive shall have executed a release of all of Executive’s rights and claims (other than to compensation or other matters to which Executive is entitled under this Agreement following termination of employment) against CBI, its officers, directors, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates with respect to all matters relating to CBI or its parent companies, subsidiaries, or affiliates existing at the time of Executive’s execution of the release, and such release has become binding upon and irrevocable by the Executive. The release shall be in substantially the form of Exhibit A hereto, or such variation thereof as CBI reasonably determines to be necessary to comply with then applicable law or otherwise appropriate to secure a release of all the aforesaid rights and claims of Executive. If a release satisfactory to CBI has not become binding and irrevocable within sixty (60) days after the Date of Termination, the conditions of this Section 6(g) shall not be satisfied, the Executive shall not have any right to the compensation provided under Section 6(c)(i)-(vii), each of which is additional compensation to which the Executive would otherwise not be entitled, and CBI shall have no further obligations to Executive under this Agreement.

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     (h) In the event that CBI subsequently determines that termination for Cause was warranted, CBI may cease payments and benefits hereunder and the Executive is required to repay to CBI each of the payments and benefits set forth in Section(c)(i)-(vii).
     7.  FURTHER BENEFITS .
     Upon termination of the employment of Executive, Executive shall accrue no further benefits under the Pension Plans and shall make no further contributions to any Pension Plan or other benefit plan permitting employee contributions.
     8.  RIGHT TO TERMINATE; SOURCE OF PAYMENTS .
     (a) Right to Terminate by CBI . CBI may terminate Executive’s employment at any time upon written notice to Executive subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (b) Right to Terminate by Executive . Executive may terminate his or her
employment with CBI at any time for Good Reason or otherwise upon written notice to CBI, subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (c) Source of Payments . All payments provided for in this Agreement shall be paid in cash from the general funds of CBI or from any special or separate trust or fund to be established in connection herewith. To the extent that any person acquires a right to receive payments from CBI hereunder, whether or not any funds are segregated by CBI for such purpose, such right shall be no greater than the right of an unsecured creditor of CBI.

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     9.  AMENDMENTS; WAIVER .
     This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. The waiver by either party of compliance with the provisions of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such party. Notwithstanding the foregoing, CBI may amend this Agreement to the extent it determines in good faith that an amendment is necessary to comply with the requirements of Section 409A of the Code, provided that such amendment preserves, as near as possible, the economic benefits of the Agreement to both parties. The provisions of Sections 14, 15, 16, 17 and 21 shall survive termination of this Agreement.
     10.  BINDING AGREEMENT .
     This Agreement shall be binding upon and inure to the benefit of the parties hereto, any successors to the business of CBI, Executive’s heirs and the personal representatives of Executive’s estate.
     11.  ASSIGNMENT .
     This Agreement shall not be assigned by either Executive or CBI except that CBI may assign this Agreement to any successor in interest of CBI whether by merger, consolidation, purchase of assets or otherwise, provided, however, that in connection with such an assignment CBI will require a successor in interest to fully assume all of CBI’s obligations hereunder.
     12.  NOTICES .
     Any notice required or permitted hereunder shall be deemed sufficiently given if in writing and either personally delivered or sent by certified or registered mail, postage pre-paid,

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addressed to the party at the address set forth below or at such other address as the party may subsequently designate:
         
 
  (a)   Executive:
 
      James J. Johnston
 
      2708 Sylvan Way
 
      McKinney, TX 75070
 
       
 
  (b)   CBI:
 
      CBI Holdings Inc.
 
      5301 Legacy Drive
 
      Plano, TX 75024
 
      Attn: General Counsel
 
       
 
  copy to:   Cadbury Schweppes plc
 
      25 Berkeley Square
 
      London, England W 1 X 6HT
 
      Attn: Chief Legal Officer and Company Secretary (Group)
     Any such notice will be deemed given upon delivery, if delivered in person, or upon the date of mailing, if sent by certified or registered mail.
     13.  ENTIRE AGREEMENT .
     This Agreement supersedes any prior agreements or understandings, oral or written, with respect to the employment of Executive and constitutes the entire agreement with respect thereto. It cannot be changed or terminated orally and may be modified only by a subsequent written agreement executed by both parties hereto. In addition, the Executive will not be eligible to participate in any other severance pay plan, program or practice that may be adopted from time to time.
     14.  CONFIDENTIALITY .
     (a) Executive agrees and acknowledges that, during the term of this Agreement, CBI promises to provide and Executive will have access to and acquire certain trade secrets and confidential information of CBI and of corporations affiliated

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with CBI that is not generally available to the public, and that such information constitutes valuable, special and unique property of CBI and its affiliates that, if disclosed, could put CBI or its affiliates at a competitive disadvantage (the “Confidential Information”). Such Confidential Information includes but is not limited to methods, techniques, specifications, devices, systems, designs, formulae, models, patents and trademarks, manuals, lists of customers and prospective customers, customer requirements, vendor information and relationships, price lists and other pricing information and analyses, data used to prepare bids, marketing plans and other market information and analyses, business, strategic and operating plans, financial statements and other financial information, training techniques, and other confidential and proprietary information and documents regarding the business of CBI and its affiliates.
     (b) As a material inducement to CBI to enter into this Agreement and to provide Executive the compensation and other consideration set forth herein, Executive agrees that, without the prior written consent of CBI, Executive will not, during or after the term of Executive’s employment with CBI, directly or indirectly use or disclose any such Confidential Information to any person or entity for any reason or purpose whatsoever, except as may be required by law or as may be required in the course of Executive’s performance of his or her duties at CBI.
     (c) Executive acknowledges and agrees that all files, records, documents, plans, specifications, equipment, information, computer files, and similar items and materials relating to CBI’s business shall remain the sole property of CBI and shall immediately be returned to CBI upon CBI’s request or upon the termination of this Agreement for any reason, and that Executive shall keep no copies thereof. The

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provisions of this Section 14 shall survive the termination of this Agreement and shall be binding upon any successor or assign of Executive.
     15.  NON-COMPETITION AND NON-SOLICITATION .
     (a) Consideration . Executive acknowledges and agrees that Executive has received, and will continue to receive, substantial and valuable consideration for the agreements set forth in this Section, including but not limited to access to Confidential Information, which CBI hereby promises to provide to Executive; specialized training related to CBI’s services, business practices and Confidential Information; post-termination payments; and other compensation and benefits as described in this Agreement.
     (b) Non-Solicitation of Customers and Employees . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that during employment and for a period of twelve (12) months following the Date of Termination, whether for Executive’s own account or for the account of any other individual, partnership, firm, corporation or business organization, Executive shall not either directly or indirectly solicit or endeavor to entice away from CBI any person who is employed by or otherwise engaged to perform services for CBI (or its affiliates) or to interfere with the relationship of CBI (or its affiliates) with any person who then is a customer of CBI.
     (c) Non-Competition . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that, for a period of

22


 

twelve (12) months following the Date of Termination, Executive shall not become employed in an executive capacity by any Competitor of CBI within the United States, Canada or any other region in which CBI or its current or former affiliates operates or has operated and in which Executive has directly or indirectly rendered services during the last thirty-six (36) months of Executive’s employment and, further, Executive shall not provide services of a similar or comparable type and character to those provided by Executive to CBI during the last thirty-six (36) months of Executive’s employment with CBI, whether as an employee, officer, director, partner, shareholder, consultant or otherwise, to any Competitor of CBI within the United States, Canada or any region in which Cadbury Schweppes plc operates and in which Executive has rendered services during Executive’s employment; provided, however, that this Section 15 shall not prohibit Executive’s ownership, either directly or indirectly, of less than 1% of any class of publicly traded securities of any entity, and provided further that this Section 15 shall not prohibit Executive’s employment as an employee or officer or Executive’s performance of services as a consultant with any Competitor if Executive is not directly or indirectly involved in the aspects of such Competitor’s business that are competitive with CBI.
     16.  JUDICIAL AMENDMENT .
     Executive and CBI acknowledge the reasonableness of the agreements set forth in Sections 14 and 15 above and the reasonableness of the geographic area, duration of time and subject matter that are part of the covenant not to compete contained in Section 15(c). Executive further acknowledges that Executive’s skills are such that Executive can be gainfully employed in noncompetitive employment and that the agreement not to compete will in no manner prevent Executive from earning a living. Notwithstanding the foregoing, in the event it is judicially

23


 

determined that any of the limitations contained in Section 15 are unreasonable, illegal or offensive under any applicable law and may not be enforced as agreed herein, the parties agree that the unreasonable, illegal or offensive portions of Section 15, whether they relate to duration, area or subject matter, shall be and hereby are revised to conform with all applicable laws and that the Agreement, as modified, shall remain in full force and effect and shall not be rendered void or illegal.
     17.  IRREPARABLE INJURY .
     Executive acknowledges that CBI has invested substantial time, labor, skill and money in developing the Confidential Information to be provided to Executive. Executive further acknowledges that the Confidential Information to be provided to Executive, and the services Executive is to render to CBI, are such that any breach of the covenants contained in Sections 14 and 15 above by Executive would cause CBI irreparable harm and injury and would damage CBI in a way that could not be adequately compensated by monetary damages. Accordingly, the parties agree that CBI’s remedies may include a temporary restraining order, preliminary injunction, or other injunctive relief against any threatened or actual breach of Sections 14 or 15 by Executive. Executive acknowledges that this injunctive relief shall be in addition to any other legal or equitable relief to which CBI may otherwise be entitled under applicable law.
     18.  HEADINGS .
     The headings used in this Agreement are for convenience only and shall not be deemed to curtail or affect the meaning or construction of any provision under this Agreement.
     19.  WITHHOLDING .
     All payments or benefits to Executive under this Agreement shall be reduced by any amounts required to be withheld by CBI under applicable tax laws, including U.S. Federal, state,

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or local income tax laws or similar laws then in effect as well as the laws of other countries while on international assignment. In the event new tax legislation results in additional taxation to the Executive or CBI which may be avoided by amendment to this Agreement with no material financial impact to Executive or CBI, then this Agreement shall be so amended by written agreement of the parties.
     20.  OTHER PLANS .
     Except as otherwise provided in this Agreement, the terms of the AIP, Pension Plans, Equity Incentive Plans and any other CBI option plan, bonus plan or benefit plan (as the same may be amended from time to time) or any agreements entered into pursuant to such plans, shall remain in full force and effect. Except as expressly provided herein, if there is any conflict between this Agreement and the Plans described above in this Section 20, the terms of the applicable Plan documents shall control.
     21.  ARBITRATION .
     Any controversy or claim, other than an action for injunctive or equitable relief for unfair competition or to enforce the confidentiality, noncompete or nonsolicitation provisions set forth in Sections 14 and 15, arising out of or relating to (a) this Agreement or the breach thereof, (b) Executive’s employment with CBI, or (c) the termination of Executive’s employment with CBI, (including but not limited to claims arising under applicable employment-related statutes, including without limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Rehabilitation Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the American Jobs Creation Act of 2004, or the Fair Labor Standards Act, applicable state fair employment practices statutes, and claims for retaliation arising under applicable workers’ compensation statutes; as well as

25


 

employment-related common-law tort claims, including without limitation claims for negligence, intentional torts, post-termination defamation (e.g., employment references), violation of privacy rights, fraud, misrepresentation, unjust enrichment, tortious interference and/or promissory estoppel), which is not settled by agreement among the parties shall be resolved by final and binding arbitration, to be held in a metropolitan area located within fifty (50) miles of the location at which Executive is employed, in accordance with the employment arbitration rules and procedures of the American Arbitration Association. Neither party shall initiate or prosecute any lawsuit in any way related to any claims; provided, however, that the provisions of this Section 21 do not limit Executive’s right to file an administrative charge with the Equal Employment Opportunity Commission. Judgment upon the award rendered may be entered and enforced in any court having jurisdiction thereof.
     22.  VALIDITY; APPLICABLE LAW .
     The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect, and the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State in which Executive is employed .

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     IN WITNESS WHEREOF, CBI has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto subscribed his or her name, all as of the day, month and year first above written.
                 
CBI Holdings Inc.       Executive    
 
               
By:
  /s/ James L. Baldwin       /s/ James J. Johnston    
 
               
 
  James L. Baldwin       James J. Johnston    
 
  Executive Vice President            

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EXHIBIT “A”
GENERAL RELEASE
     This General Release (the “Release”) is executed as of this                      day of                      , 20       , by and between James J. Johnston (“Executive”) and CBI Holdings Inc. (“CBI”) for purposes of evidencing the covenants, obligations and undertakings of such parties set forth below.
     WHEREAS, CBI and Executive entered into an agreement of employment (the “Agreement”) dated October 15, 2007; and
     WHEREAS, Executive’s employment with CBI was terminated effective as of                      , 20       , pursuant to Paragraph 6(c) of the Agreement;
     NOW THEREFORE, as a condition to, and in consideration of, payment by CBI of the benefits specified in Paragraph 6(c) of the Agreement, Executive hereby agrees as follows:
     1. Executive, for himself and on behalf of Executive’s agents, attorneys, heirs, executors, administrators, successors and assigns, hereby irrevocably releases, acquits, discharges and forever forgives CBI, its past and present officers, directors, shareholders, representatives, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates, and all persons acting by, through, under or in concert with them, (the “Releasees”) from any and all claims, causes of action, suits, controversies, appeals, grievances, promises, agreements, damages, rights, debts, liabilities, costs, losses, personal injuries and any other compensation whatsoever, whether presently known or unknown, liquidated or unliquidated, matured or contingent, arising at any time through the date of the execution of this Agreement. This Release covers any and all claims, regardless of whether they arose in contract or in tort or are based upon statutes, laws or rules, regulations, common law principles or otherwise, and includes but is not limited to claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Pregnancy Discrimination Act, the Equal Pay Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, COBRA, the Occupational Safety and Health Act, or any other federal, state or local statute, law or regulation relating to employment; common-law claims for breach of contract, quantum meruit, reformation of contract, breach of implied covenant of good faith and fair dealing, debt, wrongful discharge, defamation, invasion of privacy, infliction of emotional distress, tortious interference, misrepresentation, fraud, conspiracy, negligence or gross negligence; and any other statutory or common-law cause of action, whether or not relating to Executive’s employment with CBI; provided, however, that this Release does not include any claims Executive may have to compensation or benefits to be provided to Executive following termination of Executive’s employment with CBI pursuant to Section 6(c) of the Agreement, any rights Executive may have (subject to the provisions of Section 6(c) of the Agreement) under any pension or benefit plan in which Executive was or is a participant, and any indemnification rights Executive may have under company bylaws or insurance.

A-1


 

     2. Executive covenants and agrees that, to the fullest extent permitted by law, Executive will not bring any legal action against any of the Releasees for any claim waived and released under this Release and represents and warrants that no such claim has been filed to date. Executive agrees that should any person, organization or other entity institute or file a civil action, suit or legal proceeding against the Releasees on Executive’s behalf involving any matter occurring at any time in the past up to and including the date on which Executive executes this Release, Executive shall not seek or accept any personal, equitable or monetary relief in such civil action, suit or legal proceeding.
     3. Executive agrees that the terms and conditions of this Release are confidential and that Executive will not, directly or indirectly, disclose the fact of or terms of this Release to anyone other than Executive’s attorney or tax advisor, except to the extent such disclosure may be required for accounting or tax reporting purposes or otherwise be required by law or direction of a court. Nothing in this provision shall be construed to prohibit Executive from disclosing this Release to the Equal Employment Opportunity Commission in connection with any complaint or charge submitted to that agency.
     4. Executive agrees not to make any comments relating to the Releasees that are critical, disparaging or derogatory or that may tend to injure the business of the Releasees and agrees not to encourage any person, corporation or entity to sue or not to do business with the Releasees.
     5. Effective as of the Termination Date, Executive hereby resigns from any and all positions as an officer or director of CBI or its affiliates and subsidiaries, and agrees to execute any documents required for the purpose of effecting such resignation.
     6. The provisions of this Release are severable. If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision. One or more waivers of a breach of any covenant, term or provision of this Release by any party shall not operate or be construed as a waiver of any subsequent breach of the same covenant, term or provision, nor shall it be construed as a waiver of any other then existing or subsequent breach of a different covenant, term or provision.
     7. This Release sets forth the entire agreement between CBI and Executive and supersedes any and all prior oral or written agreements or understandings concerning the subject matter of this Release. This Release may not be altered, amended or modified, except by a further written document signed by a duly authorized representative of CBI and Executive.
     8. This Release is made within the State of Texas and shall in all respects be interpreted, enforced and governed by the laws of the State of Texas.
     9. This Release shall be binding upon Executive, his heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of the Releasees and their respective administrators, representatives, successors and assigns.

A-2


 

     10. Executive acknowledges that this Release is in full settlement, satisfaction, and discharge of any and all claims, demands, actions, and causes of action released by Executive, and that it applies to all claims, whether known or unknown. Executive further acknowledges that the consideration to be provided pursuant to the Agreement upon execution of this Release represents amounts and benefits greater than Executive would be entitled to receive if Executive were not to execute this Release. Executive represents and warrants that Executive has full power and authority to enter into and execute this Release. Executive represents that Executive has carefully read and fully understands all the provisions of this Release, that Executive has been advised to consult with an attorney of Executive’s choice and has had the opportunity to do so, and that Executive is freely, knowingly and voluntarily entering into this Release without reliance on any representations of any kind or character not set forth herein.
     11. Executive acknowledges that Executive has been provided at least twenty-one (21) days after receipt of this Release to decide whether to sign the Release and be bound by its terms, and that Executive has considered the terms of this Release for at least twenty-one (21) days or knowingly and voluntarily waived Executive’s right to do so. Executive further acknowledges and understands that Executive has the right to revoke this Release for a period of seven (7) days after Executive has signed it.
     IN WITNESS WHEREOF, the parties hereto have executed this General Release as of the date first above written.
             
EXECUTIVE       CBI HOLDINGS INC.
 
           
 
           
         
 
           
 
      By:    
 
           
 
      Its:    
 
           

A-3

 

Exhibit 10.15
AGREEMENT
BETWEEN
CBI HOLDINGS INC.
AND
PEDRO HERRAN
DATED AS OF OCTOBER 15, 2007

 


 

TABLE OF CONTENTS
             
        PAGE  
1.
  DEFINITIONS.     1  
2.
  TERM.     5  
3.
  POSITION AND DUTIES.     5  
4.
  COMPENSATION.     6  
5.
  TERMINATION.     7  
6.
  COMPENSATION UPON TERMINATION OF EMPLOYMENT.     8  
7.
  FURTHER BENEFITS.     18  
8.
  RIGHT TO TERMINATE; SOURCE OF PAYMENTS.     18  
9.
  AMENDMENTS; WAIVER.     19  
10.
  BINDING AGREEMENT.     19  
11.
  ASSIGNMENT.     19  
12.
  NOTICES.     19  
13.
  ENTIRE AGREEMENT.     20  
14.
  CONFIDENTIALITY.     20  
15.
  NON-COMPETITION AND NON-SOLICITATION.     22  
16.
  JUDICIAL AMENDMENT.     23  
17.
  IRREPARABLE INJURY.     24  
18.
  HEADINGS.     24  
19.
  WITHHOLDING.     24  
20.
  OTHER PLANS.     25  
21.
  ARBITRATION.     25  
22.
  VALIDITY; APPLICABLE LAW.     26  

 


 

AGREEMENT
     This AGREEMENT (the “Agreement”) is made and entered into as of the 15th day of October, 2007, by and between CBI Holdings Inc. and Pedro Herran (“Executive”).
WITNESSETH:
     WHEREAS, Executive is employed as an officer of CBI Holdings Inc. or its subsidiaries (collectively “CBI”) and is devoting Executive’s ability, time, effort and energy to the affairs of CBI; and
     WHEREAS, CBI considers the continuance of a sound and vital management to be essential to protecting and enhancing the best interests of CBI and its shareholders; and
     WHEREAS, CBI desires to assure itself of retaining the services of Executive and to reward Executive for Executive’s valuable, dedicated service to CBI;
     WHEREAS, CBI and Executive are parties to an employment agreement dated as of April 17, 2007 (the “Prior Agreement”); and
     WHEREAS, the parties desire to amend and restate the Prior Agreement, generally effective as of October 15, 2007.
     NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, the parties hereto covenant and agree as follows:
     1.  DEFINITIONS .
     The following terms, as used herein, have the following meaning:
     (a) AIP . “AIP” shall mean the annual incentive plan in which Executive is entitled to participate, as such plan is in effect from time to time. References herein to Executive’s “Target AIP” shall mean Executive’s target annual bonus opportunity at such time; provided, however, that if at such time Executive’s target annual bonus opportunity

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under the AIP has not yet been set for the then current year, the target annual bonus opportunity in effect for Executive under the AIP for the immediately preceding year shall be used as the Executive’s target annual bonus opportunity. If Executive has been promoted to a band in CBI’s salary structure having a minimum higher target annual bonus opportunity under the AIP, but has not yet had his/her target annual bonus opportunity increased to the minimum target annual bonus opportunity applying to others at that band, such increased target annual bonus opportunity nonetheless shall be used to calculate the Executive’s Target AIP hereunder.
     (b) Cause . Termination for “Cause” shall mean termination by CBI of Executive’s employment for Executive’s:
     (i) willful failure to substantially perform Executive’s duties with CBI;
     (ii) breach of Executive’s duty of loyalty toward CBI;
     (iii) commission of an act of dishonesty toward CBI, theft of CBI’s corporate property, or usurpation of CBI’s corporate opportunities;
     (iv) unethical business conduct including any violation of law connected with Executive’s employment at CBI; or
     (v) conviction of any felony involving dishonest or immoral conduct.
     For purposes of this Section 1(b), an act or failure to act by Executive shall be considered “willful” only if Executive’s conduct was not in good faith and Executive lacked a reasonable belief that Executive’s act or omission was in the best interests of CBI.

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     (c) Code . “Code” shall mean the United States Internal Revenue Code of 1986, as amended.
     (d) Competitor . For purposes of this Agreement, “Competitor” means an individual, partnership, firm, corporation or other business organization or entity that materially competes with a significant business owned or operated by CBI, its parent companies, or affiliates as of the Date of Termination, the names of which shall be made available to Executive at the time of Executive’s separation from the CBI and upon reasonable request. As of the date of this Agreement, the definition of a Competitor includes, but is not limited to, the following businesses: The Coca-Cola Company, PepsiCo, Inc., Nestlé S.A., Kraft Foods Inc., Hershey Foods Corporation, Ferrero SpA, Mars, Incorporated, Groupe Danone S.A., and Wm. Wrigley Jr. Company. The list of companies set out above or provided to Executive shall be deemed to include all direct and indirect subsidiaries and divisions of these companies.
     (e) Date of Termination . “Date of Termination” shall mean the date Executive’s employment with CBI is terminated.
     (f) Disability or Disabled . “Disability” or “Disabled” shall mean Executive’s inability, because of incapacity due to physical or mental illness or injury and notwithstanding reasonable accommodation, to perform the essential functions of Executive’s position with CBI on a full-time basis for at least six consecutive months.
     (g) Equity Incentive Plans . “Equity Incentive Plans” shall mean any stock option, stock purchase or other stock incentive plan maintained by CBI Holdings Inc. or any parent or affiliated company.

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     (h) Good Reason . Termination for “Good Reason” shall mean a termination by Executive of Executive’s employment with CBI for any of the following reasons:
     (i) CBI’s failure to perform any of its material obligations under this Agreement;
     (ii) unless otherwise agreed or waived, notice of a proposed relocation by CBI of Executive’s principal place of employment to a site outside a fifty (50) mile radius of the current site of Executive’s principal place of employment; or
     (iii) the failure by a successor in interest to CBI to expressly assume CBI’s obligations under this Agreement.
     A termination by Executive for Good Reason may not occur unless the Executive has given notice to CBI within 90 days of Executive’s knowledge of the initial existence of a condition described in clauses (i) through (iii) above, and CBI shall have a period of at least thirty (30) days (the “Correction Period”) during which it may remedy the condition. If CBI remedies the condition within the Correction Period, Executive may not terminate for that Good Reason event.
     A termination for “Good Reason” may occur only within thirty (30) days following the expiration of the Correction Period.
     (i) Notice of Termination . “Notice of Termination” shall mean a notice that (i) indicates the specific termination provisions in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provisions so indicated, and (iii) is given in conformity with the provisions of Section 12 of this Agreement.

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     (j) Qualified Pension Plan . “Qualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate and which is intended to be qualified under Section 401(a) of the Code.
     (k) Nonqualified Pension Plan . “Nonqualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate, but only to the extent such plan is designed to provide benefits which would otherwise be provided in the Qualified Pension Plan but for the limitations of the Code.
     (l) Pension Plans . “Pension Plans” shall mean, collectively, the Qualified Pension Plans and the Nonqualified Pension Plans.
     (m) Without Cause . Termination “Without Cause” shall mean a termination by CBI of Executive’s employment for any reason other than death, Disability, or Cause.
     2.  TERM .
     The term of this Agreement shall commence on the date first set forth above , and shall continue thereafter for a period of ten (10) years, at which time it shall expire unless sooner terminated in accordance with the provisions of this Agreement or by mutual written agreement of the parties on such terms and conditions as such written agreement may specify.
     3.  POSITION AND DUTIES .
     (a) Executive shall serve in such executive capacity as CBI may determine from time to time and with such authority, duties and responsibilities as are commensurate with such position and as are typically performed by executives holding such position in business organizations of a size and nature similar to that of CBI, and

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shall perform such other services for CBI and its affiliated companies as may be assigned to Executive from time to time by the Board of Directors of CBI and as are consistent with the position of an executive officer.
     (b) Executive shall devote substantially all of Executive’s business time and attention to the business and affairs of CBI and shall perform the duties set forth herein faithfully and diligently and to the best of Executive’s ability, experience and talents, acting solely in the best interest of CBI and subject to the lawful direction of the Board of Directors of CBI. Executive agrees to abide by all Bylaws, policies, practices, procedures and rules of CBI. During the term of this Agreement, Executive agrees not to be employed by or perform services for any other person, business or organization without the prior written consent of the Board of Directors of CBI; provided, however, (1) that nothing in this Section 3(b) shall prevent Executive from devoting a reasonable amount of time to charitable, municipal or public service work or service on the boards of directors of other companies so long as such work and service does not interfere with Executive’s employment pursuant to this Agreement or otherwise violate any term or provision of this Agreement and (2) that service on the board of directors of another company requires approval in writing in advance from the Chairman and Chief Executive Officer of Cadbury Schweppes plc or its successor.
     4.  COMPENSATION .
     As full compensation to Executive for the performance of the services hereunder and for Executive’s acceptance of the responsibilities described herein, CBI agrees to pay Executive and Executive agrees to accept the following salary and other benefits during the term of this Agreement and any extension hereof.

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     (a) Base Salary . CBI shall pay Executive a base salary at an annualized rate equal to Executive’s current base salary as of the date hereof or at such higher rate as the Compensation Committee or Board of Directors of CBI may from time to time determine at their sole discretion, payable in accordance with the standard payroll practices of CBI. The base salary shall be subject to all applicable withholding and other taxes that Executive is obligated to pay or that CBI may be required by law to withhold from time to time.
     (b) Compensation and Benefit Programs . Executive shall be entitled to participate in all employee compensation and benefit plans, programs and practices of CBI or CBI’s parents or affiliates now or hereafter made generally available to CBI’s senior executives, as such programs may be in effect from time to time, including incentive compensation, equity compensation, health, welfare and retirement arrangements.
     (c) Expenses . Executive shall be entitled to receive proper reimbursement by CBI for all reasonable, out-of-pocket expenses incurred by Executive (in accordance with the policies and procedures established by CBI for its senior executives) in performing services under this Agreement, provided Executive submits reasonable documentation for such expenses.
     5.  TERMINATION .
     Subject to the provisions of Section 6, employment pursuant to the terms of this Agreement shall terminate upon the occurrence of any of the following events:
     (a) expiration of term;
     (b) written Notice of Termination by CBI;

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     (c) written Notice of Termination by Executive;
     (d) Executive’s death;
     (e) Executive’s Disability.
     6.  COMPENSATION UPON TERMINATION OF EMPLOYMENT .
     The following will apply upon termination of employment pursuant to the terms of this Agreement.
     (a) Termination Upon Expiration of Term . In the event this Agreement expires at the end of the term hereof in accordance with Section 2 and Executive’s employment is terminated by CBI on or after such expiration and termination, Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans, the AIP and CBI’s policies and practices. Executive’s rights under Equity Incentive Plans and any other similar plans in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (respectively), copies of which have been or will be made available to Executive. CBI shall have no further obligations to Executive under this Agreement.
     (b) Termination for Cause or Not for Good Reason . If during the term of this Agreement, Executive’s employment is terminated for Cause or if Executive effects termination other than for Good Reason, CBI shall pay Executive his or her full salary through the effective date of such termination at the rate in effect on the date CBI or Executive, as the case may be, notifies the other party of such termination, and CBI shall have no further obligations to Executive under this Agreement. In the event of such termination, Executive shall not be entitled to receive any payment under the AIP for the year in which Executive’s Date of Termination occurs or any later year.

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     (c) Termination Without Cause or for Good Reason . If CBI shall terminate Executive’s employment Without Cause during the term of this Agreement, or if Executive shall terminate Executive’s employment for Good Reason during the term of this Agreement, then Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans in which Executive is a Participant, the AIP and CBI’s policies and practices. CBI shall have no further obligations to Executive under this Agreement; provided, however, that, subject to the satisfaction of the conditions in Sections 6(f) and 6(g) hereof, and provided that Executive complies with the covenants of non-disclosure, non-solicitation and non-competition contained in Sections 14 and 15 of this Agreement, Executive shall be entitled to the payments and benefits specified in this Section 6(c). In the event of a breach by Executive of any of his obligations pursuant to Sections 14 or 15, CBI’s payment obligations pursuant to this Section 6(c) shall cease immediately as of the date of such breach, and CBI shall have no further obligations to Executive under this Agreement.
     (i) Salary . CBI shall pay to Executive an amount equal to nine (9) months of Executive’s annual base salary. Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination.
     (ii) AIP . CBI shall pay to Executive an amount equal to three-quarters (3/4) of Executive’s Target AIP award, as defined in Section 1(a). Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination.

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CBI shall also pay to Executive his pro rata portion of his actual AIP award under the AIP for the year in which the Date of Termination occurs. Such payment shall be calculated in accordance with the AIP. Such pro rata amount shall be paid to Executive by CBI in a lump sum within two and one-half months following the end of the year in which the Date of Termination shall have occurred. The payments under this Section 6(c)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Date of Termination occurs or any later year. In addition to the foregoing, CBI shall pay Executive any accrued award Executive may have earned under the AIP for any CBI fiscal year prior to the Date of Termination which has not been paid.
     (iii) Continuation Payments . Subject to offset as provided in the last sentence of this Section 6(c)(iii), CBI shall pay Executive an amount equal to the aggregate of nine (9) months of Executive’s annual base salary plus three-quarters (3/4) of Executive’s Target AIP, as defined in Section 1(a), in effect on the Date of Termination. Such amount will be paid ratably by CBI to Executive within the regular payroll cycles during the nine (9) month period following the Date of Termination, unless such amount exceeds an amount (“Unrestricted Amount”) equal to two times the lesser of (A) the Executive’s annual compensation based on the annual rate of pay from CBI for the calendar year preceding the calendar year of the Date of Termination (adjusted for any increase in such annual rate of pay during the calendar year of the Date of Termination that was expected to continue indefinitely if the Executive had not terminated employment) and (B) the maximum amount that can be taken into account under a qualified plan pursuant

10


 

to Section 401(a)(17) of the Code. If the amount exceeds the Unrestricted Amount, then no more than the Unrestricted Amount may be paid in the six months following the Executive’s Date of Termination and the monthly pro rata payments shall be reduced to comply with this limitation. If the monthly payments are reduced to comply with such limitation, any amount not paid in the initial six months following the Date of Termination shall be paid in a lump sum six months and two days after the Date of Termination and thereafter the ratable payments shall continue through the remainder of the nine (9) month period following the Date of Termination. If Executive secures full time employment within such nine (9) month period, then commencing on the date of such new employment, the payments under this Section 6(c)(iii) shall be offset by the base salary Executive earns from such new employer and the target annual bonus or other cash bonus established for Executive by such new employer, in each case pro-rated to reflect the amount of such new base salary and bonus which is allocable to the remainder of such nine (9) month period, calculated by multiplying such award by a fraction, the numerator of which is the number of weeks commencing on the date of new employment through the end of such nine (9) month period, and the denominator of which is 52.
     (iv) Benefit Plans . CBI shall continue Executive’s participation in the medical, dental and vision plans of CBI (or shall provide equivalent benefits) for a period of nine (9) months following the Date of Termination at the same rates as an active employee or, if earlier, the commencement of equivalent benefits by Executive’s new employer; provided that if Executive shall die before the

11


 

expiration of the period during which CBI would be required to continue Executive’s participation in such plans, the participation of Executive’s surviving spouse and family in such plans shall continue throughout such period at the same rates as an active employee to Executive’s surviving spouse and family. Executive’s participation in CBI’s life and disability plans and Executive’s travel accident insurance under CBI’s group plan shall terminate on the Date of Termination. Following termination of coverage under any CBI benefit plan, Executive may continue coverage at Executive’s own expense if permitted by the terms of the applicable plan. At Executive’s option, Executive may continue medical coverage under COBRA at Executive’s own expense for the maximum period provided by COBRA, calculated from the Date of Termination, unless otherwise provided by law. Within sixty (60) days of the Date of Termination, Executive may, at Executive’s option, surrender Executive’s CBI company car or purchase such vehicle at a price equal to the greater of (i) 100% of its wholesale value, or (ii) the remaining lease payments; provided, that the price shall, in no event, be less than fair market value as of the Date of Termination of the company car as determined in good faith by CBI. Executive’s participation in CBI’s Employee Services Allowance (“ESA”) shall end on the Date of Termination, and no ESA payments regularly scheduled to be paid after the Date of Termination shall be paid to Executive.
     (v) Qualified Pension Plan . CBI shall pay Executive, in a lump sum within sixty (60) days of the Date of Termination, an amount equal to the difference, if any, between the present value of Executive’s accrued benefit,

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whether or not vested, as of the Date of Termination under the Qualified Pension Plan, and the present value of the vested portion of such accrued benefit, with such difference to be calculated, to the extent relevant, using the actuarial assumptions and interest rates specified in the Qualified Pension Plan. The vested portion of such accrued benefit, if any, shall be paid in accordance with the provisions of the Qualified Pension Plan.
     (vi) Nonqualified Pension Plan . CBI shall pay Executive an amount equal to the lump sum which would have been payable under the Nonqualified Pension Plan had Executive (A) been completely vested in Executive’s full accrued benefit under the Nonqualified Pension Plan, (B) been eligible for normal retirement under the Nonqualified Pension Plan, and (C) retired as of the Date of Termination. Such benefit shall be calculated, to the extent relevant, using the actuarial assumptions specified in the Nonqualified Pension Plan. The payment under this Section 6(c)(vi) shall be paid within six months and two days of the Date of Termination, and shall be made in lieu of any and all payments otherwise due under the Nonqualified Pension Plan.
     (vii) Outplacement and Job Search Expenses . CBI will, at its expense, make available to Executive the services of an outplacement firm designated by CBI. In addition, CBI will reimburse Executive for reasonable out-of-pocket job search expenses incurred by Executive for a period of up to nine (9) months following the Date of Termination, provided that such expenses shall not exceed $300 per month and shall be properly documented.

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     (viii) Equity Incentive Plan; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (d) Termination Due to Death . The employment of Executive under this Agreement shall terminate upon Executive’s death. In the event of the death of Executive during the term of his employment hereunder, CBI shall have no further obligations to Executive under this Agreement, except that the estate or any other legal representative of Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay to Executive’s estate or other legal representatives the base salary as provided in Section 4(a) above, at the rate in effect at the time of Executive’s death through the end of the month in which Executive dies.
     (ii) AIP . CBI shall pay to Executive’s estate or other legal representative the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s death occurs. Such payment shall be calculated by multiplying such Target AIP award by a fraction, the numerator of which is the number of weeks in the applicable year which precedes the date of death and the denominator of which is 52. Such amount shall be paid by CBI in a lump sum within thirty (30) days of the date of death. The payments under this Section 6(d)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s death occurs.

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     (iii) Equity Incentive Plans; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive’s estate or other legal representative all of the amounts and shall provide all benefits generally available under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (e) Termination Due to Disability . The employment of Executive under this Agreement shall be terminated on the date that Executive becomes Disabled, as determined by the written opinion of the licensed physician regularly attending Executive. If CBI disagrees with this opinion, CBI may, at its own expense, engage a second physician to examine Executive. If Executive’s physician and CBI’s physician agree in writing that Executive is or is not Disabled, their written opinion shall, except as otherwise set forth in this paragraph 6(e), be conclusive as to Executive’s Disability. If the physicians disagree as to Executive’s Disability, they shall select a third physician to make the determination, whose written opinion shall be conclusive and binding on the issue of Disability. The date of any written opinion conclusively finding Executive to be Disabled shall be the effective date of Disability for purposes of this paragraph 6(e). In the event of termination due to Disability, CBI shall have no further obligations to

15


 

     Executive under this Agreement, except that Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay Executive the base salary as provided in Section 4(a) above at the rate in effect at the time Executive becomes Disabled through the end of the month in which Executive’s employment terminates due to Disability.
     (ii) AIP . CBI shall pay Executive the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s Disability occurs, computed as in Section 6(d)(ii) above but substituting Disability for death. The payments under this Section 6(e)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Disability occurs.
     (iii) Equity Incentive Plans . Executive’s right to exercise options under the Equity Incentive Plans shall be governed by the terms and conditions of the Equity Incentive Plans, copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive the amounts and shall provide all benefits generally available to similarly situated executives under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (f) Mitigation . Executive agrees to use reasonable efforts to secure other employment but shall not otherwise be required to mitigate the amount of any payment provided for in this Section 6; provided, however, that in the event Executive secures

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other employment, any continuation payments otherwise due Executive shall be subject to offset as provided in Section 6(c)(iii) above.
     (g) Release of Claims . Any other provisions of this Agreement notwithstanding, Executive shall not be entitled to any compensation under Section 6(c)(i) through 6(c)(vii) hereof following termination of employment unless and until Executive shall have executed a release of all of Executive’s rights and claims (other than to compensation or other matters to which Executive is entitled under this Agreement following termination of employment) against CBI, its officers, directors, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates with respect to all matters relating to CBI or its parent companies, subsidiaries, or affiliates existing at the time of Executive’s execution of the release, and such release has become binding upon and irrevocable by the Executive. The release shall be in substantially the form of Exhibit A hereto, or such variation thereof as CBI reasonably determines to be necessary to comply with then applicable law or otherwise appropriate to secure a release of all the aforesaid rights and claims of Executive. If a release satisfactory to CBI has not become binding and irrevocable within sixty (60) days after the Date of Termination, the conditions of this Section 6(g) shall not be satisfied, the Executive shall not have any right to the compensation provided under Section 6(c)(i)-(vii), each of which is additional compensation to which the Executive would otherwise not be entitled, and CBI shall have no further obligations to Executive under this Agreement.

17


 

     (h) In the event that CBI subsequently determines that termination for Cause was warranted, CBI may cease payments and benefits hereunder and the Executive is required to repay to CBI each of the payments and benefits set forth in Section(c)(i)-(vii).
     7.  FURTHER BENEFITS .
     Upon termination of the employment of Executive, Executive shall accrue no further benefits under the Pension Plans and shall make no further contributions to any Pension Plan or other benefit plan permitting employee contributions.
     8.  RIGHT TO TERMINATE; SOURCE OF PAYMENTS .
     (a) Right to Terminate by CBI . CBI may terminate Executive’s employment at any time upon written notice to Executive subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (b) Right to Terminate by Executive . Executive may terminate his or her
employment with CBI at any time for Good Reason or otherwise upon written notice to CBI, subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (c) Source of Payments . All payments provided for in this Agreement shall be paid in cash from the general funds of CBI or from any special or separate trust or fund to be established in connection herewith. To the extent that any person acquires a right to receive payments from CBI hereunder, whether or not any funds are segregated by CBI for such purpose, such right shall be no greater than the right of an unsecured creditor of CBI.

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     9.  AMENDMENTS; WAIVER .
     This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. The waiver by either party of compliance with the provisions of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such party. Notwithstanding the foregoing, CBI may amend this Agreement to the extent it determines in good faith that an amendment is necessary to comply with the requirements of Section 409A of the Code, provided that such amendment preserves, as near as possible, the economic benefits of the Agreement to both parties. The provisions of Sections 14, 15, 16, 17 and 21 shall survive termination of this Agreement.
     10.  BINDING AGREEMENT .
     This Agreement shall be binding upon and inure to the benefit of the parties hereto, any successors to the business of CBI, Executive’s heirs and the personal representatives of Executive’s estate.
     11.  ASSIGNMENT .
     This Agreement shall not be assigned by either Executive or CBI except that CBI may assign this Agreement to any successor in interest of CBI whether by merger, consolidation, purchase of assets or otherwise, provided, however, that in connection with such an assignment CBI will require a successor in interest to fully assume all of CBI’s obligations hereunder.
     12.  NOTICES .
     Any notice required or permitted hereunder shall be deemed sufficiently given if in writing and either personally delivered or sent by certified or registered mail, postage pre-paid,

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addressed to the party at the address set forth below or at such other address as the party may subsequently designate:
     
(a)
  Executive:
 
  Pedro Herran
 
  5301 Legacy Drive
 
  Plano, TX 75024
 
   
(b)
  CBI:
 
  CBI Holdings Inc.
 
  5301 Legacy Drive
 
  Plano, TX 75024
 
  Attn: General Counsel
 
   
copy to:
  Cadbury Schweppes plc
 
  25 Berkeley Square
 
  London, England W 1 X 6HT
 
  Attn: Chief Legal Officer and Company Secretary (Group)
Any such notice will be deemed given upon delivery, if delivered in person, or upon the date of mailing, if sent by certified or registered mail.
     13.  ENTIRE AGREEMENT .
     This Agreement supersedes any prior agreements or understandings, oral or written, with respect to the employment of Executive and constitutes the entire agreement with respect thereto. It cannot be changed or terminated orally and may be modified only by a subsequent written agreement executed by both parties hereto. In addition, the Executive will not be eligible to participate in any other severance pay plan, program or practice that may be adopted from time to time.
     14.  CONFIDENTIALITY .
     (a) Executive agrees and acknowledges that, during the term of this Agreement, CBI promises to provide and Executive will have access to and acquire certain trade secrets and confidential information of CBI and of corporations affiliated

20


 

with CBI that is not generally available to the public, and that such information constitutes valuable, special and unique property of CBI and its affiliates that, if disclosed, could put CBI or its affiliates at a competitive disadvantage (the “Confidential Information”). Such Confidential Information includes but is not limited to methods, techniques, specifications, devices, systems, designs, formulae, models, patents and trademarks, manuals, lists of customers and prospective customers, customer requirements, vendor information and relationships, price lists and other pricing information and analyses, data used to prepare bids, marketing plans and other market information and analyses, business, strategic and operating plans, financial statements and other financial information, training techniques, and other confidential and proprietary information and documents regarding the business of CBI and its affiliates.
     (b) As a material inducement to CBI to enter into this Agreement and to provide Executive the compensation and other consideration set forth herein, Executive agrees that, without the prior written consent of CBI, Executive will not, during or after the term of Executive’s employment with CBI, directly or indirectly use or disclose any such Confidential Information to any person or entity for any reason or purpose whatsoever, except as may be required by law or as may be required in the course of Executive’s performance of his or her duties at CBI.
     (c) Executive acknowledges and agrees that all files, records, documents, plans, specifications, equipment, information, computer files, and similar items and materials relating to CBI’s business shall remain the sole property of CBI and shall immediately be returned to CBI upon CBI’s request or upon the termination of this Agreement for any reason, and that Executive shall keep no copies thereof. The provisions of this Section 14 shall survive the termination of this Agreement and shall be binding upon any successor or assign of Executive.

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     15.  NON-COMPETITION AND NON-SOLICITATION .
     (a) Consideration . Executive acknowledges and agrees that Executive has received, and will continue to receive, substantial and valuable consideration for the agreements set forth in this Section, including but not limited to access to Confidential Information, which CBI hereby promises to provide to Executive; specialized training related to CBI’s services, business practices and Confidential Information; post-termination payments; and other compensation and benefits as described in this Agreement.
     (b) Non-Solicitation of Customers and Employees . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that during employment and for a period of twelve (12) months following the Date of Termination, whether for Executive’s own account or for the account of any other individual, partnership, firm, corporation or business organization, Executive shall not either directly or indirectly solicit or endeavor to entice away from CBI any person who is employed by or otherwise engaged to perform services for CBI (or its affiliates) or to interfere with the relationship of CBI (or its affiliates) with any person who then is a customer of CBI.
     (c) Non-Competition . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that, for a period of

22


 

twelve (12) months following the Date of Termination, Executive shall not become employed in an executive capacity by any Competitor of CBI within the United States, Canada or any other region in which CBI or its current or former affiliates operates or has operated and in which Executive has directly or indirectly rendered services during the last thirty-six (36) months of Executive’s employment and, further, Executive shall not provide services of a similar or comparable type and character to those provided by Executive to CBI during the last thirty-six (36) months of Executive’s employment with CBI, whether as an employee, officer, director, partner, shareholder, consultant or otherwise, to any Competitor of CBI within the United States, Canada or any region in which Cadbury Schweppes plc operates and in which Executive has rendered services during Executive’s employment; provided, however, that this Section 15 shall not prohibit Executive’s ownership, either directly or indirectly, of less than 1% of any class of publicly traded securities of any entity, and provided further that this Section 15 shall not prohibit Executive’s employment as an employee or officer or Executive’s performance of services as a consultant with any Competitor if Executive is not directly or indirectly involved in the aspects of such Competitor’s business that are competitive with CBI.
     16.  JUDICIAL AMENDMENT .
     Executive and CBI acknowledge the reasonableness of the agreements set forth in Sections 14 and 15 above and the reasonableness of the geographic area, duration of time and subject matter that are part of the covenant not to compete contained in Section 15(c). Executive further acknowledges that Executive’s skills are such that Executive can be gainfully employed in noncompetitive employment and that the agreement not to compete will in no manner prevent Executive from earning a living. Notwithstanding the foregoing, in the event it is judicially

23


 

determined that any of the limitations contained in Section 15 are unreasonable, illegal or offensive under any applicable law and may not be enforced as agreed herein, the parties agree that the unreasonable, illegal or offensive portions of Section 15, whether they relate to duration, area or subject matter, shall be and hereby are revised to conform with all applicable laws and that the Agreement, as modified, shall remain in full force and effect and shall not be rendered void or illegal.
     17.  IRREPARABLE INJURY .
     Executive acknowledges that CBI has invested substantial time, labor, skill and money in developing the Confidential Information to be provided to Executive. Executive further acknowledges that the Confidential Information to be provided to Executive, and the services Executive is to render to CBI, are such that any breach of the covenants contained in Sections 14 and 15 above by Executive would cause CBI irreparable harm and injury and would damage CBI in a way that could not be adequately compensated by monetary damages. Accordingly, the parties agree that CBI’s remedies may include a temporary restraining order, preliminary injunction, or other injunctive relief against any threatened or actual breach of Sections 14 or 15 by Executive. Executive acknowledges that this injunctive relief shall be in addition to any other legal or equitable relief to which CBI may otherwise be entitled under applicable law.
     18.  HEADINGS .
     The headings used in this Agreement are for convenience only and shall not be deemed to curtail or affect the meaning or construction of any provision under this Agreement.
     19.  WITHHOLDING .
     All payments or benefits to Executive under this Agreement shall be reduced by any amounts required to be withheld by CBI under applicable tax laws, including U.S. Federal, state,

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or local income tax laws or similar laws then in effect as well as the laws of other countries while on international assignment. In the event new tax legislation results in additional taxation to the Executive or CBI which may be avoided by amendment to this Agreement with no material financial impact to Executive or CBI, then this Agreement shall be so amended by written agreement of the parties.
     20.  OTHER PLANS .
     Except as otherwise provided in this Agreement, the terms of the AIP, Pension Plans, Equity Incentive Plans and any other CBI option plan, bonus plan or benefit plan (as the same may be amended from time to time) or any agreements entered into pursuant to such plans, shall remain in full force and effect. Except as expressly provided herein, if there is any conflict between this Agreement and the Plans described above in this Section 20, the terms of the applicable Plan documents shall control.
     21.  ARBITRATION .
     Any controversy or claim, other than an action for injunctive or equitable relief for unfair competition or to enforce the confidentiality, noncompete or nonsolicitation provisions set forth in Sections 14 and 15, arising out of or relating to (a) this Agreement or the breach thereof, (b) Executive’s employment with CBI, or (c) the termination of Executive’s employment with CBI, (including but not limited to claims arising under applicable employment-related statutes, including without limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Rehabilitation Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the American Jobs Creation Act of 2004, or the Fair Labor Standards Act, applicable state fair employment practices statutes, and claims for retaliation arising under applicable workers’ compensation statutes; as well as

25


 

employment-related common-law tort claims, including without limitation claims for negligence, intentional torts, post-termination defamation (e.g., employment references), violation of privacy rights, fraud, misrepresentation, unjust enrichment, tortious interference and/or promissory estoppel), which is not settled by agreement among the parties shall be resolved by final and binding arbitration, to be held in a metropolitan area located within fifty (50) miles of the location at which Executive is employed, in accordance with the employment arbitration rules and procedures of the American Arbitration Association. Neither party shall initiate or prosecute any lawsuit in any way related to any claims; provided, however, that the provisions of this Section 21 do not limit Executive’s right to file an administrative charge with the Equal Employment Opportunity Commission. Judgment upon the award rendered may be entered and enforced in any court having jurisdiction thereof.
     22.  VALIDITY; APPLICABLE LAW .
     The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect, and the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State in which Executive is employed .

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     IN WITNESS WHEREOF, CBI has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto subscribed his or her name, all as of the day, month and year first above written.
         
CBI Holdings Inc.   Executive
 
       
 
       
By:
  /s/ James L. Baldwin   /s/ Pedro Herran
 
   ;    
 
  James L. Baldwin   Pedro Herran
 
  Executive Vice President    

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EXHIBIT “A”
GENERAL RELEASE
     This General Release (the “Release”) is executed as of this                      day of                                            , 20___, by and between Pedro Herran (“Executive”) and CBI Holdings Inc. (“CBI”) for purposes of evidencing the covenants, obligations and undertakings of such parties set forth below.
     WHEREAS, CBI and Executive entered into an agreement of employment (the “Agreement”) dated October 15, 2007; and
     WHEREAS, Executive’s employment with CBI was terminated effective as of                                           , 20___, pursuant to Paragraph 6(c) of the Agreement;
     NOW THEREFORE, as a condition to, and in consideration of, payment by CBI of the benefits specified in Paragraph 6(c) of the Agreement, Executive hereby agrees as follows:
     1. Executive, for himself and on behalf of Executive’s agents, attorneys, heirs, executors, administrators, successors and assigns, hereby irrevocably releases, acquits, discharges and forever forgives CBI, its past and present officers, directors, shareholders, representatives, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates, and all persons acting by, through, under or in concert with them, (the “Releasees”) from any and all claims, causes of action, suits, controversies, appeals, grievances, promises, agreements, damages, rights, debts, liabilities, costs, losses, personal injuries and any other compensation whatsoever, whether presently known or unknown, liquidated or unliquidated, matured or contingent, arising at any time through the date of the execution of this Agreement. This Release covers any and all claims, regardless of whether they arose in contract or in tort or are based upon statutes, laws or rules, regulations, common law principles or otherwise, and includes but is not limited to claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Pregnancy Discrimination Act, the Equal Pay Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, COBRA, the Occupational Safety and Health Act, or any other federal, state or local statute, law or regulation relating to employment; common-law claims for breach of contract, quantum meruit, reformation of contract, breach of implied covenant of good faith and fair dealing, debt, wrongful discharge, defamation, invasion of privacy, infliction of emotional distress, tortious interference, misrepresentation, fraud, conspiracy, negligence or gross negligence; and any other statutory or common-law cause of action, whether or not relating to Executive’s employment with CBI; provided, however, that this Release does not include any claims Executive may have to compensation or benefits to be provided to Executive following termination of Executive’s employment with CBI pursuant to Section 6(c) of the Agreement, any rights Executive may have (subject to the provisions of Section 6(c) of the Agreement) under any pension or benefit plan in which Executive was or is a participant, and any indemnification rights Executive may have under company bylaws or insurance.

A-1


 

     2. Executive covenants and agrees that, to the fullest extent permitted by law, Executive will not bring any legal action against any of the Releasees for any claim waived and released under this Release and represents and warrants that no such claim has been filed to date. Executive agrees that should any person, organization or other entity institute or file a civil action, suit or legal proceeding against the Releasees on Executive’s behalf involving any matter occurring at any time in the past up to and including the date on which Executive executes this Release, Executive shall not seek or accept any personal, equitable or monetary relief in such civil action, suit or legal proceeding.
     3. Executive agrees that the terms and conditions of this Release are confidential and that Executive will not, directly or indirectly, disclose the fact of or terms of this Release to anyone other than Executive’s attorney or tax advisor, except to the extent such disclosure may be required for accounting or tax reporting purposes or otherwise be required by law or direction of a court. Nothing in this provision shall be construed to prohibit Executive from disclosing this Release to the Equal Employment Opportunity Commission in connection with any complaint or charge submitted to that agency.
     4. Executive agrees not to make any comments relating to the Releasees that are critical, disparaging or derogatory or that may tend to injure the business of the Releasees and agrees not to encourage any person, corporation or entity to sue or not to do business with the Releasees.
     5. Effective as of the Termination Date, Executive hereby resigns from any and all positions as an officer or director of CBI or its affiliates and subsidiaries, and agrees to execute any documents required for the purpose of effecting such resignation.
     6. The provisions of this Release are severable. If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision. One or more waivers of a breach of any covenant, term or provision of this Release by any party shall not operate or be construed as a waiver of any subsequent breach of the same covenant, term or provision, nor shall it be construed as a waiver of any other then existing or subsequent breach of a different covenant, term or provision.
     7. This Release sets forth the entire agreement between CBI and Executive and supersedes any and all prior oral or written agreements or understandings concerning the subject matter of this Release. This Release may not be altered, amended or modified, except by a further written document signed by a duly authorized representative of CBI and Executive.
     8. This Release is made within the State of Texas and shall in all respects be interpreted, enforced and governed by the laws of the State of Texas.
     9. This Release shall be binding upon Executive, his heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of the Releasees and their respective administrators, representatives, successors and assigns.

A-2


 

     10. Executive acknowledges that this Release is in full settlement, satisfaction, and discharge of any and all claims, demands, actions, and causes of action released by Executive, and that it applies to all claims, whether known or unknown. Executive further acknowledges that the consideration to be provided pursuant to the Agreement upon execution of this Release represents amounts and benefits greater than Executive would be entitled to receive if Executive were not to execute this Release. Executive represents and warrants that Executive has full power and authority to enter into and execute this Release. Executive represents that Executive has carefully read and fully understands all the provisions of this Release, that Executive has been advised to consult with an attorney of Executive’s choice and has had the opportunity to do so, and that Executive is freely, knowingly and voluntarily entering into this Release without reliance on any representations of any kind or character not set forth herein.
     11. Executive acknowledges that Executive has been provided at least twenty-one (21) days after receipt of this Release to decide whether to sign the Release and be bound by its terms, and that Executive has considered the terms of this Release for at least twenty-one (21) days or knowingly and voluntarily waived Executive’s right to do so. Executive further acknowledges and understands that Executive has the right to revoke this Release for a period of seven (7) days after Executive has signed it.
     IN WITNESS WHEREOF, the parties hereto have executed this General Release as of the date first above written.
         
EXECUTIVE   CBI HOLDINGS INC.
 
       
 
       
     
 
       
 
  By:    
 
       
 
       
 
  Its:    
 
       

A-3

 

Exhibit 10.16
AGREEMENT
BETWEEN
CBI HOLDINGS INC.
AND
GILBERT M. CASSAGNE
DATED AS OF OCTOBER 1, 2007

 


 

TABLE OF CONTENTS
             
        PAGE
 
1.
  DEFINITIONS     1  
2.
  TERM     5  
3.
  POSITION AND DUTIES     5  
4.
  COMPENSATION     6  
5.
  TERMINATION     7  
6.
  COMPENSATION UPON TERMINATION OF EMPLOYMENT     8  
7.
  FURTHER BENEFITS     18  
8.
  RIGHT TO TERMINATE; SOURCE OF PAYMENTS     18  
9.
  AMENDMENTS; WAIVER     19  
10.
  BINDING AGREEMENT     19  
11.
  ASSIGNMENT     19  
12.
  NOTICES     20  
13.
  ENTIRE AGREEMENT     20  
14.
  CONFIDENTIALITY     21  
15.
  NON-COMPETITION AND NON-SOLICITATION     22  
16.
  JUDICIAL AMENDMENT     24  
17.
  IRREPARABLE INJURY     25  
18.
  HEADINGS     25  
19.
  WITHHOLDING     26  
20.
  OTHER PLANS     26  
21.
  ARBITRATION     26  
22.
  VALIDITY; APPLICABLE LAW     27  

 


 

AMENDED AND RESTATED AGREEMENT
     This AMENDED AND RESTATED AGREEMENT (the “Agreement”), dated as of the 1st day of October, 2007, by and between CBI Holdings Inc. and Gilbert M. Cassagne (“Executive”) amends the employment agreement between the parties dated as of December 1, 2006 and is effective as of December 1, 2006.
WITNESSETH:
     WHEREAS, Executive is employed as an officer of CBI Holdings Inc. or its subsidiaries (collectively “CBI”) and is devoting Executive’s ability, time, effort and energy to the affairs of CBI; and
     WHEREAS, CBI considers the continuance of a sound and vital management to be essential to protecting and enhancing the best interests of CBI and its shareholders; and
     WHEREAS, CBI desires to assure itself of retaining the services of Executive and to reward Executive for Executive’s valuable, dedicated service to CBI;
     NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, the parties hereto covenant and agree as follows:
     1.  DEFINITIONS .
     The following terms, as used herein, have the following meaning:
     (a) AIP . “AIP” shall mean the annual incentive plan in which Executive is entitled to participate, as such plan is in effect from time to time. References herein to Executive’s “Target AIP” shall mean Executive’s target annual bonus opportunity at such time; provided, however, that if at such time Executive’s target annual bonus opportunity under the AIP has not yet been set for the then current year, the target annual bonus opportunity in effect for Executive under the AIP for the immediately preceding year

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shall be used as the Executive’s target annual bonus opportunity. If Executive has been promoted to a band in CBI’s salary structure having a minimum higher target annual bonus opportunity under the AIP, but has not yet had his/her target annual bonus opportunity increased to the minimum target annual bonus opportunity applying to others at that band, such increased target annual bonus opportunity nonetheless shall be used to calculate the Executive’s Target AIP hereunder.
     (b) Cause . Termination for “Cause” shall mean termination by CBI of Executive’s employment for Executive’s:
     (i) willful failure to substantially perform Executive’s duties with CBI;
     (ii) breach of Executive’s duty of loyalty toward CBI;
     (iii) commission of an act of dishonesty toward CBI, theft of CBI’s corporate property, or usurpation of CBI’s corporate opportunities;
     (iv) unethical business conduct including any violation of law connected with Executive’s employment at CBI; or
     (v) conviction of any felony involving dishonest or immoral conduct.
     For purposes of this Section 1(b), an act or failure to act by Executive shall be considered “willful” only if Executive’s conduct was not in good faith and Executive lacked a reasonable belief that Executive’s act or omission was in the best interests of CBI.
     (c) Code . “Code” shall mean the United States Internal Revenue Code of 1986, as amended.

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     (d) Competitor . For purposes of this Agreement, “Competitor” means an individual, partnership, firm, corporation or other business organization or entity that materially competes with a significant business owned or operated by CBI, its parent companies, or affiliates as of the Date of Termination, the names of which shall be made available to Executive at the time of Executive’s separation from CBI and upon reasonable request. As of the date of this Agreement, the definition of a Competitor includes, but is not limited to, the following businesses: The Coca-Cola Company, PepsiCo, Inc., Nestlé S.A., Kraft Foods Inc., Hershey Foods Corporation, Ferrero SpA, Mars, Incorporated, Groupe Danone S.A., and Wm. Wrigley Jr. Company. The list of companies set out above or provided to Executive shall be deemed to include all direct and indirect subsidiaries and divisions of these companies.
     (e) Date of Termination . “Date of Termination” shall mean the date Executive’s employment with CBI is terminated.
     (f) Disability or Disabled . “Disability” or “Disabled” shall mean Executive’s inability, because of incapacity due to physical or mental illness or injury and notwithstanding reasonable accommodation, to perform the essential functions of Executive’s position with CBI on a full-time basis for at least six consecutive months.
     (g) Equity Incentive Plans . “Equity Incentive Plans” shall mean any stock option, stock purchase or other stock incentive plan maintained by CBI Holdings Inc. or any parent or affiliated company.
     (h) Good Reason . Termination for “Good Reason” shall mean a termination by Executive of Executive’s employment with CBI for any of the following reasons:

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     (i) CBI’s failure to perform any of its material obligations under this Agreement;
     (ii) unless otherwise agreed or waived, notice of a proposed relocation by CBI of Executive’s principal place of employment to a site outside a fifty (50) mile radius of the current site of Executive’s principal place of employment; or
     (iii) the failure by a successor in interest to CBI to expressly assume CBI’s obligations under this Agreement.
     A termination by Executive for Good Reason may not occur unless the Executive has given notice to CBI within 90 days of Executive’s knowledge of the initial existence of a condition described in clauses (i) through (iii) above, and CBI shall have a period of at least thirty (30) days (the “Correction Period”) during which it may remedy the condition. If CBI remedies the condition within the Correction Period, Executive may not terminate for that Good Reason event.
     A termination for “Good Reason” may occur only within thirty (30) days following the expiration of the Correction Period.
     (i) Notice of Termination . “Notice of Termination” shall mean a notice that (i) indicates the specific termination provisions in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provisions so indicated, and (iii) is given in conformity with the provisions of Section 12 of this Agreement.
     (j) Qualified Pension Plan . “Qualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to

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time, in which Executive is eligible to participate and which is intended to be qualified under Section 401(a) of the Code.
     (k) Nonqualified Pension Plan . “Nonqualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate, but only to the extent such plan is designed to provide benefits which would otherwise be provided in the Qualified Pension Plan but for the limitations of the Code.
     (l) Pension Plans . “Pension Plans” shall mean, collectively, the Qualified Pension Plans and the Nonqualified Pension Plans.
     (m) Without Cause . Termination “Without Cause” shall mean a termination by CBI of Executive’s employment for any reason other than death, Disability, or Cause.
     2.  TERM .
     The term of this Agreement shall commence on the date first set forth above, and shall continue thereafter for a period of ten (10) years, at which time it shall expire unless sooner terminated in accordance with the provisions of this Agreement or by mutual written agreement of the parties on such terms and conditions as such written agreement may specify.
     3.  POSITION AND DUTIES .
     (a) Executive shall serve in such executive capacity as CBI may determine from time to time and with such authority, duties and responsibilities as are commensurate with such position and as are typically performed by executives holding such position in business organizations of a size and nature similar to that of CBI, and shall perform such other services for CBI and its affiliated companies as may be assigned

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to Executive from time to time by the Board of Directors of CBI and as are consistent with the position of an executive officer.
     (b) Executive shall devote substantially all of Executive’s business time and attention to the business and affairs of CBI and shall perform the duties set forth herein faithfully and diligently and to the best of Executive’s ability, experience and talents, acting solely in the best interest of CBI and subject to the lawful direction of the Board of Directors of CBI. Executive agrees to abide by all Bylaws, policies, practices, procedures and rules of CBI. During the term of this Agreement, Executive agrees not to be employed by or perform services for any other person, business or organization without the prior written consent of the Board of Directors of CBI; provided, however, (1) that nothing in this Section 3(b) shall prevent Executive from devoting a reasonable amount of time to charitable, municipal or public service work or service on the boards of directors of other companies so long as such work and service does not interfere with Executive’s employment pursuant to this Agreement or otherwise violate any term or provision of this Agreement, and (2) that service on the board of directors of another company requires approval in writing in advance from the Chairman and Chief Executive Officer of Cadbury Schweppes plc or its successor.
     4.  COMPENSATION .
     As full compensation to Executive for the performance of the services hereunder, and for Executive’s acceptance of the responsibilities described herein, CBI agrees to pay Executive and Executive agrees to accept the following salary and other benefits during the term of this Agreement and any extension hereof.

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     (a) Base Salary . CBI shall pay Executive a base salary at an annualized rate equal to Executive’s current base salary as of the date hereof or at such higher rate as the Compensation Committee or Board of Directors of CBI may from time to time determine at their sole discretion, payable in accordance with the standard payroll practices of CBI. The base salary shall be subject to all applicable withholding and other taxes that Executive is obligated to pay or that CBI may be required by law to withhold from time to time.
     (b) Compensation and Benefit Programs . Executive shall be entitled to participate in all employee compensation and benefit plans, programs and practices of CBI or CBI’s parents or affiliates now or hereafter made generally available to CBI’s senior executives, as such programs may be in effect from time to time, including, incentive compensation, equity compensation, health, welfare and retirement arrangements.
     (c) Expenses . Executive shall be entitled to receive proper reimbursement by CBI for all reasonable, out-of-pocket expenses incurred by Executive (in accordance with the policies and procedures established by CBI for its senior executives) in performing services under this Agreement, provided Executive submits reasonable documentation for such expenses.
     5.  TERMINATION .
     Subject to the provisions of Section 6, employment pursuant to the terms of this Agreement shall terminate upon the occurrence of any of the following events:
     (a) expiration of term;
     (b) written Notice of Termination by CBI;

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     (c) written Notice of Termination by Executive;
     (d) Executive’s death;
     (e) Executive’s Disability;
     6.  COMPENSATION UPON TERMINATION OF EMPLOYMENT .
     The following will apply upon termination of employment pursuant to the terms of this Agreement.
     (a) Termination Upon Expiration of Term . In the event this Agreement expires at the end of the term hereof in accordance with Section 2 and Executive’s employment is terminated by CBI on or after such expiration and termination, Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans, the AIP and CBI’s policies and practices. Executive’s Equity Incentive Plans and any other similar plans in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans, and such other plans (respectively), copies of which have been or will be made available to Executive. CBI shall have no further obligations to Executive under this Agreement.
     (b) Termination for Cause or Not for Good Reason . If during the term of this Agreement, Executive’s employment is terminated for Cause or if Executive effects termination other than for Good Reason, CBI shall pay Executive his or her full salary through the effective date of such termination at the rate in effect on the date CBI or Executive, as the case may be, notifies the other party of such termination, and CBI shall have no further obligations to Executive under this Agreement. In the event of such

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termination, Executive shall not be entitled to receive any payment under the AIP for the year in which Executive’s Date of Termination occurs or any later year.
     (c) Termination Without Cause or for Good Reason . If CBI shall terminate Executive’s employment Without Cause during the term of this Agreement, or if Executive shall terminate Executive’s employment for Good Reason during the term of this Agreement, then Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans in which Executive is a Participant, the AIP and CBI’s policies and practices. CBI shall have no further obligations to Executive under this Agreement; provided, however, that, subject to the satisfaction of the conditions in Sections 6(f) and 6(g) hereof, and provided that Executive complies with the covenants of non-disclosure, non-solicitation and non-competition contained in Sections 14 and 15 of this Agreement, Executive shall be entitled to the payments and benefits specified in this Section 6(c). In the event of a breach by Executive of any of his obligations pursuant to Sections 14 or 15, CBI’s payment obligations pursuant to this Section 6(c) shall cease immediately as of the date of such breach, and CBI shall have no further obligations to Executive under this Agreement.
     (i) Salary . CBI shall pay to Executive an amount equal to Executive’s annual base salary. Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination.
     (ii) AIP . CBI shall pay to Executive an amount equal to Executive’s Target AIP award, as defined in Section 1(a). Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination. CBI shall also pay

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to Executive his pro rata portion of his actual AIP award under the AIP for the year in which the Date of Termination occurs. Such payment shall be calculated in accordance with the AIP. Such pro rata amount shall be paid to Executive by CBI in a lump sum within two and one-half months following the end of the year in which the Date of Termination shall have occurred. The payments under this Section 6(c)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Date of Termination occurs or any later year. In addition to the foregoing, CBI shall pay Executive any accrued award Executive may have earned under the AIP for any CBI fiscal year prior to the Date of Termination which has not been paid.
     (iii) Continuation Payments . Subject to offset as provided in the last sentence of this Section 6(c)(iii), CBI shall pay Executive an amount equal to the aggregate of Executive’s annual base salary plus Executive’s Target AIP, as defined in Section 1(a), in effect on the Date of Termination. Such amount will be paid ratably by CBI to Executive within the regular payroll cycles during the 12 month period following the Date of Termination, unless such amount exceeds an amount (“Unrestricted Amount”) equal to two times the lesser of (A) the Executive’s annual compensation based on the annual rate of pay from CBI for the calendar year preceding the calendar year of the Date of Termination (adjusted for any increase in such annual rate of pay during the calendar year of the Date of Termination that was expected to continue indefinitely if the Executive’s employment had not terminated) and (B) the maximum amount that can be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code. If

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the amount exceeds the Unrestricted Amount, then no more than the Unrestricted Amount may be paid in the six months following the Executive’s Date of Termination and the monthly pro rata payments shall be suspended at such time as the Unrestricted Amount has been paid. If the monthly payments are so suspended to comply with such limitation, any amount not paid in the initial six months following the Date of Termination shall be paid in a lump sum six months and two days after the Date of Termination and thereafter the ratable payments shall continue through the remainder of the 12 month period following the Date of Termination. If Executive secures full time employment within such twelve (12) month period, then commencing on the date of such new employment, the payments under this Section 6(c)(iii) shall be offset by the base salary Executive earns from such new employer and the target annual bonus or other cash bonus established for Executive by such new employer, in each case pro-rated to reflect the amount of such new base salary and bonus which is allocable to the remainder of such twelve (12) month period, calculated by multiplying such award by a fraction, the numerator of which is the number of weeks commencing on the date of new employment through the end of such twelve (12) month period, and the denominator of which is 52.
     (iv) Benefit Plans . CBI shall continue Executive’s participation in the medical, dental and vision plans of CBI (or shall provide equivalent benefits) for a period of twelve (12) months following the Date of Termination at the same rates as an active employee or, if earlier, the commencement of equivalent benefits by Executive’s new employer; provided that if Executive shall die before the

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expiration of the period during which CBI would be required to continue Executive’s participation in such plans, the participation of Executive’s surviving spouse and family in such plans shall continue throughout such period at the same rates as an active employee to Executive’s surviving spouse and family. Executive’s participation in CBI’s life and disability plans and Executive’s travel accident insurance under CBI’s group plan shall terminate on the Date of Termination. Following termination of coverage under any CBI benefit plan, Executive may continue coverage at Executive’s own expense if permitted by the terms of the applicable plan. At Executive’s option, Executive may continue medical coverage under COBRA at Executive’s own expense for the maximum period provided by COBRA, calculated from the Date of Termination, unless otherwise provided by law. Within sixty (60) days of the Date of Termination, Executive may, at Executive’s option, surrender Executive’s CBI company car or purchase such vehicle at a price equal to the greater of (i) 100% of its wholesale value, or (ii) the remaining lease payments; provided, that the price shall, in no event, be less than fair market value as of the Date of Termination of the company car as determined in good faith by CBI. Executive’s participation in CBI’s Employee Services Allowance (“ESA”) shall end on the Date of Termination, and no ESA payments regularly scheduled to be paid after the Date of Termination shall be paid to Executive.
     (v) Qualified Pension Plan . CBI shall pay Executive, in a lump sum within sixty (60) days of the Date of Termination, an amount equal to the difference, if any, between the present value of Executive’s accrued benefit,

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whether or not vested, as of the Date of Termination under the Qualified Pension Plan, and the present value of the vested portion of such accrued benefit, with such difference to be calculated, to the extent relevant, using the actuarial assumptions and interest rates specified in the Qualified Pension Plan. The vested portion of such accrued benefit, if any, shall be paid in accordance with the provisions of the Qualified Pension Plan.
     (vi) Nonqualified Pension Plan . CBI shall pay Executive an amount equal to the lump sum which would have been payable under the Nonqualified Pension Plan had Executive (A) been completely vested in Executive’s full accrued benefit under the Nonqualified Pension Plan, (B) been eligible for normal retirement under the Nonqualified Pension Plan, and (C) retired as of the Date of Termination. Such benefit shall be calculated, to the extent relevant, using the actuarial assumptions specified in the Nonqualified Pension Plan. The payment under this Section 6(c)(vi) shall be paid within six months and two days of the Date of Termination, and shall be made in lieu of any and all payments otherwise due under the Nonqualified Pension Plan.
     (vii) Outplacement and Job Search Expenses . CBI will, at its expense, make available to Executive the services of an outplacement firm designated by CBI. In addition, CBI will reimburse Executive for reasonable out-of-pocket job search expenses incurred by Executive for a period of up to twelve (12) months following the Date of Termination, provided that such expenses shall not exceed $300 per month and shall be properly documented.

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     (viii) Equity Incentive Plan; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (ix) Integration Success Share Plan (ISSP) . Following your Date of Termination, you will receive an award of 50,000 shares (representing 50% of your potential target award) including any award that has already vested. This is full and final settlement in this program. The shares will be released within 90 days following your Date of Termination.
     (d) Termination Due to Death . The employment of Executive under this Agreement shall terminate upon Executive’s death. In the event of the death of Executive during the term of his/her employment hereunder, CBI shall have no further obligations to Executive under this Agreement, except that the estate or any other legal representative of Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay to Executive’s estate or other legal representatives the base salary as provided in Section 4(a) above, at the rate in effect at the time of Executive’s death through the end of the month in which Executive dies.
     (ii) AIP . CBI shall pay to Executive’s estate or other legal representative the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s death occurs. Such payment shall be calculated

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by multiplying such Target AIP award by a fraction, the numerator of which is the number of weeks in the applicable year which precedes the date of death and the denominator of which is 52. Such amount shall be paid by CBI in a lump sum within thirty (30) days of the date of death. The payments under this Section 6(d)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s death occurs.
     (iii) Equity Incentive Plans; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other plansimilar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive’s estate or other legal representative all of the amounts and shall provide all benefits generally available under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (e) Termination Due to Disability . The employment of Executive under this Agreement shall be terminated on the date that Executive becomes Disabled, as determined by the written opinion of the licensed physician regularly attending Executive. If CBI disagrees with this opinion, CBI may, at its own expense, engage a second physician to examine Executive. If Executive’s physician and CBI’s physician agree in writing that Executive is or is not Disabled, their written opinion shall, except as otherwise set forth in this paragraph 6(e), be conclusive as to Executive’s Disability. If

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the physicians disagree as to Executive’s Disability, they shall select a third physician to make the determination, whose written opinion shall be conclusive and binding on the issue of Disability. The date of any written opinion conclusively finding Executive to be Disabled shall be the effective date of Disability for purposes of this paragraph 6(e). In the event of termination due to Disability, CBI shall have no further obligations to Executive under this Agreement, except that Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay Executive the base salary as provided in Section 4(a) above at the rate in effect at the time Executive becomes Disabled through the end of the month in which Executive’s employment terminates due to Disability.
     (ii) AIP . CBI shall pay Executive the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s Disability occurs, computed as in Section 6(d)(ii) above but substituting Disability for death. The payments under this Section 6(e)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Disability occurs.
     (iii) Equity Incentive Plans . Executive’s right to exercise options under the Equity Incentive Plans shall be governed by the terms and conditions of the Equity Incentive Plans, copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive the amounts and shall provide all benefits generally available to similarly situated executives under the employee benefit plans, and the policies and practices of CBI, determined in

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accordance with the applicable terms and provisions of such plans, policies and practices.
     (f) Mitigation . Executive agrees to use reasonable efforts to secure other employment but shall not otherwise be required to mitigate the amount of any payment provided for in this Section 6; provided, however, that in the event Executive secures other employment, any continuation payments otherwise due Executive shall be subject to offset as provided in Section 6(c)(iii) above.
     (g) Release of Claims . Any other provisions of this Agreement notwithstanding, Executive shall not be entitled to any compensation under Section 6(c)(i) through 6(c)(vii) hereof following termination of employment unless and until Executive shall have executed a release of all of Executive’s rights and claims (other than to compensation or other matters to which Executive is entitled under this Agreement following termination of employment) against CBI, its officers, directors, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates with respect to all matters relating to CBI or its parent companies, subsidiaries, or affiliates existing at the time of Executive’s execution of the release, and such release has become binding upon and irrevocable by the Executive. The release shall be in substantially the form of Exhibit A hereto, or such variation thereof as CBI reasonably determines to be necessary to comply with then applicable law or otherwise appropriate to secure a release of all the aforesaid rights and claims of Executive. If a release satisfactory to CBI has not become binding and irrevocable within sixty (60) days after the Date of Termination, the conditions of this Section 6(g) shall not be satisfied, the Executive shall not have any right to the

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compensation provided under Section 6(c)(i)-(vii), each of which is additional compensation to which the Executive would otherwise not be entitled, and CBI shall have no further obligations to Executive under this Agreement.
     (h) In the event that CBI subsequently determines that termination for Cause was warranted, CBI may cease payments and benefits hereunder and the Executive is required to repay to CBI each of the payments and benefits set forth in Section(c)(i)-(vii).
     7.  FURTHER BENEFITS .
     Upon termination of the employment of Executive, Executive shall accrue no further benefits under the Pension Plans, and shall make no further contributions to any Pension Plan or other benefit plan permitting employee contributions.
     8.  RIGHT TO TERMINATE; SOURCE OF PAYMENTS .
     (a) Right to Terminate by CBI . CBI may terminate Executive’s employment at any time upon written notice to Executive subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (b) Right to Terminate by Executive . Executive may terminate his or her
employment with CBI at any time for Good Reason or otherwise upon written notice to CBI, subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (c) Source of Payments . All payments provided for in this Agreement shall be paid in cash from the general funds of CBI or from any special or separate trust or fund to be established in connection herewith. To the extent that any person acquires a right to receive payments from CBI hereunder, whether or not any funds are segregated

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by CBI for such purpose, such right shall be no greater than the right of an unsecured creditor of CBI.
     9.  AMENDMENTS; WAIVER .
     This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. The waiver by either party of compliance with the provisions of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such party. Notwithstanding the foregoing, CBI may amend this Agreement to the extent it determines in good faith that an amendment is necessary to comply with the requirements of Section 409A of the Code, provided that such amendment preserves, as near as possible, the economic benefits of the Agreement to both parties. The provisions of Sections 6, 14, 15, 16, 17 and 21 shall survive termination of this Agreement.
     10.  BINDING AGREEMENT .
     This Agreement shall be binding upon and inure to the benefit of the parties hereto, any successors to the business of CBI, Executive’s heirs and the personal representatives of Executive’s estate.
     11.  ASSIGNMENT .
     This Agreement shall not be assigned by either Executive or CBI except that CBI may assign this Agreement to any successor in interest of CBI whether by merger, consolidation, purchase of assets or otherwise, provided, however, that in connection with such an assignment CBI will require a successor in interest to fully assume all of CBI’s obligations hereunder.

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     12.  NOTICES .
     Any notice required or permitted hereunder shall be deemed sufficiently given if in writing and either personally delivered or sent by certified or registered mail, postage pre-paid, addressed to the party at the address set forth below or at such other address as the party may subsequently designate:
(a)    Executive:
Gilbert M. Cassagne
5939 Deloache Avenue
Dallas, TX 75225
(b)    CBI:
CBI Holdings Inc.
5301 Legacy Drive
Plano, TX 75024
Attn: General Counsel
copy to:
Cadbury Schweppes plc
25 Berkeley Square
London, England W 1 X 6HT
Attn: Chief Legal Officer and Company Secretary
Any such notice will be deemed given upon delivery, if delivered in person, or upon the date of mailing, if sent by certified or registered mail.
     13.  ENTIRE AGREEMENT .
     This Agreement supersedes any prior agreements or understandings, oral or written, with respect to the employment of Executive and constitutes the entire agreement with respect thereto. It cannot be changed or terminated orally and may be modified only by a subsequent written agreement executed by both parties hereto. In addition, the Executive will not be eligible to participate in any other severance pay plan, program or practice that may be adopted from time to time.

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     14.  CONFIDENTIALITY .
     (a) Executive agrees and acknowledges that during the term of this Agreement, CBI promises to provide and Executive will have access to and acquire certain trade secrets and confidential information of CBI and of corporations affiliated with CBI that is not generally available to the public, and that such information constitutes valuable, special and unique property of CBI and its affiliates that, if disclosed, could put CBI or its affiliates at a competitive disadvantage (the “Confidential Information”). Such Confidential Information includes but is not limited to methods, techniques, specifications, devices, systems, designs, formulae, models, patents and trademarks, manuals, lists of customers and prospective customers, customer requirements, vendor information and relationships, price lists and other pricing information and analyses, data used to prepare bids, marketing plans and other market information and analyses, business, strategic and operating plans, financial statements and other financial information, training techniques, and other confidential and proprietary information and documents regarding the business of CBI and its affiliates.
     (b) As a material inducement to CBI to enter into this Agreement and to provide Executive the compensation and other consideration set forth herein, Executive agrees that, without the prior written consent of CBI, Executive will not, during or after the term of Executive’s employment with CBI, directly or indirectly use or disclose any such Confidential Information to any person or entity for any reason or purpose whatsoever, except as may be required by law or as may be required in the course of Executive’s performance of his or her duties at CBI.

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     (c) Executive acknowledges and agrees that all files, records, documents, plans, specifications, equipment, information, computer files, and similar items and materials relating to CBI’s business shall remain the sole property of CBI and shall immediately be returned to CBI upon CBI’s request or upon the termination of this Agreement for any reason, and that Executive shall keep no copies thereof. The provisions of this Section 14 shall survive the termination of this Agreement and shall be binding upon any successor or assign of Executive.
     15.  NON-COMPETITION AND NON-SOLICITATION .
     (a) Consideration . Executive acknowledges and agrees that Executive has received, and will continue to receive, substantial and valuable consideration for the agreements set forth in this Section, including but not limited to Confidential Information, which CBI hereby promises to provide to Executive; specialized training related to CBI’s services, business practices and Confidential Information; post-termination payments; and other compensation and benefits as described in this Agreement.
     (b) Non-Solicitation of Customers and Employees . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that, during employment and for a period of twelve (12) months following the Date of Termination, whether for Executive’s own account or for the account of any other individual, partnership, firm, corporation or business organization, Executive shall not either directly or indirectly solicit or endeavor to entice away from CBI any person who is employed by or otherwise engaged to perform services for CBI

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(or its affiliates) or to interfere with the relationship of CBI (or its affiliates) with any person who then is a customer of CBI.
     (c) Non-Competition . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that, for a period of twelve (12) months following the Date of Termination, Executive shall not become employed in an executive capacity by any Competitor of CBI within the United States, Canada or any other region in which CBI or its current or former affiliates operates or has operated and in which Executive has directly or indirectly rendered services during the last thirty-six (36) months of Executive’s employment and, further, Executive shall not provide services of a similar or comparable type and character to those provided by Executive to CBI during the last thirty-six (36) months of Executive’s employment with CBI, whether as an employee, officer, director, partner, shareholder, consultant or otherwise, to any Competitor of CBI within the United States, Canada or any region in which Cadbury Schweppes plc operates and in which Executive has rendered services during Executive’s employment; provided, however, that this Section 15 shall not prohibit Executive’s ownership, either directly or indirectly, of less than 1% of any class of publicly traded securities of any entity, and provided further that this Section 15 shall not prohibit Executive’s employment as an employee or officer or Executive’s performance of services as a consultant with any Competitor if Executive is not directly or indirectly involved in the aspects of such Competitor’s business that are competitive with CBI.

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As further material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a), above, and as a condition to receipt of the benefits set forth in Section 6 (c), Executive agrees that for the earlier of (i) the closing consummation of the Transaction (as defined below) or (ii) a period of twelve (12) months following the Date of Termination, Executive will not become employed or perform services, directly or indirectly, whether as an employee, advisor, or consultant or in any other capacity, in connection with the sale by Cadbury Schweppes plc of an interest in Cadbury Schweppes Americas Beverage (the “Transaction”) to”), by or on behalf of any private equity firm, their advisors, bankers or consultants (although Executive may provide services for such other private equity firms in any other capacity).
Executive specifically recognizes and affirms that the Non-Competition provision contained herein is material and contains important terms of this Agreement, and Executive further agrees that should all or any part or application of this Section 15(c) be held or found invalid or unenforceable for any reason whatsoever by a court of competent jurisdiction in an action between Executive and CBI, Exectuive forfeits all benefits setforth in Section 6(c) and must repay to CBI any benefits already paid by CBI to Executive under Section 6(c)(i), (ii), (iii), (iv), (vi), (vii) (viii) and (ix).
     16.  JUDICIAL AMENDMENT .
     Executive and CBI acknowledge the reasonableness of the agreements set forth in Sections 14 and 15 above and the reasonableness of the geographic area, duration of time and subject matter that are part of the covenant not to compete contained in Section 15(c). Executive further acknowledges that Executive’s skills are such that Executive can be gainfully employed

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in noncompetitive employment and that the agreement not to compete will in no manner prevent Executive from earning a living. Notwithstanding the foregoing, in the event it is judicially determined that any of the limitations contained in Section 15 are unreasonable, illegal or offensive under any applicable law and may not be enforced as agreed herein, the parties agree that the unreasonable, illegal or offensive portions of Section 15, whether they relate to duration, area or subject matter, shall be and hereby are revised to conform with all applicable laws and that the Agreement, as modified, shall remain in full force and effect and shall not be rendered void or illegal.
     17.  IRREPARABLE INJURY .
     Executive acknowledges that CBI has invested substantial time, labor, skill and money in developing the Confidential Information to be provided to Executive. Executive further acknowledges that the Confidential Information to be provided to Executive, and the services Executive is to render to CBI, are such that any breach of the covenants contained in Sections 14 and 15 above by Executive would cause CBI irreparable harm and injury and would damage CBI in a way that could not be adequately compensated by monetary damages. Accordingly, the parties agree that CBI’s remedies may include a temporary restraining order, preliminary injunction, or other injunctive relief against any threatened or actual breach of Sections 14 or 15 by Executive. Executive acknowledges that this injunctive relief shall be in addition to any other legal or equitable relief to which CBI may otherwise be entitled under applicable law.
     18.  HEADINGS .
     The headings used in this Agreement are for convenience only and shall not be deemed to curtail or affect the meaning or construction of any provision under this Agreement.

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     19.  WITHHOLDING .
     All payments or benefits to Executive under this Agreement shall be reduced by any amounts required to be withheld by CBI under applicable tax laws, including U.S. Federal, state, or local income tax laws or similar laws then in effect as well as the laws of other countries while on international assignment. In the event new tax legislation results in additional taxation to the Executive or CBI which may be avoided by amendment to this Agreement with no material financial impact to Executive or CBI, then this Agreement shall be so amended by written agreement of the parties.
     20.  OTHER PLANS .
     Except as otherwise provided in this Agreement, the terms of the AIP, Pension Plans, Equity Incentive Plans, and any other CBI option plan, bonus plan or benefit plan (as the same may be amended from time to time) or any agreements entered into pursuant to such plans, shall remain in full force and effect. Except as expressly provided herein, if there is any conflict between this Agreement and the Plans described above in this Section 20, the terms of the applicable Plan documents shall control.
     21.  ARBITRATION .
     Any controversy or claim, other than an action for injunctive or equitable relief for unfair competition or to enforce the confidentiality, noncompete or nonsolicitation provisions set forth in Sections 14 and 15, arising out of or relating to (a) this Agreement or the breach thereof, (b) Executive’s employment with CBI, or (c) the termination of Executive’s employment with CBI, (including but not limited to claims arising under applicable employment-related statutes, including without limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Rehabilitation Act, the Family and

26


 

Medical Leave Act, the Employee Retirement Income Security Act, the American Jobs Creation Act of 2004, or the Fair Labor Standards Act, applicable state fair employment practices statutes, and claims for retaliation arising under applicable workers’ compensation statutes; as well as employment-related common-law tort claims, including without limitation claims for negligence, intentional torts, post-termination defamation (e.g., employment references), violation of privacy rights, fraud, misrepresentation, unjust enrichment, tortious interference and/or promissory estoppel), which is not settled by agreement among the parties shall be resolved by final and binding arbitration, to be held in a metropolitan area located within fifty (50) miles of the location at which Executive is employed, in accordance with the employment arbitration rules and procedures of the American Arbitration Association. Neither party shall initiate or prosecute any lawsuit in any way related to any claims; provided, however, that the provisions of this Section 21 do not limit Executive’s right to file an administrative charge with the Equal Employment Opportunity Commission. Judgment upon the award rendered may be entered and enforced in any court having jurisdiction thereof.
     22.  VALIDITY; APPLICABLE LAW .
     The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect, and the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State in which Executive is employed.

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     IN WITNESS WHEREOF, CBI has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto subscribed his or her name, all as of the day, month and year first above written.
                         
CBI Holdings Inc.       Executive
 
                       
By:
  /s/  H. Todd Stitzer       /s/  Gilbert M. Cassagne
             
    H. Todd Stitzer       Gilbert M. Cassagne
    Chief Executive Officer                

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EXHIBIT “A”
GENERAL RELEASE
     This General Release (the “Release”) is executed as of this 12th day of October, 2007 by and between Gilbert M. Cassagne (“Executive”) and CBI Holdings Inc. (“CBI”) for purposes of evidencing the covenants, obligations and undertakings of such parties set forth below.
     WHEREAS, CBI and Executive entered into an amended agreement of employment (the “Agreement”) dated as of October 1, 2007; and
     WHEREAS, Executive’s employment with CBI was terminated effective as of 12 th day of October, 2007 pursuant to Paragraph 6(c) of the Agreement;
     NOW THEREFORE, as a condition to, and in consideration of, payment by CBI of the benefits specified in Paragraph 6(c) of the Agreement, Executive hereby agrees as follows:
     1. Executive, for himself and on behalf of Executive’s agents, attorneys, heirs, executors, administrators, successors and assigns, hereby irrevocably releases, acquits, discharges and forever forgives CBI, its past and present officers, directors, shareholders, representatives, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates, and all persons acting by, through, under or in concert with them, (the “Releasees”) from any and all claims, causes of action, suits, controversies, appeals, grievances, promises, agreements, damages, rights, debts, liabilities, costs, losses, personal injuries and any other compensation whatsoever, whether presently known or unknown, liquidated or unliquidated, matured or contingent, arising at any time through the date of the execution of this Agreement. This Release covers any and all claims, regardless of whether they arose in contract or in tort or are based upon statutes, laws or rules, regulations, common law principles or otherwise, and includes but is not limited to claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Pregnancy Discrimination Act, the Equal Pay Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, COBRA, the Occupational Safety and Health Act, or any other federal, state or local statute, law or regulation relating to employment; common-law claims for breach of contract, quantum meruit, reformation of contract, breach of implied covenant of good faith and fair dealing, debt, wrongful discharge, defamation, invasion of privacy, infliction of emotional distress, tortious interference, misrepresentation, fraud, conspiracy, negligence or gross negligence; and any other statutory or common-law cause of action, whether or not relating to Executive’s employment with CBI; provided, however, that this Release does not include any claims Executive may have to compensation or benefits to be provided to Executive following termination of Executive’s employment with CBI pursuant to Section 6(c) of the Agreement, any rights Executive may have (subject to the provisions of Section 6(c) of the Agreement) under any pension or benefit plan in which Executive was or is a participant, and any indemnification rights Executive may have under company bylaws or insurance.

A-1


 

     2. Executive covenants and agrees that, to the fullest extent permitted by law, Executive will not bring any legal action against any of the Releasees for any claim waived and released under this Release and represents and warrants that no such claim has been filed to date. Executive agrees that should any person, organization or other entity institute or file a civil action, suit or legal proceeding against the Releasees on Executive’s behalf involving any matter occurring at any time in the past up to and including the date on which Executive executes this Release, Executive shall not seek or accept any personal, equitable or monetary relief in such civil action, suit or legal proceeding.
     3. Executive agrees that the terms and conditions of this Release are confidential and that Executive will not, directly or indirectly, disclose the fact of or terms of this Release to anyone other than Executive’s spouse, attorney or tax advisor, except to the extent such disclosure may be required for accounting or tax reporting purposes or otherwise be required by law or direction of a court. Nothing in this provision shall be construed to prohibit Executive from disclosing this Release to the Equal Employment Opportunity Commission in connection with any complaint or charge submitted to that agency.
     4. Executive agrees not to make any comments relating to the Releasees that are critical, disparaging or derogatory or that may tend to injure the business of the Releasees and agrees not to encourage any person, corporation or entity to sue or not to do business with the Releasees. CBI agrees that it will take all reasonable steps necessary to ensure that its employees do not criticize, denigrate or disparage Executive. Executive understands and agrees that CBI and the Releasees have numerous employees, that its employees will not be aware of this letter agreement, and that the only commitment of contractual significance by CBI contained in this paragraph is for CBI and the Releasees to do nothing in bad faith to induce its employees not to comply with the agreement set forth in this paragraph.
     5. Effective as of the Termination Date, Executive hereby resigns from any and all positions as an officer or director of CBI or its affiliates and subsidiaries, and agrees to execute any documents required for the purpose of effecting such resignation.
     6. The provisions of this Release are severable. If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision. One or more waivers of a breach of any covenant, term or provision of this Release by any party shall not operate or be construed as a waiver of any subsequent breach of the same covenant, term or provision, nor shall it be construed as a waiver of any other then existing or subsequent breach of a different covenant, term or provision.
     7. This Release sets forth the entire agreement between CBI and Executive and supersedes any and all prior oral or written agreements or understandings concerning the subject matter of this Release. This Release may not be altered, amended or modified, except by a further written document signed by a duly authorized representative of CBI and Executive.
     8. This Release is made within the State of Texas and shall in all respects be interpreted, enforced and governed by the laws of the State of Texas.

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     9. This Release shall be binding upon Executive, his heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of the Releasees and their respective administrators, representatives, successors and assigns.
     10. Executive acknowledges that this Release is in full settlement, satisfaction, and discharge of any and all claims, demands, actions, and causes of action released by Executive, and that it applies to all claims, whether known or unknown. Executive further acknowledges that the consideration to be provided pursuant to the Agreement upon execution of this Release represents amounts and benefits greater than Executive would be entitled to receive if Executive were not to execute this Release. Executive represents and warrants that Executive has full power and authority to enter into and execute this Release. Executive represents that Executive has carefully read and fully understands all the provisions of this Release, that Executive has been advised to consult with an attorney of Executive’s choice and has had the opportunity to do so, and that Executive is freely, knowingly and voluntarily entering into this Release without reliance on any representations of any kind or character not set forth herein.
     11. Executive acknowledges that Executive has been provided at least twenty-one (21) days after receipt of this Release to decide whether to sign the Release and be bound by its terms, and that Executive has considered the terms of this Release for at least twenty-one (21) days or knowingly and voluntarily waived Executive’s right to do so. Executive further acknowledges and understands that Executive has the right to revoke this Release for a period of seven (7) days after Executive has signed it.
     IN WITNESS WHEREOF, the parties hereto have executed this General Release as of the date first above written.
                         
EXECUTIVE       CBI HOLDINGS INC.
 
                       
 
                       
         
Gilbert M. Cassagne                
 
              By:        
                     
 
              Its:        
                     

A-3

 

Exhibit 10.17
AGREEMENT
BETWEEN
CBI HOLDINGS INC.
AND
JOHN L. BELSITO
DATED AS OF OCTOBER 15, 2007

 


 

TABLE OF CONTENTS
             
        PAGE
1.
  DEFINITIONS     1  
2.
  TERM     5  
3.
  POSITION AND DUTIES     5  
4.
  COMPENSATION     6  
5.
  TERMINATION     7  
6.
  COMPENSATION UPON TERMINATION OF EMPLOYMENT     8  
7.
  FURTHER BENEFITS     18  
8.
  RIGHT TO TERMINATE; SOURCE OF PAYMENTS     18  
9.
  AMENDMENTS; WAIVER     19  
10.
  BINDING AGREEMENT     19  
11.
  ASSIGNMENT     19  
12.
  NOTICES     19  
13.
  ENTIRE AGREEMENT     20  
14.
  CONFIDENTIALITY     20  
15.
  NON-COMPETITION AND NON-SOLICITATION     22  
16.
  JUDICIAL AMENDMENT     23  
17.
  IRREPARABLE INJURY     24  
18.
  HEADINGS     24  
19.
  WITHHOLDING     24  
20.
  OTHER PLANS     25  
21.
  ARBITRATION     25  
22.
  VALIDITY; APPLICABLE LAW     26  

 


 

AGREEMENT
     This AGREEMENT (the “Agreement”) is made and entered into as of the 15th day of October, 2007, by and between CBI Holdings Inc. and John L. Belsito (“Executive”).
WITNESSETH:
     WHEREAS, Executive is employed as an officer of CBI Holdings Inc. or its subsidiaries (collectively “CBI”) and is devoting Executive’s ability, time, effort and energy to the affairs of CBI; and
     WHEREAS, CBI considers the continuance of a sound and vital management to be essential to protecting and enhancing the best interests of CBI and its shareholders; and
     WHEREAS, CBI desires to assure itself of retaining the services of Executive and to reward Executive for Executive’s valuable, dedicated service to CBI;
     WHEREAS, CBI and Executive are parties to an employment agreement dated as of May 8, 2007 (the “Prior Agreement”); and
     WHEREAS, the parties desire to amend and restate the Prior Agreement, generally effective as of October 15, 2007.
     NOW, THEREFORE, in consideration of the premises and the mutual promises herein contained, the parties hereto covenant and agree as follows:
     1.  DEFINITIONS .
     The following terms, as used herein, have the following meaning:
     (a) AIP . “AIP” shall mean the annual incentive plan in which Executive is entitled to participate, as such plan is in effect from time to time. References herein to Executive’s “Target AIP” shall mean Executive’s target annual bonus opportunity at such time; provided, however, that if at such time Executive’s target annual bonus opportunity

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under the AIP has not yet been set for the then current year, the target annual bonus opportunity in effect for Executive under the AIP for the immediately preceding year shall be used as the Executive’s target annual bonus opportunity. If Executive has been promoted to a band in CBI’s salary structure having a minimum higher target annual bonus opportunity under the AIP, but has not yet had his/her target annual bonus opportunity increased to the minimum target annual bonus opportunity applying to others at that band, such increased target annual bonus opportunity nonetheless shall be used to calculate the Executive’s Target AIP hereunder.
     (b) Cause . Termination for “Cause” shall mean termination by CBI of Executive’s employment for Executive’s:
     (i) willful failure to substantially perform Executive’s duties with CBI;
     (ii) breach of Executive’s duty of loyalty toward CBI;
     (iii) commission of an act of dishonesty toward CBI, theft of CBI’s corporate property, or usurpation of CBI’s corporate opportunities;
     (iv) unethical business conduct including any violation of law connected with Executive’s employment at CBI; or
     (v) conviction of any felony involving dishonest or immoral conduct.
     For purposes of this Section 1(b), an act or failure to act by Executive shall be considered “willful” only if Executive’s conduct was not in good faith and Executive lacked a reasonable belief that Executive’s act or omission was in the best interests of CBI.

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     (c) Code . “Code” shall mean the United States Internal Revenue Code of 1986, as amended.
     (d) Competitor . For purposes of this Agreement, “Competitor” means an individual, partnership, firm, corporation or other business organization or entity that materially competes with a significant business owned or operated by CBI, its parent companies, or affiliates as of the Date of Termination, the names of which shall be made available to Executive at the time of Executive’s separation from the CBI and upon reasonable request. As of the date of this Agreement, the definition of a Competitor includes, but is not limited to, the following businesses: The Coca-Cola Company, PepsiCo, Inc., Nestlé S.A., Kraft Foods Inc., Hershey Foods Corporation, Ferrero SpA, Mars, Incorporated, Groupe Danone S.A., and Wm. Wrigley Jr. Company. The list of companies set out above or provided to Executive shall be deemed to include all direct and indirect subsidiaries and divisions of these companies.
     (e) Date of Termination . “Date of Termination” shall mean the date Executive’s employment with CBI is terminated.
     (f) Disability or Disabled . “Disability” or “Disabled” shall mean Executive’s inability, because of incapacity due to physical or mental illness or injury and notwithstanding reasonable accommodation, to perform the essential functions of Executive’s position with CBI on a full-time basis for at least six consecutive months.
     (g) Equity Incentive Plans . “Equity Incentive Plans” shall mean any stock option, stock purchase or other stock incentive plan maintained by CBI Holdings Inc. or any parent or affiliated company.

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     (h) Good Reason . Termination for “Good Reason” shall mean a termination by Executive of Executive’s employment with CBI for any of the following reasons:
     (i) CBI’s failure to perform any of its material obligations under this Agreement;
     (ii) unless otherwise agreed or waived, notice of a proposed relocation by CBI of Executive’s principal place of employment to a site outside a fifty (50) mile radius of the current site of Executive’s principal place of employment; or
     (iii) the failure by a successor in interest to CBI to expressly assume CBI’s obligations under this Agreement.
     A termination by Executive for Good Reason may not occur unless the Executive has given notice to CBI within 90 days of Executive’s knowledge of the initial existence of a condition described in clauses (i) through (iii) above, and CBI shall have a period of at least thirty (30) days (the “Correction Period”) during which it may remedy the condition. If CBI remedies the condition within the Correction Period, Executive may not terminate for that Good Reason event.
     A termination for “Good Reason” may occur only within thirty (30) days following the expiration of the Correction Period.
     (i) Notice of Termination . “Notice of Termination” shall mean a notice that (i) indicates the specific termination provisions in this Agreement relied upon, (ii) sets forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of Executive’s employment under the provisions so indicated, and (iii) is given in conformity with the provisions of Section 12 of this Agreement.

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     (j) Qualified Pension Plan . “Qualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate and which is intended to be qualified under Section 401(a) of the Code.
     (k) Nonqualified Pension Plan . “Nonqualified Pension Plan” shall mean each pension plan adopted by CBI Holdings Inc., as such plan may be in effect from time to time, in which Executive is eligible to participate, but only to the extent such plan is designed to provide benefits which would otherwise be provided in the Qualified Pension Plan but for the limitations of the Code.
     (l) Pension Plans . “Pension Plans” shall mean, collectively, the Qualified Pension Plans and the Nonqualified Pension Plans.
     (m) Without Cause . Termination “Without Cause” shall mean a termination by CBI of Executive’s employment for any reason other than death, Disability, or Cause.
     2.  TERM .
     The term of this Agreement shall commence on the date first set forth above , and shall continue thereafter for a period of ten (10) years, at which time it shall expire unless sooner terminated in accordance with the provisions of this Agreement or by mutual written agreement of the parties on such terms and conditions as such written agreement may specify.
     3.  POSITION AND DUTIES .
     (a) Executive shall serve in such executive capacity as CBI may determine from time to time and with such authority, duties and responsibilities as are commensurate with such position and as are typically performed by executives holding such position in business organizations of a size and nature similar to that of CBI, and

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shall perform such other services for CBI and its affiliated companies as may be assigned to Executive from time to time by the Board of Directors of CBI and as are consistent with the position of an executive officer.
     (b) Executive shall devote substantially all of Executive’s business time and attention to the business and affairs of CBI and shall perform the duties set forth herein faithfully and diligently and to the best of Executive’s ability, experience and talents, acting solely in the best interest of CBI and subject to the lawful direction of the Board of Directors of CBI. Executive agrees to abide by all Bylaws, policies, practices, procedures and rules of CBI. During the term of this Agreement, Executive agrees not to be employed by or perform services for any other person, business or organization without the prior written consent of the Board of Directors of CBI; provided, however, (1) that nothing in this Section 3(b) shall prevent Executive from devoting a reasonable amount of time to charitable, municipal or public service work or service on the boards of directors of other companies so long as such work and service does not interfere with Executive’s employment pursuant to this Agreement or otherwise violate any term or provision of this Agreement and (2) that service on the board of directors of another company requires approval in writing in advance from the Chairman and Chief Executive Officer of Cadbury Schweppes plc or its successor.
     4.  COMPENSATION .
     As full compensation to Executive for the performance of the services hereunder and for Executive’s acceptance of the responsibilities described herein, CBI agrees to pay Executive and Executive agrees to accept the following salary and other benefits during the term of this Agreement and any extension hereof.

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     (a) Base Salary . CBI shall pay Executive a base salary at an annualized rate equal to Executive’s current base salary as of the date hereof or at such higher rate as the Compensation Committee or Board of Directors of CBI may from time to time determine at their sole discretion, payable in accordance with the standard payroll practices of CBI. The base salary shall be subject to all applicable withholding and other taxes that Executive is obligated to pay or that CBI may be required by law to withhold from time to time.
     (b) Compensation and Benefit Programs . Executive shall be entitled to participate in all employee compensation and benefit plans, programs and practices of CBI or CBI’s parents or affiliates now or hereafter made generally available to CBI’s senior executives, as such programs may be in effect from time to time, including incentive compensation, equity compensation, health, welfare and retirement arrangements.
     (c) Expenses . Executive shall be entitled to receive proper reimbursement by CBI for all reasonable, out-of-pocket expenses incurred by Executive (in accordance with the policies and procedures established by CBI for its senior executives) in performing services under this Agreement, provided Executive submits reasonable documentation for such expenses.
     5.  TERMINATION .
     Subject to the provisions of Section 6, employment pursuant to the terms of this Agreement shall terminate upon the occurrence of any of the following events:
     (a) expiration of term;
     (b) written Notice of Termination by CBI;

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     (c) written Notice of Termination by Executive;
     (d) Executive’s death;
     (e) Executive’s Disability.
     6.  COMPENSATION UPON TERMINATION OF EMPLOYMENT .
     The following will apply upon termination of employment pursuant to the terms of this Agreement.
     (a) Termination Upon Expiration of Term . In the event this Agreement expires at the end of the term hereof in accordance with Section 2 and Executive’s employment is terminated by CBI on or after such expiration and termination, Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans, the AIP and CBI’s policies and practices. Executive’s rights under Equity Incentive Plans and any other similar plans in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (respectively), copies of which have been or will be made available to Executive. CBI shall have no further obligations to Executive under this Agreement.
     (b) Termination for Cause or Not for Good Reason . If during the term of this Agreement, Executive’s employment is terminated for Cause or if Executive effects termination other than for Good Reason, CBI shall pay Executive his or her full salary through the effective date of such termination at the rate in effect on the date CBI or Executive, as the case may be, notifies the other party of such termination, and CBI shall have no further obligations to Executive under this Agreement. In the event of such

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termination, Executive shall not be entitled to receive any payment under the AIP for the year in which Executive’s Date of Termination occurs or any later year.
     (c) Termination Without Cause or for Good Reason . If CBI shall terminate Executive’s employment Without Cause during the term of this Agreement, or if Executive shall terminate Executive’s employment for Good Reason during the term of this Agreement, then Executive shall be entitled to receive the base salary, benefits and AIP owing to Executive as of the Date of Termination, in accordance with the applicable terms and provisions of the employee benefit plans in which Executive is a Participant, the AIP and CBI’s policies and practices. CBI shall have no further obligations to Executive under this Agreement; provided, however, that, subject to the satisfaction of the conditions in Sections 6(f) and 6(g) hereof, and provided that Executive complies with the covenants of non-disclosure, non-solicitation and non-competition contained in Sections 14 and 15 of this Agreement, Executive shall be entitled to the payments and benefits specified in this Section 6(c). In the event of a breach by Executive of any of his obligations pursuant to Sections 14 or 15, CBI’s payment obligations pursuant to this Section 6(c) shall cease immediately as of the date of such breach, and CBI shall have no further obligations to Executive under this Agreement.
     (i) Salary . CBI shall pay to Executive an amount equal to Executive’s annual base salary. Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination.
     (ii) AIP . CBI shall pay to Executive an amount equal to Executive’s Target AIP award, as defined in Section 1(a). Such amount shall be paid in a lump sum within thirty (30) days of the Date of Termination. CBI shall also pay

9


 

to Executive his pro rata portion of his actual AIP award under the AIP for the year in which the Date of Termination occurs. Such payment shall be calculated in accordance with the AIP. Such pro rata amount shall be paid to Executive by CBI in a lump sum within two and one-half months following the end of the year in which the Date of Termination shall have occurred. The payments under this Section 6(c)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Date of Termination occurs or any later year. In addition to the foregoing, CBI shall pay Executive any accrued award Executive may have earned under the AIP for any CBI fiscal year prior to the Date of Termination which has not been paid.
     (iii) Continuation Payments . Subject to offset as provided in the last sentence of this Section 6(c)(iii), CBI shall pay Executive an amount equal to the aggregate of Executive’s annual base salary plus Executive’s Target AIP, as defined in Section 1(a), in effect on the Date of Termination. Such amount will be paid ratably by CBI to Executive within the regular payroll cycles during the 12 month period following the Date of Termination, unless such amount exceeds an amount (“Unrestricted Amount”) equal to two times the lesser of (A) the Executive’s annual compensation based on the annual rate of pay from CBI for the calendar year preceding the calendar year of the Date of Termination (adjusted for any increase in such annual rate of pay during the calendar year of the Date of Termination that was expected to continue indefinitely if the Executive had not terminated employment) and (B) the maximum amount that can be taken into account under a qualified plan pursuant to Section 401(a)(17) of the Code. If the

10


 

amount exceeds the Unrestricted Amount, then no more than the Unrestricted Amount may be paid in the six months following the Executive’s Date of Termination and the monthly pro rata payments shall be reduced to comply with this limitation. If the monthly payments are reduced to comply with such limitation, any amount not paid in the initial six months following the Date of Termination shall be paid in a lump sum six months and two days after the Date of Termination and thereafter the ratable payments shall continue through the remainder of the 12 month period following the Date of Termination. If Executive secures full time employment within such twelve (12) month period, then commencing on the date of such new employment, the payments under this Section 6(c)(iii) shall be offset by the base salary Executive earns from such new employer and the target annual bonus or other cash bonus established for Executive by such new employer, in each case pro-rated to reflect the amount of such new base salary and bonus which is allocable to the remainder of such twelve (12) month period, calculated by multiplying such award by a fraction, the numerator of which is the number of weeks commencing on the date of new employment through the end of such twelve (12) month period, and the denominator of which is 52.
     (iv) Benefit Plans . CBI shall continue Executive’s participation in the medical, dental and vision plans of CBI (or shall provide equivalent benefits) for a period of twelve (12) months following the Date of Termination at the same rates as an active employee or, if earlier, the commencement of equivalent benefits by Executive’s new employer; provided that if Executive shall die before the

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expiration of the period during which CBI would be required to continue Executive’s participation in such plans, the participation of Executive’s surviving spouse and family in such plans shall continue throughout such period at the same rates as an active employee to Executive’s surviving spouse and family. Executive’s participation in CBI’s life and disability plans and Executive’s travel accident insurance under CBI’s group plan shall terminate on the Date of Termination. Following termination of coverage under any CBI benefit plan, Executive may continue coverage at Executive’s own expense if permitted by the terms of the applicable plan. At Executive’s option, Executive may continue medical coverage under COBRA at Executive’s own expense for the maximum period provided by COBRA, calculated from the Date of Termination, unless otherwise provided by law. Within sixty (60) days of the Date of Termination, Executive may, at Executive’s option, surrender Executive’s CBI company car or purchase such vehicle at a price equal to the greater of (i) 100% of its wholesale value, or (ii) the remaining lease payments; provided, that the price shall, in no event, be less than fair market value as of the Date of Termination of the company car as determined in good faith by CBI. Executive’s participation in CBI’s Employee Services Allowance (“ESA”) shall end on the Date of Termination, and no ESA payments regularly scheduled to be paid after the Date of Termination shall be paid to Executive.
     (v) Qualified Pension Plan . CBI shall pay Executive, in a lump sum within sixty (60) days of the Date of Termination, an amount equal to the difference, if any, between the present value of Executive’s accrued benefit,

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whether or not vested, as of the Date of Termination under the Qualified Pension Plan, and the present value of the vested portion of such accrued benefit, with such difference to be calculated, to the extent relevant, using the actuarial assumptions and interest rates specified in the Qualified Pension Plan. The vested portion of such accrued benefit, if any, shall be paid in accordance with the provisions of the Qualified Pension Plan.
     (vi) Nonqualified Pension Plan . CBI shall pay Executive an amount equal to the lump sum which would have been payable under the Nonqualified Pension Plan had Executive (A) been completely vested in Executive’s full accrued benefit under the Nonqualified Pension Plan, (B) been eligible for normal retirement under the Nonqualified Pension Plan, and (C) retired as of the Date of Termination. Such benefit shall be calculated, to the extent relevant, using the actuarial assumptions specified in the Nonqualified Pension Plan. The payment under this Section 6(c)(vi) shall be paid within six months and two days of the Date of Termination, and shall be made in lieu of any and all payments otherwise due under the Nonqualified Pension Plan.
     (vii) Outplacement and Job Search Expenses . CBI will, at its expense, make available to Executive the services of an outplacement firm designated by CBI. In addition, CBI will reimburse Executive for reasonable out-of-pocket job search expenses incurred by Executive for a period of up to twelve (12) months following the Date of Termination, provided that such expenses shall not exceed $300 per month and shall be properly documented.

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     (viii) Equity Incentive Plan; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (d) Termination Due to Death . The employment of Executive under this Agreement shall terminate upon Executive’s death. In the event of the death of Executive during the term of his employment hereunder, CBI shall have no further obligations to Executive under this Agreement, except that the estate or any other legal representative of Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay to Executive’s estate or other legal representatives the base salary as provided in Section 4(a) above, at the rate in effect at the time of Executive’s death through the end of the month in which Executive dies.
     (ii) AIP . CBI shall pay to Executive’s estate or other legal representative the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s death occurs. Such payment shall be calculated by multiplying such Target AIP award by a fraction, the numerator of which is the number of weeks in the applicable year which precedes the date of death and the denominator of which is 52. Such amount shall be paid by CBI in a lump sum within thirty (30) days of the date of death. The payments under this Section 6(d)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s death occurs.

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     (iii) Equity Incentive Plans; Other Benefit Plans . Executive’s right to exercise options under the Equity Incentive Plans, and right to receive benefits under any other similar plans (if any) in which Executive is a participant shall be governed by the terms and conditions of the Equity Incentive Plans and such other plans (if any), copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive’s estate or other legal representative all of the amounts and shall provide all benefits generally available under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (e) Termination Due to Disability . The employment of Executive under this Agreement shall be terminated on the date that Executive becomes Disabled, as determined by the written opinion of the licensed physician regularly attending Executive. If CBI disagrees with this opinion, CBI may, at its own expense, engage a second physician to examine Executive. If Executive’s physician and CBI’s physician agree in writing that Executive is or is not Disabled, their written opinion shall, except as otherwise set forth in this paragraph 6(e), be conclusive as to Executive’s Disability. If the physicians disagree as to Executive’s Disability, they shall select a third physician to make the determination, whose written opinion shall be conclusive and binding on the issue of Disability. The date of any written opinion conclusively finding Executive to be Disabled shall be the effective date of Disability for purposes of this paragraph 6(e). In the event of termination due to Disability, CBI shall have no further obligations to

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Executive under this Agreement, except that Executive shall be entitled to receive the following:
     (i) Base Salary . CBI shall pay Executive the base salary as provided in Section 4(a) above at the rate in effect at the time Executive becomes Disabled through the end of the month in which Executive’s employment terminates due to Disability.
     (ii) AIP . CBI shall pay Executive the pro-rata portion of Executive’s Target AIP award under the AIP for the year in which Executive’s Disability occurs, computed as in Section 6(d)(ii) above but substituting Disability for death. The payments under this Section 6(e)(ii) shall be made in lieu of any and all payments otherwise due under the AIP for the year in which Executive’s Disability occurs.
     (iii) Equity Incentive Plans . Executive’s right to exercise options under the Equity Incentive Plans shall be governed by the terms and conditions of the Equity Incentive Plans, copies of which have been made available to Executive.
     (iv) Other Benefits . CBI shall pay to Executive the amounts and shall provide all benefits generally available to similarly situated executives under the employee benefit plans, and the policies and practices of CBI, determined in accordance with the applicable terms and provisions of such plans, policies and practices.
     (f) Mitigation . Executive agrees to use reasonable efforts to secure other employment but shall not otherwise be required to mitigate the amount of any payment provided for in this Section 6; provided, however, that in the event Executive secures

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other employment, any continuation payments otherwise due Executive shall be subject to offset as provided in Section 6(c)(iii) above.
     (g) Release of Claims . Any other provisions of this Agreement notwithstanding, Executive shall not be entitled to any compensation under Section 6(c)(i) through 6(c)(vii) hereof following termination of employment unless and until Executive shall have executed a release of all of Executive’s rights and claims (other than to compensation or other matters to which Executive is entitled under this Agreement following termination of employment) against CBI, its officers, directors, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates with respect to all matters relating to CBI or its parent companies, subsidiaries, or affiliates existing at the time of Executive’s execution of the release, and such release has become binding upon and irrevocable by the Executive. The release shall be in substantially the form of Exhibit A hereto, or such variation thereof as CBI reasonably determines to be necessary to comply with then applicable law or otherwise appropriate to secure a release of all the aforesaid rights and claims of Executive. If a release satisfactory to CBI has not become binding and irrevocable within sixty (60) days after the Date of Termination, the conditions of this Section 6(g) shall not be satisfied, the Executive shall not have any right to the compensation provided under Section 6(c)(i)-(vii), each of which is additional compensation to which the Executive would otherwise not be entitled, and CBI shall have no further obligations to Executive under this Agreement.

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     (h) In the event that CBI subsequently determines that termination for Cause was warranted, CBI may cease payments and benefits hereunder and the Executive is required to repay to CBI each of the payments and benefits set forth in Section(c)(i)-(vii).
     7.  FURTHER BENEFITS .
     Upon termination of the employment of Executive, Executive shall accrue no further benefits under the Pension Plans and shall make no further contributions to any Pension Plan or other benefit plan permitting employee contributions.
     8.  RIGHT TO TERMINATE; SOURCE OF PAYMENTS .
     (a) Right to Terminate by CBI . CBI may terminate Executive’s employment at any time upon written notice to Executive subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (b) Right to Terminate by Executive . Executive may terminate his or her
employment with CBI at any time for Good Reason or otherwise upon written notice to CBI, subject to Executive’s right to receive the payments and benefits specified in this Agreement.
     (c) Source of Payments . All payments provided for in this Agreement shall be paid in cash from the general funds of CBI or from any special or separate trust or fund to be established in connection herewith. To the extent that any person acquires a right to receive payments from CBI hereunder, whether or not any funds are segregated by CBI for such purpose, such right shall be no greater than the right of an unsecured creditor of CBI.

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     9.  AMENDMENTS; WAIVER .
     This Agreement may not be changed orally, but only by an agreement in writing signed by the party against whom enforcement of any waiver, change, modification, extension or discharge is sought. The waiver by either party of compliance with the provisions of this Agreement by the other party shall not operate or be construed as a waiver of any subsequent breach by such party. Notwithstanding the foregoing, CBI may amend this Agreement to the extent it determines in good faith that an amendment is necessary to comply with the requirements of Section 409A of the Code, provided that such amendment preserves, as near as possible, the economic benefits of the Agreement to both parties. The provisions of Sections 14, 15, 16, 17 and 21 shall survive termination of this Agreement.
     10.  BINDING AGREEMENT .
     This Agreement shall be binding upon and inure to the benefit of the parties hereto, any successors to the business of CBI, Executive’s heirs and the personal representatives of Executive’s estate.
     11.  ASSIGNMENT .
     This Agreement shall not be assigned by either Executive or CBI except that CBI may assign this Agreement to any successor in interest of CBI whether by merger, consolidation, purchase of assets or otherwise, provided, however, that in connection with such an assignment CBI will require a successor in interest to fully assume all of CBI’s obligations hereunder.
     12.  NOTICES .
     Any notice required or permitted hereunder shall be deemed sufficiently given if in writing and either personally delivered or sent by certified or registered mail, postage pre-paid,

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addressed to the party at the address set forth below or at such other address as the party may subsequently designate:
         
 
  (a)   Executive:
 
      John L. Belsito
 
      166 West 88th Street
 
      New York, NY 10024
 
       
 
  (b)   CBI:
 
      CBI Holdings Inc.
 
      5301 Legacy Drive
 
      Plano, TX 75024
 
      Attn: General Counsel
 
       
 
  copy to:   Cadbury Schweppes plc
 
      25 Berkeley Square
 
      London, England W 1 X 6HT
 
      Attn: Chief Legal Officer and Company Secretary (Group)
Any such notice will be deemed given upon delivery, if delivered in person, or upon the date of mailing, if sent by certified or registered mail.
     13.  ENTIRE AGREEMENT .
     This Agreement supersedes any prior agreements or understandings, oral or written, with respect to the employment of Executive and constitutes the entire agreement with respect thereto. It cannot be changed or terminated orally and may be modified only by a subsequent written agreement executed by both parties hereto. In addition, the Executive will not be eligible to participate in any other severance pay plan, program or practice that may be adopted from time to time.
     14.  CONFIDENTIALITY .
     (a) Executive agrees and acknowledges that, during the term of this Agreement, CBI promises to provide and Executive will have access to and acquire certain trade secrets and confidential information of CBI and of corporations affiliated

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with CBI that is not generally available to the public, and that such information constitutes valuable, special and unique property of CBI and its affiliates that, if disclosed, could put CBI or its affiliates at a competitive disadvantage (the “Confidential Information”). Such Confidential Information includes but is not limited to methods, techniques, specifications, devices, systems, designs, formulae, models, patents and trademarks, manuals, lists of customers and prospective customers, customer requirements, vendor information and relationships, price lists and other pricing information and analyses, data used to prepare bids, marketing plans and other market information and analyses, business, strategic and operating plans, financial statements and other financial information, training techniques, and other confidential and proprietary information and documents regarding the business of CBI and its affiliates.
     (b) As a material inducement to CBI to enter into this Agreement and to provide Executive the compensation and other consideration set forth herein, Executive agrees that, without the prior written consent of CBI, Executive will not, during or after the term of Executive’s employment with CBI, directly or indirectly use or disclose any such Confidential Information to any person or entity for any reason or purpose whatsoever, except as may be required by law or as may be required in the course of Executive’s performance of his or her duties at CBI.
     (c) Executive acknowledges and agrees that all files, records, documents, plans, specifications, equipment, information, computer files, and similar items and materials relating to CBI’s business shall remain the sole property of CBI and shall immediately be returned to CBI upon CBI’s request or upon the termination of this Agreement for any reason, and that Executive shall keep no copies thereof. The

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provisions of this Section 14 shall survive the termination of this Agreement and shall be binding upon any successor or assign of Executive.
     15.  NON-COMPETITION AND NON-SOLICITATION .
     (a) Consideration . Executive acknowledges and agrees that Executive has received, and will continue to receive, substantial and valuable consideration for the agreements set forth in this Section, including but not limited to access to Confidential Information, which CBI hereby promises to provide to Executive; specialized training related to CBI’s services, business practices and Confidential Information; post-termination payments; and other compensation and benefits as described in this Agreement.
     (b) Non-Solicitation of Customers and Employees . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that during employment and for a period of twelve (12) months following the Date of Termination, whether for Executive’s own account or for the account of any other individual, partnership, firm, corporation or business organization, Executive shall not either directly or indirectly solicit or endeavor to entice away from CBI any person who is employed by or otherwise engaged to perform services for CBI (or its affiliates) or to interfere with the relationship of CBI (or its affiliates) with any person who then is a customer of CBI.
     (c) Non-Competition . As a material inducement for CBI to provide Executive with the consideration set forth in Sections 4(a), 4(b) and 15(a) above, and as a condition to receipt of the benefits set forth in Section 6(c), Executive agrees that, for a period of

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twelve (12) months following the Date of Termination, Executive shall not become employed in an executive capacity by any Competitor of CBI within the United States, Canada or any other region in which CBI or its current or former affiliates operates or has operated and in which Executive has directly or indirectly rendered services during the last thirty-six (36) months of Executive’s employment and, further, Executive shall not provide services of a similar or comparable type and character to those provided by Executive to CBI during the last thirty-six (36) months of Executive’s employment with CBI, whether as an employee, officer, director, partner, shareholder, consultant or otherwise, to any Competitor of CBI within the United States, Canada or any region in which Cadbury Schweppes plc operates and in which Executive has rendered services during Executive’s employment; provided, however, that this Section 15 shall not prohibit Executive’s ownership, either directly or indirectly, of less than 1% of any class of publicly traded securities of any entity, and provided further that this Section 15 shall not prohibit Executive’s employment as an employee or officer or Executive’s performance of services as a consultant with any Competitor if Executive is not directly or indirectly involved in the aspects of such Competitor’s business that are competitive with CBI.
     16.  JUDICIAL AMENDMENT .
     Executive and CBI acknowledge the reasonableness of the agreements set forth in Sections 14 and 15 above and the reasonableness of the geographic area, duration of time and subject matter that are part of the covenant not to compete contained in Section 15(c). Executive further acknowledges that Executive’s skills are such that Executive can be gainfully employed in noncompetitive employment and that the agreement not to compete will in no manner prevent Executive from earning a living. Notwithstanding the foregoing, in the event it is judicially

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determined that any of the limitations contained in Section 15 are unreasonable, illegal or offensive under any applicable law and may not be enforced as agreed herein, the parties agree that the unreasonable, illegal or offensive portions of Section 15, whether they relate to duration, area or subject matter, shall be and hereby are revised to conform with all applicable laws and that the Agreement, as modified, shall remain in full force and effect and shall not be rendered void or illegal.
     17.  IRREPARABLE INJURY .
     Executive acknowledges that CBI has invested substantial time, labor, skill and money in developing the Confidential Information to be provided to Executive. Executive further acknowledges that the Confidential Information to be provided to Executive, and the services Executive is to render to CBI, are such that any breach of the covenants contained in Sections 14 and 15 above by Executive would cause CBI irreparable harm and injury and would damage CBI in a way that could not be adequately compensated by monetary damages. Accordingly, the parties agree that CBI’s remedies may include a temporary restraining order, preliminary injunction, or other injunctive relief against any threatened or actual breach of Sections 14 or 15 by Executive. Executive acknowledges that this injunctive relief shall be in addition to any other legal or equitable relief to which CBI may otherwise be entitled under applicable law.
     18.  HEADINGS .
     The headings used in this Agreement are for convenience only and shall not be deemed to curtail or affect the meaning or construction of any provision under this Agreement.
     19.  WITHHOLDING .
     All payments or benefits to Executive under this Agreement shall be reduced by any amounts required to be withheld by CBI under applicable tax laws, including U.S. Federal, state,

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or local income tax laws or similar laws then in effect as well as the laws of other countries while on international assignment. In the event new tax legislation results in additional taxation to the Executive or CBI which may be avoided by amendment to this Agreement with no material financial impact to Executive or CBI, then this Agreement shall be so amended by written agreement of the parties.
     20.  OTHER PLANS .
     Except as otherwise provided in this Agreement, the terms of the AIP, Pension Plans, Equity Incentive Plans and any other CBI option plan, bonus plan or benefit plan (as the same may be amended from time to time) or any agreements entered into pursuant to such plans, shall remain in full force and effect. Except as expressly provided herein, if there is any conflict between this Agreement and the Plans described above in this Section 20, the terms of the applicable Plan documents shall control.
     21.  ARBITRATION .
     Any controversy or claim, other than an action for injunctive or equitable relief for unfair competition or to enforce the confidentiality, noncompete or nonsolicitation provisions set forth in Sections 14 and 15, arising out of or relating to (a) this Agreement or the breach thereof, (b) Executive’s employment with CBI, or (c) the termination of Executive’s employment with CBI, (including but not limited to claims arising under applicable employment-related statutes, including without limitation Title VII of the Civil Rights Act of 1964, the Age Discrimination in Employment Act, the Americans with Disabilities Act, the Rehabilitation Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, the American Jobs Creation Act of 2004, or the Fair Labor Standards Act, applicable state fair employment practices statutes, and claims for retaliation arising under applicable workers’ compensation statutes; as well as

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employment-related common-law tort claims, including without limitation claims for negligence, intentional torts, post-termination defamation (e.g., employment references), violation of privacy rights, fraud, misrepresentation, unjust enrichment, tortious interference and/or promissory estoppel), which is not settled by agreement among the parties shall be resolved by final and binding arbitration, to be held in a metropolitan area located within fifty (50) miles of the location at which Executive is employed, in accordance with the employment arbitration rules and procedures of the American Arbitration Association. Neither party shall initiate or prosecute any lawsuit in any way related to any claims; provided, however, that the provisions of this Section 21 do not limit Executive’s right to file an administrative charge with the Equal Employment Opportunity Commission. Judgment upon the award rendered may be entered and enforced in any court having jurisdiction thereof.
     22.  VALIDITY; APPLICABLE LAW .
     The invalidity or unenforceability of any provisions of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect, and the invalid or unenforceable term or provision shall be deemed replaced by a term or provision that is valid and enforceable and that comes closest to expressing the intention of the invalid or unenforceable term or provision. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State in which Executive is employed .

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     IN WITNESS WHEREOF, CBI has caused this Agreement to be executed by its duly authorized officer, and Executive has hereunto subscribed his or her name, all as of the day, month and year first above written.
                 
CBI Holdings Inc.       Executive    
 
               
By:
  /s/ James L. Baldwin       /s/ John L. Belsito    
 
               
 
  James L. Baldwin       John L. Belsito    
 
  Executive Vice President            

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EXHIBIT “A”
GENERAL RELEASE
     This General Release (the “Release”) is executed as of this                      day of                      , 20___, by and between John L. Belsito (“Executive”) and CBI Holdings Inc. (“CBI”) for purposes of evidencing the covenants, obligations and undertakings of such parties set forth below.
     WHEREAS, CBI and Executive entered into an agreement of employment (the “Agreement”) dated October 15, 2007; and
     WHEREAS, Executive’s employment with CBI was terminated effective as of                      , 20___, pursuant to Paragraph 6(c) of the Agreement;
     NOW THEREFORE, as a condition to, and in consideration of, payment by CBI of the benefits specified in Paragraph 6(c) of the Agreement, Executive hereby agrees as follows:
     1. Executive, for himself and on behalf of Executive’s agents, attorneys, heirs, executors, administrators, successors and assigns, hereby irrevocably releases, acquits, discharges and forever forgives CBI, its past and present officers, directors, shareholders, representatives, agents, servants, and employees, and their respective successors, assigns, insurers, parent companies, subsidiaries, and affiliates, and all persons acting by, through, under or in concert with them, (the “Releasees”) from any and all claims, causes of action, suits, controversies, appeals, grievances, promises, agreements, damages, rights, debts, liabilities, costs, losses, personal injuries and any other compensation whatsoever, whether presently known or unknown, liquidated or unliquidated, matured or contingent, arising at any time through the date of the execution of this Agreement. This Release covers any and all claims, regardless of whether they arose in contract or in tort or are based upon statutes, laws or rules, regulations, common law principles or otherwise, and includes but is not limited to claims arising under Title VII of the Civil Rights Act of 1964, as amended, the Americans with Disabilities Act, the Age Discrimination in Employment Act, the Pregnancy Discrimination Act, the Equal Pay Act, the Fair Labor Standards Act, the Family and Medical Leave Act, the Employee Retirement Income Security Act, COBRA, the Occupational Safety and Health Act, or any other federal, state or local statute, law or regulation relating to employment; common-law claims for breach of contract, quantum meruit, reformation of contract, breach of implied covenant of good faith and fair dealing, debt, wrongful discharge, defamation, invasion of privacy, infliction of emotional distress, tortious interference, misrepresentation, fraud, conspiracy, negligence or gross negligence; and any other statutory or common-law cause of action, whether or not relating to Executive’s employment with CBI; provided, however, that this Release does not include any claims Executive may have to compensation or benefits to be provided to Executive following termination of Executive’s employment with CBI pursuant to Section 6(c) of the Agreement, any rights Executive may have (subject to the provisions of Section 6(c) of the Agreement) under any pension or benefit plan in which Executive was or is a participant, and any indemnification rights Executive may have under company bylaws or insurance.

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     2. Executive covenants and agrees that, to the fullest extent permitted by law, Executive will not bring any legal action against any of the Releasees for any claim waived and released under this Release and represents and warrants that no such claim has been filed to date. Executive agrees that should any person, organization or other entity institute or file a civil action, suit or legal proceeding against the Releasees on Executive’s behalf involving any matter occurring at any time in the past up to and including the date on which Executive executes this Release, Executive shall not seek or accept any personal, equitable or monetary relief in such civil action, suit or legal proceeding.
     3. Executive agrees that the terms and conditions of this Release are confidential and that Executive will not, directly or indirectly, disclose the fact of or terms of this Release to anyone other than Executive’s attorney or tax advisor, except to the extent such disclosure may be required for accounting or tax reporting purposes or otherwise be required by law or direction of a court. Nothing in this provision shall be construed to prohibit Executive from disclosing this Release to the Equal Employment Opportunity Commission in connection with any complaint or charge submitted to that agency.
     4. Executive agrees not to make any comments relating to the Releasees that are critical, disparaging or derogatory or that may tend to injure the business of the Releasees and agrees not to encourage any person, corporation or entity to sue or not to do business with the Releasees.
     5. Effective as of the Termination Date, Executive hereby resigns from any and all positions as an officer or director of CBI or its affiliates and subsidiaries, and agrees to execute any documents required for the purpose of effecting such resignation.
     6. The provisions of this Release are severable. If any provision is held to be invalid or unenforceable, it shall not affect the validity or enforceability of any other provision. One or more waivers of a breach of any covenant, term or provision of this Release by any party shall not operate or be construed as a waiver of any subsequent breach of the same covenant, term or provision, nor shall it be construed as a waiver of any other then existing or subsequent breach of a different covenant, term or provision.
     7. This Release sets forth the entire agreement between CBI and Executive and supersedes any and all prior oral or written agreements or understandings concerning the subject matter of this Release. This Release may not be altered, amended or modified, except by a further written document signed by a duly authorized representative of CBI and Executive.
     8. This Release is made within the State of New York and shall in all respects be interpreted, enforced and governed by the laws of the State of New York.
     9. This Release shall be binding upon Executive, his heirs, administrators, representatives, executors, successors and assigns, and shall inure to the benefit of the Releasees and their respective administrators, representatives, successors and assigns.

A- 2


 

     10. Executive acknowledges that this Release is in full settlement, satisfaction, and discharge of any and all claims, demands, actions, and causes of action released by Executive, and that it applies to all claims, whether known or unknown. Executive further acknowledges that the consideration to be provided pursuant to the Agreement upon execution of this Release represents amounts and benefits greater than Executive would be entitled to receive if Executive were not to execute this Release. Executive represents and warrants that Executive has full power and authority to enter into and execute this Release. Executive represents that Executive has carefully read and fully understands all the provisions of this Release, that Executive has been advised to consult with an attorney of Executive’s choice and has had the opportunity to do so, and that Executive is freely, knowingly and voluntarily entering into this Release without reliance on any representations of any kind or character not set forth herein.
     11. Executive acknowledges that Executive has been provided at least twenty-one (21) days after receipt of this Release to decide whether to sign the Release and be bound by its terms, and that Executive has considered the terms of this Release for at least twenty-one (21) days or knowingly and voluntarily waived Executive’s right to do so. Executive further acknowledges and understands that Executive has the right to revoke this Release for a period of seven (7) days after Executive has signed it.
     IN WITNESS WHEREOF, the parties hereto have executed this General Release as of the date first above written.
                 
EXECUTIVE       CBI HOLDINGS INC.    
 
               
             
 
               
 
      By:        
 
               
 
               
 
      Its:        
 
               

A- 3

 

Exhibit 10.18
October 3, 2007
Gilbert M. Cassagne
5939 Deloache Avenue
Dallas, TX 75225
Dear Gil,
The purpose of this letter is to outline the details of your employment with CBI Holdings Inc or its subsidiaries (the Company) through October 12, 2007, the Date of Termination under your Executive Employment Agreement (EEA). The Company has provided you with a new EEA as of the date of this letter and the terms of this letter are expressly subject to your execution of the new EEA and the Release required by the EEA.
Unless otherwise noted all defined terms used in this letter shall have the meaning set forth in the EEA.
OCTOBER 1 — OCTOBER 12, 2007
Announcement — On or about October 10, 2007, Cadbury Schweppes Americas Beverages will announce that you are resigning your position as President & Chief Executive Officer, effective October 12, 2007. You will have the opportunity to review the announcement in advance and to request reasonable changes; however, the final text shall be at the sole discretion of the Company.
Continued Employment — During this period you will remain an employee of the Company. It is not anticipated, however, that you will report to work at the Company’s Plano office or perform any substantive duties. Within these parameters you will make yourself reasonably available to answer inquiries by telephone or email.
Date of Termination — The Company hereby elects to terminate your employment Without Cause pursuant to Section 6 (c) of the EEA; your Date of Termination shall be October 12, 2007.
Base Salary — Your annual base salary will remain at (US) $900,000.
2007 Annual Incentive Plan (AIP) Award — You will remain eligible for a pro-rated 2007 AIP award, whose value will be dependent on actual business results and payable in March 2008 in accordance with the EEA.
Employee Share Purchase Plan (ESPP) — Up until October 12, 2007, you will continue to participate in the 2006 offering at a rate of $300 per pay period. You will not be eligible to participate in future offerings.
Benefits — You will continue to participate in all Health, Welfare, Savings (SIP and SSP) and Retirement (PPA PEP and SERP) plans in which you are actively participating through October 12, 2007.
Bonus Share Retention Plan (BSRP) —You will no longer be eligible to participate in future offerings of the Bonus Share Retention Plan.
Annual Vacation — You will receive pay for any vacation days outstanding at your Date of Termination.
Executive Service Allowance — After October 12, 2007, you will no longer be eligible to participate in the Executive Service Allowance benefit.
Outplacement — You will be entitled to the International Centre for Executive Options Program at the Company’s expense through Drake Beam Morin for a period of twelve months commencing at any time

Page 1 of 5


 

after October 12, 2007, but ending no later than December 31, 2009 . In addition, you will be reimbursed for reasonable out-of-pocket search expenses incurred during the 12 month period of such outplacement assistance provided that such expenses do not exceed US$300 per month and are properly documented.
AFTER OCTOBER 12, 2007 (FOLLOWING TERMINATION)
We acknowledge that you have been terminated “without cause” within the meaning of your EEA. The benefits payable to you following your Date of Termination include the following and are governed by the EEA and the terms of the applicable benefit plans. You acknowledge that you have no reason to believe that the benefits described below do not properly reflect the benefits due to you under the referenced benefit plans.
Lump Sum Payment — Within 30 days of your Date of Termination, you will receive a lump sum payment equivalent to $1,800,000, which consists of 100% of your full annual base salary ($900,000 x 100% = $900,000), plus 100% of your full AIP award at Target (100%X 100% x $900,000 = $900,000), less all applicable withholding, provided you have executed and returned the Release required by the EEA.
Salary Continuation — You will receive an amount equivalent to $1,800,000, which consists of 100% of your full annual base salary ($900,000 x 100% = $900,000), plus 100% of your full AIP award at Target (100% x 100% x $900,000 = $900,000), less all applicable withholding. This amount will be paid to you in bi-weekly increments until you have been paid $450,000 (at the end of three months), consistent with the payroll schedule in place for all active employees of the Company; provided you have executed and returned the Release required by the EEA. No amount will be paid during months four, five and six. As part of the first pay period following the second day of month seven you will be paid $450,000. Thereafter, biweekly payments of $69,230.77 will be made until the total of all continuation payments equals $1,800,000. This salary continuation shall be subject to the offset as provided in Section 6(c) (iii) of the EEA.
Benefits Continuation — For the period October 12, 2007 through October 11, 2008, or until you have commenced participation in equivalent benefits under other employment, whichever is earlier, you will continue to be eligible to participate in the medical, dental and vision plans, at the same level of expense as that charged to a similarly covered active employee. Upon the termination of such benefits you will be eligible to purchase medical and prescription drug coverage through COBRA. The cost is 102% of the premium inclusive of the administrative fees.
Please feel free to contact Cynthia Coker at 972-673-5734 if you have any questions pertaining to your health and welfare benefits.
Savings and Retirement Benefits — As soon as administratively possible following your separation you may withdraw and/or roll-over your accumulated balances in the Savings Incentive Plan (SIP). Your SSP payment will be deferred 6 months and 2 days following your Date of Termination.
As soon as administratively possible following your separation you may withdraw and/or roll-over all earned benefits available to you through the Personal Pension Account (PPA). Your Pension Equalization Plan (PEP) and Supplemental Executive Retirement Plan (SERP) payments will be deferred 6 months and 2 days following your Date of Termination. It will be paid in a lump sum payment and your final benefit will be determined using then current actuarial assumptions, interest and discount rates.
Please feel free to contact Bill Zeller at 972-673-6418 or Scott Baker at 972-673-5719 if you have any questions regarding your financial benefits.
Share options which have vested: You will be treated as a “good leaver” for the purposes of exercising your share options after the Date of Termination. The following unexercised share options will be available to exercise in the 12 months following 12 October 2007:
         
         
Leaving Letter ~ Executive Name       Page 2 of 5

 


 

                 
            Share Price
Date of Grant   Number of Shares   (£)
2 September 2000     150,000     £ 4.09  
1 September 2001     160,000     £ 4.77  
24 August 2002     175,000     £ 4.825  
10 May 2003     250,000     £ 3.515  
28 August 2004     160,000     £ 4.395  
Unvested Share options (exercisable subject to performance target): - Options granted under the 2004 plan will be available to exercise in the twelve months following the third anniversary of the date of grant, to the extent that the performance target has been met. Therefore, if the performance during the three-year vesting period means that 50% of an award becomes exercisable, you may exercise 50% of your share options. If the five-year performance target is met at the end of a further two years, you will be able to exercise the remaining 50% of the option within the following twelve months.
You should contact the Company to verify whether the performance target has been met, and whether the options can be exercised in part or in full, before the end of the initial three-year period.
                                                 
Date of   Number of   Share Price   3 Year Vesting   3 Year Exercise   5 Year Vesting   5 Year Exercise
Grant   Shares   (£)   Date   Date   Date   Date
2 April 2005
    145,500     £ 5.255     2 April 2008   1 April 2009   2 April 2010   1 April 2011
Bonus Share Retention Plan (BSRP) — You have chosen not to participate in the BSRP since the 2002 offering, thus there is no additional benefit owed to you.
Group Long-Term Incentive Plan (LTIP) - On the basis of your termination on October 12, 2007, the Company will procure that the Remuneration Committee approves you as eligible to receive awards under the following LTIP performance periods:
         
    Pro-rata Entitlement    
Performance Cycle   (Periods)   Date at which any Award is Due
2002 — 2004
  75.25 out of 78   March 2008
2003 — 2005
  62.25 out of 65   March 2008 (earliest)
2005 — 2007
  36.25 out of 39   March 2008
2006 — 2008
  23.25 out of 39   March 2009
2007 — 2009
  10.25 out of 39   March 2010
Awards on the basis of threshold and maximum performance are shown below, but actual awards will depend upon achievement against the targets for each performance cycle. Any award due at the end of each performance cycle shall be paid in full immediately and no part of the award will be deferred.
         
         
Leaving Letter ~ Executive Name       Page 3 of 5

 


 

                 
    Threshold Award   Maximum Award
Performance Cycle   (no. of shares)   (no. of shares)
2002 — 2004     25,885       56,084  
2003 — 2005     26,653       57,748  
2005 — 2007     27,347       68,369  
2006 — 2008     18,105       60,351  
2007 — 2009     8,322       27,740  
You have 30,597 LTIP shares in trust which will be released to you within 90 days following your Date of Termination, together with a dividend equivalent payment in respect of those shares.
Employee Share Purchase Plan (ESPP)
You will have ninety (90) days following your Date of Termination to decide from one of the two distribution options described below. Stacy Higgins, Sr Compensation Analyst, will be able to assist you and answer any questions you might have regarding your current account balances. Stacy can be reached at (972) 673-7668 or at stacy.higgins@cs-americas.com.
Option 1 — (Buy & Hold)
If this option is chosen, you elect to exercise the right to purchase shares under the terms and conditions of the Employee Share Offering. The vendor, UBS, will establish an account and purchase American Depository Receipts (ADR’s) with the accumulated funds. Accumulated interest will be returned to you in the form of a check. The vendor will oversee the administration of the shareholder account. The ADRs must remain at the vendor for one year, following the one year period, the vendor can provide you with a stock certificate if you wish to terminate this arrangement. You may sell the ADRs at any time after they are allocated to your account.
Option 2 — (Full Refund)
By choosing this option, you forfeit the right to purchase shares under the terms and conditions of the Employee Share Offering. The accumulated funds plus the interest earned will be returned to you in the form of a check.
Automobile Benefit — Within sixty (60) days of the Date of Termination, you may purchase your current company provided automobile as described in the EEA.
Personal Expenses — You agree to reimburse the Company for all personal expenses incurred by you (or your family members), including but not limited to, cell phone expenses and any and all other personal expenses. You agree to reimburse the Company by separate check within thirty (30) days of your receipt of the final bill from the Company. In the event of your failure to reimburse the Company within such thirty (30) day period, the Company has the right to withhold further payments to you under Section 6(c) of your EEA until all such personal expenses are paid.
You acknowledge the sufficiency of the consideration furnished to you for the foregoing commitments.
The above terms describe our current policies, programs and perquisites. The Company reserves the right to improve, change or delete such policies, programs or perquisites at any time in the future, however under no circumstance, and consistent with the intent on this Agreement, will the terms and conditions of your EEA or other plan documents be modified in such a way for the sole purpose to negatively effect you.
         
         
Leaving Letter ~ Executive Name       Page 4 of 5

 


 

Should you have any questions about the details of this letter, please feel free to contact me or Jan Vernon for assistance.
Yours sincerely,

/s/ Robert J. Stack
Robert J. Stack
Enc: Agreement
cc: H. Todd Stitzer
I concur with the terms and conditions of the arrangements outlined for me in the foregoing letter, dated                                           .
GILBERT M. CASSAGNE
     
/s/ Gilbert M. Cassagne
  Nov. 10, 2007
 
   
EMPLOYEE SIGNATURE
  Date
         
         
Leaving Letter ~ Executive Name       Page 5 of 5

 

 

Exhibit 10.19
FORM OF
DR PEPPER SNAPPLE GROUP, INC.
OMNIBUS STOCK INCENTIVE PLAN OF 2008
          1. Plan . This Dr Pepper Snapple Group, Inc. Omnibus Stock Incentive Plan of 2008 (this “Plan”) was adopted by Dr Pepper Snapple Group, Inc., a Delaware corporation (the “Company”), to reward certain employees, consultants and nonemployee directors of the Company or its Subsidiaries by enabling them to acquire shares of common stock of the Company.
          2. Objectives . This Plan is designed to attract and retain employees and consultants of the Company and its Subsidiaries, to attract and retain qualified nonemployee directors of the Company, to encourage the sense of proprietorship of such employees, consultants and nonemployee directors and to stimulate the active interest of such persons in the development and financial success of the Company and its Subsidiaries. These objectives are to be accomplished by making Awards under this Plan and thereby providing Participants with a proprietary interest in the growth and performance of the Company and its Subsidiaries. All Performance Awards payable under the Plan to Executive Officers are intended to be deductible by the Company under Section 162(m) (as such terms are defined below).
          3. Definitions . As used herein, the terms set forth below shall have the following respective meanings:
     “Authorized Officer” means the Chairman of the Board or the Chief Executive Officer of the Company (or any other senior officer of the Company to whom either of them shall delegate the authority to execute any Award Agreement).
     “Award” means the grant of any Option, Stock Appreciation Right, Stock Award or Performance Award, whether granted singly, in combination or in tandem, to a Participant pursuant to such applicable terms, conditions and limitations as the Committee may establish in accordance with the objectives of the Plan.
     “Award Agreement” means any written agreement (including in electronic form) between the Company and a Participant setting forth the terms, conditions and limitations applicable to an Award.
     “Board” means the board of directors of the Company.
     “Cadbury Board” means the board of directors of Cadbury Schweppes plc.
     “Code” means the Internal Revenue Code of 1986, as amended from time to time.
     “Committee” means, on and after the Separation Date, the Compensation Committee of the Board, any successor committee thereto or such other committee of the Board as may be designated by the Board to administer the Plan and, prior to the Separation Date, a committee of the Cadbury Board appointed by the Cadbury Board.

 


 

     “Common Stock” means the Common Stock, par value $       per share, of the Company.
     “Consultant” means any consultant or independent contractor of the Company or any Subsidiary, but not including any Employee or Nonemployee Director.
     “Dividend Equivalents” means, with respect to shares of Restricted Stock or Restricted Stock Units, with respect to which shares are to be issued at the end of the Restriction Period, an amount equal to all dividends and other distributions (or the economic equivalent thereof) that are payable to shareholders of record during the Restriction Period on a like number of shares of Common Stock.
     “Employee” means an employee of the Company or any of its Subsidiaries and an individual who has agreed to become an employee of the Company or any of its Subsidiaries and actually becomes such an employee within the following six months.
     “Executive Officer” means a “covered employee” within the meaning of Section 162(m)(3) or any other executive officer designated by the Committee for purposes of exempting compensation payable under the Plan from the deduction limitations of Section 162(m).
     “Fair Market Value” of a share of Common Stock means, as of a particular date, (i) if shares of Common Stock are listed on a national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal national securities exchange on which shares of Common Stock are listed on that date, or, if there shall have been no such sales reported on that date, on the last preceding date on which such a sale was so reported, (ii) if the Common Stock is not so listed but is traded on an over-the-counter market, the mean between the closing bid and asked price on that date, or, if there are no such prices available for such date, on the last preceding date on which such prices shall be available, as reported by the National Quotation Bureau Incorporated, or (iii) if shares of Common Stock are not publicly traded, the most recent value determined by an independent appraiser appointed by the Company for such purpose. Notwithstanding the foregoing, in the case of any Initial Award the price shall be equal to the Company’s fair market value, as determined by the Committee in good faith based upon the available facts and circumstances at the time.
     “Incentive Option” means an Option that is intended to comply with the requirements set forth in Section 422 of the Code.
     “Initial Awards” means those Awards granted by the Committee prior to but contingent upon and effective only as of the Publicly Traded Date.
     “Option” means a right to purchase a specified number of shares of Common Stock at a specified price.
     “Nonemployee Director” means an individual serving as a member of the Board who is not an employee of the Company or any of its Subsidiaries.
     “Nonqualified Option” means an Option that is not intended to comply with the requirements set forth in Section 422 of the Code.

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     “Participant” means an Employee, Consultant or Nonemployee Director to whom an Award has been made under this Plan.
     “Performance Award” means an award made pursuant to this Plan to a Participant who is an Employee, which Award is subject to the attainment of one or more Performance Goals.
     “Performance Goal” means a standard established by the Committee, to determine in whole or in part whether a Performance Award shall be earned.
     “Publicly Traded Date” means the first day the U.S. Securities and Exchange Commission declares the Form 10 registration statement effective.
     “Restricted Stock” means any Common Stock that is restricted or subject to forfeiture provisions.
     “Restricted Stock Unit” means a unit evidencing the right to receive one share of Common Stock or equivalent value (as determined by the Committee) that is restricted or subject to forfeiture provisions.
     “Restriction Period” means a period of time beginning as of the date upon which an Award of Restricted Stock or Restricted Stock Units is made pursuant to this Plan and ending as of the date upon which the Common Stock subject to such Award is issued (if not previously issued) no longer restricted or subject to forfeiture provisions.
     “Section 162(m)” means Section 162(m) of the Code and any Treasury Regulations and guidance promulgated thereunder.
     “Section 409A” means Section 409A of the Code and any Treasury Regulations and guidance promulgated thereunder.
     “Separation Date” means [          ], 2008.
     “Stock Appreciation Right” means a right to receive a payment, in cash or Common Stock, equal to the excess of the Fair Market Value or other specified valuation of a specified number of shares of Common Stock on the date the right is exercised over a specified strike price, in each case, as determined by the Committee.
     “Stock Award” means an award in the form of shares of Common Stock or units denominated in shares of Common Stock.
     “Subsidiary” means (i) in the case of a corporation, any corporation of which the Company directly or indirectly owns shares representing 50% or more of the combined voting power of the shares of all classes or series of capital stock of such corporation which have the right to vote generally on matters submitted to a vote of the shareholders of such corporation and (ii) in the case of a partnership or other business entity not organized as a corporation, any such business entity of which the Company directly or indirectly owns 50% or more of the voting, capital or profits interests (whether in the form of partnership interests, membership interests or otherwise).

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     “Substitute Award” means a Stock Award granted by the Committee prior to but contingent upon and effective only as of the Publicly Traded Date in replacement for an equity based award previously granted by Cadbury Schweppes plc.
          4. Eligibility .
     (a) Employees . All Employees are eligible for Awards under this Plan in the sole discretion of the Committee.
     (b) Consultants . Consultants are eligible for Awards under this Plan in the sole discretion of the Committee.
     (c) Nonemployee Directors . Nonemployee Directors are eligible for Awards under this Plan, in their capacities as directors.
          5. Common Stock Available for Awards. Subject to the provisions of paragraph 15 hereof, there shall be available for Awards under this Plan granted wholly or partly in Common Stock (including rights or options that may be exercised for or settled in Common Stock) an aggregate of [                      ] shares of Common Stock plus any shares that are subject to Substitute Awards. In the sole discretion of the Committee, [                      ] shares of Common Stock may be granted as Incentive Options. Additionally, the number of shares of Common Stock that are the subject of Awards under this Plan, that are cancelled, forfeited, terminated, expire unexercised or that are settled through issuance or consideration other than shares of Common Stock (including, without limitation, cash), shall again immediately become available for Awards hereunder. The number of shares reserved for issuance under the Plan shall be reduced only to the extent that shares of Common Stock are actually issued in connection with the exercise or settlement of an Award. The Committee may from time to time adopt and observe such procedures concerning the counting of shares against the Plan maximum as it may deem appropriate. The Committee and the appropriate officers of the Company shall be authorized to, from time to time, take all such actions as any of them may determine are necessary or appropriate to file any documents with governmental authorities, stock exchanges and transaction reporting systems as may be required to ensure that shares of Common Stock are available for issuance pursuant to Awards.
          6. Administration .
     (a) Authority of the Committee . Subject to the provisions hereof, this Plan shall be administered and interpreted by the Committee. The Committee shall have full and exclusive power and authority to administer this Plan and to take all actions that are specifically contemplated hereby or are necessary or appropriate in connection with the administration hereof. The Committee shall also have full and exclusive power to interpret this Plan and to make factual and legal determinations and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or proper, all of which powers shall be exercised in the best interests of the Company and in keeping with the objectives of this Plan. Subject to paragraph 6(c) hereof, the Committee may, in its sole discretion, provide for the extension of the exercisability of an Award, accelerate the vesting or exercisability of an Award, eliminate or make less restrictive any

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restrictions contained in an Award, waive any restriction or other provision of this Plan or an Award or otherwise amend or modify an Award in any manner that is (i) not materially adverse to the Participant to whom such Award was granted, (ii) consented to by such Participant or (iii) authorized by paragraph 15(c) hereof; provided, however, that no such action shall permit the term of any Option to be greater than ten years from the applicable grant date. The Committee may make an Award to an individual who it expects to become an employee of the Company or any of its Subsidiaries within the next six months, with such Award being subject to the individual’s actually becoming an employee within such time period, and subject to such other terms and conditions as may be established by the Committee. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Award in the manner and to the extent the Committee deems necessary or desirable to further the Plan purposes. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole discretion and shall be final, conclusive and binding on all parties concerned.
     (b) Limitation of Liability. No member of the Committee or officer of the Company to whom the Committee has delegated authority in accordance with the provisions of paragraph 7 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee or by any officer of the Company in connection with the performance of any duties under this Plan, except for his or her own willful misconduct or as expressly provided by statute.
     (c) Prohibition on Repricing of Awards . No Award may be repriced, replaced, regranted through cancellation or modified without shareholder approval (except in connection with a change in the Company’s capitalization), if the effect would be to reduce the exercise price for the shares underlying such Award.
          7. Delegation of Authority . Except with respect to matters under Section 162(m) that are required to be determined or established by the Committee to qualify Awards to Executive Officers as qualified “performance-based compensation,” the Committee may delegate to the Chief Executive Officer and to other senior officers of the Company or to such other committee of the Board its duties under this Plan pursuant to such conditions or limitations as the Committee may establish.
          8. Awards . (a) The Committee shall determine the type or types of Awards to be made under this Plan and shall designate from time to time the Participants who are to be the recipients of such Awards. Each Award shall be embodied in an Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee in its sole discretion and may be signed by the Participant to whom the Award is made and by an Authorized Officer for and on behalf of the Company. Awards may consist of those listed in this paragraph 8(a) and may be granted singly, in combination or in tandem. Awards may also be made in combination or in tandem with, in replacement of, or as alternatives to, grants or rights under this Plan or any other plan of the Company or any of its Subsidiaries, including the plan of any acquired entity; provided that, except as contemplated in paragraph 15 hereof, no Option may be issued in exchange for the cancellation of an Option with a higher exercise price nor may the exercise price of any Option be reduced. All or part of an Award may be subject to

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conditions established by the Committee, which may include, but are not limited to, continuous service with the Company and its Subsidiaries, achievement of specific business objectives, increases in specified indices, attainment of specified growth rates and other comparable measurements of performance. Upon the termination of employment by a Participant, any unexercised, deferred, unvested or unpaid Awards shall be treated as set forth in the applicable Award Agreement.
     (i) Option . An Award may be in the form of an Option. An Option awarded pursuant to this Plan may consist of an Incentive Option or a Nonqualified Option. Incentive Options may not be awarded to Nonemployee Directors. The price at which shares of Common Stock may be purchased upon the exercise of an Option shall be not less than the Fair Market Value of the Common Stock on the date of grant. The term of an Option shall not exceed ten years from the date of grant. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any Options awarded pursuant to this Plan, including the term of any Options and the date or dates upon which they become exercisable, shall be determined by the Committee.
     (ii) Stock Appreciation Right . An Award may be in the form of a Stock Appreciation Right. The strike price for a Stock Appreciation Right shall not be less than the Fair Market Value of the Common Stock on the date on which the Stock Appreciation Right is granted. The term of a Stock Appreciation Right shall not exceed ten years from the date of grant. Subject to the foregoing limitations, the terms, conditions and limitations applicable to any Stock Appreciation Rights awarded pursuant to this Plan, including the term of any Stock Appreciation Rights and the date or dates upon which they become exercisable, shall be determined by the Committee.
     (iii) Stock Award . An Award may be in the form of a Stock Award. The terms, conditions and limitations applicable to any Stock Awards granted pursuant to this Plan shall be determined by the Committee, subject to the limitations specified below. Any Stock Award which is not a Performance Award shall have a minimum Restriction Period of three years from the date of grant, provided that (i) the Committee may provide for earlier vesting following a change in control or other specified events involving the Company or upon an Employee’s termination of employment by reason of death, disability or retirement, (ii) such three-year minimum Restricted Period shall not apply to a Stock Award that is granted in lieu of salary or bonus, and (iii) vesting of a Stock Award may occur incrementally over the three-year minimum Restricted Period; provided, however, that such three-year minimum Restricted Period shall not apply to any Substitute Award.
     (iv) Performance Award. Without limiting the type or number of Awards that may be made under the other provisions of this Plan, an Award may be in the form of a Performance Award. The terms, conditions and limitations applicable to any Performance Awards granted to Participants pursuant to this Plan shall be determined by the Committee, subject to the limitations specified below. Any Stock Award which is a Performance Award shall have a minimum Restriction Period of one year from the date of grant, provided that the Committee may provide for earlier vesting following a change in control or other specified events involving the Company, or upon a termination of

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employment by reason of death, disability or retirement, subject to the limitations specified below. The Committee shall set Performance Goals in its sole discretion which, depending on the extent to which they are met, will determine the value and/or amount of Performance Awards that will be paid out to the Participant and/or the portion of an Award that may be exercised.
          (A) Nonqualified Performance Awards . Performance Awards granted to Employees or Nonemployee Directors that are not intended to qualify as qualified performance-based compensation under Section 162(m) shall be based on achievement of such Performance Goals and be subject to such terms, conditions and restrictions as the Committee or its delegate shall determine.
          (B) Qualified Performance Awards . Performance Awards granted to Executive Officers under the Plan that are intended to qualify as qualified performance-based compensation under Section 162(m) shall be paid, vested or otherwise deliverable solely on account of the attainment of one or more pre-established, objective Performance Goals established and administered by the Committee in accordance with Section 162(m) prior to the earlier to occur of (x) 90 days after the commencement of the period of service to which the Performance Goal relates and (y) the lapse of 25% of the period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain. A Performance Goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a Performance Goal may be based on one or more business criteria that apply to an Executive Officer, one or more business units, divisions or sectors of the Company, or the Company as a whole, and if so desired by the Committee, by comparison with a peer group of companies. A Performance Goal may include one or more of the following and need not be the same for each Executive Officer:
    revenue and income measures (which include revenue, gross margin, income from operations, net income and earnings per share);
 
    expense measures (which include costs of goods sold, selling, general and administrative expenses and overhead costs);
 
    operating measures (which include volume, margin, productivity and market share);
 
    cash flow measures (which include net cash flow from operating activities and working capital);
 
    liquidity measures (which include earnings before or after the effect of certain items such as interest, taxes, depreciation and amortization, and free cash flow);
 
    leverage measures (which include debt-to-equity ratio and net debt);

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    market measures (which include stock price, total shareholder return and market capitalization measures);
 
    return measures (which include return on equity, return on assets and return on invested capital);
 
    corporate value measures (which include compliance, safety, environmental and personnel matters); and
 
    other measures such as those relating to acquisitions, dispositions or customer satisfaction.
Unless otherwise stated, such a Performance Goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo , performance relative to a peer group determined by the Committee or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting Plan provisions applicable to Performance Goals and qualified Performance Awards, it is the intent of the Plan to conform with Section 162(m), including, without limitation, Treasury Regulation §1.162-27(e)(2)(i), as to grants to Executive Officers and the Committee in establishing such goals and interpreting the Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of Performance Goals applicable to qualified Performance Awards, the Committee must certify in writing that applicable Performance Goals and any of the material terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any qualified Performance Awards made pursuant to this Plan shall be determined by the Committee to the extent permitted by Section 162(m).
     (b) The Committee shall have the right to adjust the Performance Goals (either up or down) and the level of the Performance Award that a Participant may earn under this Plan, to the extent permitted pursuant to Section 162(m), if it determines that the occurrence of external changes or other unanticipated business conditions have materially affected the fairness of the goals and have unduly influenced the Company’s ability to meet them, including without limitation, events such as material acquisitions, changes in the capital structure of the Company, and extraordinary accounting changes. In addition, Performance Goals and Performance Awards shall be calculated without regard to any changes in accounting standards that may be required by the Financial Accounting Standards Board after such Performance Goals are established. Further, in the event a period of service to which a Performance Goal relates is less than twelve months, the Committee shall have the right, in its sole discretion, to adjust the Performance Goals and the level of Performance Award opportunity.
     (c) Notwithstanding anything to the contrary contained in this Plan, the following limitations shall apply to Awards that are not Substitute Awards made hereunder:

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     (i) no Participant may be granted, during any one-year period, Awards consisting of Options or Stock Appreciation Rights that are exercisable for more than [                      ] shares of Common Stock; and
     (ii) no Participant may be granted, during any one-year period, Stock Awards covering or relating to more than [                      ] shares of Common Stock (the limitation set forth in this clause (ii), together with the limitation set forth in clause (i) above, being hereinafter collectively referred to as the “Stock-based Awards Limitations”).
          9. Awards to Nonemployee Directors . The Committee may grant a Nonemployee Director of the Company one or more Awards and establish the terms thereof in accordance with paragraph 8 consistent with the provisions therein for the granting of Awards to Employees and subject to the applicable terms, conditions and limitations set forth in this Plan and the applicable Award Agreement.
          10. Award Payment; Dividends; Substitution; Fractional Shares .
     (a) General . Payment of Awards may be made in the form of cash or Common Stock, or a combination thereof, and may include such restrictions as the Committee shall determine, including, in the case of Common Stock, restrictions on transfer and forfeiture provisions. If payment of an Award is made in the form of Restricted Stock, the applicable Award Agreement relating to such shares shall specify whether they are to be issued at the beginning or end of the Restriction Period. In the event that shares of Restricted Stock are to be issued at the beginning of the Restriction Period, the certificates evidencing such shares (to the extent that such shares are so evidenced) shall contain appropriate legends and restrictions that describe the terms and conditions of the restrictions applicable thereto. In the event that shares of Restricted Stock are to be issued at the end of the Restricted Period, the right to receive such shares shall be evidenced by book entry registration or in such other manner as the Committee may determine.
     (b) Deferral . With the approval of the Committee, amounts payable in respect of Awards may be deferred and paid either in the form of installments or as a lump-sum payment; provided, however, that if deferral is permitted, each provision of the Award shall be interpreted to permit the deferral only as allowed in compliance with the requirements of Section 409A and any provision that would conflict with such requirements shall not be valid or enforceable. The Committee intends that any Awards under the Plan satisfy or qualify as exempt from the applicable requirements of Section 409A to avoid imposition of applicable taxes thereunder. The Committee may permit selected Participants to elect to defer payments of some or all types of Awards in accordance with procedures established by the Committee. Any deferred payment of an Award, whether elected by the Participant or specified by the Award Agreement or by the Committee, may be forfeited if and to the extent that the Award Agreement so provides.
     (c) Dividends and Interest . Rights to dividends or Dividend Equivalents may be extended to and made part of any Award consisting of shares of Common Stock or

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units denominated in shares of Common Stock, subject to such terms, conditions and restrictions as the Committee may establish. The Committee may also establish rules and procedures for the crediting of interest on deferred cash payments and Dividend Equivalents for Awards consisting of shares of Common Stock or units denominated in shares of Common Stock.
     (d) Fractional Shares . No fractional shares shall be issued or delivered pursuant to any Award under this Plan. The Committee shall determine whether cash, Awards or other property shall be issued or paid in lieu of fractional shares, or whether fractional shares or any rights thereto shall be forfeited or otherwise eliminated.
          11. Stock Option Exercise . The price at which shares of Common Stock may be purchased under an Option shall be paid in full at the time of exercise in cash or, if elected by the Participant, the Participant may purchase such shares by means of tendering Common Stock or surrendering another Award, including Restricted Stock, valued at Fair Market Value on the date of exercise, or any combination thereof. The Committee, in its sole discretion, shall determine acceptable methods for Participants to tender Common Stock or other Awards. In accordance with the rules and procedures established by the Committee for this purpose and subject to applicable law, Options may also be exercised through “cashless exercise” procedures approved by the Committee involving a broker or dealer approved by the Committee. Unless otherwise provided in the applicable Award Agreement, in the event shares of Restricted Stock are tendered as consideration for the exercise of an Option, a number of the shares issued upon the exercise of the Option, equal to the number of shares of Restricted Stock used as consideration thereof, shall be subject to the same restrictions as the Restricted Stock so submitted as well as any additional restrictions that may be imposed by the Committee.
          12. Taxes . The Company shall have the right to deduct applicable taxes from any Award payment and withhold, at the time of delivery or vesting of cash or shares of Common Stock under this Plan, an appropriate amount of cash or number of shares of Common Stock or a combination thereof for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes. The Committee may also permit withholding to be satisfied by the transfer to the Company of shares of Common Stock theretofore owned by the holder of the Award with respect to which withholding is required. If shares of Common Stock are used to satisfy tax withholding, such shares shall be valued based on the Fair Market Value when the tax withholding is required to be made.
          13. Amendment, Modification, Suspension or Termination . The Board or the Committee may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would materially adversely affect the rights of any Participant under any Award previously granted to such Participant shall be made without the consent of such Participant and (ii) no amendment or alteration shall be effective prior to its approval by the shareholders of the Company to the extent shareholder approval is otherwise required by applicable legal requirements.

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          14. Assignability . Unless otherwise determined by the Committee in the Award Agreement, no Award or any other benefit under this Plan shall be assignable or otherwise transferable. Any attempted assignment of an Award or any other benefit under this Plan in violation of this paragraph 14 shall be null and void.
          15. Adjustments .
     (a) The existence of outstanding Awards shall not affect in any manner the right or power of the Company or its shareholders to make or authorize any or all adjustments, recapitalizations, reorganizations or other changes in the capital stock of the Company or its business or any merger or consolidation of the Company, or any issue of bonds, debentures, preferred or prior preference stock (whether or not such issue is prior to, on a parity with or junior to the Common Stock) or the dissolution or liquidation of the Company, or any sale or transfer of all or any part of its assets or business, or any other corporate act or proceeding of any kind, whether or not of a character similar to that of the acts or proceedings enumerated above.
     (b) In the event of any subdivision or consolidation of outstanding shares of Common Stock, declaration of a dividend payable in shares of Common Stock or other stock split, then (i) the number of shares of Common Stock reserved under this Plan, (ii) the number of shares of Common Stock covered by outstanding Awards in the form of Common Stock or units denominated in Common Stock, (iii) the exercise or other price in respect of such Awards, (iv) the Stock-based Award Limitations described in paragraph 8(c) hereof, (v) the number of shares of Common Stock covered by Awards to Nonemployee Directors granted pursuant to paragraph 9 hereof, and (vi) the appropriate Fair Market Value and other price determinations for such Awards shall each be proportionately adjusted by the Board to reflect such transaction. In the event of any other recapitalization or capital reorganization of the Company, any consolidation or merger of the Company with another corporation or entity, the adoption by the Company of any plan of exchange affecting the Common Stock or any distribution to holders of Common Stock of securities or property (other than normal cash dividends or dividends payable in Common Stock), the Board shall make appropriate adjustments to (i) the number of shares of Common Stock covered by Awards in the form of Common Stock or units denominated in Common Stock, (ii) the exercise or other price in respect of such Awards, and (iii) the appropriate Fair Market Value and other price determinations for such Awards, (iv) the number of shares of Common Stock covered by Awards to Nonemployee Directors automatically granted pursuant to paragraph 9 hereof and (v) the Stock-based Award Limitations described in paragraph 8(b) hereof, to give effect to such transaction shall each be proportionately adjusted by the Board to reflect such transaction; provided that such adjustments shall only be such as are necessary to maintain the proportionate interest of the holders of the Awards and preserve, without exceeding, the value of such Awards.
     (c) In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board may make such adjustments to Awards or other provisions for the disposition of Awards as it deems equitable, and shall be authorized, in its sole discretion, (i) to provide for the substitution of a new

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Award or other arrangement (which, if applicable, may be exercisable for such property or stock as the Board determines) for an Award or the assumption of the Award, regardless of whether in a transaction to which Section 424(a) of the Code applies, (ii) to provide, prior to the transaction, for the acceleration of the vesting and exercisability of, or lapse of restrictions with respect to, the Award and, if the transaction is a cash merger, provide for the termination of any portion of the Award that remains unexercised at the time of such transaction or (iii) to cancel any such Awards and to deliver to the Participants cash in an amount that the Board shall determine in its sole discretion is equal to the fair market value of such Awards on the date of such event, which in the case of Options or Stock Appreciation Rights shall be the excess of the Fair Market Value of Common Stock on such date over the exercise price of such Award (for the avoidance of doubt, if the exercise price is less than Fair Market Value the Option or Stock Appreciation Right may be canceled for no consideration).
          16. Restrictions . No Common Stock or other form of payment shall be issued with respect to any Award unless the Company shall be satisfied based on the advice of its counsel that such issuance will be in compliance with applicable federal and state securities laws. Certificates evidencing shares of Common Stock delivered under this Plan (to the extent that such shares are so evidenced) may be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any securities exchange or transaction reporting system upon which the Common Stock is then listed or to which it is admitted for quotation and any applicable federal or state securities law. The Committee may cause a legend or legends to be placed upon such certificates (if any) to make appropriate reference to such restrictions.
          17. Unfunded Plan . Insofar as it provides for Awards of cash, Common Stock or rights thereto, this Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are entitled to cash, Common Stock or rights thereto under this Plan, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by cash, Common Stock or rights thereto, nor shall this Plan be construed as providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any cash, Common Stock or rights thereto to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to an Award of cash, Common Stock or rights thereto under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement, and no such liability or obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan.
          18. Section 409A of the Code . Notwithstanding anything in this Plan to the contrary, if any Plan provision or Award under the Plan would result in the imposition of an applicable tax under Section 409A, that Plan provision or Award shall be reformed to avoid imposition of the applicable tax and no such action shall be deemed to adversely affect the Participant’s rights to an Award.

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          19. Governing Law . This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Delaware.
          20. No Right to Employment or Directorship . Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company or a Subsidiary to terminate any Participant’s employment or other service relationship at any time, nor confer upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company or any Subsidiary. Further, nothing in the Plan or an Award Agreement constitutes any assurance or obligation of the Board to nominate any Nonemployee Director for re-election by the Company’s shareholders.
          21. Successors . All obligations of the Company under the Plan with respect to Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
          22. Effectiveness . This Plan is effective           , 2008, the date on which it was approved by the shareholders of the Company. The Plan shall continue in effect for a term of ten years after the date on which the shareholders of the Company approve the Plan, unless sooner terminated by action of the Board.

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Exhibit 10.20
FORM OF

DR PEPPER SNAPPLE GROUP, INC.
ANNUAL CASH INCENTIVE PLAN
          1.  Plan . This Dr Pepper Snapple Group, Inc. Annual Cash Incentive Plan (this “Plan”) was adopted by Dr Pepper Snapple Group, Inc., a Delaware corporation (the “Company”), to reward certain employees of the Company or its Subsidiaries by enabling them to receive performance-based cash compensation.
          2.  Objectives . This Plan is designed to attract and retain employees of the Company and its Subsidiaries and to stimulate the active interest of such persons in the development and financial success of the Company and its Subsidiaries. These objectives are to be accomplished by making cash awards under this Plan based on the achievement of certain performance goals. All awards payable under the Plan to Executive Officers are intended to be deductible by the Company under Section 162(m) (as such terms are defined below).
          3.  Definitions . As used herein, the terms set forth below shall have the following respective meanings:
     “Authorized Officer” means the Chairman of the Board or the Chief Executive Officer of the Company (or any other senior officer of the Company to whom either of them shall delegate the authority to execute any Award Agreement).
     “Award Agreement” means any written agreement (including in electronic form) between the Company and a Participant setting forth the terms, conditions and limitations applicable to a Performance Cash Award.
     “Board” means the board of directors of the Company.
     “Cadbury Board” means the board of directors of Cadbury Schweppes plc.
     “Code” means the Internal Revenue Code of 1986, as amended from time to time.
     “Committee” means, on and after the Separation Date, the Compensation Committee of the Board, any successor committee thereto or such other committee of the Board as may be designated by the Board to administer the Plan and, prior to the Separation Date, a committee of the Cadbury Board appointed by the Cadbury Board.
     “Employee” means an employee of the Company or any of its Subsidiaries and an individual who has agreed to become an employee of the Company or any of its Subsidiaries and actually becomes such an employee within the following six months.
     “Executive Officer” means a “covered employee” within the meaning of Section 162(m)(3) or any other executive officer designated by the Committee for purposes of exempting compensation payable under the Plan from the deduction limitations of Section 162(m).

 


 

     “Participant” means an Employee to whom a Performance Cash Award has been made under this Plan.
     “Performance Cash Award” or “Award” means the grant of any award to a Participant pursuant to such applicable terms, conditions and limitations as the Committee may establish in accordance with the objectives of the Plan, which award is subject to the attainment of one or more Performance Goals.
     “Performance Goal” means a standard established by the Committee, to determine in whole or in part whether a Performance Cash Award shall be earned.
     “Publicly Traded Date” means the first day the U. S. Securities and Exchange Commission declares the Form 10 registration statement effective.
     “Section 162(m)” means Section 162(m) of the Code and any Treasury Regulations and guidance promulgated thereunder.
     “Section 409A” means Section 409A of the Code and any Treasury Regulations and guidance promulgated thereunder.
     “Separation Date” means [             ], 2008.
     “Subsidiary” means (i) in the case of a corporation, any corporation of which the Company directly or indirectly owns shares representing 50% or more of the combined voting power of the shares of all classes or series of capital stock of such corporation which have the right to vote generally on matters submitted to a vote of the shareholders of such corporation and (ii) in the case of a partnership or other business entity not organized as a corporation, any such business entity of which the Company directly or indirectly owns 50% or more of the voting, capital or profits interests (whether in the form of partnership interests, membership interests or otherwise).
          4.  Eligibility . All Employees are eligible for Performance Cash Awards under this Plan in the sole discretion of the Committee.
          5.  Administration .
     (a) Authority of the Committee . Subject to the provisions hereof, this Plan shall be administered and interpreted by the Committee. The Committee shall have full and exclusive power and authority to administer this Plan and to take all actions that are specifically contemplated hereby or are necessary or appropriate in connection with the administration hereof. The Committee shall also have full and exclusive power to interpret this Plan and to make factual and legal determinations and to adopt such rules, regulations and guidelines for carrying out this Plan as it may deem necessary or proper, all of which powers shall be exercised in the best interests of the Company and in keeping with the objectives of this Plan. The Committee may, in its sole discretion, provide for the acceleration of vesting of a Performance Cash Award, eliminate or make less restrictive any restrictions contained in a Performance Cash Award, waive any restriction or other provision of this Plan or a Performance Cash Award or otherwise

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amend or modify a Performance Cash Award in any manner that is (i) not materially adverse to the Participant to whom such Performance Cash Award was granted, or (ii) consented to by such Participant. The Committee may make a Performance Cash Award to an individual who it expects to become an employee of the Company or any of its Subsidiaries within the next six months, with such Performance Cash Award being subject to the individual’s actually becoming an employee within such time period, and subject to such other terms and conditions as may be established by the Committee. The Committee may correct any defect or supply any omission or reconcile any inconsistency in this Plan or in any Performance Cash Award in the manner and to the extent the Committee deems necessary or desirable to further the Plan purposes. Any decision of the Committee in the interpretation and administration of this Plan shall lie within its sole discretion and shall be final, conclusive and binding on all parties concerned.
     (b) Limitation of Liability. No member of the Committee or officer of the Company to whom the Committee has delegated authority in accordance with the provisions of paragraph 6 of this Plan shall be liable for anything done or omitted to be done by him or her, by any member of the Committee or by any officer of the Company in connection with the performance of any duties under this Plan, except for his or her own willful misconduct or as expressly provided by statute.
          6.  Delegation of Authority . Except with respect to matters under Section 162(m) that are required to be determined or established by the Committee to qualify Performance Cash Awards to Executive Officers as qualified “performance-based compensation” the Committee may delegate to the Chief Executive Officer and to other senior officers of the Company or to such other committee of the Board its duties under this Plan pursuant to such conditions or limitations as the Committee may establish.
          7.  Performance Cash Awards .
     (a) The Committee shall determine the type or types of Performance Cash Awards to be made under this Plan and shall designate from time to time the Participants who are to be the recipients of such Performance Cash Awards. Each Performance Cash Award shall be embodied in an Award Agreement, which shall contain such terms, conditions and limitations as shall be determined by the Committee in its sole discretion and may be signed by the Participant to whom the Performance Cash Award is made and by an Authorized Officer for and on behalf of the Company. All or part of a Performance Cash Award may be subject to conditions established by the Committee, which may include, but are not limited to, continuous service with the Company and its Subsidiaries. Upon the termination of employment by a Participant, any deferred, unvested or unpaid Performance Cash Awards shall be treated as set forth in the applicable Award Agreement.
The terms, conditions and limitations applicable to any Performance Cash Awards granted to Participants pursuant to this Plan shall be determined by the Committee, subject to the limitations specified below. The Committee shall set Performance Goals in its sole discretion which, depending on the extent to which they are met, will determine the amount of Performance Cash Awards that will be paid out to the Participant.

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     (i) Nonqualified Performance Cash Awards . Performance Cash Awards granted to Employees that are not intended to qualify as qualified performance-based compensation under Section 162(m) shall be based on achievement of such Performance Goals and be subject to such terms, conditions and restrictions as the Committee or its delegate shall determine.
     (ii) Qualified Performance Cash Awards . Performance Cash Awards granted to Executive Officers under the Plan that are intended to qualify as qualified performance-based compensation under Section 162(m) shall be paid on account of the attainment of one or more pre-established, objective Performance Goals established and administered by the Committee in accordance with Section 162(m) prior to the earlier to occur of (x) 90 days after the commencement of the period of service to which the Performance Goal relates and (y) the lapse of 25% of the period of service (as scheduled in good faith at the time the goal is established), and in any event while the outcome is substantially uncertain. A Performance Goal is objective if a third party having knowledge of the relevant facts could determine whether the goal is met. Such a Performance Goal may be based on one or more business criteria that apply to an Executive Officer, one or more business units, divisions or sectors of the Company, or the Company as a whole, and if so desired by the Committee, by comparison with a peer group of companies. A Performance Goal may include one or more of the following and need not be the same for each Executive Officer:
    revenue and income measures (which include revenue, gross margin, income from operations, net income and earnings per share);
 
    expense measures (which include costs of goods sold, selling, general and administrative expenses and overhead costs);
 
    operating measures (which include volume, margin, productivity and market share);
 
    cash flow measures (which include net cash flow from operating activities and working capital);
 
    liquidity measures (which include earnings before or after the effect of certain items such as interest, taxes, depreciation and amortization, and free cash flow);
 
    leverage measures (which include debt-to-equity ratio and net debt);
 
    market measures (including those relating to stock price, total shareholder return and market capitalization measures);
 
    return measures (which include return on equity, return on assets and return on invested capital);

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    corporate value measures (which include compliance, safety, environmental and personnel matters); and
 
    other measures such as those relating to acquisitions, dispositions or customer satisfaction.
Unless otherwise stated, such a Performance Goal need not be based upon an increase or positive result under a particular business criterion and could include, for example, maintaining the status quo , performance relative to a peer group determined by the Committee or limiting economic losses (measured, in each case, by reference to specific business criteria). In interpreting Plan provisions applicable to Performance Goals and qualified Performance Cash Awards, it is the intent of the Plan to comply with Section 162(m), including, without limitation, Treasury Regulation §1.162-27(e)(2)(i), as to grants to Executive Officers and the Committee in establishing such goals and interpreting the Plan shall be guided by such provisions. Prior to the payment of any compensation based on the achievement of Performance Goals applicable to qualified Performance Cash Awards, the Committee must certify in writing that applicable Performance Goals and any of the material terms thereof were, in fact, satisfied. Subject to the foregoing provisions, the terms, conditions and limitations applicable to any qualified Performance Cash Awards made pursuant to this Plan shall be determined by the Committee to the extent permitted under Section 162(m).
     (b) The Committee shall have the right to adjust the Performance Goals (either up or down) and the level of the Performance Cash Award that a Participant may earn under this Plan, to the extent permitted pursuant to Section 162(m), if it determines that the occurrence of external changes or other unanticipated business conditions have materially affected the fairness of the goals and have unduly influenced the Company’s ability to meet them, including without limitation, events such as material acquisitions, changes in the capital structure of the Company, and extraordinary accounting changes. In addition, Performance Goals and Performance Cash Awards shall be calculated without regard to any changes in accounting standards that may be required by the Financial Accounting Standards Board after such Performance Goals are established. Further, in the event a period of service to which a Performance Goal relates is less than 12 months, the Committee shall have the right, in its sole discretion, to adjust the Performance Goals and the level of Performance Cash Award opportunity.
     (c) Notwithstanding anything to the contrary contained in this Plan, the amount payable to a Participant under this Plan in respect of any one-year period shall not exceed $5,000,000.
          8.  Performance Cash Award Payment .
     (a) General . Payment of Performance Cash Awards shall be made in the form of cash, and may include such restrictions as the Committee shall determine. Subject to Subsection 8(b), payments shall be made between January 1 and March 15 of the year following the year in which the Performance Cash Award relates.
     (b) Deferral . With the approval of the Committee, amounts payable in respect of Performance Cash Awards may be deferred and paid either in the form of

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installments or as a lump-sum payment; provided, however, that if deferral is permitted, each provision of the Performance Cash Award shall be interpreted to permit the deferral only as allowed in compliance with the requirements of Section 409A and any provision that would conflict with such requirements shall not be valid or enforceable. The Committee intends that any Performance Cash Awards under the Plan satisfy or qualify as exempt from the applicable requirements of Section 409A to avoid imposition of applicable taxes thereunder. The Committee may permit selected Participants to elect to defer payments of Performance Cash Awards in accordance with procedures established by the Committee. Any deferred payment of a Performance Cash Award, whether elected by the Participant or specified by the Award Agreement or by the Committee, may be forfeited if and to the extent that the Award Agreement so provides.
          9.  Taxes . The Company shall have the right to deduct applicable taxes from any Performance Cash Award payment and withhold, at the time of delivery or vesting of cash under this Plan, an appropriate amount of cash for payment of taxes required by law or to take such other action as may be necessary in the opinion of the Company to satisfy all obligations for withholding of such taxes.
          10.  Amendment, Modification, Suspension or Termination . The Board or the Committee may amend, modify, suspend or terminate this Plan for the purpose of meeting or addressing any changes in legal requirements or for any other purpose permitted by law, except that (i) no amendment or alteration that would materially adversely affect the rights of any Participant under any Performance Cash Award previously granted to such Participant shall be made without the consent of such Participant and (ii) no amendment or alteration shall be effective prior to its approval by the shareholders of the Company to the extent shareholder approval is otherwise required by applicable legal requirements.
          11.  Assignability . Unless otherwise determined by the Committee in the Award Agreement, no Performance Cash Award or any other benefit under this Plan shall be assignable or otherwise transferable. Any attempted assignment of a Performance Cash Award or any other benefit under this Plan in violation of this paragraph 11 shall be null and void.
          12.  Adjustments . In the event of a corporate merger, consolidation, acquisition of property or stock, separation, reorganization or liquidation, the Board may make such adjustments to Performance Cash Awards or other provisions for the disposition of Awards as it deems equitable, and shall be authorized, in its sole discretion, (i) to provide for the substitution of a new Performance Cash Award or other arrangement (which, if applicable, may be exercisable for such property or stock as the Board determines) for a Performance Cash Award or the assumption of the Performance Cash Award, (ii) to provide, prior to the transaction, for the acceleration of the vesting of the Performance Cash Award or (iii) to cancel any such Performance Cash Awards and to deliver to the Participants cash in an amount that the Board shall determine in its sole discretion.
          13.  Unfunded Plan . This Plan shall be unfunded. Although bookkeeping accounts may be established with respect to Participants who are entitled to cash, any such accounts shall be used merely as a bookkeeping convenience. The Company shall not be required to segregate any assets that may at any time be represented by cash or rights thereto, nor

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shall this Plan be construed as providing for such segregation, nor shall the Company, the Board or the Committee be deemed to be a trustee of any cash or rights thereto to be granted under this Plan. Any liability or obligation of the Company to any Participant with respect to a Performance Cash Award of cash or rights thereto under this Plan shall be based solely upon any contractual obligations that may be created by this Plan and any Award Agreement, and no such liability or obligation of the Company shall be deemed to be secured by any pledge or other encumbrance on any property of the Company. Neither the Company nor the Board nor the Committee shall be required to give any security or bond for the performance of any obligation that may be created by this Plan.
          14.  Section 409A of the Code . Notwithstanding anything in this Plan to the contrary, if any Plan provision or Performance Cash Award under the Plan would result in the imposition of an applicable tax under Section 409A, that Plan provision or Performance Cash Award shall be reformed to avoid imposition of the applicable tax and no such action shall be deemed to adversely affect the Participant’s rights to a Performance Cash Award.
          15.  Governing Law . This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Delaware.
          16.  No Right to Employment . Nothing in the Plan or an Award Agreement shall interfere with or limit in any way the right of the Company or a Subsidiary to terminate any Participant’s employment or other service relationship at any time, nor confer upon any Participant any right to continue in the capacity in which he or she is employed or otherwise serves the Company or any Subsidiary.
          17.  Successors . All obligations of the Company under the Plan with respect to Performance Cash Awards granted hereunder shall be binding on any successor to the Company, whether the existence of such successor is the result of a direct or indirect purchase, merger, consolidation, or otherwise, of all or substantially all of the business and/or assets of the Company.
          18.  Effectiveness . This Plan is effective [             ], 2008. The Plan shall continue in effect for a term of 10 years, unless sooner terminated by action of the Board.

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Exhibit 10.21
FORM OF
DR PEPPER SNAPPLE GROUP, INC.
EMPLOYEE STOCK PURCHASE PLAN
Section 1
PURPOSE
          The purpose of the Dr Pepper Snapple Group, Inc. Employee Stock Purchase Plan is to provide Employees of the Company and its Designated Subsidiaries with an opportunity to acquire a proprietary interest in the Company’s long-term performance and success through the purchase of shares of Common Stock at a price that may be less than the Fair Market Value of the stock on the date of purchase from funds accumulated through payroll deductions.
Section 2
BACKGROUND
          The Plan is intended to qualify as an “employee stock purchase plan” under Code Section 423. The Plan will, accordingly, be construed so as to extend and limit participation in a manner within the requirements of that Code section. The terms of the Plan as contained in this document will apply with respect to Purchase Periods beginning on and after the Effective Date.
Section 3
DEFINITIONS
     As used in the Plan, the following terms, when capitalized, have the following meanings:
      “Board” means the Board of Directors of the Company.
      “Business Day” means a day that the New York Stock Exchange, or such other principal exchange on which the Common Stock is traded, is open for trading.
      “Code” means the Internal Revenue Code of 1986, as amended.
      “Committee” means the committee described in Section 11.
      “Common Stock” means the common stock, par value $.01 per share, of the Company, or any stock into which that common stock may be converted, reclassified or exchanged.
      “Company” means Dr Pepper Snapple Group, Inc., a Delaware corporation, and any successor entity.
      “Compensation” means (a) for salaried Employees, the regular base salary or wages, and commissions, paid by the Company or a Designated Subsidiary for services performed by such Employees which are computed on a weekly, biweekly, monthly, annual or other comparable basis, before any payroll deductions for taxes or any other purposes; and (b) for hourly Employees, wages paid by the Company or a Designated

 


 

Subsidiary for services performed by such Employees which are computed on a biweekly or other comparable basis, before any payroll deductions for taxes or any other purposes. However, in the case of both (a) and (b) above, Compensation shall not include overtime, shift premium, bonuses and other special payments, incentive payments, pension, severance pay, foreign service premiums or other foreign assignment uplifts or any other extraordinary compensation, nor Company or Designated Subsidiary contributions to a retirement plan or any other deferred compensation or employee benefit plan or program of the Company or any Designated Subsidiary.
      “Contributions” means all amounts contributed by a Participant to the Plan in accordance with Section 6.
      “Designated Subsidiary” means a Subsidiary that has been designated by the Board or the Committee as eligible to participate in the Plan as to its eligible Employees.
“Effective Date” means [    ], 2008.
      “Employee” means any person who performs services as an employee for, and who is classified as an employee on the payroll records of, the Company or a Designated Subsidiary.
      “Fair Market Value” of a share of Common Stock means, as of a particular date, (i) if shares of Common Stock are listed on a national securities exchange, the closing sales price per share of Common Stock on the consolidated transaction reporting system for the principal national securities exchange on which shares of Common Stock are listed on that date, or, if there shall have been no such sales reported on that date, on the last preceding date on which such a sale was so reported, (ii) if the Common Stock is not so listed, but is traded on an over the counter market, the mean between the closing bid and asked price on that date, or, if there are no such prices available for such date, on the last preceding date on which such prices shall be available, as reported by the National Quotation Bureau Incorporated, or (iii) if shares of Common Stock are not publicly traded, the most recent value determined by an independent appraiser appointed by the Company for such purpose.
“Offering Date” means the first Business Day of each Purchase Period.
“Participant” means a participant in the Plan as described in Section 5.
“Payroll Deduction Account” means the bookkeeping account established for a Participant in accordance with Section 6.
      “Plan” means the Dr Pepper Snapple Group, Inc. Employee Stock Purchase Plan, as set forth herein, and as amended and restated from time to time.
“Purchase Date” means the last Business Day of each Purchase Period or such other date as required by administrative operational requirements.

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      “Purchase Period” means a period of twelve months commencing on January 1 of each calendar year and ending on the following December 31, or such other period as determined by the Committee; provided that in no event may a Purchase Period exceed 27 months. The initial Purchase Period following the Effective Date may be a short Purchase Period beginning on the date selected by the Committee (but no earlier than the date of effectiveness of the initial registration statement on Form S-8 filed by the Company with respect to the Plan), and ending on a date selected by the Committee.
      “Purchase Price” means an amount equal to 85% to 100% of the Fair Market Value of a Share on one of the following dates: (i) the Offering Date, (ii) the Purchase Date or (iii) the lower of the Offering Date or the Purchase Date, as the Committee in its sole discretion shall determine and communicate to the Participants.
      “Share” means a share of Common Stock, as adjusted in accordance with Section 13.
      “Subsidiary” means each corporation in an unbroken chain of corporations beginning or ending with the Company if, on or after the Effective Date, each of the corporations other than the last corporation in the chain owns stock possessing fifty percent (50%) or more of the total combined voting power of all classes of stock in one of the other corporations in the chain.
Section 4
ELIGIBILITY
     (a)  Eligible Employees. Any person who is an Employee as of an Offering Date in a given Purchase Period will be eligible to participate in the Plan for that Purchase Period, subject to the requirements of Section 5 and the limitations imposed by Code Section 423(b). Notwithstanding the foregoing, the Committee may, on a prospective basis, (i) exclude from participation in the Plan any or all Employees whose customary employment is 20 hours per week or less or is not for more than five months in a calendar year, and (ii) impose an eligibility service requirement of up to two years of employment. The Committee may also determine that a designated group of highly compensated employees (within the meaning of Code Section 414(q)) are ineligible to participate in the Plan.
     (b)  Five Percent Shareholders. Notwithstanding any other provision of the Plan, no Employee will be eligible to participate in the Plan if the Employee (or any other person whose stock would be attributed to the Employee pursuant to Code Section 424(d)) owns an amount of capital stock of the Company and/or holds outstanding options to purchase stock which equals or exceeds five percent (5%) of the total combined voting power or value of all classes of stock of the Company or a Designated Subsidiary.
Section 5
PARTICIPATION
          An Employee may elect to become a Participant in the Plan by completing such enrollment documents as are provided by the Committee or its designee, including where

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applicable a payroll deduction authorization form, and submitting them to the Committee or its designee in accordance with the administrative requirements and any limitations established by the Committee. The enrollment documents will set forth the amount of the Participant’s Contributions, which may be established as a percentage of the Participant’s Compensation or a specific dollar amount; provided, however, in no event shall a Participant’s Contributions exceed an amount of compensation which would give the Participant the right to purchase a number of shares at an annual rate which exceeds the accrual limit specified in Code Section 423(b)(8) for a calendar year. Contributions to the Plan may be also subject to such other limits designated by the Committee, including any minimum Contribution amount or percentage.
          The Plan is a discretionary plan. Participation by any Employee is purely voluntary. Participation in the Plan with respect to any Purchase Period shall not entitle any Participant to participate with respect to any other Purchase Period.
Section 6
CONTRIBUTIONS
     (a)  Payroll Deductions. A Participant’s Contributions with respect to a Purchase Period will begin on the first payroll paid with respect to such Purchase Period and will end on the last payroll paid on or before the Purchase Date of said Purchase Period, unless the Participant elects to withdraw from the Plan as provided in Section 9. A Participant’s enrollment documents will not remain in effect for successive Purchase Periods unless the Committee otherwise provides.
     (b)  Payroll Deduction Account. For each payroll for which the Participant has elected to make Contributions to the Plan by means of payroll deduction or otherwise (as approved by the Committee), the Committee will credit the amount of each Participant’s Contributions to the Participant’s Payroll Deduction Account. A Participant may not make any additional payments to the Participant’s Payroll Deduction Account, except as expressly provided in the Plan or as authorized by the Committee.
     (c)  No Interest. No interest or other earnings will accrue on a Participant’s Contributions to the Plan or be payable to a Participant upon any payment to or withdrawal by such Participant of funds from such Participant’s Payroll Deduction Account.
     (d)  Non-U.S. Contributions. In countries where payroll deductions are not permissible or feasible, the Committee may, in its sole discretion, permit an Employee to participate in the Plan by alternative means. Except as otherwise specified by the Committee, Contributions (including payroll deductions) made with respect to Employees paid in currencies other than U.S. dollars will be accumulated in local currency and converted to U.S. dollars as of the Purchase Date.
Section 7
STOCK PURCHASES
     (a) Automatic Purchase. Effective as of the close of business on each Purchase Date, but subject to the limitations of Section 8, each Participant will be deemed, without further

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action, to have automatically purchased the number of whole Shares that the Participant’s Payroll Deduction Account balance can purchase at the Purchase Price specified by the Committee as applicable for that Purchase Period on that Purchase Date and such Shares will be considered to be issued and outstanding. Except as otherwise specified by the Committee, any amounts that are not sufficient to purchase a whole Share will be returned to each Participant following the Purchase Period.
     (b)  Delivery of Shares. Purchased Shares shall be credited in book entry form as soon as practicable after each Purchase Date to an account administered by a designated custodian, bank or financial institution. The Committee may require that Shares be retained by the account administrator for a specified period of time and may restrict dispositions during that period, and the Committee may establish other procedures to permit tracking of disqualifying dispositions of the Shares or to restrict transfer of the Shares. A Participant shall not be permitted to pledge, transfer, or sell Shares until they are issued in book entry, except as otherwise permitted by the Committee and subject to the Company’s policies regarding securities trading.
     (c)  Notice Restrictions. The Committee may require, as a condition of participation in the Plan, that each Participant agree to notify the Company if the Participant sells or otherwise disposes of any Shares within two years of the Offering Date or one year of the Purchase Date for the Purchase Period in which the Shares were purchased.
     (d)  Shareholder Rights. A Participant will have no interest or voting right in a Share until a Share has been purchased on the Participant’s behalf under the Plan.
Section 8
LIMITATION ON PURCHASES
     (a)  Limitations on Aggregate Shares Available During a Purchase Period. With respect to each Purchase Period, the Committee, at its discretion, may specify the maximum number of Shares that may be purchased or such other limitations that it may deem appropriate, subject to the aggregate number of Shares authorized under Section 12 of this Plan. If the number of Shares to be purchased on a Purchase Date exceeds the number of Shares available for purchase under the Plan, the Shares purchased on such Purchase Date shall be reduced to an amount determined by the Committee not to exceed the number of Shares so available for purchase and shall be allocated by the Committee pro rata among the Participants in the Purchase Period in proportion to the relative amounts credited to their accounts. Any amounts not thereby applied to the purchase of Shares under the Plan shall be refunded to the Participants after the end of the Purchase Period, without interest.
     (b)  Limitations on Participant Purchases. Participant purchases are subject to the following limitations:
     (1) Purchase Period Limitation. Subject to the calendar year limits provided in (2) below, the maximum number of Shares that a Participant will have the right to purchase in any Purchase Period will be determined by dividing (i) the accrual limit

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specified in Code Section 423(b)(8) by (ii) the Fair Market Value of one Share on the Offering Date for such Purchase Period.
     (2) Calendar Year Limitation. No right to purchase Shares under the Plan will be granted to an Employee if such right, when combined with all other rights and options granted under all of the Code Section 423 employee stock purchase plans of the Company, its Subsidiaries or any parent corporation (within the meaning of Code Section 424(e)), would permit the Employee to purchase Shares with a Fair Market Value (determined at the time the right or option is granted) in excess of the accrual limit specified in Code Section 423(b)(8) for each calendar year in which the right or option is outstanding at any time, determined in accordance with Code Section 423(b)(8).
     (c)  Refunds. As of the first Purchase Date on which this Section 8 limits a Participant’s ability to purchase Shares, the Participant’s payroll deductions will terminate, and the unused balance will be returned to such Participant without interest.
Section 9
WITHDRAWAL FROM PARTICIPATION
          Subject to the Company’s policies regarding securities trading, a Participant may cease participation in a Purchase Period at any time prior to the Purchase Date and withdraw all, but not less than all, of the Contributions credited to the Participant’s Payroll Deduction Account by providing at least 15 days’ prior written notice in the form and manner prescribed by the Committee. Partial cash withdrawals shall not be permitted. If a Participant elects to withdraw, the Participant may not make any further Contributions to the Plan for the purchase of Shares during that Purchase Period. A Participant’s voluntary withdrawal during a Purchase Period will not have any effect upon the Participant’s eligibility to participate in the Plan during a subsequent Purchase Period.
Section 10
EMPLOYMENT TERMINATION
     (a)  In General. If a Participant’s employment with the Company or a Designated Subsidiary terminates for any reason, the Participant will cease to participate in the Plan and the Company or its designee will refund the balance in the Participant’s Payroll Deduction Account without interest.
     (b)  Leaves of Absence. The Committee may establish administrative policies regarding a Participant’s rights to continue to participate in the Plan in the event of such Participant’s leave of absence.
Section 11
PLAN ADMINISTRATION AND AMENDMENTS
          The Plan will be administered by the Committee, which will be appointed by the Board. The Committee will initially be the Compensation Committee of the Board unless and until the Board appoints another committee to administer the Plan; provided, however, that such

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committee shall satisfy the independence requirements under Section 16 of the Securities Exchange Act of 1934, as amended, and as prescribed by any stock exchange on which the Common Stock is listed.
          Subject to the express provisions of the Plan, the Committee will have the discretionary authority to interpret the Plan and to make factual and legal determinations; to take any actions necessary to implement the Plan; to prescribe, amend, and rescind rules and regulations relating to the Plan; and to make all other determinations necessary or advisable in administering the Plan. All such determinations will be final and binding upon all persons. The Committee may request advice or assistance or employ or designate such other persons as are necessary or appropriate for proper administration of the Plan.
          To the fullest extent permitted by law, the Company shall indemnify and hold harmless any member of the Board or any Committee and other individuals performing services on behalf of the Committee, against any liability, cost or expense arising as a result of any claim asserted by any person or entity under applicable laws with respect to any action or failure to act of such individuals taken in connection with this Plan, except claims or liabilities arising on account of the willful misconduct or bad faith of such Board member, Committee member or individual.
Section 12
RESERVED SHARES
          Subject to adjustments as provided in Section 13, the maximum number of Shares available for purchase under the Plan on or after the Effective Date is [      ] Shares. Shares issued under the Plan may be Shares of original issuance, Shares held in treasury, or Shares that have been reacquired by the Company.
Section 13
CAPITAL CHANGES
     (a)  Changes in Capitalization . Subject to any required action by the shareholders of the Company, the right to purchase Shares covered by a current Purchase Period and the number of Shares which have been authorized for issuance under the Plan for any future Purchase Period, the maximum number of Shares each Participant may purchase each Purchase Period (pursuant to Section 8), as well as the price per Share and the number of Shares covered by each right under the Plan which have not yet been purchased shall be proportionately adjusted, as determined by the Committee, for any increase or decrease in the number of issued Shares resulting from a stock split, reverse stock split, stock dividend, combination or reclassification of the Common Stock, or any other increase or decrease in the number of Shares effected without receipt of consideration by the Company. Except as expressly provided in the immediately preceding sentence and unless otherwise determined by the Committee, no issuance by the Company of shares of stock of any class, or securities convertible into or exchangeable for shares of stock of any class, shall affect, and no adjustment by reason thereof shall be made with respect to, the number or price of Shares hereunder.

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     (b)  Dissolution or Liquidation . In the event of the proposed dissolution or liquidation of the Company, the Purchase Period then in progress shall be shortened by the Committee’s setting a new Purchase Date and shall terminate immediately prior to the consummation of such proposed dissolution or liquidation, unless provided otherwise by the Committee. The new Purchase Date selected by the Committee shall be before the date of the Company’s proposed dissolution or liquidation. Each Participant will be notified in writing, at least 10 business days prior to the new Purchase Date or such shorter period as the Committee may determine, that the Purchase Date for the Participant’s right to purchase Shares has been changed to the new Purchase Date and that the applicable number of Shares will automatically be purchased on the new Purchase Date, unless prior to such date the Participant has withdrawn from the Plan as provided in Section 9 hereof.
     (c)  Merger or Asset Sale . In the event of a proposed sale of all or substantially all of the assets of the Company, or the merger or consolidation of the Company with or into another entity, unless provided otherwise by the Committee each outstanding right to purchase Shares shall be assumed, or an equivalent right to purchase shares substituted, by the successor or resulting entity or a parent or subsidiary of the such entity. In the event that the successor or resulting entity refuses to assume or substitute the right to purchase Shares or if so determined by the Committee, any Purchase Period then in progress shall be shortened by the Committee’s setting a new Purchase Date and any Purchase Period then in progress shall end on the new Purchase Date. The new Purchase Date selected by the Committee shall be before the effective date of such proposed sale, merger or consolidation. Each Participant will be notified in writing at least 10 business days prior to the new Purchase Date or such shorter period as the Committee may determine that the Purchase Date for the Participant’s right to purchase Shares has been changed to the new Purchase Date and that the applicable number of Shares will be purchased automatically on the new Purchase Date, unless prior to such date the Participant has withdrawn from the Plan as provided in Section 9 hereof.
Section 14
AMENDMENT OR TERMINATION OF THE PLAN
          The Board or the Committee, in its sole discretion, may suspend or terminate the Plan, or amend the Plan in any respect; provided, however, that the stockholders of the Company must approve any amendment to the extent required by Code Section 423 or the requirements of any stock exchange on which the Common Stock is listed.
          The Plan and all rights of Employees under the Plan will terminate: (a) immediately following the Purchase Date on which the number of Shares purchased on such date has been reduced pursuant to Section 8(a), unless otherwise determined by the Board, or (b) at any date at the discretion of the Board or the Committee. Upon termination of the Plan, each Participant will receive the balance in the Participant’s Payroll Deduction Account, without interest.

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Section 15
REGULATORY AND TAX COMPLIANCE; LISTING OF SHARES
          The Plan, the grant and exercise of the rights to purchase Shares under the Plan, and the Company’s obligation to sell and deliver Shares upon the exercise of rights to purchase Shares, will be subject to all applicable federal, state and foreign laws, rules and regulations, and to such approvals by any regulatory or government agency as may be required or desirable. The Plan is intended to comply with Rule 16b-3 under the U.S. Securities Exchange Act of 1934, as amended. Any provision inconsistent with such Rule shall be inoperative and shall not affect the validity of the Plan.
          If at any time the Board or the Committee shall determine that the listing, registration or qualification of the Shares covered by the Plan upon any national securities exchange or reporting system or under any applicable law is necessary or desirable as a condition of, or in connection with, the sale or purchase of Shares under the Plan, no Shares will be sold, issued or delivered unless and until such listing, registration or qualification shall have been effected or obtained, or otherwise provided for.
Section 16
NON-U.S. JURISDICTIONS
          The Committee may, in its sole discretion, adopt such rules or procedures to accommodate the requirements of local laws of non-U.S. jurisdictions, including rules or procedures relating to the handling of payroll deductions, conversion of local currency, payroll taxes and withholding procedures, as the Committee in its sole discretion deems appropriate. The Committee may also adopt rules and procedures different from those set forth in the Plan applicable to Participants who are employed by specific Designated Subsidiaries or at certain non-U.S. locations that are not intended to be within the scope of Code Section 423, subject to the provisions of Section 12, and may where appropriate establish one or more sub-plans for this purpose.
Section 17
MISCELLANEOUS
     (a)  Nontransferability . Except by the laws of descent and distribution, no benefit provided hereunder, including a right to purchase Shares, shall be subject to alienation, assignment, or transfer by a Participant (or by any person entitled to such benefit pursuant to the terms of this Plan), nor shall it be subject to attachment or other legal process of whatever nature, and any attempted alienation, assignment, attachment, or transfer shall be void and of no effect whatsoever and, upon any such attempt, the benefit shall terminate and be of no force or effect. During a Participant’s lifetime, rights granted to the Participant hereunder shall be exercisable only by the Participant. Shares of Common Stock shall be delivered only to the Participant or, in the event of his death, his properly designated beneficiary entitled to receive the same or, in the absence of such designation, to the executor, administrator or other legal representative of the Participant’s estate.

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     (b)  Tax Withholding. The Company or any Designated Subsidiary shall have the right to withhold from all payments hereunder any federal, state, local, or non-U.S. income, social insurance, or other taxes that it deems are required by law to be withheld with respect to such payments. If such withholding is insufficient to satisfy such Federal, state, local or non-U.S. taxes, the Participant shall be required to pay to the Company or Designated Subsidiary, as the case may be, such amount required to be withheld or make such other arrangements satisfactory to the Company or such Designated Subsidiary, as the Committee shall determine.
     (c)  No Employment Right. Nothing contained in this Plan nor any action taken hereunder shall be construed as giving any right to any individual to be retained as an officer or Employee of the Company or any other employer or subsidiary or affiliate of the Company.
     (d)  Equal Rights and Privileges. All eligible Employees shall have equal rights and privileges with respect to the Plan so that the Plan qualifies as an “employee stock purchase plan” within the meaning of Section 423 or any successor provision of the Code and related regulations. Any provision of the Plan which is inconsistent with Section 423 or any successor provision of the Code shall without further act or amendment by the Company be reformed to comply with the requirements of Section 423.
     (e)  No Rights as Shareholder. A Participant shall not be considered a shareholder with respect to Shares to be purchased until the Purchase Date. Thus, a Participant shall not have a right to any dividend or distribution on Shares subject to purchase during a Purchase Period.
     (f)  Relationship to Other Benefits. It is not intended that any rights or benefits provided under this Plan be considered part of normal or expected compensation for purposes of calculating any severance, redundancy, termination indemnity, end of service awards, pension, retirement, profit sharing, or group insurance plan or similar benefits or payments. No payment under this Plan shall be taken into account in determining any benefits under any severance, termination, end of service awards, pension, retirement, profit sharing, or group insurance plan of the Company or any Designated Subsidiary or subsidiary or affiliate of the Company.
     (g)  Expenses. The expenses of implementing and administering this Plan shall be borne by the Company. Any brokerage fees for the subsequent transfer or sale of Shares acquired under this Plan shall be paid by the Participant (or his beneficiary or estate, if applicable).
     (h)  Titles and Headings. The titles and headings of the Sections and subsections in this Plan are for convenience of reference only, and in the event of any conflict, the text of this Plan, rather than such titles or headings, shall control.
     (i)  Application of Funds. All funds received by the Company under the Plan shall constitute general funds of the Company.
     (j) Nonexclusivity of Plan. Neither the adoption of the Plan by the Board nor the submission of the Plan to the stockholders of the Company for approval shall be construed as creating any limitations on the power of the Board to adopt such other incentive arrangements as it may deem desirable, including, without limitation, the granting of stock options otherwise than

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under the Plan, and such arrangements may be either applicable generally or only in specific cases.
     (k)  Duration of Plan. Notwithstanding any provision in the Plan, no rights to purchase Shares shall be granted hereunder prior to the Effective Date. Following termination of the Plan in accordance with Section 14, the Plan shall remain in effect until all rights granted under the Plan prior to such termination have been exercised or expired, vested or forfeited, and/or otherwise satisfied.
     (l)  Governing Law. This Plan and all determinations made and actions taken pursuant hereto, to the extent not otherwise governed by mandatory provisions of the Code or the securities laws of the United States, shall be governed by and construed in accordance with the laws of the State of Delaware.

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Table of Contents

Information contained herein is subject to completion or amendment. A Registration Statement on Form 10 relating to these securities has been filed with the United States Securities and Exchange Commission under the United States Securities Exchange Act of 1934, as amended.
 
 
Preliminary and Subject to Completion, dated February 12, 2008
 
INFORMATION STATEMENT
 
Dr Pepper Snapple Group, Inc.
 
We are furnishing this information statement to the shareholders of Cadbury Schweppes plc (“Cadbury Schweppes”) in connection with the distribution of all of the outstanding shares of common stock of Dr Pepper Snapple Group, Inc. (“DPS”) to shareholders of Cadbury Schweppes. After the distribution is completed, DPS will be a separate company and will own and operate Cadbury Schweppes’ beverage business in the United States, Canada, Mexico and the Caribbean (the “Americas Beverages business”). Cadbury Schweppes’ global confectionery business and its other beverages business (located principally in Australia) will be owned and operated by Cadbury plc, a U.K. company, which will be the new publicly-traded parent company of Cadbury Schweppes.
 
A shareholder vote approving the distribution was held in the United Kingdom on          , 2008. No further shareholder action is necessary for you to receive the shares of our common stock to which you are entitled in the distribution. You do not need to pay any consideration to DPS, Cadbury Schweppes or Cadbury plc. The distribution remains contingent on, among other things, court approval of certain matters in the United Kingdom. The final court approval is scheduled for          , 2008. Immediately after the distribution is completed, we will be an independent public company. We expect the distribution to occur on          , 2008. For additional details regarding the distribution, see “The Distribution” in this information statement.
 
All of our common stock is currently owned by Cadbury Schweppes. Accordingly, currently there is no public trading market for our common stock. We intend to apply to have our common stock authorized for listing on the New York Stock Exchange under the symbol “DPS.”
 
As you review this information statement, you should carefully consider the matters described in “Risk Factors” beginning on page 15 of this information statement.
 
 
Neither the United States Securities and Exchange Commission nor any U.S. state securities commission has approved or disapproved of these securities or determined if this information statement is truthful or complete. Any representation to the contrary is a criminal offense.
 
 
This information statement does not constitute an offer to sell or the solicitation of an offer to buy any securities.
 
 
The date of this information statement is          , 2008.
 
This information statement was first mailed to stockholders of Cadbury Schweppes on or about          , 2008.


 

 
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In this information statement, references to “DPS,” “our company,” “we,” “us” and “our” refer to Dr Pepper Snapple Group, Inc. and its subsidiaries, references to “Cadbury Schweppes” refer to Cadbury Schweppes plc and its subsidiaries and references to “Cadbury plc” refer to Cadbury plc and its subsidiaries, except in each case where otherwise indicated or the context otherwise requires.
 
We were recently formed for the purpose of holding Cadbury Schweppes’ Americas Beverages business in connection with the separation and distribution described herein and had no operations prior to the separation and distribution. Our company was initially incorporated under the name CSAB Inc. The name of our company was changed from CSAB Inc. to Dr Pepper Snapple Group, Inc. on January 2, 2008.
 
The fiscal years presented in this information statement are the 52-week period ended December 31, 2006, which we refer to as “2006,” the 52-week period ended January 1, 2006, which we refer to as “2005,” and 53-week period ended January 2, 2005, which we refer to as “2004.” The year end dates represent the Sunday closest to December 31 of each year. Effective 2006, our fiscal year ends on December 31 of each year. We refer to the fiscal period from January 1, 2007 to September 30, 2007 as the “nine months ended September 30, 2007” and from January 2, 2006 to September 30, 2006 as the “nine months ended September 30, 2006.”
 
This information statement contains some of our owned or licensed trademarks, trade names and service marks, which we refer to as our brands. All of the product names and logos included in the information statement are either our registered trademarks or those of our licensors.
 
The market and industry data in this information statement is from the following independent industry sources: ACNielsen of the Nielsen Company (“ACNielsen”), Beverage Digest LLC (“Beverage Digest”) and Canadean Limited (“Canadean”). For a description of the different methodologies used by these sources (including the sales channels covered), see “Industry — Use of Market Data in this Information Statement.”


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INFORMATION STATEMENT SUMMARY
 
This summary highlights information contained elsewhere in this information statement. It is not complete and may not contain all the information that may be important to you. You should read the entire information statement carefully, especially the information presented under the heading “Risk Factors,” our unaudited pro forma combined financial statements and our audited and unaudited combined financial statements included elsewhere in this information statement.
 
Except as otherwise indicated or unless the context otherwise requires, the information included in this information statement assumes the completion of the separation of DPS from Cadbury Schweppes and the related distribution of our common stock. Our historical combined financial information has been prepared on a “carve-out” basis from Cadbury Schweppes’ consolidated financial statements using the historical results of operations, assets and liabilities, attributable to Cadbury Schweppes’ Americas Beverages business and including allocations of expenses from Cadbury Schweppes. Our unaudited pro forma combined financial information adjusts our historical combined financial information to give effect to our separation from Cadbury Schweppes, the distribution of our common stock and the related financing, each as described herein.
 
Our Company
 
We are a leading integrated brand owner, bottler and distributor of non-alcoholic beverages in the United States, Canada and Mexico with a diverse portfolio of flavored (non-cola) carbonated soft drinks (“CSDs”) and non-carbonated soft drinks (“non-CSDs”), including ready-to-drink teas, juices, juice drinks and mixers. We have some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers.
 
The following table provides highlights about our company and our key brands:
 
Our Company
 
     
   
•   #1 flavored CSD company in the United States

   
•   More than 75% of our volume from brands that are either #1 or #2 in their category

   
•   #3 North American liquid refreshment beverage business

   
•   $4.7 billion of net sales in 2006 from the United States (88%), Canada (4%) and Mexico and the Caribbean (8%)

   
•   $1.0 billion of income from operations in 2006

 
Our Key Brands
 
     
(DR. PEPPER)
 
•   #1 in its flavor category and #2 overall flavored CSD in the United States

•   Distinguished by its unique blend of 23 flavors and loyal consumer following

•   Flavors include regular, diet and “Soda Fountain Classics” line extensions

•   Oldest major soft drink in the United States, introduced in 1885
 
     
(SNAPPLE)
 
•   A leading ready-to-drink tea in the United States

•   Teas include premium Snapple teas and super premium white, green, red and black teas

•   Brand also includes premium juices, juice drinks and recently launched enhanced waters

•   Founded in Brooklyn, New York in 1972
 
     
(7 UP)
 
•   #2 lemon-lime CSD in the United States

•   Re-launched in 2006 as the only major lemon-lime CSD with all-natural flavors and no artificial preservatives

•   Flavors include regular, diet and cherry

•   The original “Un-Cola,” created in 1929
 


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(MOTTS)
 
•   #1 apple juice and #1 apple sauce brand in the United States

•   Juice products include apple and other fruit juices, Mott’s Plus and Mott’s for Tots

•   Apple sauce products include regular, unsweetened, flavored and organic

•   Brand began as a line of apple cider and vinegar offerings in 1876
 
     
(SUNKIST)
 
•   #1 orange CSD in the United States

•   Flavors include orange, diet and other fruits

•   Licensed to us as a soft drink by the Sunkist Growers Association since 1986
 
     
(HAWAIIAN PUNCH)
 
•   #1 fruit punch brand in the United States

•   Brand includes a variety of fruit flavored and reduced calorie juice drinks

•   Developed originally as an ice cream topping known as “Leo’s Hawaiian Punch” in 1934
 
     
(A
<DATA,AMPERSAND>
	W)
 
•   #1 root beer in the United States

•   Flavors include regular and diet root beer and cream soda

•   A classic all-American soda first sold at a veteran’s parade in 1919
 
     
(CANADA DRY)
 
•   #1 ginger ale in the United States and Canada

•   Brand includes club soda, tonic and other mixers

•   Created in Toronto, Canada in 1904 and introduced in the United States in 1919
 
     
(SCHWEPPES)
 
•   #2 ginger ale in the United States and Canada

•   Brand includes club soda, tonic and other mixers

•   First carbonated beverage in the world, invented in 1783
 
     
(SQUIRT)
 
•   #1 grapefruit CSD in the United States and #2 grapefruit CSD in Mexico

•   Flavors include regular, diet and ruby red

•   Founded in 1938
 
     
(CLAMATO)
 
•   A leading spicy tomato juice brand in the United States, Canada and Mexico

•   Key ingredient in Canada’s popular cocktail, the Bloody Caesar

•   Created in 1969
 
     
(PENAFIEL)
 
•   #1 carbonated mineral water brand in Mexico

•   Brand includes Flavors, Twist and Naturel

•   Mexico’s oldest mineral water, founded in 1928
 
     
(MR
<DATA,AMPERSAND>
	MRS T)
 
•   #1 portfolio of mixer brands in the United States

•   #1 mixer brand (Mr & Mrs T) in the United States

•   Leading mixers (Margaritaville and Rose’s) in their flavor categories
 
 
Note:   All information regarding our company’s market positions is for 2006 and from Beverage Digest and Canadean. All information regarding our brand market positions in the United States is for 2006 and from ACNielsen. All information regarding our brand market positions in Canada and Mexico is for 2006 and from Canadean. For a description of the different methodologies used by these sources (including sales channels covered), see “Industry — Use of Market Data in this Information Statement.”
 
The Sunkist, Rose’s and Margaritaville logos are registered trademarks of Sunkist Growers, Inc., Cadbury Ireland Limited and Margaritaville Enterprises, LLC, respectively, in each case used by us under license. All other logos in the table above are registered trademarks of DPS or its subsidiaries.

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We have built our business over the last 25 years, through a series of strategic acquisitions, into an integrated brand owner, bottler and distributor that is now the third largest liquid refreshment beverage company in North America (according to Beverage Digest and Canadean). Most recently, we acquired several bottling businesses in the United States, which provide us with more control over the bottling, distribution and route-to-market for our products. In the six months ended June 30, 2007, we bottled and/or distributed approximately 45% of our total products sold in the United States (as measured by volume).
 
Our business is currently part of Cadbury Schweppes. Following our separation from Cadbury Schweppes, we will be an independent, publicly-traded company, and Cadbury Schweppes will not retain any ownership interest in us. In connection with the separation, we will enter into a number of agreements with Cadbury plc that will govern our relationship following the separation. These include agreements to provide each other with services during a transition period and indemnify each other against certain liabilities arising from our respective businesses and from the separation. For a more detailed description of the separation, see “The Distribution” and for a more detailed description of these agreements, see “Our Relationship with Cadbury plc After the Distribution.”
 
Our Industry
 
Total retail sales (i.e., sales to end consumers) in 2006 in the U.S. liquid refreshment beverage market were $106 billion, with CSDs accounting for 66.1%, non-CSDs (including ready-to-drink teas, juices, juice drinks and sports drinks) accounting for 19.7% and bottled water accounting for 14.2%. The U.S. liquid refreshment beverage market has grown over the last five years, with average annual volume growth of 3.9% between 2001 and 2006 and average annual retail sales growth of 5.1% over the same period. In 2006, CSD retail sales grew 2.9%, despite a 0.6% decline in volume. Within the CSD market segment, flavored CSDs increased their share (as measured by volume), from 40.1% in 2001 to 42.6% in 2006, and colas lost share from 59.9% in 2001 to 57.4% in 2006. Non-CSDs have experienced strong volume growth over the last five years with their share of the U.S. liquid refreshment beverage market increasing from 12.7% in 2001 to 16.3% in 2006. Non-CSD volume and retail sales increased by 13.2% and 14.8%, respectively, in 2006, with strong growth in ready-to-drink teas, sports drinks and juice drinks. The Canadian and Mexican markets have exhibited broadly similar trends to those in the United States, except that Mexican CSD volume grew 4.9% in 2006 according to Canadean. All U.S. market and industry data set forth in this paragraph is from Beverage Digest. See “Industry — Use of Market Data in this Information Statement.”
 
Our Strengths
 
The key strengths of our business are:
 
Strong portfolio of leading, consumer-preferred brands.   We own a diverse portfolio of well-known CSD and non-CSD brands, which provides our bottlers, distributors and retailers with a wide variety of products and provides us with a platform for growth and profitability. We are the #1 flavored CSD company in the United States. In addition, we are the only major beverage concentrate manufacturer with year-over-year market share growth in the CSD market segment in each of the last four years. Our largest brand, Dr Pepper, is the #2 flavored CSD in the United States, according to ACNielsen, and our Snapple brand is a leading ready-to-drink tea. Overall, in 2006, more than 75% of our volume was generated by brands that hold either the #1 or #2 position in their category. The strength of our key brands has allowed us to launch innovations and brand extensions such as Dr Pepper Soda Fountain Classics, Mott’s for Tots and Snapple Antioxidant Waters.
 
Integrated business model.   We believe our brand ownership, bottling and distribution are more integrated than the U.S. operations of our principal competitors and that this differentiation provides us with a competitive advantage. Our integrated business model strengthens our route-to-market and enables us to improve focus on our brands. Our integrated business model also provides opportunities for net sales and profit growth through the alignment of the economic interests of our brand ownership and our bottling and distribution businesses.
 
Strong customer relationships.   Our brands have enjoyed long-standing relationships with many of our top customers. We sell our products to a wide range of customers, from bottlers and distributors to national retailers, large foodservice and convenience store customers. We have strong relationships with some of the largest bottlers and distributors, including those affiliated with The Coca-Cola Company (“Coca-Cola”) and PepsiCo, Inc. (“PepsiCo”), some of the largest and most important retailers, including Wal-Mart, Safeway, Kroger and


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Target, some of the largest foodservice customers, including McDonald’s, Yum! and Burger King, and convenience store customers, including 7-Eleven.
 
Attractive positioning within a large, growing and profitable market.   We hold the #3 position in each of the United States, Canada and Mexico, three of the top ten beverage markets by CSD volume, according to Beverage Digest and Canadean. In addition, we participate in many of the growing categories in the liquid refreshment beverage market, such as ready-to-drink teas. We do not participate significantly in colas, which have declined in CSD volume share from 70.0% in 1991 to 57.4% in 2006 in the United States, according to Beverage Digest. We also do not participate significantly in the bottled water market segment, which we believe is a highly competitive and generally low margin market segment.
 
Broad geographic manufacturing and distribution coverage.   As of December 31, 2007, we had 21 manufacturing facilities and more than 250 distribution centers in the United States, as well as 4 manufacturing facilities and more than 25 distribution centers in Mexico. These facilities use a variety of manufacturing processes. Following our recent bottling acquisitions and manufacturing investments, we now have greater geographic coverage with strategically located manufacturing and distribution capabilities, enabling us to better align our operations with our customers, reduce transportation costs and have greater control over the timing and coordination of new product launches.
 
Strong operating margins and significant, stable cash flows.   The breadth and strength of our brand portfolio have enabled us to generate strong operating margins which, combined with our relatively modest capital expenditures, have delivered significant and stable cash flows. These cash flows create stockholder value by enabling us to consider a variety of alternatives, such as investing in our business, reducing debt and returning capital to our stockholders.
 
Experienced executive management team.   Our executive management team has an average of more than 20 years of experience in the food and beverage industry. The team has broad experience in brand ownership, bottling and distribution, and enjoys strong relationships both within the industry and with major customers.
 
Our Strategy
 
The key elements of our business strategy are to:
 
Build and enhance leading brands.   We have a well-defined portfolio strategy to allocate our marketing and sales resources. We use an on-going process of market and consumer analysis to identify key brands that we believe have the greatest potential for profitable sales growth. For example, in 2006, we relaunched 7UP with 100% natural flavors and no artificial preservatives, thereby differentiating the 7UP brand from other major lemon-lime CSDs. We intend to continue to invest most heavily in our key brands to drive profitable and sustainable growth by strengthening consumer awareness, developing innovative products and brand extensions to take advantage of evolving consumer trends, improving distribution and increasing promotional effectiveness.
 
Focus on opportunities in high growth and high margin categories.   We are focused on driving growth in our business in selected profitable and emerging categories. These categories include ready-to-drink teas, energy drinks and other functional beverages. We also intend to capitalize on opportunities in these categories through brand extensions, new product launches and selective acquisitions of brand and distribution rights.
 
Increase presence in high margin channels and packages.   We are focused on improving our product presence in high margin channels, such as convenience stores, vending machines and small independent retail outlets, through increased selling activity and investments in coolers and other cold drink equipment. We also intend to increase demand for high margin products like single-serve packages for many of our key brands through increased promotional activity and innovation.
 
Leverage our integrated business model.   We believe our integrated brand ownership, bottling and distribution business model provides us opportunities for net sales and profit growth through the alignment of the economic interests of our brand ownership and our bottling and distribution businesses. We intend to leverage our integrated business model to reduce costs by creating greater geographic manufacturing and distribution coverage and to be more flexible and responsive to the changing needs of our large retail customers by coordinating sales, service, distribution, promotions and product launches.


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Strengthen our route-to-market through acquisitions.   The acquisition and creation of our Bottling Group is part of our longer-term initiative to strengthen the route-to-market for our products. We believe additional acquisitions of regional bottling companies will broaden our geographic coverage in regions where we are currently under-represented and enhance coordination with our large retail customers.
 
Improve operating efficiency.   We believe our recently announced restructuring will reduce our selling, general and administrative expenses and improve our operating efficiency. In addition, the integration of recent acquisitions into our Bottling Group has created the opportunity to improve our manufacturing, warehousing and distribution operations.
 
Background and Reasons for the Distribution
 
On March 15, 2007, Cadbury Schweppes announced that it intended to separate its Americas Beverages business from its global confectionery business and its other beverages business (located principally in Australia). The board of directors of Cadbury Schweppes initially determined to simultaneously explore the potential for both a sale of our company to a third party and a distribution of our common stock to Cadbury Schweppes shareholders as alternatives for the separation of the businesses. After determining that difficult debt market conditions would not facilitate an acceptable sale process for the foreseeable future, Cadbury Schweppes announced on October 10, 2007 that it intended to focus on the separation of its Americas Beverages business through the distribution of the common stock of DPS to Cadbury Schweppes’ shareholders. On          , 2008, Cadbury Schweppes’ board of directors approved the distribution of our common stock to the shareholders of Cadbury Schweppes. Cadbury Schweppes believes that the separation of its Americas Beverages business from its global confectionery business and its other beverages business (located principally in Australia) will enhance value for stockholders of DPS and shareholders of Cadbury plc, the new parent company of Cadbury Schweppes, by creating significant opportunities and benefits, including:
 
  •  allowing the management of each company to focus its efforts on its own business and strategic priorities;
 
  •  enabling each company to allocate its capital more efficiently;
 
  •  providing DPS with direct access to the debt and equity capital markets;
 
  •  improving DPS’s ability to pursue strategic transactions through the use of shares of common stock as consideration;
 
  •  enhancing DPS’s market recognition with investors; and
 
  •  increasing DPS’s ability to attract and retain employees by providing equity compensation tied directly to its business.
 
For more information on the distribution, see “The Distribution.”
 
Risk Factors
 
Our new company faces both general and specific risks and uncertainties relating to our business, our separation from Cadbury Schweppes and our being a publicly-traded company following the distribution, which are described in “Risk Factors,” beginning on page 15.
 
Recent Developments
 
New President and Chief Executive Officer
 
Larry Young was appointed President and Chief Executive Officer of Cadbury Schweppes’ Americas Beverages business on October 10, 2007. Mr. Young was previously our Chief Operating Officer, as well as President, Bottling Group, and has more than 30 years of experience in the bottling and beverages industry.
 
Organizational Restructuring
 
On October 10, 2007, we announced a restructuring of our organization that is intended to create a more efficient organization. This restructuring will result in a reduction of approximately 470 employees in our corporate, sales and supply chain functions and will include approximately 150 employees in Plano, Texas,


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150 employees in Rye Brook, New York and 80 employees in Aspers, Pennsylvania. The remaining reductions will occur at a number of sites located in the United States, Canada and Mexico. The restructuring will also include the closure of two manufacturing facilities in Waterloo, New York and Denver, Colorado. The employee reductions and facilities closures are expected to be completed by June 2008.
 
As a result of this restructuring, we expect to recognize a charge of approximately $70 million primarily in 2007, with the balance in 2008. We expect this restructuring to generate annual cost savings of approximately $70 million, most of which are expected to be realized in 2008 with the full annual benefit realized from 2009 onwards. As part of this restructuring, our Bottling Group segment has assumed management and operational control of our Snapple Distributors segment. These operations are currently being integrated and will be reported in our 2007 annual results as a single segment.
 
Accelerade Launch
 
We launched our new, ready-to-drink Accelerade sports drink in the first half of 2007. The launch represented an introduction of a new product into a new beverage category for us and has been supported by significant national product placement and marketing investments, predominantly in the third quarter. Net sales have been well below expectations despite these investments. We incurred an operating loss of approximately $40 million from the Accelerade launch in the nine months ended September 30, 2007. Going forward, we intend to focus on selling Accelerade to informed athletes, trainers and exercisers, and targeting retailers that are frequented by these consumers, such as health and nutrition outlets, where we expect the product to be financially viable.
 
Glacéau Termination
 
Following its acquisition by Coca-Cola on August 30, 2007, Energy Brands, Inc. notified us that it was terminating our distribution agreements for glacéau products, including vitaminwater, fruitwater and smartwater, effective November 2, 2007. Pursuant to the terms of the agreement, we received a payment of approximately $92 million from Energy Brands, Inc. for this termination in December 2007. Our glacéau net sales for the nine months ended September 30, 2007 were approximately $200 million and are reflected in our Bottling Group and Snapple Distributors segments.
 
SeaBev Acquisition
 
On July 11, 2007, we acquired the Jacksonville, Florida-based Southeast-Atlantic Beverage Corp. (“SeaBev”), the second largest independent bottling and distribution company in the United States, for approximately $53 million. SeaBev has 2 manufacturing facilities and 16 warehouses and distribution centers located from Miami to Atlanta. It distributes many of our CSDs and non-CSDs throughout Florida and Northern Georgia, providing us with expanded geographic coverage and a more integrated business. SeaBev’s results of operations are reported as part of our Bottling Group segment.


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Questions and Answers About the Distribution
 
The information statement has been prepared as if the vote of the shareholders of Cadbury Schweppes plc to approve the separation and distribution of our shares and related matters described herein had already occurred. The information statement will not be distributed to shareholders until such a vote has occurred. For a more detailed description of the matters summarized below, see “The Distribution.”
 
What is the distribution? The distribution is part of the process by which Cadbury Schweppes will separate its Americas Beverages business from its global confectionery business and its other beverages business (located principally in Australia). Although the separation and distribution have several steps, ultimately, holders of Cadbury Schweppes ordinary shares (and holders of American depositary receipts (“ADRs”) representing Cadbury Schweppes ordinary shares) will receive shares of common stock of Dr Pepper Snapple Group, Inc., a new company which will own Cadbury Schweppes’ Americas Beverages business, and shares of Cadbury plc, a new company which will own Cadbury Schweppes’ global confectionery business and its other beverages business (located principally in Australia) (or ADRs representing such shares). These two companies will be independent from each other after the separation. We intend that the shares of our common stock will be listed on the New York Stock Exchange. It is also intended that the ordinary shares of Cadbury plc will be listed on the London Stock Exchange and ADRs representing its ordinary shares will be listed on the New York Stock Exchange.
 
How will the separation work?
Cadbury Schweppes currently intends to effect the separation and distribution through the following steps:
 
•  Scheme of Arrangement .  Cadbury Schweppes intends to implement a corporate reorganization pursuant to which a new company, Cadbury plc, will become the holding company of Cadbury Schweppes. This corporate reorganization is known as a “scheme of arrangement” under UK law. Pursuant to the scheme of arrangement, all outstanding Cadbury Schweppes ordinary shares will be cancelled and holders of Cadbury Schweppes ordinary shares will receive Cadbury plc ordinary shares, which will represent the ongoing ownership interest in the global confectionery business and its other beverages business (located principally in Australia), and Cadbury plc “beverage shares,” which, ultimately, will entitle the holder to receive our common stock in connection with the distribution which we expect to be completed on          , 2008.
 
•  Reduction of Capital and the Distribution of Our Common Stock.   Shortly after the scheme of arrangement becomes effective, Cadbury plc will cancel the Cadbury plc “beverage shares” (pursuant to a “reduction of capital” under UK law) and transfer its Americas Beverages business to us. In return for the transfer of the Americas Beverages business to us, we will distribute all of the shares of our common stock to the holders of Cadbury plc “beverage shares.”
 
For additional information on the distribution, see “The Distribution — Reorganization of Cadbury Schweppes and Distribution of Shares of Our Common Stock” and “The Distribution — Manner of Effecting the Distribution.”


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What will the relationship of Dr Pepper Snapple Group, Inc. and Cadbury plc be after the distribution?
We and Cadbury plc will each be independent, publicly-traded companies with separate management teams and boards of directors. Pursuant to the scheme of arrangement, Cadbury Schweppes will become a subsidiary of Cadbury plc.
 
Prior to the distribution, we will enter into agreements with Cadbury Schweppes to provide each other with services during a transition period and indemnify each other against certain liabilities arising from our respective businesses and from the separation. For additional information on our relationship with Cadbury plc after the distribution, see “Our Relationship with Cadbury plc After the Distribution.”
 
When will the distribution be completed?
We expect the distribution to be completed in the second quarter of 2008.
 
What is the record date for the distribution of our shares of common stock?
The record date for the distribution of shares of our common stock is expected to be          , 2008.
 
What do Cadbury Schweppes shareholders and holders of ADRs have to do to participate in the distribution?
A shareholder vote approving the separation and distribution was held in the United Kingdom on          , 2008. No further action by Cadbury Schweppes shareholders or holders of Cadbury Schweppes ADRs is necessary for you to receive the shares of our common stock to which you are entitled in the distribution. You do not need to pay any consideration to us, Cadbury Schweppes or Cadbury plc. The distribution remains contingent on the approval of the High Court of Justice of England and Wales, as well as certain other conditions described in “The Distribution” and summarized below under “— What are the conditions to the distribution?”
 
How many shares of our common stock will Cadbury Schweppes shareholders and holders of ADRs receive?
We will distribute           shares of our common stock for each Cadbury plc beverage share or           shares of our common stock for each Cadbury Schweppes ADR held at the Cadbury plc Reduction of Capital Record Time (as defined under “The Distribution”). Based on approximately           million Cadbury Schweppes ordinary shares outstanding as of          , 2008, a total of approximately           million shares of our common stock will be distributed. For additional information on the distribution, see “The Distribution — Results of the Distribution.”
 
What are the tax consequences of the receipt of Cadbury plc ordinary shares or Cadbury plc ADRs and our common stock by holders of Cadbury Schweppes ordinary shares?
The receipt of Cadbury plc ordinary shares and shares of our common stock should not constitute a disposal by a holder of Cadbury Schweppes ordinary shares for U.K. tax purposes, and so no chargeable gain or allowable loss should arise for U.K. tax purposes. Where the amount of cash received in lieu of a fractional share of our common stock is “small” as compared to the value of the holding, a U.K. Holder (as defined under “Material Tax Considerations — U.K. Holders”) may treat the cash received as a deduction from the base cost of the holding of common stock, rather than as a partial disposal of the common stock.
 
In the case of any U.K. Holder who, alone or together with persons connected with him, holds more than 5% of, or any class of, shares in or debentures of Cadbury Schweppes, it is a condition for this treatment that the separation and distribution are being effected for


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bona fide commercial reasons and do not form part of a scheme or arrangement of which the main purpose, or one of the main purposes, is an avoidance of liability to U.K. corporation tax or capital gains tax.
 
Cadbury Schweppes has requested a private letter ruling from the U.S. Internal Revenue Service (the “IRS”) that subject to the facts, representations and qualifications contained therein, your receipt of Cadbury plc ordinary shares and our common stock (along with certain related restructuring transactions) will qualify for non-recognition treatment under Sections 355 and 368(a)(1)(F) of the Internal Revenue Code of 1986, as amended (the “Internal Revenue Code”). Under such treatment, a holder of Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs who is a U.S. person for U.S. federal income tax purposes will not incur U.S. federal income tax upon the receipt of Cadbury plc ordinary shares or Cadbury plc ADRs and our common stock. Any cash received in lieu of a fractional share of Cadbury plc ordinary shares or our common stock will generally be treated as capital gain.
 
See “Material Tax Considerations.”
 
What are the conditions to the distribution?
The distribution is subject to a number of conditions, including, among others, the approval of Cadbury Schweppes shareholders and the High Court of Justice of England and Wales, the Securities and Exchange Commission (the “SEC”) declaring effective the registration statement of which this information statement forms a part and the completion of the financing related to the distribution. See “The Distribution.”
 
Does Dr Pepper Snapple Group, Inc. intend to pay dividends on the common stock?
Prior to the effectiveness of the registration statement of which this information statement forms a part, we intend to determine and disclose a policy with respect to the payment of any dividends to our stockholders. See “Dividend Policy.”
 
Will Dr Pepper Snapple Group, Inc. incur any debt prior to or at the time of the distribution?
We intend to enter into new financing arrangements prior to the completion of the distribution. See “Risk Factors — Risks Related to Our Business — After our separation from Cadbury Schweppes, we will have a significant amount of debt, which could adversely affect our business and our ability to meet our obligations” and “Description of Indebtedness.”
 
Where will trading begin in the common stock?
There is no current trading market for our common stock. We intend to apply to have our common stock authorized for listing on the New York Stock Exchange under the symbol “DPS.” After this listing, shares of our common stock will generally be freely-tradable. For additional information regarding the trading of our common stock, see “Risk Factors — Risks Related to Our Common Stock” and “The Distribution — Market for Our Common Stock.”
 
What will happen to the listing of Cadbury Schweppes ordinary shares and ADRs?
Once the scheme of arrangement becomes effective, Cadbury Schweppes ordinary shares and Cadbury Schweppes ADRs will be delisted from the London Stock Exchange and the New York Stock Exchange, respectively. Ordinary shares of Cadbury plc, the new parent company of Cadbury Schweppes, will be listed on the London Stock Exchange under the symbol “          ” and the Cadbury plc ADRs will be listed on the New York Stock Exchange


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under the symbol “          .” See “The Distribution — Reorganization of Cadbury Schweppes and Distribution of Shares of Our Common Stock.”
 
What will be the separation costs?
Cadbury Schweppes currently expects to incur pre-tax separation costs of approximately $      million to $      million in connection with our separation from Cadbury Schweppes, with the possibility that these costs could be higher. Nearly all of these costs will be incurred by Cadbury Schweppes and us prior to the distribution. Except as provided in the agreements to be entered into by Cadbury plc and us in connection with the separation, to the extent additional separation costs are incurred by us after the distribution, they will be our responsibility. In addition, we will incur additional costs on a going-forward basis in connection with operating as a publicly-traded company separate from Cadbury Schweppes. For more information regarding the costs of the separation and our ongoing incremental costs, see “Unaudited Pro Forma Combined Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
 
Are there risks associated with owning Dr Pepper Snapple Group, Inc. common stock?
Our new company will face both general and specific risks and uncertainties relating to our business, our separation from, and ongoing relationship with, Cadbury plc and our being a publicly-traded company following the distribution. You should read carefully “Risk Factors,” beginning on page 15.
 
Who do I contact for information regarding Dr Pepper Snapple Group, Inc. and the distribution?
You should direct inquiries relating to the distribution to:
     Cadbury Schweppes plc
     25 Berkeley Square
     London W1J 6HB
     United Kingdom
     Attention: Investor Relations
     Tel: 011-44-207-830-5124
 
 
After the distribution, the transfer agent and registrar for our common stock will be:
 
     Computershare Trust Company, N.A.
     250 Royall Street
     Canton, MA 02021
     USA
     Attention: Jennifer LaGrow
     Tel: 781-575-2000
 
 
Corporate Information
 
We were incorporated in Delaware on October 24, 2007. The address of our principal executive offices is 5301 Legacy Drive, Plano, Texas 75024. Our telephone number is (972) 673-7000. We were recently formed for the purpose of holding Cadbury Schweppes’ Americas Beverages business in connection with the separation and distribution described herein and had no operations prior to the separation and distribution.


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Summary Historical and Unaudited Pro Forma Combined Financial Data
 
The following table presents our summary historical and unaudited pro forma combined financial data. Our summary historical combined financial data presented below as of December 31, 2006 and January 1, 2006 (the last day of fiscal 2005) and for the three fiscal years 2006, 2005 and 2004 have been derived from our audited combined financial statements, included elsewhere in this information statement. Our summary historical combined balance sheet data presented below as of January 2, 2005 (the last day of fiscal 2004) have been derived from our historical accounting records, which are unaudited. Our summary historical combined financial data presented below as of September 30, 2007 and for each of the nine months ended September 30, 2007 and 2006 have been derived from our unaudited combined financial statements included elsewhere in this information statement, which have been prepared on a basis consistent with our annual audited combined financial statements. In the opinion of our management, such unaudited financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for the fair presentation of the information set forth therein. The results for the interim periods are not necessarily indicative of the results to be expected for any future period.
 
Our historical financial data have been prepared on a “carve-out” basis from Cadbury Schweppes’ consolidated financial statements using the historical results of operations, assets and liabilities attributable to Cadbury Schweppes’ Americas Beverages business and including allocations of expenses from Cadbury Schweppes. This historical Cadbury Schweppes’ Americas Beverages information is our predecessor financial information. The results included below and elsewhere in this information statement are not necessarily indicative of our future performance and do not reflect our financial performance had we been an independent, publicly-traded company during the periods presented. You should read this information along with the information included in “Unaudited Pro Forma Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited combined financial statements and the related notes thereto included elsewhere in this information statement.
 
On May 2, 2006, we acquired approximately 55% of the outstanding shares of Dr Pepper/Seven Up Bottling Group, Inc. (“DPSUBG”), which combined with our pre-existing 45% ownership, resulted in our full ownership of DPSUBG. DPSUBG’s results have been included in the individual line items within our combined financial statements beginning on May 2, 2006. Prior to this date, the existing investment in DPSUBG was accounted for under the equity method and reflected in the line item captioned “equity in earnings of unconsolidated subsidiaries, net of tax.” In addition, on June 9, 2006 we acquired the assets of All American Bottling Company, on August 7, 2006 we acquired Seven Up Bottling Company of San Francisco and on July 11, 2007 we acquired SeaBev. Each of these four acquisitions is included in our combined financial statements beginning on its date of acquisition. As a result, our financial data is not necessarily comparable on a period-to-period basis. There are no adjustments reflected in the summary unaudited pro forma financial data for these acquisitions.
 
The summary unaudited pro forma financial data has been adjusted to give effect to:
 
  •  the contribution by Cadbury Schweppes of its Americas Beverages business to us;
 
  •  the distribution of           million shares of our common stock to shareholders of Cadbury plc;
 
  •  $      million of debt incurred under our new financing arrangements and the associated interest expense and other financing costs; and
 
  •  the repayment of $      million of related party debt and $           million of related party payables, in each case owed by DPS to Cadbury Schweppes.


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The unaudited pro forma combined balance sheet data has been prepared as though the separation, distribution and related financing transactions occurred on September 30, 2007. The unaudited pro forma combined statement of operations data for 2006 and the nine months ended September 30, 2007 have been prepared as though the separation, distribution and related financing transactions occurred on January 2, 2006 (the first day of fiscal 2006). The pro forma adjustments are based upon available information and assumptions that we believe are reasonable. The unaudited pro forma combined financial statements are for informational purposes only and are not necessarily indicative of what our financial performance would have been had the separation, distribution and related financing transactions been completed on the dates assumed. They may not reflect the financial performance which would have resulted had we been an independent, publicly-traded company during those periods. In addition, they are not indicative of our future financial performance. For further information regarding the pro forma adjustments described above, see “Unaudited Pro Forma Combined Financial Data” and our audited and unaudited combined financial statements and related notes thereto included elsewhere in this information statement.
 
                                                         
                            Pro Forma     Historical  
                Nine Months Ended
 
    Pro Forma     Historical     September 30,  
    2006     2006     2005     2004     2007     2007     2006  
    (Unaudited)                       (Unaudited)              
 
Statements of Operations Data:
  (In millions, except per share data)
Net sales
  $                $ 4,735     $ 3,205     $ 3,065     $                $ 4,347     $ 3,380  
Cost of sales
            1,994       1,120       1,051               1,984       1,399  
                                                         
Gross profit
            2,741       2,085       2,014               2,363       1,981  
                                                         
Selling, general and administrative expenses
            1,659       1,179       1,135               1,527       1,239  
Depreciation and amortization
            69       26       10               69       44  
Restructuring costs
            27       10       36               36       9  
Gain on disposal of property and intangible assets
            (32 )     (36 )     (1 )                   (32 )
                                                         
Income from operations
            1,018       906       834               731       721  
                                                         
Interest expense
            257       210       177               195       189  
Interest income
            (46 )     (40 )     (48 )             (38 )     (35 )
Other expense (income)
            2       (51 )     2               (2 )     5  
                                                         
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
            805       787       703               576       562  
Provision for income taxes
            298       321       270               218       206  
                                                         
Income before equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
            507       466       433               358       356  
Equity in earnings of unconsolidated subsidiaries, net of tax
            3       21       13               1       3  
                                                         
Income before cumulative effect of change in accounting policy
            510       487       446               359       359  
Cumulative effect of change in accounting policy, net of tax
                  10                            
                                                         
Net income
  $       $ 510     $ 477     $ 446     $       $ 359     $ 359  
                                                         
Net income per share — basic(1)
  $                               $                    
Net income per share — diluted(2)
  $                               $                    
Balance Sheets Data:
                                                       
Cash and cash equivalents
          $ 35     $ 28     $ 19             $ 34          
Total assets
            9,346       7,433       7,625               10,896          
Current portion of long-term debt
            708       404       435               258          
Long-term debt
            3,084       2,858       3,468               2,969          
Other non-current liabilities
            1,321       1,013       943               1,381          
Total invested equity
            3,250       2,426       2,106               4,992          
 


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                            Pro Forma     Historical  
                Nine Months Ended
 
    Pro Forma     Historical     September 30,  
    2006     2006     2005     2004     2007     2007     2006  
    (Unaudited)                       (Unaudited)              
Statements of Cash Flows Data:
  (In millions)
Cash provided by (used in):
                                                       
Operating activities
  $            $ 581     $ 583     $ 610     $            $ 757     $ 521  
Investing activities
            (502 )     283       184               (1,450 )     (550 )
Financing activities
            (72 )     (815 )     (799 )             691       81  
Depreciation expense(3)
            94       48       53               89       65  
Amortization expense(3)
            45       31       31               38       33  
Capital expenditures
            (158 )     (44 )     (71 )             (123 )     (79 )
Other Financial Data:
                                                       
EBITDA(4)
  $       $ 1,158     $ 1,047     $ 929     $       $ 861     $ 817  
 
 
(1) The number of shares used to compute net income per share — basic is          , which is the number of shares of our common stock assumed to be outstanding on the distribution date, based on a distribution ratio of           shares of our common stock for each           Cadbury Schweppes ordinary shares.
 
(2) The number of shares used to compute net income per share — diluted is based on the number of shares of our common stock assumed to be outstanding on the distribution date. Net income per share diluted also reflects the potential dilution that could occur if restricted stock units and options granted under equity-based compensation arrangements were exercised or converted into common stock.
 
(3) The depreciation and amortization expenses reflected in this section of the table represent our total depreciation and amortization expenses as reflected on our combined statements of cash flows. Depreciation and amortization expenses in our combined statements of operations data are reflected in various line items including “depreciation and amortization,” “cost of sales” and “selling, general and administrative expenses.”
 
(4) EBITDA is defined as net income before interest expense, interest income, provision for income taxes, depreciation and amortization. EBITDA is a measure commonly used by financial analysts in evaluating a company’s liquidity. Accordingly, we believe that EBITDA may be useful for investors in assessing our ability to meet our debt service requirements. EBITDA is not a recognized measurement under U.S. GAAP. When evaluating liquidity, investors should not consider EBITDA in isolation of, or as a substitute for, measures of liquidity as determined in accordance with U.S. GAAP, such as net income or net cash provided by operating activities. EBITDA may have material limitations as a liquidity measure because it excludes interest expense, interest income, taxes and depreciation and amortization. Other companies may calculate EBITDA differently, and therefore our EBITDA may not be comparable to similarly titled measures reported by other companies. A reconciliation of EBITDA to net income is provided below.
 
                                                         
                    Pro Forma   Historical
            Nine Months Ended
    Pro Forma   Historical   September 30,
    2006   2006   2005   2004   2007   2007   2006
    (Unaudited)               (Unaudited)        
    (In millions)
 
Net income
  $       $ 510     $ 477     $  446     $       $  359     $  359  
Interest expense
            257       210       177               195       189  
Interest income
            (46 )     (40 )     (48 )             (38 )     (35 )
Income taxes
            298       321       270               218       206  
Depreciation expense
            94       48       53               89       65  
Amortization expense
                 45       31       31                    38       33  
                                                         
EBITDA
  $       $ 1,158     $ 1,047     $ 929     $       $ 861     $ 817  
                                                         

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Significant Items Affecting Comparability
 
The comparability of our period-to-period income from operations is affected by significant acquisitions and disposals, most notably our bottling acquisitions in 2006, and the other factors described in our period-to-period results of operations under “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” As a result, our financial data is not necessarily comparable on a period-to-period basis. The table below sets forth certain significant items affecting comparability of our period-to-period income from operations.
 
                                         
                      Nine Months Ended
 
                      September 30,  
    2006     2005     2004     2007     2006  
    (In millions)  
 
Restructuring costs
  $ 27     $ 10     $ 36     $ 36     $ 9  
Gain on disposal of assets
    (32 )     (36 )     (1 )           (32 )
 
Restructuring Costs
 
In the nine months ended September 30, 2007, the $36 million in expenses was primarily due to restructuring costs associated with the integration of our Bottling Group. In the nine months ended September 30, 2006, the $9 million in expenses was primarily related to costs associated with the integration of our Bottling Group as well as various other cost reduction and efficiency initiatives. The Bottling Group integration and other cost reduction and efficiency initiatives primarily related to the alignment of management information systems, the consolidation of the back office operations from the acquired businesses, the elimination of duplicate employees, and employee relocations.
 
In 2006, the $27 million in expenses was primarily related to integration costs associated with our bottling acquisitions, similar to those discussed above, as well as outsourcing initiatives related to our back office operations and a reorganization of our information technology functions. The outsourcing initiatives involved the transfer of certain back office functions, such as accounts payable and travel and entertainment management, to a third party provider. In 2005, the $10 million in expenses was primarily related to costs from the restructuring of our four North American businesses (Mott’s, Snapple, Dr Pepper/Seven Up and Mexico) that occurred in 2004 and the further consolidation of our back office operations. In 2004, the $36 million in expenses was primarily related to the restructuring of our four North American businesses into a combined management reporting unit, the creation of a back office operations service center and the closure of our North Brunswick plant.
 
Gain on Disposal of Assets
 
In 2006, we recognized a $32 million gain attributed to the disposals of the Grandma’s Molasses brand and Slush Puppie business, which is also reflected in the nine months ended September 30, 2006. In 2005, we recognized a $36 million gain on the disposal of the Holland House brand. In 2004, we recognized a $1 million gain attributed to various asset disposals.


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RISK FACTORS
 
Ownership of our common stock involves risk. You should understand and carefully consider the risks below, as well as all of the other information contained in this information statement, including our financial statements and the related notes. Some of the risks relate to our business while others relate to our separation from Cadbury Schweppes and ownership of our common stock. Our business may be adversely affected by risks and uncertainties not currently known to us. If any of these risks or uncertainties develop into actual events, our business and financial performance (including our financial condition, results of operations and cash flows) could be materially and adversely affected, and the trading price of our common stock could decline.
 
Risks Related to Our Business
 
We operate in highly competitive markets.
 
Our industry is highly competitive. We compete with multinational corporations with significant financial resources, including Coca-Cola and PepsiCo. These competitors can use their resources and scale to rapidly respond to competitive pressures and changes in consumer preferences by introducing new products, reducing prices or increasing promotional activities. We also compete against a variety of smaller, regional and private label manufacturers. Smaller companies may be more innovative, better able to bring new products to market and better able to quickly exploit and serve niche markets. Our inability to compete effectively could result in a decline in our sales. As a result, we may have to reduce our prices or increase our spending on marketing, advertising and product innovation. Any of these could negatively affect our business and financial performance.
 
We may not effectively respond to changing consumer preferences, trends, health concerns and other factors.
 
Consumers’ preferences can change due to a variety of factors, including aging of the population, social trends, negative publicity, economic downturn or other factors. For example, consumers are increasingly concerned about health and wellness, and demand for regular CSDs has decreased as consumers have shifted towards low or no calorie soft drinks and, increasingly, to non-CSDs, such as water, ready-to-drink teas and sports drinks. If we do not effectively anticipate these trends and changing consumer preferences, then quickly develop new products in response, our sales could suffer. Developing and launching new products can be risky and expensive. We may not be successful in responding to changing markets and consumer preferences, and some of our competitors may be better able to respond to these changes, either of which could negatively affect our business and financial performance.
 
Costs for our raw materials may increase substantially.
 
The principal raw materials we use in our business are aluminum cans and ends, glass bottles, plastic bottles and caps, paperboard packaging, high fructose corn syrup (“HFCS”) and other sweeteners, juice, fruit, electricity, fuel and water. The cost of the raw materials can fluctuate substantially. For example, aluminum, glass, plastic and HFCS prices increased significantly in 2006 and 2007. In addition, we are significantly impacted by increases in fuel costs due to the large truck fleet we operate in our distribution businesses. Under many of our supply arrangements, the price we pay for raw materials fluctuates along with certain changes in underlying commodities costs, such as aluminum in the case of cans, natural gas in the case of glass bottles, resin in the case of plastic bottles and caps, corn in the case of HFCS and pulp in the case of paperboard packaging. We expect these increases to continue to exert pressure on our costs and we may not be able to pass along any such increases to our customers or consumers, which could negatively affect our business and financial performance.
 
Certain raw materials we use are available from a limited number of suppliers and shortages could occur.
 
Some raw materials we use, such as aluminum cans and ends, glass bottles, plastic bottles, HFCS and other ingredients, are available from only a few suppliers. If these suppliers are unable or unwilling to meet our requirements, we could suffer shortages or substantial cost increases. Changing suppliers can require long lead times. The failure of our suppliers to meet our needs could occur for many reasons, including fires, natural disasters, weather, manufacturing problems, disease, crop failure, strikes, transportation interruption, government regulation,


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political instability and terrorism. A failure of supply could also occur due to suppliers’ financial difficulties, including bankruptcy. Some of these risks may be more acute where the supplier or its plant is located in riskier or less-developed countries or regions. Any significant interruption to supply or cost increase could substantially harm our business and financial performance.
 
Substantial disruption to production at our beverage concentrates or other manufacturing facilities could occur.
 
A disruption in production at our beverage concentrates manufacturing facility, which manufactures almost all of our concentrates, could have a material adverse effect on our business. In addition, a disruption could occur at any of our other facilities or those of our suppliers, bottlers or distributors. The disruption could occur for many reasons, including fire, natural disasters, weather, manufacturing problems, disease, strikes, transportation interruption, government regulation or terrorism. Alternative facilities with sufficient capacity or capabilities may not be available, may cost substantially more or may take a significant time to start production, each of which could negatively affect our business and financial performance.
 
Our products may not meet health and safety standards or could become contaminated.
 
We have adopted various quality, environmental, health and safety standards. However, our products may still not meet these standards or could otherwise become contaminated. A failure to meet these standards or contamination could occur in our operations or those of our bottlers, distributors or suppliers. This could result in expensive production interruptions, recalls and liability claims. Moreover, negative publicity could be generated from false, unfounded or nominal liability claims or limited recalls. Any of these failures or occurrences could negatively affect our business and financial performance.
 
Our facilities and operations may require substantial investment and upgrading.
 
We are engaged in an ongoing program of investment and upgrading in our manufacturing, distribution and other facilities. We expect to incur substantial costs to upgrade or keep up-to-date various facilities and equipment or restructure our operations, including closing existing facilities or opening new ones. If our investment and restructuring costs are higher than anticipated or our business does not develop as anticipated to appropriately utilize new or upgraded facilities, our costs and financial performance could be negatively affected.
 
Weather and climate changes could adversely affect our business.
 
Unseasonable or unusual weather or long-term climate changes may negatively impact the price or availability of raw materials, energy and fuel, and demand for our products. Unusually cool weather during the summer months may result in reduced demand for our products and have a negative effect on our business and financial performance.
 
We depend on a small number of large retailers for a significant portion of our sales.
 
Food and beverage retailers in the United States have been consolidating. Consolidation has resulted in large, sophisticated retailers with increased buying power. They are in a better position to resist our price increases and demand lower prices. They also have leverage to require us to provide larger, more tailored promotional and product delivery programs. If we, and our bottlers and distributors, do not successfully provide appropriate marketing, product, packaging, pricing and service to these retailers, our product availability, sales and margins could suffer. Certain retailers make up a significant percentage of our products’ retail volume, including volume sold by our bottlers and distributors. For example, Wal-Mart, the largest retailer of our products, represented approximately 9.5% of our net sales in 2006. Some retailers also offer their own private label products that compete with some of our brands. The loss of sales of any of our products in a major retailer could have a material adverse effect on our business and financial performance.


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We depend on third-party bottling and distribution companies for a substantial portion of our business.
 
We generate a substantial portion of our net sales from sales of beverage concentrates to third-party bottling companies. During 2006, approximately two-thirds of our beverage concentrates volume was sold to bottlers that we do not own. Some of these bottlers are partly owned by our competitors, and much of their business comes from selling our competitors’ products. In addition, some of the products we manufacture are distributed by third parties. As independent companies, these bottlers and distributors make their own business decisions. They may have the right to determine whether, and to what extent, they produce and distribute our products, our competitors’ products and their own products. They may devote more resources to other products or take other actions detrimental to our brands. In many cases, they may be able to terminate their bottling and distribution arrangements with us without cause. We may need to increase support for our brands in their territories and may not be able to pass on price increases to them. Their financial condition could also be adversely affected by conditions beyond our control and our business could suffer. Any of these factors could negatively affect our business and financial performance.
 
Our intellectual property rights could be infringed or we could infringe the intellectual property rights of others and adverse events regarding licensed intellectual property, including termination of distribution rights, could harm our business.
 
We possess intellectual property that is important to our business. This intellectual property includes ingredient formulas, trademarks, copyrights, patents, business processes and other trade secrets. See “Business — Intellectual Property and Trademarks” for more information. We and third parties, including competitors, could come into conflict over intellectual property rights. Litigation could disrupt our business, divert management attention and cost a substantial amount to protect our rights or defend ourselves against claims. We cannot be certain that the steps we take to protect our rights will be sufficient or that others will not infringe or misappropriate our rights. If we are unable to protect our intellectual property rights, our brands, products and business could be harmed.
 
We also license various trademarks from third parties and license our trademarks to third parties. In some countries, other companies own a particular trademark which we own in the United States, Canada or Mexico. For example, Dr Pepper is owned by Coca-Cola in certain other countries. Adverse events affecting those third parties or their products could affect our use of the trademark and negatively impact our brands.
 
In some cases, we license products from third-parties which we distribute. The licensor may be able to terminate the license arrangement upon an agreed period of notice, in some cases without payment to us of any termination fee. The termination of any material license arrangement could adversely affect our business and financial performance. For example, following its acquisition by Coca-Cola on August 30, 2007, Energy Brands, Inc. notified us that it was terminating our distribution agreement for glacéau products.
 
Litigation or legal proceedings could expose us to significant liabilities and damage our reputation.
 
We are party to various litigation claims and legal proceedings. We evaluate these claims and proceedings to assess the likelihood of unfavorable outcomes and estimate, if possible, the amount of potential losses. We may establish a reserve as appropriate based upon assessments and estimates in accordance with our accounting policies. We base our assessments, estimates and disclosures on the information available to us at the time and rely on legal and management judgment. Actual outcomes or losses may differ materially from assessments and estimates. Actual settlements, judgments or resolutions of these claims or proceedings may negatively affect our business and financial performance. For more information, see “Business — Legal Matters.”
 
We may not comply with applicable government laws and regulations, and they could change.
 
We are subject to a variety of federal, state and local laws and regulations in the United States, Canada, Mexico and other countries in which we do business. These laws and regulations apply to many aspects of our business including the manufacture, safety, labeling, transportation, advertising and sale of our products. See “Business — Regulatory Matters” for more information regarding many of these laws and regulations. Violations of these laws or regulations could damage our reputation and/or result in regulatory actions with substantial penalties. In addition, any significant change in such laws or regulations or their interpretation, or the introduction of higher standards or more stringent laws or regulations,


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could result in increased compliance costs or capital expenditures. For example, changes in recycling and bottle deposit laws or special taxes on soft drinks or ingredients could increase our costs. Regulatory focus on the health, safety and marketing of food products is increasing. Certain state warning and labeling laws, such as California’s “Prop 65,” which requires warnings on any product with substances that the state lists as potentially causing cancer or birth defects, could become applicable to our products. Some local and regional governments and school boards have enacted, or have proposed to enact, regulations restricting the sale of certain types of soft drinks in schools. Any violations or changes of regulations could have a material adverse effect on our profitability, or disrupt the production or distribution of our products, and negatively affect our business and financial performance.
 
We may not be able to renew collective bargaining agreements on satisfactory terms, or we could experience strikes.
 
Approximately 5,000 of our employees, many of whom are at our key manufacturing locations, are covered by collective bargaining agreements. These agreements typically expire every three to four years at various dates. We may not be able to renew our collective bargaining agreements on satisfactory terms or at all. This could result in strikes or work stoppages, which could impair our ability to manufacture and distribute our products and result in a substantial loss of sales. The terms of existing or renewed agreements could also significantly increase our costs or negatively affect our ability to increase operational efficiency.
 
We could lose key personnel or may be unable to recruit qualified personnel.
 
Our performance significantly depends upon the continued contributions of our executive officers and key employees, both individually and as a group, and our ability to retain and motivate them. Our officers and key personnel have many years of experience with us and in our industry and it may be difficult to replace them. If we lose key personnel or are unable to recruit qualified personnel, our operations and ability to manage our business may be adversely affected. We do not have “key person” life insurance for any of our executive officers or key employees.
 
Benefits cost increases could reduce our profitability.
 
Our profitability is substantially affected by the costs of pension, postretirement medical and employee medical and other benefits. In recent years, these costs have increased significantly due to factors such as increases in health care costs, declines in investment returns on pension assets and changes in discount rates used to calculate pension and related liabilities. Although we actively seek to control increases, there can be no assurance that we will succeed in limiting future cost increases, and continued upward pressure in these costs could have a material adverse affect on our business and financial performance.
 
We depend on key information systems and third-party service providers.
 
We depend on key information systems to accurately and efficiently transact our business, provide information to management and prepare financial reports. We rely on third-party providers for a number of key information systems and business processing services, including hosting our primary data center and processing various accounting, order entry and other transactional services. These systems and services are vulnerable to interruptions or other failures resulting from, among other things, natural disasters, terrorist attacks, software, equipment or telecommunications failures, processing errors, computer viruses, hackers, other security issues or supplier defaults. Security, backup and disaster recovery measures may not be adequate or implemented properly to avoid such disruptions or failures. Any disruption or failure of these systems or services could cause substantial errors, processing inefficiencies, security breaches, inability to use the systems or process transactions, loss of customers or other business disruptions, all of which could negatively affect our business and financial performance.
 
We may not realize benefits of acquisitions.
 
We have recently acquired various bottling and distribution businesses and are integrating their operations into our business. We may pursue further acquisitions of independent bottlers and distributors to complement our


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existing capabilities and further expand the distribution of our brands. We may also pursue acquisition of brands and products to expand our brand portfolio. The failure to successfully identify, make and integrate acquisitions may impede the growth of our business. The timing or success of any acquisition and integration is uncertain, requires significant expenses, and diverts financial and managerial resources away from our existing businesses. We also may not be able to raise the substantial capital required for acquisitions and integrations on satisfactory terms, if at all. In addition, even after an acquisition, we may not be able to successfully integrate an acquired business or brand or realize the anticipated benefits of an acquisition, all of which could have a negative effect on our business and financial performance.
 
The accounting treatment of goodwill and other identified intangibles could result in future asset impairments losses, which would adversely affect our financial performance.
 
As of December 31, 2006, we had approximately $9.3 billion of total assets, of which approximately $6.8 billion were intangible assets. Intangible assets include goodwill, and other intangible assets in connection with brands, bottler agreements, distribution rights and customer relationships. We conduct impairment tests on goodwill and all indefinite lived intangible assets annually, as of December 31, or more frequently if circumstances indicate that the carrying amount of an asset may not be recoverable. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess. Our annual impairment analysis, performed as of December 31, 2006, did not result in an impairment charge. For additional information about these intangible assets, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Critical Accounting Policies — Goodwill and Other Indefinite Lived Intangible Assets” and our combined financial statements included elsewhere in this information statement.
 
The impairment tests require us to make an estimate of the fair value of intangible assets. Since a number of factors may influence determinations of fair value of intangible assets, including those set forth in this discussion of “Risk Factors” and in “Special Note Regarding Forward-Looking Statements,” we are unable to predict whether impairments of goodwill or other indefinite lived intangibles will occur in the future. Any such impairment would result in us recognizing a charge to our operating results, which may adversely affect our financial performance.
 
After our separation from Cadbury Schweppes, we will have a significant amount of debt, which could adversely affect our business and our ability to meet our obligations.
 
As of September 30, 2007, on a pro forma basis after giving effect to the new financing arrangements that we expect to enter into in connection with the separation and the application of the net proceeds thereof as contemplated under “Unaudited Pro Forma Combined Financial Data” and “Description of Indebtedness,” our total indebtedness would have been $     .
 
This significant amount of debt could have important consequences to us and our investors, including:
 
  •  requiring a substantial portion of our cash flow from operations to make interest payments on this debt;
 
  •  making it more difficult to satisfy debt service and other obligations;
 
  •  increasing the risk of a future credit ratings downgrade of our debt, which could increase future debt costs;
 
  •  increasing our vulnerability to general adverse economic and industry conditions;
 
  •  reducing the cash flow available to fund capital expenditures and other corporate purposes and to grow our business;
 
  •  limiting our flexibility in planning for, or reacting to, changes in our business and the industry;
 
  •  placing us at a competitive disadvantage to our competitors that may not be as highly leveraged with debt; and
 
  •  limiting our ability to borrow additional funds as needed or take advantage of business opportunities as they arise, pay cash dividends or repurchase common stock.


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To the extent we become more leveraged, the risks described above would increase. In addition, our actual cash requirements in the future may be greater than expected. Our cash flow from operations may not be sufficient to repay at maturity all of the outstanding debt as it becomes due, and we may not be able to borrow money, sell assets or otherwise raise funds on acceptable terms, or at all, to refinance our debt.
 
Risks Related to Our Separation from and Relationship with Cadbury Schweppes
 
We may not realize the potential benefits from the separation.
 
We may not realize the benefits that we anticipate from our separation from Cadbury Schweppes. These benefits include the following:
 
  •  allowing our management to focus its efforts on our business and strategic priorities,
 
  •  enabling us to allocate our capital more efficiently,
 
  •  providing us with direct access to the debt and equity capital markets,
 
  •  improving our ability to pursue acquisitions through the use of shares of our common stock as consideration,
 
  •  enhancing our market recognition with investors, and
 
  •  increasing our ability to attract and retain employees by providing equity compensation tied to our business.
 
We may not achieve the anticipated benefits from our separation for a variety of reasons. For example, the process of separating our business from Cadbury Schweppes and operating as an independent public company may distract our management from focusing on our business and strategic priorities. Although as an independent public company we will be able to control how we allocate our capital, we may not succeed in allocating our capital in ways that benefit our business. In addition, although we will have direct access to the debt and equity capital markets following the separation, we may not be able to issue debt or equity on terms acceptable to us or at all. The availability of shares of our common stock for use as consideration for acquisitions also will not ensure that we will be able to successfully pursue acquisitions or that the acquisitions will be successful. Moreover, even with equity compensation tied to our business we may not be able to attract and retain employees as desired. We also may not realize the anticipated benefits from our separation if any of the matters identified as risks in this Risk Factors section were to occur. If we do not realize the anticipated benefits from our separation for any reason, our business may be adversely affected.
 
Our historical financial performance may not be representative of our financial performance as a separate, stand-alone company.
 
The historical financial information included in this information statement has been derived from Cadbury Schweppes’ consolidated financial statements and does not reflect what our financial condition, results of operations or cash flows would have been had we operated as a separate, stand-alone company during the periods presented. Cadbury Schweppes currently provides certain corporate functions to us and costs associated with these functions have been allocated to us. These functions include corporate communications, regulatory, human resources and benefits management, treasury, investor relations, corporate controller, internal audit, Sarbanes-Oxley compliance, information technology, corporate legal and compliance, and community affairs. The total amount of these allocations from Cadbury Schweppes was approximately $103 million in the nine months ended September 30, 2007 and approximately $124 million in 2006. In addition to the foregoing corporate allocations, Cadbury Schweppes made other allocations to us totaling $10 million for the nine months ended September 30, 2007 and $18 million for 2006. All of these allocations are based on what we and Cadbury Schweppes considered to be reasonable reflections of the historical levels of the services and support provided to our business. The historical information does not necessarily indicate what our results of operations, financial condition, cash flows or costs and expenses will be in the future as an independent publicly-traded, stand-alone company.
 
Significant changes are expected to occur in our cost structure, management, financing and business operations as a result of our separation from Cadbury Schweppes. These changes are expected to increase our


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expenses as we will incur stand-alone costs for services currently provided by Cadbury Schweppes, will need additional personnel to perform services currently provided by Cadbury Schweppes and will incur legal, accounting, compliance and other costs associated with being a public company with listed equity. For additional information, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Unaudited Pro Forma Combined Financial Data” and “Our Relationship with Cadbury plc After the Distribution.”
 
After our separation from Cadbury Schweppes, we may experience increased costs resulting from a decrease in the purchasing power and other operational efficiencies we currently have due to our association with Cadbury Schweppes.
 
We have been able to take advantage of Cadbury Schweppes’ purchasing power in technology and services, including information technology, media purchasing, insurance, treasury services, property support and, to a lesser extent, the procurement of goods. As a smaller separate, stand-alone company, it may be more difficult for us to obtain goods, technology and services at prices and on terms as favorable as those available to us prior to the separation.
 
Prior to the distribution, we will enter into agreements with Cadbury plc, the new holding company of Cadbury Schweppes, under which Cadbury plc will provide some of these services to us on a transitional basis, for which we will pay Cadbury plc. These services may not be sufficient to meet our needs and, after these agreements with Cadbury plc end, we may not be able to replace these services at all or obtain these services at acceptable prices and terms.
 
Our ability to operate our business effectively may suffer if we do not cost effectively establish our own financial, administrative and other support functions to operate as a stand-alone company.
 
Historically, we have relied on certain financial, administrative and other support functions of Cadbury Schweppes to operate our business. With our separation from Cadbury Schweppes, we will need to enhance our own financial, administrative and other support systems. We will also need to rapidly establish our own accounting and auditing policies. Any failure in our own financial or administrative policies and systems could impact our financial performance and could materially harm our business and financial performance.
 
The obligations associated with being a public company will require significant resources and management attention.
 
In connection with the separation from Cadbury Schweppes and the distribution of our common stock, we will become subject to the reporting requirements of the U.S. Securities Exchange Act of 1934, as amended (the “Exchange Act”), and the Sarbanes-Oxley Act of 2002 and we will be required to prepare our financial statements according to accounting principles generally accepted in the United States (“U.S. GAAP”) which differs from our historical method of preparing financials, which was generally pursuant to International Financial Reporting Standard (“IFRS”). In addition, the Exchange Act requires that we file annual, quarterly and current reports. Our failure to prepare and disclose this information in a timely manner could subject us to penalties under federal securities laws, expose us to lawsuits and restrict our ability to access financing. The Sarbanes-Oxley Act requires that we, among other things, establish and maintain effective internal controls and procedures for financial reporting and we are presently evaluating our existing internal controls in light of the standards adopted by the Public Company Accounting Oversight Board. During the course of our evaluation, we may identify areas requiring improvement and may be required to design enhanced processes and controls to address issues identified through this review. This could result in significant cost to us and require us to divert substantial resources, including management time, from other activities.
 
Section 404 of the Sarbanes-Oxley Act requires annual management assessments of the effectiveness of our internal control over financial reporting, starting with our 2009 annual report that we will file with the SEC in 2010. In preparation for this, we may identify deficiencies that we may not be able to remediate in time to meet the deadline for compliance with the requirements of Section 404. Our failure to satisfy the requirements of Section 404


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on a timely basis could result in the loss of investor confidence in the reliability of our financial statements, which in turn could have a material adverse effect on our business and our common stock.
 
We and Cadbury Schweppes are agreeing to indemnify each other for certain taxes.
 
We will enter into a tax-sharing and indemnification agreement with Cadbury Schweppes under which tax liabilities relating to taxable periods before and after the separation and distribution will be computed and apportioned between Cadbury Schweppes and ourselves, and responsibility for payment of those tax liabilities (including any subsequent adjustments to such tax liabilities) will be allocated between Cadbury Schweppes and ourselves. In general, under the terms of the tax-sharing and indemnification agreement, we and Cadbury Schweppes each will be responsible for taxes imposed on our respective business for all taxable periods, whether ending on, before or after the date of the separation and distribution, except that taxes attributable to certain restructuring transactions undertaken in anticipation of the separation and distribution and various other transactions will be specially allocated to (and indemnified against by) Cadbury Schweppes or ourselves depending on the transaction. In addition, we generally will be liable for any liabilities, taxes or other charges that are imposed on Cadbury Schweppes as a result of the separation and distribution (and certain related restructuring transactions) failing to qualify for nonrecognition treatment for U.S. federal income tax purposes, if such failure is the result of a breach by us of any representation or covenant made by us in the tax-sharing and indemnification agreement in respect of these transactions and various other matters, including our failure to continue the active conduct of the historic business relied upon for purposes of the private letter ruling request submitted to the IRS, certain sales of our common stock for cash and taking any action inconsistent with the information and representations furnished to the IRS in connection with the private letter ruling request. As a result, we could have significant indemnification obligations to Cadbury Schweppes with respect to tax liabilities. Further, although Cadbury Schweppes has agreed to indemnify us against certain tax liabilities pursuant to the tax-sharing and indemnification agreement, we may be liable at law to a taxing authority for some of these tax liabilities and, if Cadbury Schweppes were to default on their obligations to us, we would be liable for the entire amount of these liabilities. Accordingly, under certain circumstances, we may be obligated to pay amounts in excess of our allocated share of tax liabilities.
 
The receipt of our common stock could be a taxable transaction for U.S. persons.
 
The receipt of Cadbury plc ordinary shares or Cadbury plc ADRs and our common stock by holders of Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs (and certain related restructuring transactions) is intended to qualify for non-recognition treatment under Sections 355 and 368(a)(1)(F) of the Internal Revenue Code. Cadbury Schweppes has requested a private letter ruling from the IRS that, subject to the facts, representations and qualifications contained therein, the receipt of Cadbury plc ordinary shares and our common stock by Cadbury Schweppes stockholders (along with certain related restructuring transactions) will qualify for non-recognition treatment under Sections 355 and 368(a)(1)(F) of the Internal Revenue Code. Notwithstanding any eventual private letter ruling, the IRS could determine on audit that the receipt of Cadbury plc ordinary shares or Cadbury plc ADRs and our common stock should not qualify for nonrecognition treatment because, for example, one or more of the controlling facts or representations set forth in the private letter ruling request was not complete, or as a result of certain actions taken after the separation. If, contrary to any eventual private letter ruling, the receipt of our common stock ultimately is determined not to qualify for nonrecognition treatment under Section 355 of the Internal Revenue Code, a holder of Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs who is a U.S. person for U.S. federal income tax purposes generally would be treated as receiving a taxable distribution in an amount equal to the fair market value of our common stock (at the time of distribution) that is received by such stockholder and the amount of cash received in lieu of a fractional share of our common stock (without reduction for any portion of their tax basis in their Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs), which amount would be taxable as a dividend for U.S. federal income tax purposes (provided, as is expected, Cadbury plc has sufficient current and accumulated earnings and profits (including current and accumulated earnings and profits of Cadbury Schweppes) as determined for U.S. federal income purposes, or, if not so determined, dividend treatment will be presumed).


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Risks Related to Our Common Stock
 
Our common stock has no existing public market and the price of our common stock may be subject to volatility.
 
Prior to the distribution, there will be no trading market for our common stock and you will not be able to buy or sell our common stock publicly. Although we intend to apply to have our common stock authorized for listing on the New York Stock Exchange, we cannot predict the extent to which an active trading market for our common stock will develop or be sustained after the distribution.
 
We have not and will not set the initial price of our common stock. The initial price will be established by the public markets. We cannot predict the price at which our common stock will trade after the distribution. In fact, the combined trading prices after the separation of the shares of our common stock and the Cadbury plc ordinary shares that each Cadbury Schweppes shareholder receives in connection with the separation may not equal the trading price of a Cadbury Schweppes ordinary share immediately prior to the separation. The price at which our common stock trades is likely to fluctuate significantly, particularly until an orderly public market develops. Even if an orderly and active trading market for our common stock develops, the market price of our common stock could be subject to significant volatility due to factors such as:
 
  •  general economic trends and other external factors;
 
  •  changes in our earnings or operating results;
 
  •  success or failure of our business strategies;
 
  •  failure of our financial performance to meet securities analysts’ expectations;
 
  •  our ability to obtain financing as needed;
 
  •  introduction of new products by us or our competitors;
 
  •  changes in conditions or trends in our industry, markets or customers;
 
  •  changes in governmental regulation;
 
  •  depth and liquidity of the market for our common stock; and
 
  •  our operating performance and that of our competitors. 
 
In the past, the stock markets have experienced significant price and volume fluctuations. Such fluctuations in the future could result in volatility in the trading price of our common stock.
 
Following the distribution, substantial sales of our common stock could cause our stock price to decline.
 
Sales of substantial amounts of our common stock (or shares issuable upon exercise of options), or the perception that these sales may occur, may cause the price of our common stock to decline and impede our ability to raise capital through the issuance of equity securities in the future. Based on the distribution ratio and the number of shares of Cadbury Schweppes common stock outstanding as of     , we expect that immediately following the distribution, there will be approximately      shares of our common stock outstanding. All of these shares will be freely transferable without restriction or further registration under the Securities Act of 1933, as amended (the “Securities Act”), subject to restrictions that may be applicable to our “affiliates,” as that term is defined in Rule 144 of the Securities Act.


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Index funds tied to the Standard & Poor’s 500 Index and other indices that hold shares of Cadbury Schweppes common stock likely will be required to sell their shares of our common stock received in the distribution to the extent we are not included in the index. In addition, a significant percentage of the shareholders of Cadbury Schweppes are not resident in the United States. Many of these shareholders may sell their shares immediately following the distribution. The sale of significant amounts of our common stock for the above or other reasons, or the perception that such sales will occur, may cause the price of our common stock to decline.
 
Provisions in Delaware law and our certificate of incorporation and by-laws could delay and discourage takeover attempts that stockholders may consider favorable.
 
Certain provisions in Delaware law and our certificate of incorporation and by-laws may make it more difficult for or prevent a third party from acquiring control of us or changing our board of directors. These provisions could have the effect of depriving stockholders of an opportunity to sell their shares at a premium over prevailing market prices, or could deter potential acquirers or prevent the completion of a transaction in which our stockholders could receive a substantial premium over the then-current market price for their shares.


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SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
 
This information statement contains forward-looking statements including, in particular, statements about future events, future financial performance, plans, strategies, expectations, prospects, competitive environment, regulation and availability of raw materials. Forward-looking statements include all statements that are not historical facts and can be identified by the use of forward-looking terminology such as the words “may,” “will,” “expect,” “anticipate,” “believe,” “estimate,” “plan,” “intend” or the negative of these terms or similar expressions in this information statement. We have based these forward-looking statements on our current views with respect to future events and financial performance. Our actual financial performance could differ materially from those projected in the forward-looking statements due to the inherent uncertainty of estimates, forecasts and projections, and our financial performance may be better or worse than anticipated. Given these uncertainties, you should not put undue reliance on any forward-looking statements.
 
Our forward-looking statements are subject to risks and uncertainties, including:
 
  •  the highly competitive markets in which we operate and our ability to compete with companies that have significant financial resources;
 
  •  changes in consumer preferences, trends and health concerns;
 
  •  increases in cost of materials or supplies used in our business;
 
  •  shortages of materials used in our business;
 
  •  substantial disruption at our beverage concentrates manufacturing facility or our other manufacturing facilities;
 
  •  our products meeting health and safety standards or contamination of our products;
 
  •  need for substantial investment and restructuring at our production, distribution and other facilities;
 
  •  weather and climate changes;
 
  •  maintaining our relationships with our large retail customers;
 
  •  dependence on third-party bottling and distribution companies;
 
  •  infringement of our intellectual property rights by third parties, intellectual property claims against us or adverse events regarding licensed intellectual property;
 
  •  litigation claims or legal proceedings against us;
 
  •  our ability to comply with, or changes in, governmental regulations in the countries in which we operate;
 
  •  strikes or work stoppages;
 
  •  our ability to retain or recruit qualified personnel;
 
  •  increases in the cost of employee benefits;
 
  •  disruptions to our information systems and third-party service providers;
 
  •  failure of our acquisition and integration strategies;
 
  •  future asset impairments;
 
  •  need to service a significant amount of debt;
 
  •  completing our current organizational restructuring;
 
  •  risks relating to our separation from and relationship with Cadbury Schweppes;


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  •  risks relating to our agreement to indemnify, and be indemnified by, Cadbury plc for certain taxes; and
 
  •  other factors discussed under “Risk Factors” and elsewhere in this information statement.
 
Forward-looking statements represent our estimates and assumptions only as of the date that they were made. We do not undertake any duty to update the forward-looking statements, and the estimates and assumptions associated with them, after the date of this information statement, except to the extent required by applicable securities laws. All of the forward-looking statements are qualified in their entirety by reference to the factors discussed above and under “Risk Factors” and elsewhere in this information statement. These risk factors may not be exhaustive as we operate in a continually changing business environment with new risks emerging from time to time that we are unable to predict or that we currently do not expect to have a material adverse effect on our business. You should carefully read this information statement in its entirety as it contains important information about our business and the risks we face.


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DIVIDEND POLICY
 
Prior to the effectiveness of the registration statement of which this information statement is a part, we intend to determine and disclose a policy with respect to the payment of any dividends to our stockholders.


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CAPITALIZATION
 
The following table presents our capitalization and cash and cash equivalents as of September 30, 2007:
 
  •  on an actual basis
 
  •  on a pro forma basis after giving effect to the adjustments described in “Unaudited Pro Forma Combined Financial Data.”
 
The information below is not necessarily indicative of what our capitalization and cash and cash equivalents would have been had the separation, distribution and related financing transactions been completed as of September 30, 2007. In addition, it is not indicative of our future capitalization and cash and cash equivalents, results of operations or financial condition. This table should be read in conjunction with “Unaudited Pro Forma Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” and our audited and unaudited combined financial statements and the related notes thereto included elsewhere in this information statement.
 
                 
    September 30, 2007  
    Historical     Pro Forma  
    (In millions)  
 
Cash and cash equivalents
  $ 34     $        
                 
Debt:
               
Short-term debt:
               
Debt payable to Cadbury Schweppes
  $ 218     $    
Payable to Cadbury Schweppes
    509          
Debt payable to third parties
    40          
Long-term debt (excluding current maturities):
               
Debt payable to Cadbury Schweppes
    2,946          
Debt payable to third parties
    23          
New financing arrangements
             
                 
Total debt
    3,736          
                 
Total invested equity
    4,992          
                 
Total capitalization
  $ 8,728     $  
                 


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SELECTED HISTORICAL COMBINED FINANCIAL DATA
 
The following table presents our selected historical combined financial data. Our selected historical combined financial data presented below as of December 31, 2006 and January 1, 2006 (the last day of fiscal 2005) and for the three fiscal years 2006, 2005 and 2004 have been derived from our audited combined financial statements, included elsewhere in this information statement. Our selected historical combined balance sheet data presented below as of January 2, 2005 (the last day of fiscal 2004) have been derived from our historical accounting records, which are unaudited. Our selected historical combined financial data presented below as of September 30, 2007 and for each of the nine months September 30, 2007 and 2006 have been derived from our unaudited combined financial statements included elsewhere in this information statement, which have been prepared on a basis consistent with our annual audited combined financial statements. In the opinion of our management, such unaudited financial statements reflect all adjustments, consisting only of normal and recurring adjustments, necessary for the fair presentation of the information set forth therein. The results for the interim periods are not necessarily indicative of the results that may be expected for any future period.
 
Our historical financial data have been prepared on a “carve-out” basis from Cadbury Schweppes’ consolidated financial statements using the historical results of operations, assets and liabilities attributable to Cadbury Schweppes’ Americas Beverages business and including allocations of expenses from Cadbury Schweppes. This historical Cadbury Schweppes’ Americas Beverages information is our predecessor financial information. The results included below and elsewhere in this document are not necessarily indicative of our future performance and do not reflect our financial performance had we been an independent, publicly-traded company during the periods presented. You should read this information along with the information included in “Unaudited Pro Forma Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our audited and unaudited combined financial statements and the related notes thereto included elsewhere in this information statement.
 
On May 2, 2006, we acquired approximately 55% of the outstanding shares of DPSUBG, which combined with our pre-existing 45% ownership, resulted in our full ownership of DPSUBG. DPSUBG’s results have been included in the individual line items within our combined financial statements beginning on May 2, 2006. Prior to this date, the existing investment in DPSUBG was accounted for under the equity method and reflected in the line item captioned “equity in earnings of unconsolidated subsidiaries, net of tax.” In addition, on June 9, 2006 we acquired the assets of All American Bottling Company, on August 7, 2006 we acquired Seven Up Bottling Company of San Francisco and on July 11, 2007 we acquired SeaBev. Each of these four acquisitions is included in our combined financial statements beginning on its date of acquisition. As a result, our financial data is not necessarily comparable on a period-to-period basis. There are no adjustments reflected in the summary unaudited pro forma financial data for these acquisitions.
 
Our financial data for the years ended December 31, 2003 and 2002 have been omitted from this information statement because they are not available without unreasonable effort and expense. We believe the omission of the financial data for the years ended December 31, 2003 and 2002 does not have a material impact on the understanding of our financial performance and related trends.
 


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                      Nine Months Ended
 
                      September 30,  
    2006     2005     2004     2007     2006  
    (In millions, except per share data)  
 
Statements of Operations Data:
                                       
Net sales
  $ 4,735     $ 3,205     $ 3,065     $ 4,347     $ 3,380  
Cost of sales
    1,994       1,120       1,051       1,984       1,399  
                                         
Gross profit
    2,741       2,085       2,014       2,363       1,981  
                                         
Selling, general and administrative expenses
    1,659       1,179       1,135       1,527       1,239  
Depreciation and amortization
    69       26       10       69       44  
Restructuring costs
    27       10       36       36       9  
Gain on disposal of property and intangible assets
    (32 )     (36 )     (1 )           (32 )
                                         
Income from operations
    1,018       906       834       731       721  
                                         
Interest expense
    257       210       177       195       189  
Interest income
    (46 )     (40 )     (48 )     (38 )     (35 )
Other expense (income)
    2       (51 )     2       (2 )     5  
                                         
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
    805       787       703       576       562  
Provision for income taxes
    298       321       270       218       206  
                                         
Income before equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
    507       466       433       358       356  
Equity in earnings of unconsolidated subsidiaries, net of tax
    3       21       13       1       3  
                                         
Income before cumulative effect of change in accounting policy
    510       487       446       359       359  
Cumulative effect of change in accounting policy, net of tax
          10                    
                                         
Net income
  $ 510     $ 477     $ 446     $ 359     $ 359  
                                         
Balance Sheets Data:
                                       
Cash and cash equivalents
  $ 35     $ 28     $ 19     $ 34          
Total assets
    9,346       7,433       7,625       10,896          
Current portion of long-term debt
    708       404       435       258          
Long-term debt
    3,084       2,858       3,468       2,969          
Other non-current liabilities
    1,321       1,013       943       1,381          
Total invested equity
    3,250       2,426       2,106       4,992          
                                         
Statements of Cash Flows Data:
                                       
Cash provided by (used in):
                                       
Operating activities
  $ 581     $ 583     $ 610     $ 757     $ 521  
Investing activities
    (502 )     283       184       (1,450 )     (550 )
Financing activities
    (72 )     (815 )     (799 )     691       81  
Depreciation expense(1)
    94       48       53       89       65  
Amortization expense(1)
    45       31       31       38       33  
Capital expenditures
    (158 )     (44 )     (71 )     (123 )     (79 )
                                         
Other Financial Data:
                                       
EBITDA(2)
  $ 1,158     $ 1,047     $ 929     $ 861     $ 817  

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(1) The depreciation and amortization expenses reflected in this section of the table represent our total depreciation and amortization expenses as reflected on our combined statements of cash flows. Depreciation and amortization expenses in our combined statements of operations data are reflected in various line items including “depreciation and amortization,” “cost of sales” and “selling, general and administrative expenses.”
 
(2) EBITDA is defined as net income before interest expense, interest income, provision for income taxes, depreciation and amortization. EBITDA is a measure commonly used by financial analysts in evaluating a company’s liquidity. Accordingly, we believe that EBITDA may be useful for investors in assessing our ability to meet our debt service requirements. EBITDA is not a recognized measurement under U.S. GAAP. When evaluating liquidity, investors should not consider EBITDA in isolation of, or as a substitute for, measures of liquidity as determined in accordance with U.S. GAAP, such as net income or net cash provided by operating activities. EBITDA may have material limitations as a liquidity measure because it excludes interest expense, interest income, taxes and depreciation and amortization. Other companies may calculate EBITDA differently, and therefore our EBITDA may not be comparable to similarly titled measures reported by other companies. A reconciliation of EBITDA to net income is provided below.
 
                                         
                Nine Months Ended
                September 30,
    2006   2005   2004   2007   2006
    (In millions)
 
Net income
  $ 510     $ 477     $ 446     $ 359     $ 359  
Interest expense
    257       210       177       195       189  
Interest income
    (46 )     (40 )     (48 )     (38 )     (35 )
Income taxes
    298       321       270       218       206  
Depreciation expense
    94       48       53       89       65  
Amortization expense
    45       31       31       38       33  
                                         
EBITDA
  $ 1,158     $ 1,047     $ 929     $ 861     $ 817  
                                         


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UNAUDITED PRO FORMA COMBINED FINANCIAL DATA
 
The following tables present our unaudited pro forma combined financial data and reflects adjustments to our historical combined financial statements to give effect to our separation from Cadbury Schweppes, the distribution of our shares of common stock and related financing transactions. The unaudited pro forma combined balance sheet data as of September 30, 2007 has been prepared as though the separation, distribution and related financing transactions occurred on September 30, 2007. The unaudited pro forma combined statement of operations data for the year ended December 31, 2006 and the nine months ended September 30, 2007 have been prepared as though the separation, distribution and related financing transactions occurred on January 2, 2006 (the first day of fiscal 2006). The pro forma adjustments are based upon available information and assumptions that we believe are reasonable.
 
Cadbury Schweppes currently provides certain corporate functions to us and costs associated with these functions have been allocated to us. These functions include corporate communications, regulatory, human resources and benefits management, treasury, investor relations, corporate controller, internal audit, Sarbanes-Oxley compliance, information technology, corporate legal and compliance and community affairs. The total cost of these allocations from Cadbury Schweppes was approximately $103 million in the nine months ended September 30, 2007 and approximately $124 million in 2006. As an independent publicly-traded company, and effective as of our separation from Cadbury Schweppes, we will assume responsibility for the costs for these functions. We expect, subject to the finalization of our plans, that our total annual costs for these functions, together with other independent publicly-traded company costs not previously paid by Cadbury Schweppes, will be in the range of $      million to $      million in 2008 (representing incremental expenses in the range of $      million to $      million). These incremental anticipated costs are not reflected in our historical combined financial statements or in our pro forma financial data presented below. In addition, we may lose the benefits of combined purchasing power with Cadbury Schweppes for some supplies and services.
 
The unaudited pro forma combined financial data has been adjusted to give effect to:
 
  •  the contribution by Cadbury Schweppes of its Americas Beverages business to us;
 
  •  the distribution of           million shares of our common stock to shareholders of Cadbury plc;
 
  •  $      million of debt incurred under new financing arrangements and the associated interest expense and other financing costs; and
 
  •  the repayment of $      million of related party debt and $      million of related party payables, in each case, owed by DPS to Cadbury Schweppes.
 
These unaudited pro forma combined financial data are for informational purposes only and are not necessarily indicative of what our financial performance would have been had the separation, distribution and related financing transactions been completed on the dates assumed. They may not reflect the financial performance that would have resulted had we been operating as an independent, publicly-traded company during those periods. In addition, they are not indicative of our financial performance.
 
On May 2, 2006, we acquired approximately 55% of the outstanding shares of DPSUBG, which combined with our pre-existing 45% ownership, resulted in our full ownership of DPSUBG. DPSUBG’s results have been included in our combined financial statements beginning on May 2, 2006. Prior to this date, the existing investment in DPSUBG was accounted for under the equity method and reflected in the line item captioned “equity in earnings of unconsolidated subsidiaries, net of tax.” In addition, on June 9, 2006 we acquired the assets of All American Bottling Company, on August 7, 2006 we acquired Seven Up Bottling Company of San Francisco and on July 11, 2007 we acquired SeaBev. Each of these four acquisitions is included in our combined financial statements beginning on its date of acquisition. There are no adjustments reflected in the summary unaudited pro forma financial data for these acquisitions.
 
The following unaudited pro forma combined financial statements should be read in conjunction with “Selected Historical Combined Financial Data,” “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our historical audited and unaudited combined financial statements and the related notes thereto included elsewhere in this information statement.


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Dr Pepper Snapple Group, Inc.
 
Unaudited Pro Forma Combined Statement of Operations
For the Year Ended December 31, 2006
 
                         
    Historical     Adjustments     Pro Forma  
    (In millions except per share amounts)  
 
Net sales
  $ 4,735     $           $        
Cost of sales
    1,994                  
                         
Gross profit
    2,741                  
                         
Selling, general and administrative expenses
    1,659                  
Depreciation and amortization
    69                  
Restructuring costs
    27                  
Gain on disposal of property and intangible assets
    (32 )                
                         
Income from operations
    1,018                  
                         
Interest expense
    257                  
Interest income
    (46 )                
Other expense
    2                  
                         
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries
    805                  
Provision for income taxes
    298                  
                         
Income before equity in earnings of unconsolidated subsidiaries
    507                  
Equity in earnings of unconsolidated subsidiaries, net of tax
    3                  
                         
Net income
  $ 510     $           $        
                         
Net income per share — basic(1)
                  $        
Net income per share — diluted(2)
                  $        
 
See Notes to Unaudited Pro Forma Combined Financial Data


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Dr Pepper Snapple Group, Inc.
 
Unaudited Pro Forma Combined Statement of Operations
For the Nine Months Ended September 30, 2007
 
                         
    Historical     Adjustments     Pro Forma  
    (In millions, except per share amounts)  
 
Net sales
  $ 4,347     $           $        
Cost of sales
    1,984                  
                         
Gross profit
    2,363                  
                         
Selling, general and administrative expenses
    1,527                  
Depreciation and amortization
    69                  
Restructuring costs
    36                  
                         
Income from operations
    731                  
                         
Interest expense
    195                  
Interest income
    (38 )                
Other expense
    (2 )                
                         
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries
    576                  
Provision for income taxes
    218                  
                         
Income before equity in earnings of unconsolidated subsidiaries
    358                  
Equity in earnings of unconsolidated subsidiaries, net of tax
    1                  
                         
Net income
  $ 359     $       $  
                         
Net income per share — basic(1)
                  $       
Net income per share — diluted(2)
                  $       
 
See Notes to Unaudited Pro Forma Combined Financial Data


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Dr Pepper Snapple Group, Inc.
 
Unaudited Pro Forma Combined Balance Sheet
As of September 30, 2007
 
                         
    Historical     Adjustments     Pro Forma  
    (In millions)  
 
Assets
Current assets:
                       
Cash and cash equivalents
  $ 34     $       $    
Accounts receivable:
                       
Trade (net of allowance of $21)
    609                  
Other
    30                  
Related party receivable
    11                  
Note receivable from related party
    1,931                  
Inventories
    352                  
Deferred tax assets
    57                  
Prepaid and other current assets
    94                          
                         
Total current assets
    3,118                  
Property, plant and equipment, net
    795                  
Investment in unconsolidated subsidiaries
    14                  
Goodwill, net
    3,211                  
Other intangible assets, net
    3,635                  
Other non-current assets
    95                  
Non-current deferred tax assets
    28                          
                         
Total assets
  $ 10,896     $       $  
                         
 
Liabilities and Invested Equity
Current liabilities:
                       
Accounts payable and accrued expenses
  $ 763     $       $    
Related party payable
    509                  
Current portion of long-term debt payable to third party
    40                  
Current portion of long-term debt payable to related parties
    218                  
Income taxes payable
    24                          
                         
Total current liabilities
    1,554                  
Long-term debt payable to third party
    23                  
Long-term debt payable to related parties
    2,946                  
Deferred tax liabilities
    1,267                  
Other non-current liabilities
    114                          
                         
Total liabilities
    5,904                  
Commitments and contingencies
                       
Cadbury Schweppes’ net investment
    4,964                  
Accumulated other comprehensive income
    28                          
                         
Total invested equity
    4,992                          
                         
Total liabilities and invested equity
  $ 10,896     $       $  
                         
 
See Notes to Unaudited Pro Forma Combined Financial Data


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Notes to Unaudited Pro Forma Combined Financial Data
 
(1) The number of shares used to compute net income per share — basic is based on the number of shares of our common stock assumed to be outstanding on the distribution date, based on a distribution ratio of           shares of our common stock for each Cadbury Schweppes ordinary share.
 
(2) The number of shares used to compute diluted earnings per share is based on the number of shares of our common stock assumed to be outstanding on the distribution date. Net income per share — diluted also reflects the potential dilution that could occur if restricted stock units and options granted under equity-based compensation arrangements were exercised or converted into common stock.


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MANAGEMENT’S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
 
You should read the following discussion in conjunction with our audited and unaudited combined financial statements and related notes and our unaudited pro forma combined financial data included elsewhere in this information statement. This discussion contains forward-looking statements that are based on management’s current expectations, estimates and projections about our business and operations. Our actual results may differ materially from those currently anticipated and expressed in such forward-looking statements as a result of various factors including the factors we describe under “Risk Factors,” “Special Note Regarding Forward-Looking Statements,” and elsewhere in this information statement.
 
The fiscal years presented in this section are the 52-week period ended December 31, 2006, which we refer to as “2006,” the 52-week period ended January 1, 2006, which we refer to as “2005,” and the 53-week period ended January 2, 2005, which we refer to as “2004.” The year end dates represent the Sunday closest to December 31 of each year. Effective 2006, our fiscal year ends on December 31 of each year. We refer to the fiscal period from January 1, 2007 to September 30, 2007 as the “nine months ended September 30, 2007,” and from January 2, 2006 to September 30, 2006 as the “nine months ended September 30, 2006.” References in the financial tables to percentage changes that are not meaningful are denoted by “NM.”
 
Overview
 
We are a leading integrated brand owner, bottler and distributor of non-alcoholic beverages in the United States, Canada and Mexico with a diverse portfolio of flavored CSDs and non-CSDs, including ready-to-drink teas, juices, juice drinks and mixers. Our brand portfolio includes popular CSD brands such as Dr Pepper, 7UP, Sunkist, A&W, Canada Dry, Schweppes, Squirt and Peñafiel, and non-CSD brands such as Snapple, Mott’s, Hawaiian Punch, Clamato, Mr & Mrs T, Margaritaville and Rose’s. Our largest brand, Dr Pepper, is the #2 selling flavored CSD in the United States according to ACNielsen. We have some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers.
 
We operate primarily in the United States, Mexico and Canada, the first, second and tenth largest beverage markets, respectively, by CSD volume, according to Beverage Digest and Canadean. We also distribute our products in the Caribbean. In 2006, 88% of our net sales were generated in the United States, 4% in Canada and 8% in Mexico and the Caribbean.
 
Our Business Model
 
We operate as a brand owner, a bottler and a distributor through our five segments as follows:
 
  •  our Beverage Concentrates segment is a brand ownership business;
 
  •  our Finished Goods segment is a brand ownership and a bottling business and, to a lesser extent, a distribution business;
 
  •  our Bottling Group segment is a bottling and distribution business;
 
  •  our Snapple Distributors segment is a distribution business; and
 
  •  our Mexico and the Caribbean segment is a brand ownership and a bottling and distribution business.
 
Our Brand Ownership Businesses.   As a brand owner, we build our brands by promoting brand awareness through marketing, advertising and promotion, and by developing new and innovative products and product line extensions that address consumer preferences and needs. As the owner of the formulas and proprietary know-how required for the preparation of beverages, we manufacture, sell and distribute beverage concentrates and syrups used primarily to produce CSDs and we manufacture, bottle, sell and distribute primarily non-CSD finished beverages. Most of our sales of beverage concentrates are to bottlers who manufacture, bottle, sell and distribute our branded products into retail channels. Approximately one-third of our U.S. beverage concentrates by volume are sold to our Bottling Group, with the balance being sold to third-party bottlers affiliated with Coca-Cola or PepsiCo,


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as well as independent bottlers. We also manufacture, sell and distribute syrups for use in beverage fountain dispensers to restaurants and retailers, as well as to fountain wholesalers, who resell it to restaurants and retailers. In addition, we distribute non-CSD finished beverages through ourselves and through third-party distributors.
 
Our beverage concentrates and syrup brand ownership businesses are characterized by relatively low capital investment, raw materials and employee costs. Although the cost of building or acquiring an established brand can be significant, established brands typically do not require significant ongoing expenditures, other than marketing, and therefore generate relatively high margins. Our finished beverages brand ownership business has characteristics of both of our beverage concentrates and syrup brand ownership businesses as well as our bottling and distribution businesses discussed below.
 
Our Bottling and Distribution Businesses.   We manufacture, bottle, sell and distribute CSD finished beverages from concentrates and non-CSD finished beverages and products mostly from ingredients other than concentrates. We sell and distribute finished beverages and other products primarily into retail channels either directly to retail shelves or to warehouses through our large fleet of delivery trucks or through third party logistics providers.
 
Our bottling and distribution businesses are characterized by relatively high capital investment, raw material, selling and distribution costs, in each case compared to our beverage concentrates and syrup brand ownership businesses. Our capital costs include investing in, and maintaining, our manufacturing and warehouse equipment and facilities. Our raw material costs include purchasing concentrates, ingredients and packaging materials (including cans and bottles) from a variety of suppliers. Our selling and distribution costs include significant costs related to operating our large fleet of delivery trucks (including fuel) and employing a significant number of employees to sell and deliver finished beverages and other products to retailers. As a result of the high fixed costs associated with these types of businesses, we are focused on maintaining an adequate level of volumes as well as controlling capital expenditures, raw material, selling and distribution costs. In addition, geographic proximity to our customers is a critical component of managing the high cost of transporting finished beverages relative to their retail price. The profitability of the bottling and distribution businesses is also dependent upon our ability to sell our products into higher margin channels. As a result of the foregoing, the margins of our bottling and distribution businesses are significantly lower than those of our brand ownership businesses. In light of the largely fixed cost nature of the bottling and distribution businesses, increases in costs, for example raw materials tied to commodity prices, could have a significant negative impact on the margins of our businesses.
 
Approximately three-fourths of our 2006 Bottling Group net sales of branded products come from our own brands, with the remaining from the distribution of third-party brands such as Monster energy drink, FIJI mineral water and Big Red soda. In addition, a small portion of our Bottling Group sales come from bottling beverages and other products for private label owners or others for a fee (which we refer to as co-packing).
 
Integrated Business Model.   We believe our brand ownership, bottling and distribution are more integrated than the U.S. operations of our principal competitors and that this differentiation provides us with a competitive advantage. We believe our integrated business model:
 
  •  Strengthens our route-to-market by creating a third consolidated bottling system, our Bottling Group, in addition to the Coca-Cola affiliated and PepsiCo affiliated systems. In addition, by owning a significant portion of our bottling and distribution network we are able to improve focus on our brands, especially certain of our brands such as 7UP, Sunkist, A&W and Snapple, which do not have a large presence in the Coca-Cola affiliated and PepsiCo affiliated bottler systems. Our strengthened route-to-market following our 2006 bottling acquisitions has enabled us to increase the market share of our brands (as measured by volume) in many of the markets served by the bottlers we acquired.
 
  •  Provides opportunities for net sales and profit growth through the alignment of the economic interests of our brand ownership and our bottling and distribution businesses. For example, we can focus on maximizing profitability for our company as a whole rather than focusing on profitability generated from either the sale of concentrates or the bottling and distribution of our products.
 
  •  Enables us to be more flexible and responsive to the changing needs of our large retail customers, including by coordinating sales, service, distribution, promotions and product launches.


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  •  Allows us to more fully leverage our scale and reduce costs by creating greater geographic manufacturing and distribution coverage.
 
Trends Affecting our Business
 
According to Beverage Digest, in 2006, the U.S. CSD market segment grew by 2.9% in retail sales, despite a 0.6% decline in total CSD volume. The U.S. non-CSD volume and sales increased by 13.2% and 14.8%, respectively, in 2006. In addition, non-CSDs experienced strong volume growth over the last five years with their share of the overall U.S. liquid refreshment beverage market increasing from 12.7% in 2001 to 16.3% in 2006.
 
We believe the key trends influencing the North American liquid refreshment beverage market include:
 
  •  Increased health consciousness.   We believe the main beneficiaries of this trend include diet drinks, ready-to-drink teas, enhanced waters and bottled waters.
 
  •  Changes in lifestyle.   We believe changes in lifestyle will continue to drive increased sales of single-serve beverages, which typically have higher margins.
 
  •  Growing demographic segments in the United States.   We believe marketing and product innovations that target fast growing population segments, such as the Hispanic community in the United States, will drive further market growth.
 
  •  Product and packaging innovation.   We believe brand owners and bottling companies will continue to create new products and packages such as beverages with new ingredients and new premium flavors, as well as innovative convenient packaging that address changes in consumer tastes and preferences.
 
  •  Changing retailer landscape.   As retailers continue to consolidate, we believe retailers will support consumer product companies that can provide an attractive portfolio of products, a strong value proposition and efficient delivery.
 
  •  Recent increases in raw material costs.   The costs of a substantial proportion of the raw materials used in the beverage industry are dependent on commodity prices for aluminum, natural gas, resins, corn, pulp and other commodities. Recently, these costs on the whole have increased significantly and this has exerted pressure on industry margins.
 
Seasonality
 
The beverage market is subject to some seasonal variations. Our beverage sales are generally higher during the warmer months and also can be influenced by the timing of holidays and religious festivals as well as weather fluctuations.
 
Recent Developments
 
Organizational Restructuring
 
On October 10, 2007, we announced a restructuring of our organization that is intended to create a more efficient organization. This restructuring will result in a reduction of approximately 470 employees in our corporate, sales and supply chain functions and will include approximately 150 employees in Plano, Texas, 150 employees in Rye Brook, New York, and 80 employees in Aspers, Pennsylvania. The remaining reductions will occur at a number of sites located in the United States, Canada and Mexico. The restructuring will also include the closure of two manufacturing facilities in Waterloo, New York and Denver, Colorado. The employee reductions and facilities closures are expected to be completed by June 2008.
 
As a result of this restructuring, we expect to recognize a charge of approximately $70 million primarily in 2007, with the balance in 2008. We expect this restructuring to generate annual cost savings of approximately $70 million, most of which are expected to be realized in 2008 with the full annual benefit realized from 2009 onwards. As part of this restructuring, our Bottling Group segment has assumed management and operational control of our Snapple Distributors segment. These operations are currently being integrated and will be reported in our 2007 annual results as a single segment.


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Accelerade Launch
 
We launched our new, ready-to-drink Accelerade sports drink in the first half of 2007. The launch represented an introduction of a new product into a new beverage category for us, and has been supported by significant national product placement and marketing investments, predominantly in the third quarter. Net sales have been well below expectations despite these investments. We incurred an operating loss of approximately $40 million from the Accelerade launch in the nine months ended September 30, 2007. Going forward, we intend to focus on selling Accelerade to informed athletes, trainers and exercisers, and targeting retailers that are frequented by these consumers, such as health and nutrition outlets, where we expect the product to be financially viable.
 
Glacéau Termination
 
Following its acquisition by Coca-Cola, on August 30, 2007, Energy Brands, Inc. notified us that it was terminating our distribution agreements for glacéau products, including vitaminwater, fruitwater and smartwater, effective November 2, 2007. Pursuant to the terms of the agreement, we received a payment of approximately $92 million from Energy Brands, Inc. for this termination in December 2007. Our glacéau net sales for the nine months ended September 30, 2007 were approximately $200 million and are reflected in our Bottling Group and Snapple Distributors segments.
 
Significant Acquisitions
 
Our Bottling Group was created through the acquisition of several bottling businesses. On May 2, 2006, we acquired approximately 55% of the outstanding shares of DPSUBG, which combined with our pre-existing 45% ownership, resulted in our full ownership of DPSUBG. The purchase price consisted of $370 million in cash and we assumed debt of $651 million in connection with this acquisition.
 
DPSUBG’s results have been included in the individual line items within our combined financial statements beginning on May 2, 2006. Prior to this date, the existing investment in DPSUBG was accounted for under the equity method and reflected in the line item captioned “equity in earnings of unconsolidated subsidiaries, net of tax” in our combined statements of operations.
 
On June 9, 2006, we acquired the assets of All American Bottling Company for $58 million, and on August 7, 2006, we acquired Seven Up Bottling Company of San Francisco for $51 million. On July 11, 2007, we acquired SeaBev for approximately $53 million. Each of these acquisitions is included in our combined statements of operations beginning on its date of acquisition.
 
We refer to the foregoing four acquisitions as our “bottling acquisitions,” and they are reported in our combined financial statements collectively as our Bottling Group segment. We previously have referred to our Bottling Group segment as the Cadbury Schweppes Bottling Group. These bottling acquisitions have had an impact on our results of operations and therefore impact the comparability of our pre- and post-acquisition period results.
 
Our Separation from Cadbury Schweppes
 
On March 15, 2007, Cadbury Schweppes announced that its board of directors had approved a plan to separate its Americas Beverages business from its global confectionery business and its other beverages business (located principally in Australia). The Americas Beverages business consists of Cadbury Schweppes’ beverage business in the United States, Canada, Mexico and the Caribbean. Upon separation, DPS will own the Americas Beverages business currently owned by Cadbury Schweppes and its subsidiaries, and shares of our common stock will be distributed to holders of Cadbury Schweppes ordinary shares and ADRs.
 
Our historical financial statements have been prepared on a combined basis from Cadbury Schweppes’ consolidated financial statements using the historical results of operations and assets and liabilities attributed to Cadbury Schweppes’ Americas Beverages business and including allocations of expenses from Cadbury Schweppes. Our combined financial statements are presented in U.S. dollars, and have been prepared in accordance with U.S. GAAP. Our segment information has been prepared and presented on the basis which management uses to assess the performance of our segments, which is principally in accordance with IFRS. Our consolidated and segment results are not necessarily indicative of our future performance and do not reflect what


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our financial performance would have been had we been an independent publicly-traded company during the periods presented.
 
Cadbury Schweppes currently provides certain corporate functions to us and costs associated with these functions have been allocated to us. These functions include corporate communications, regulatory, human resources and benefits management, treasury, investor relations, corporate controller, internal audit, Sarbanes-Oxley compliance, information technology, corporate legal and compliance, and community affairs. The total amount of these allocations from Cadbury Schweppes was approximately $103 million in the nine months ended September 30, 2007 and approximately $124 million in 2006. As an independent publicly-traded company, and effective as of our separation from Cadbury Schweppes, we will assume responsibility for the costs for these functions. We expect, subject to the finalization of our plans, that our total annual costs for these functions, together with other independent publicly-traded company costs not previously paid by Cadbury Schweppes, will be in the range of $      million to $      million in 2008 (representing incremental expenses in the range of $      million to $      million). These incremental anticipated costs are not reflected in our historical combined financial statements or in our pro forma financial data. We may also lose the benefit of combined purchasing power in the case of some supplies and services. In addition to the foregoing corporate allocations, Cadbury Schweppes made other allocations to us totaling $10 million for the nine months ended September 30, 2007 and $18 million for 2006. See notes 1 and 14 to our unaudited combined financial statements and notes 1 and 16 to our audited combined financial statements for further information regarding expenses historically allocated to us.
 
Segments
 
We currently operate in five segments.
 
  •  Our Beverage Concentrates segment reflects sales from the manufacture of concentrates and syrups in the United States and Canada. Most of the brands in this segment are CSD brands.
 
  •  Our Finished Goods segment reflects sales from the manufacture and distribution of finished beverages and other products in the United States and Canada. Most of the brands in this segment are non-CSD brands.
 
  •  Our Bottling Group segment reflects sales from the manufacture, bottling and/or distribution of finished beverages, including sales of our own brands and third-party owned brands.
 
  •  Our Snapple Distributors segment reflects sales from the distribution of finished beverages, primarily Snapple, in New York City and the surrounding regions.
 
  •  Our Mexico and the Caribbean segment reflects sales from the manufacture, bottling and/or distribution of both concentrates and finished beverages in those geographies.
 
Our current segment reporting structure is largely the result of acquiring and combining various portions of our businesses over the past several years. Although we continue to report our segments separately, due to the integrated nature of our business model, we manage our business to maximize profitability for our company as a whole. As a result, profitability trends in individual segments may not be consistent with the profitability of our company or comparable to our competitors. For example, following our bottling acquisitions in 2006, we changed certain funding and manufacturing arrangements between our Beverage Concentrates and Finished Goods segments and our newly acquired bottling companies, which reduced the profitability of our Bottling Group segment while benefiting our other segments.
 
We have significant intersegment transactions. For example, our Bottling Group purchases concentrates at an arm’s length price from our Beverage Concentrates segment. We expect these purchases to account for approximately 30% of our Beverage Concentrates segment annual net sales and therefore drive a similar proportion of our Beverage Concentrates segment profitability. In addition, our Snapple Distributors segment purchases finished beverages from our Finished Goods segment. These sales are eliminated in preparing our combined results of operations.
 
We incur selling, general and administrative expenses in each of our segments. In our segment reporting, the selling, general and administrative expenses of our Bottling Group, Snapple Distributors and Mexico and the Caribbean segments relate primarily to those segments. However, as a result of our historical segment reporting


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policies, certain combined selling activities that support our Beverage Concentrates and Finished Goods segments have not been proportionally allocated between those two segments. We also incur certain centralized finance and corporate costs that support our entire business, which have not been directly allocated to our respective segments but rather have been allocated primarily to our Beverage Concentrates segment.
 
The key financial measures management uses to assess the performance of our segments are net sales, gross contribution before marketing (“GCBM”) and underlying operating profit (“UOP”).
 
To reconcile total net sales of our segments to our total company net sales, on a U.S. GAAP basis, adjustments are required to eliminate any intersegment net sales not previously eliminated at the segment level.
 
GCBM represents a measure of gross profit. To reconcile total GCBM of our segments to our total company gross profit on a U.S. GAAP basis, adjustments and eliminations are required. Adjustments consist principally of: (1) revaluations of inventory from the “first in, first out” (“FIFO”) method to a “last in, first out” (“LIFO”) inventory valuation method and (2) mark-to-market adjustments on commodity contracts related to our raw materials. Eliminations relate to the profit attributable to unsold inventory from intersegment sales held at the end from a period (“profit in inventory”). The elimination reflects the change of the profit in inventory during the period.
 
UOP represents a measure of income from operations. To reconcile total UOP of our segments to our total company income from operations on a U.S. GAAP basis, adjustments are primarily required for: (1) restructuring costs, (2) non-cash compensation charges on stock option awards, (3) amortization and impairment of intangibles and (4) incremental pension costs. In addition, adjustments are required for total company corporate costs and other items, which relate primarily to general and administrative expenses not allocated to the segments and equity in earnings of unconsolidated subsidiaries. To reconcile total company income from operations to the line item “income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy” as reported on a U.S. GAAP basis, additional adjustments are required for interest expense, interest income and other expense (income).
 
Components of Net Sales and Costs and Expenses
 
Net Sales
 
We generate net sales primarily from:
 
  •  the sale and distribution of beverage concentrates and syrups;
 
  •  the sale and distribution of finished beverages; and
 
  •  the distribution of products of third parties.
 
We offer a variety of incentives and discounts to bottlers, customers and consumers through various programs to support in the distribution and promotion of our products. These incentives and discounts include cash discounts, price allowances, volume based rebates, product placement fees and other financial support for items such as trade promotions, displays, new products, consumer incentives and advertising assistance. These incentives and discounts, collectively referred to as trade spend, are reflected as a reduction of gross sales to arrive at net sales.
 
Cost of Sales
 
Our cost of sales include costs associated with the operation of our manufacturing and other related facilities, including depreciation, as well as the following:
 
  •  Beverage concentrates cost of sales.   The major components in our beverage concentrates cost of sales are flavors and sweeteners for diet beverage concentrates.
 
  •  Bottler cost of sales.   The major components in our bottler cost of sales are beverage concentrates, packaging and ingredients. Packaging costs include aluminum, glass, plastic and paper packaging. Ingredients include HFCS and other sweeteners, agricultural commodities (such as apples, citrus fruits and tomatoes), teas and flavorings.
 
  •  Distributor cost of sales.   The major component in our distributor cost of sales is purchased finished beverages.


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Packaging costs and ingredients costs represented approximately  % and  %, respectively, of our cost of sales in 2007. Our cost of aluminum increased significantly beginning in January 2008 and is expected to negatively impact cost of sales by approximately $     million in 2008.
 
Selling, General and Administrative Expenses
 
Our selling, general and administrative expenses include:
 
  •  selling and marketing expenses;
 
  •  transportation and warehousing expenses related to customer shipments, including fuel;
 
  •  general and administrative expenses such as management payroll, benefits, travel and entertainment, accounting and legal expenses and rent on leased office facilities; and
 
  •  corporate function expenses allocated from Cadbury Schweppes (as described under “—Our Separation from Cadbury Schweppes”).
 
We expect that our selling, general and administrative expenses will increase in the range of $      million to $      million for incremental corporate and other independent publicly-traded company costs following our separation from Cadbury Schweppes. We also expect our October 10, 2007 announced organizational restructuring to result in annual selling, general and administrative expense savings of approximately $70 million, most of which are expected to be realized in 2008 with the full annual benefit realized from 2009 onwards.
 
Depreciation and Amortization
 
Our depreciation expense includes depreciation of buildings, machinery and equipment relating to our manufacturing, distribution and office facilities as well as vending machines and computer software. Our amortization expense includes amortization of definite-lived intangible assets including our brands, bottler agreements, distribution rights, customer relationships and vending contracts. Depreciation directly attributable to our manufacturing and distribution operations is included in our cost of sales. Amortization related to our long-term vending contracts is recorded in selling, general and administrative expenses. All other depreciation and amortization is included as a separate line item.
 
Restructuring Costs
 
We implement restructuring programs from time to time and incur costs that are designed to improve operating effectiveness and lower costs. These programs have included closure of manufacturing plants, reductions in workforce, integrating back office operations and outsourcing certain transactional activities. When we implement these programs, we incur various charges, including severance and other employment-related costs.
 
Interest Expense
 
Historically, we have borrowed funds from subsidiaries of Cadbury Schweppes. We have also borrowed funds from third-party banks and other lenders. The interest incurred with respect to this debt is recorded as interest expense.
 
Interest Income
 
Interest income is the return we earn on our cash and cash equivalents held at third-party banks. Historically, we have also generated interest income from our note receivable balances with subsidiaries of Cadbury Schweppes, which are a result of Cadbury Schweppes’ cash management practices.


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Income Taxes
 
Our effective income tax rate fluctuates from period-to-period and can be impacted by various items, including shifts in the mix of our earnings from various jurisdictions, changes in requirements for tax uncertainties, timing and results of any reviews or audits of our income tax filing positions or returns, and changes in tax legislation.
 
In connection with the separation, we will enter into a tax-sharing and indemnification agreement with Cadbury Schweppes. For a discussion of the tax-sharing and indemnification agreement, see “Our Relationship with Cadbury plc after the Distribution.”
 
Volume
 
In evaluating our performance, we consider different volume measures depending on whether we sell beverage concentrates and syrups or finished beverages.
 
Beverage Concentrates Sales Volume
 
In our beverage concentrates and syrup businesses, we measure our sales volume in two ways: (1) “concentrates case sales” and (2) “bottler case sales.” The unit of measurement for both concentrates case sales and bottler case sales equals 288 fluid ounces of finished beverage, or 24 twelve ounce servings.
 
Concentrates case sales represent units of measurement for concentrates and syrups sold by us to our bottlers and distributors. A concentrates case is the amount of concentrates needed to make one case of 288 fluid ounces of finished beverage. It does not include any other component of the finished beverage other than concentrates. Our net sales in our concentrates businesses are based on concentrates cases sold.
 
Bottler case sales represent the number of cases of our finished beverages sold by us and our bottling partners. Bottler case sales are calculated based upon volumes from both our Bottling Group and volumes reported to us by our third-party bottlers.
 
Bottler case sales and concentrates case sales are not equal during any given period due to changes in bottler concentrates inventory levels, which can be affected by seasonality, bottler inventory and manufacturing practices, and the timing of price increases and new product introductions.
 
Although our net sales in our concentrates businesses are based on concentrates case sales, we believe that bottler case sales are also a significant measure of our performance because they measure sales of our finished beverages into retail channels.
 
Finished Beverages Sales Volume
 
In our finished beverages businesses, we measure volume as case sales to customers. A case sale represents a unit of measurement equal to 288 fluid ounces of finished beverage sold by us. Case sales include both our owned-brands and certain brands licensed to, and/or distributed by, us.
 
Significant Items Affecting Comparability
 
The comparability of our period-to-period income from operations is affected by significant acquisitions and disposals, most notably our bottling acquisitions in May 2006, and the other factors described in our period-to-period results of operations. As a result, our financial data is not necessarily comparable on a period-to-period basis. The table below sets forth certain significant items affecting comparability of our period-to-period income from operations.
 
                                         
                      Nine Months Ended September 30,  
    2006     2005     2004     2007     2006  
    (In millions)  
 
Restructuring costs
  $ 27     $ 10     $ 36     $ 36     $ 9  
Gain on disposal of assets
    (32 )     (36 )     (1 )           (32 )


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Restructuring Costs
 
In the nine months ended September 30, 2007, the $36 million in expenses was primarily due to restructuring costs associated with the integration of our Bottling Group. In the nine months ended September 30, 2006, the $9 million in expenses was primarily related to costs associated with the integration of our Bottling Group as well as various other cost reduction and efficiency initiatives. The Bottling Group integration and other cost reduction and efficiency initiatives primarily related to the alignment of management information systems, the consolidation of the back office operations from the acquired businesses, the elimination of duplicate employees, and employee relocations.
 
In 2006, the $27 million in expenses was primarily related to integration costs associated with our bottling acquisitions, similar to those discussed above, as well as outsourcing initiatives related to our back office operations and a reorganization of our information technology functions. The outsourcing initiatives involved the transfer of certain back office functions, such as accounts payable and travel and entertainment management, to a third party provider. In 2005, the $10 million in expenses was primarily related to costs from the restructuring of our four North American businesses (Mott’s, Snapple, Dr Pepper/Seven Up and Mexico) that occurred in 2004 and the further consolidation of our back office operations. In 2004, the $36 million in expenses was primarily related to restructuring of our four North American businesses into a combined management reporting unit, the creation of a back office operations service center and the closure of our North Brunswick plant.
 
Gain on Disposal of Assets
 
In 2006, we recognized a $32 million gain attributed to the disposals of the Grandma’s Molasses brand and Slush Puppie business, which is also reflected in the nine months ended September 30, 2006. In 2005, we recognized a $36 million gain on the disposal of the Holland House brand. In 2004, we recognized a $1 million gain attributed to various asset disposals.


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Results of Operations for Nine Months Ended September 30, 2007 Compared with Nine Months Ended September 30, 2006
 
Combined Operations
 
The following table sets forth our combined results of operations for the nine months ended September 30, 2007 and 2006.
 
                                 
    Nine Months Ended September 30,     Dollar Amount
    Percentage
 
    2007     2006     Change     Change  
    (In millions, except % data)  
 
Net sales
  $ 4,347     $ 3,380     $ 967       28.6 %
Cost of sales
    1,984       1,399       585       41.8 %
                                 
Gross profit
    2,363       1,981       382       19.3 %
                                 
Selling, general and administrative expenses
    1,527       1,239       288       23.2 %
Depreciation and amortization
    69       44       25       56.8 %
Restructuring costs
    36       9       27       NM  
Gain on disposal of property and intangible assets
          (32 )     32       NM  
                                 
Income from operations
    731       721       10       1.4 %
                                 
Interest expense
    195       189       6       3.2 %
Interest income
    (38 )     (35 )     (3 )     (8.6 )%
Other expense (income)
    (2 )     5       (7 )     NM  
                                 
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries
    576       562       14       2.5 %
Provision for income taxes
    218       206       12       5.8 %
                                 
Income before equity in earnings of unconsolidated subsidiaries
    358       356       2       0.6 %
Equity in earnings of unconsolidated subsidiaries, net of tax
    1       3       (2 )     (66.7 )%
                                 
Net income
  $ 359     $ 359     $        
                                 
 
Net Sales.   The $967 million increase was primarily due to the inclusion of our bottling acquisitions, which contributed an additional $908 million. Higher pricing and improved sales mix in all remaining segments increased net sales by 2% despite lower volumes. Excluding the impact of our bottling acquisitions, volumes were down 2%, with declines in Dr Pepper and Hawaiian Punch being partially offset by increases in Snapple, Mott’s and Sunkist. The disposal of the Grandma’s Molasses brand in January 2006 and the Slush Puppie business in May 2006 reduced net sales by less than 1%.
 
Gross Profit.   The $382 million increase was primarily due to the inclusion of our bottling acquisitions, which contributed an additional $353 million. The remaining increase was primarily due to net sales growth, partially offset by increases in commodity costs, including HFCS and apple juice concentrate, as well as inventory write-offs related to Accelerade.
 
Gross margin was 54% in the nine months ended September 30, 2007 and 59% in the nine months ended September 30, 2006. The decrease in gross margin was due primarily to the inclusion of our bottling acquisitions (which generally have lower margins than our other businesses) for nine months in 2007 as compared to partial periods in 2006.
 
Selling, General and Administrative Expenses.   The $288 million increase was primarily due to the inclusion of our bottling acquisitions, which resulted in an additional $294 million of expenses in the Bottling Group segment. The expenses for all other segments decreased, primarily reflecting a reduction in annual management incentive plan accruals which more than offset the impact of inflation (particularly in wages and benefits). Marketing was up slightly as increases in the Finished Goods segment to support new product launches were offset by a reduction in the Beverage Concentrates segment.


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Depreciation and Amortization.   The $25 million increase was principally due to higher depreciation on property, plant and equipment and amortization of definite lived intangible assets in connection with our bottling acquisitions.
 
Restructuring Costs.   The $36 million expense in the nine months ended September 30, 2007 was primarily due to restructuring costs associated with the Bottling Group integration. The $9 million expense in the nine months ended September 30, 2006 was also primarily related to the Bottling Group integration as well as various other cost reduction and efficiency initiatives. The Bottling Group integration and other cost reduction and efficiency initiatives primarily related to the alignment of management information systems, the consolidation of the back office operations from the acquired businesses, the elimination of duplicate employees, and employee relocations.
 
Gain on Disposal of Property and Intangible Assets.   In the nine months ended September 30, 2006, we recognized a $32 million gain on disposals of assets, attributable to the Grandma’s Molasses brand and the Slush Puppie business.
 
Income from Operations.   The $10 million increase was due to higher net sales in 2007 and the impact of the bottling acquisitions, partially offset by $27 million of higher restructuring costs in 2007 and the $32 million gain on disposals in 2006.
 
Interest Expense.   The $6 million increase was primarily due to the increase in related party debt in connection with our bottling acquisitions.
 
Interest Income.   The $3 million decrease was due to fluctuations in related party note receivable balances with subsidiaries of Cadbury Schweppes.
 
Provision for Income Taxes.   The effective tax rates for the nine months ended September 30, 2007 and the nine months ended September 30, 2006 were 37.8% and 36.9%, respectively. The increase in the effective rate for the nine months ended September 30, 2007 was due to the impact of a favorable reversal in 2006 of previously accrued income tax reserves for various income tax uncertainties.
 
Results of Operations by Segment for Nine Months Ended September 30, 2007 Compared with Nine Months Ended September 30, 2006
 
We operate our business in five segments: Beverage Concentrates, Finished Goods, Bottling Group, Snapple Distributors and Mexico and the Caribbean. The key financial measures management uses to assess the performance of our segments are net sales, GCBM and UOP.
 
The following tables set forth net sales, GCBM and UOP for our segments for the nine months ended September 30, 2007 and 2006, as well as the adjustments necessary to reconcile our total segment results to our combined results presented in accordance with U.S. GAAP and the elimination of intersegment transactions.
 
                                 
    Nine Months Ended September 30,     Dollar Amount
    Percentage
 
    2007     2006     Change     Change  
    (In millions, except % data)  
 
Operating Segment Data:
                               
Net sales
                               
Beverage Concentrates
  $ 1,004     $ 980     $ 24       2.4 %
Finished Goods
    1,036       1,014       22       2.2 %
Bottling Group
    2,160       1,081       1,079       99.8 %
Snapple Distributors
    194       205       (11 )     (5.4 )%
Mexico and the Caribbean
    313       302       11       3.6 %
Adjustments and Eliminations(1)
    (360 )     (202 )     (158 )     78.2 %
                                 
Net sales as reported
  $ 4,347     $ 3,380     $ 967       28.6 %
                                 


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(1) Consists principally of eliminations of net sales made by our Beverage Concentrates and Finished Goods segments to our Bottling Group segment, which totaled $362 million in the nine months ended September 30, 2007 and $199 million in the nine months ended September 30, 2006. The increase in these eliminations was due principally to the inclusion of our 2006 bottling acquisitions for the full nine months ended September 30, 2007 as compared to the inclusion of our 2006 bottling acquisitions for partial periods in the nine months ended September 30, 2006. Adjustments in these periods were not material.
 
                                 
    Nine Months Ended September 30,     Dollar Amount
    Percentage
 
    2007     2006     Change     Change  
    (In millions, except % data)  
 
Gross contribution before marketing
                               
Beverage Concentrates
  $ 909     $ 886     $ 23       2.6 %
Finished Goods
    536       518       18       3.5 %
Bottling Group
    723       383       340       88.8 %
Snapple Distributors
    33       40       (7 )     (17.5 )%
Mexico and the Caribbean
    174       173       1       0.6 %
Adjustments and eliminations(1)
    (12 )     (19 )     7       (36.8 )%
                                 
Gross profit as reported
  $ 2,363     $ 1,981     $ 382       19.3 %
                                 
 
 
(1) Eliminations consist principally of eliminations of intersegment profit in inventory. These eliminations totaled $5 million in the nine months ended September 30, 2007 and $10 million in the nine months ended September 30, 2006. Adjustments consist principally of LIFO inventory revaluation and mark-to-market charges for commodity contracts related to our raw materials.
 
                                 
    Nine Months Ended September 30,     Dollar Amount
    Percentage
 
    2007     2006     Change     Change  
    (In millions, except % data)  
 
Underlying operating profit
                               
Beverage Concentrates
  $ 541     $ 511     $ 30       5.9 %
Finished Goods
    116       121       (5 )     (4.1 )%
Bottling Group
    69       67       2       3.0 %
Snapple Distributors
    34       34              
Mexico and the Caribbean
    75       72       3       4.2 %
Corporate and other(1)
    (34 )     (15 )     (19 )     126.7 %
Adjustments and eliminations(2)
    (225 )     (228 )     3       (1.3 )%
                                 
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries as reported
  $ 576     $ 562     $ 14       2.5 %
                                 
 
 
(1) Consists of equity in earnings of unconsolidated subsidiaries and general and administrative expenses not allocated to the segments. The change was primarily due to a decrease in our equity in earnings of unconsolidated subsidiaries compared to the nine months ended September 30, 2006 as a result of our purchase of the remaining 55% of DPSUBG in May 2006 and an increase in general and administrative expenses related to our IT operations.
 
(2) For the nine months ended September 30, 2007, adjustments consist principally of net interest expense of $157 million, restructuring costs of $36 million and depreciation and amortization of $69 million. For the nine months ended September 30, 2006, adjustments consist principally of net interest expense of $154 million, restructuring costs of $9 million and depreciation and amortization costs of $44 million. These 2006 adjustments were partially offset by the $32 million gain on disposal of the Grandma’s Molasses brand


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and Slush Puppie business. Eliminations in these periods were not material. Information on restructuring charges by segment is available in note 10 to our unaudited combined financial statements.
 
The following is a discussion of the results of each of our segments.
 
Beverage Concentrates
 
                                 
    Nine Months Ended September 30,   Dollar Amount
  Percentage
    2007   2006   Change   Change
    (In millions, except % data)
 
Net sales
  $ 1,004     $ 980     $ 24       2.4 %
Gross contribution before marketing
  $ 909     $ 886     $ 23       2.6 %
Underlying operating profit
  $ 541     $ 511     $ 30       5.9 %
 
The $24 million net sales increase was due primarily to price increases, which more than offset the impact of a 1.8% volume decline. The volume decline was due primarily to a 4.4% decline in Dr Pepper partially offset by single digit percentage increases in Sunkist and A&W. The Dr Pepper decline is primarily a result of comparisons to prior period volumes that included the launch of “Soda Fountain Classics” line extensions. Line extensions are usually offered for a limited time period and their volumes typically decline in the years subsequent to the year of launch, as was the case with these line extensions in 2007. The total of all other regular and Diet Dr Pepper (“base Dr Pepper volumes”) declined 0.5%. For the nine months ended September 30, 2006, net sales included $8 million for the Slush Puppie business, which was disposed in May 2006.
 
The $23 million GCBM increase was due to the net sales growth, partially offset by higher cost of sales from increased sweeteners and flavors costs.
 
The $30 million UOP increase was primarily due to the higher GCBM and lower marketing investments (particularly advertising costs) which were partially offset by increased selling, general and administrative expenses. Selling, general and administrative expenses were higher due primarily to increased corporate costs following our bottler acquisitions, a transfer of sales personnel from the Finished Goods segment to this segment reflecting a sales reorganization, and general inflationary increases, which were partially offset by lower management annual incentive plan accruals. The lower marketing investments were primarily a result of a shift in marketing to support new product initiatives in our Finished Goods segment, offset by a revision effective January 1, 2007 in our internal management reporting for marketing which resulted in higher marketing expenses in the first nine months of 2007 as compared to the first nine months of 2006. The impact of higher marketing in the first nine months of 2007 will reverse itself in the last three months of 2007. This revision only impacts the results of our Beverage Concentrates segment and has no impact on our combined results of operations.
 
Bottler case sales declined 2.1% in the nine months ended September 30, 2007 due primarily to a 3.4% decline in Dr Pepper, and a single and double digit percentage decline in 7UP and Diet Rite, respectively. The Dr Pepper decline was driven by comparisons to strong volumes in 2006 driven by the “Soda Fountain Classics” line extensions which were nationally introduced in 2005, while the total of base Dr Pepper volumes were equal to the prior period. The 7UP decline reflects the discontinuance of 7UP Plus, partially offset by the growth of base 7UP. This growth was driven by the launch of 7UP with natural flavors and the reformulation of Diet 7UP. The Diet Rite decline was due to the shift of marketing investment from Diet Rite to other diet brands, such as Diet Sunkist, Diet A&W and Diet Canada Dry. These declines were partially offset by single digit percentage increases in Sunkist and Canada Dry, which are consistent with the consumer shift from colas to flavored CSDs.


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Finished Goods
 
                                 
    Nine Months Ended
       
    September 30,   Dollar Amount
  Percentage
    2007   2006   Change   Change
    (In millions, except % data)
 
Net sales
  $ 1,036     $ 1,014     $ 22       2.2 %
Gross contribution before marketing
  $ 536     $ 518     $ 18       3.5 %
Underlying operating profit
  $ 116     $ 121     $ (5 )     (4.1 )%
 
The $22 million net sales increase was due to price increases and a favorable shift towards higher priced products such as Snapple and Mott’s. These increases were partially offset by lower volumes and higher product placement costs associated with new product launches. The volume decrease of 3.3% was primarily due to a price increase on Hawaiian Punch in April 2007, which more than offset growth from Snapple and Mott’s. Snapple volumes increased primarily due to the launch of super premium teas and Mott’s volumes increased due primarily to the new product launches of Mott’s for Tots juice and Mott’s Scooby Doo apple sauce and increased consumer demand for apple juice.
 
The $18 million GCBM increase was primarily due to net sales growth and the elimination of co-packing fees previously charged by the Bottling Group segment, which was partially offset by higher costs for glass, HFCS, apple juice concentrate and inventory write-offs related to Accelerade.
 
The $5 million UOP decrease was primarily due to new product launch expenses associated with Accelerade. For the nine months ended September 30, 2007, we incurred $36 million in costs to support the launch of our Accelerade product into the sports drink category, in which we did not have an existing product. The launch has been supported by significant product placement and marketing investments. In the nine months ended September 30, 2007, we had no net sales for this product as gross sales were more than offset by product placement fees. UOP was also impacted by $10 million of costs for the launch of Mott’s line extensions and the launch of Peñafiel in the United States, which was partially offset by lower selling, general and administrative costs due to the transfer of sales personnel from this segment to the Beverages Concentrates segment in connection with a sales reorganization.
 
Bottling Group
 
                                 
    Nine Months
  Dollar
   
    Ended September 30,   Amount
  Percentage
    2007   2006   Change   Change
    (In millions, except % data)
 
Net sales
  $ 2,160     $ 1,081     $ 1,079       99.8 %
Gross contribution before marketing
  $ 723     $ 383     $ 340       88.8 %
Underlying operating profit
  $ 69     $ 67     $ 2       3.0 %
 
The results of operations for the nine months ended September 30, 2006 only include five months of results from DPSUBG (acquired in May 2006), approximately four months of results from All American Bottling Corp. (acquired in June 2006), and four weeks of results from Seven Up Bottling Company of San Francisco (acquired in August 2006), as compared to the nine months ended September 30, 2007 which includes a full nine months of results of operations for these businesses and approximately three months of results from SeaBev (acquired in July 2007).
 
The $1,079 million net sales increase was primarily due to the bottling acquisitions described above, the transfer of the west coast division of the Snapple Distributors segment into the Bottling Group segment as of January 1, 2007, price increases and a favorable sales mix of higher priced non-CSDs. The west coast division of the Snapple Distributors segment had net sales of $38 million in the nine months ended September 30, 2006.
 
The $340 million GCBM increase was due to the net sales increase partially offset by higher cost of sales. GCBM as a percentage of sales declined from 35.4% in the nine months ended September 30, 2006 compared to 33.5% in the nine months ended September 30, 2007, due mainly to higher HFCS costs.


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UOP was $69 million in the nine months ended September 30, 2007 compared to $67 million in the five months after our 2006 bottling acquisitions. Bottling Group’s profitability is higher in the second and third quarters compared to the first quarter as volumes increase during the spring and summer months. Accordingly, the five month post-acquisition results in 2006 relate to May through September which were higher volume periods compared to the first quarter, while the 2007 nine month results reflect first, second and third quarters sales. In addition, 2007 results were impacted by the elimination of co-packing fees previously earned on manufacturing for the Finished Goods segment, an increase in post-acquisition employee benefits costs and incremental bad debt expense.
 
Snapple Distributors
 
                                 
    Nine Months Ended
  Dollar
   
    September 30,   Amount
  Percentage
    2007   2006   Change   Change
    (In millions, except % data)
 
Net sales
  $ 194     $ 205     $ (11 )     (5.4 )%
Gross contribution before marketing
  $ 33     $ 40     $ (7 )     (17.5 )%
Underlying operating profit
  $ 34     $ 34     $        
 
The $11 million net sales decrease primarily reflects a $21 million increase attributable to the acquisition of certain distribution rights for Snapple in June 2006 and $6 million from increased sales into retail channels, offset by the transfer of the west coast division of the Snapple Distributors segment into the Bottling Group segment as of January 1, 2007. The west coast division of the Snapple Distributors segment had net sales of $38 million in the nine months ended September 30, 2006.
 
The $7 million GCBM decrease primarily reflects a $5 million net decrease due to the transfer of the west coast division of the Snapple Distributors segment into the Bottling Group segment and the acquisition of distribution rights, and a further $2 million decrease due primarily to higher cost of sales for purchased products and a shift in mix to lower margin sales channels.
 
UOP was flat compared to the prior year reflecting the transfer of the west coast division of the Snapple Distributors segment into the Bottling Group segment, a $6 million profit increase due to acquisition of distribution rights, as well as a $4 million profit decrease due to higher cost of sales and trade spend.
 
Mexico and the Caribbean
 
                                 
    Nine Months Ended September 30,   Dollar Amount
  Percentage
    2007   2006   Change   Change
    (In millions, except % data)
 
Net sales
  $ 313     $ 302     $ 11       3.6 %
Gross contribution before marketing
  $ 174     $ 173     $ 1       0.6 %
Underlying operating profit
  $ 75     $ 72     $ 3       4.2 %
 
The $11 million net sales increase was due to volume growth of 2.4% and increased pricing, partially offset by unfavorable currency translation. The volume growth was due to the strong performance of Aguafiel, Peñafiel Mineral Water and Clamato brands which offset a decline in Peñafiel Flavors and Squirt. Foreign currency translation negatively impacted net sales by $5 million.
 
The $1 million GCBM increase was due to higher net sales, which was mostly offset by increased HFCS costs. Foreign currency translation negatively impacted GCBM by $3 million.
 
The $3 million UOP increase was due primarily to the increased net sales and lower marketing expenses.


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Results of Operations for 2006 Compared to 2005
 
Combined Operations
 
The following table sets forth our combined results of operations for 2006 and 2005.
 
                                 
                Dollar
       
                Amount
    Percentage
 
    2006     2005     Change     Change  
    (In millions, except % data)  
 
Net sales
  $ 4,735     $ 3,205     $ 1,530       47.7 %
Cost of sales
    1,994       1,120       874       78.0 %
                                 
Gross profit
    2,741       2,085       656       31.5 %
                                 
Selling, general and administrative expenses
    1,659       1,179       480       40.7 %
Depreciation and amortization
    69       26       43       165.4 %
Restructuring costs
    27       10       17       NM  
Gain on disposal of property and intangible assets
    (32 )     (36 )     4       NM  
                                 
Income from operations
    1,018       906       112       12.4 %
                                 
Interest expense
    257       210       47       22.4 %
Interest income
    (46 )     (40 )     (6 )     (15.0 )%
Other expense (income)
    2       (51 )     53       NM  
                                 
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
    805       787       18       2.3 %
Provision for income taxes
    298       321       (23 )     (7.2 )%
                                 
Income before equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
    507       466       41       8.8 %
Equity in earnings of unconsolidated subsidiaries, net of tax
    3       21       (18 )     NM  
                                 
Income before cumulative effect of change in accounting policy
    510       487       23       4.7 %
Cumulative effect of change in accounting policy, net of tax
          10       (10 )     NM  
                                 
Net income
  $ 510     $ 477     $ 33       6.9 %
                                 
 
Net Sales.   The $1,530 million increase was primarily due to the inclusion of our bottling acquisitions, which contributed an additional $1,432 million. The remaining $98 million increase was due primarily to higher pricing, improved sales mix and favorable foreign currency translation. Volumes declined 1.3% reflecting the impact of higher pricing in the Finished Goods and Snapple Distributors segments and lower Beverage Concentrates volumes primarily due to 7UP and Diet Rite, which were partially offset by growth in our Mexico and the Caribbean segment. The disposal of a brand and a business reduced net sales by less than 1%.
 
Gross Profit.   The $656 million increase was primarily due to the inclusion of our bottling acquisitions in our Bottling Group segment, which contributed an additional $566 million. The remaining $90 million increase was primarily due to net sales growth, partially offset by higher raw material costs, including plastic, glass and sweeteners. As a result of the bottling acquisitions, we were also able to reduce the use of external co-packing, which lowered overall production costs.
 
Gross margin was 58% in 2006 and 65% in 2005. The decrease in gross margin was due to the inclusion of our bottling acquisitions, which generally have lower margins than our other businesses.
 
Selling, General and Administrative Expenses.   The $480 million increase was primarily due to the inclusion of our bottling acquisitions, which contributed an additional $478 million of expenses. The remaining $2 million


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increase was due to higher transportation costs driven by fuel and general inflation for wages and benefits, mostly offset by lower marketing investments as well as reduced stock option and pension expenses.
 
Depreciation and Amortization.   The $43 million increase was primarily due to higher depreciation on property, plant and equipment and amortization of definite lived intangible assets following our bottling acquisitions.
 
Restructuring Costs.   In 2006, the $27 million in expenses was primarily related to integration costs associated with our bottling acquisitions, as well as the outsourcing of certain back office functions, such as accounts payable and travel and entertainment management, to a third party provider, and a reorganization of our information technology functions. The integration costs associated with our bottling acquisitions primarily related to the alignment of management information systems, the consolidation of back office operations from the acquired businesses, the elimination of duplicate functions, and employee relocations. In 2005, the $10 million in expenses was primarily related to costs from the restructuring of our four North American businesses (Mott’s, Snapple, Dr Pepper/Seven Up and Mexico) into a combined management reporting unit, that occurred in 2004 and the further consolidation of our back office operations that began in 2004.
 
Gain on Disposal of Property and Intangible Assets.   In 2006, we recognized a $32 million gain on the disposals of assets attributable to the disposals of the Grandma’s Molasses brand and Slush Puppie business. In 2005, we recognized a $36 million gain on the disposal of the Holland House brand.
 
Income from Operations.   The $112 million increase was primarily due to the net impact of our bottling acquisitions and strong performance from our Beverage Concentrates segment, partially offset by higher restructuring costs.
 
Interest Expense.   The $47 million increase was primarily due to the increase in related party debt as a result of the bottling acquisitions, which resulted in higher interest expense of $67 million. There was a further increase of $18 million due to higher interest rates on our variable rate related party debt. These increases were partially offset by a reduction of $43 million related to the repayment of certain related party debt.
 
Interest Income.   The $6 million increase is primarily due to fluctuations in related party note receivable balances with subsidiaries of Cadbury Schweppes.
 
Other expense (income).   The $53 million decrease was primarily due to the non-recurring foreign currency translation gain generated in 2005 from the redenomination of a related party debt payable by our Mexico and the Caribbean segment.
 
Provision for Income Taxes.   The effective tax rates for 2006 and 2005 were 36.9% and 39.7% respectively. The lower effective rate in 2006 was due to an income tax benefit related to the American Jobs Creation Act for domestic manufacturing, a favorable reversal of previously accrued income tax for various income tax uncertainties, changes in state, local and foreign income tax rates and shifts in the relative jurisdictional mix of taxable profits.
 
Equity in Earnings of Unconsolidated Subsidiaries, Net of Tax.   The $18 million decrease was due to the impact of our increased ownership of DPSUBG. Prior to May 2, 2006, we owned approximately 45% of DPSUBG and recorded our share of its earnings on an equity basis. On May 2, 2006, we increased our ownership from 45% to 100%. As a result, DPSUBG’s results were reflected on a consolidated basis after May 2, 2006.
 
Cumulative Effect of Change in Accounting Policy, Net of Tax.   In 2005, we adopted Statement of Financial Accounting Standards (“SFAS”) No. 123(R), Share-Based Payment and selected the prospective method of transition. Accordingly, prior period results were not restated and the cumulative impact for additional expense of $10 million was reflected in 2005.


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Results of Operations by Segment for 2006 Compared to 2005
 
The following tables set forth net sales, GCBM and UOP for our segments for 2006 and 2005, as well as adjustments necessary to reconcile our total segment results to our combined results presented in accordance with U.S. GAAP and the elimination of intersegment transactions.
 
                                         
                      Dollar
       
                      Amount
    Percentage
 
    2006     2005           Change     Change  
    (In millions, except % data)  
 
Operating Segment Data:
                                       
Net sales
                                       
Beverage Concentrates
  $ 1,330     $ 1,304             $ 26       2.0 %
Finished Goods
    1,337       1,342               (5 )     (0.4 )%
Bottling Group
    1,701                     1,701        
Snapple Distributors
    271       241               30       12.5 %
Mexico and the Caribbean
    408       354               54       15.3 %
Adjustments and eliminations(1)
    (312 )     (36 )             (276 )     NM  
                                         
Net sales as reported
  $ 4,735     $ 3,205             $ 1,530       47.7 %
                                         
 
 
(1) Consists principally of eliminations of net sales made by our Beverage Concentrates and Finished Goods segments to our Bottling Group segment in 2006 and in 2005 to DPSUBG, which was an unconsolidated subsidiary prior to our increase in ownership to 100%. These eliminations totaled $310 million in 2006 and $41 million in 2005. The increase in these eliminations was due primarily to the inclusion of our bottling acquisitions in 2006. Adjustments in these periods were not material.
 
                                         
                      Dollar
       
                      Amount
    Percentage
 
    2006     2005           Change     Change  
    (In millions, except % data)  
 
Gross contribution before marketing
                                       
Beverage Concentrates
  $ 1,206     $ 1,169             $ 37       3.2 %
Finished Goods
    686       674               12       1.8 %
Bottling Group
    590                     590        
Snapple Distributors
    53       52               1       1.9 %
Mexico and the Caribbean
    234       208               26       12.5 %
Adjustments and eliminations(1)
    (28 )     (18 )             (10 )     NM  
                                         
Gross profit as reported
  $ 2,741     $ 2,085             $ 656       31.5 %
                                         
 
 
(1) Eliminations consist principally of eliminations of intersegment profit in inventory. These eliminations totaled $19 million in 2006 and $11 million in 2005. Adjustments consist primarily of LIFO inventory revaluation, DPSUBG purchase accounting inventory adjustments and foreign currency translation.
 


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                      Dollar
       
                      Amount
    Percentage
 
    2006     2005           Change     Change  
    (In millions, except % data)  
 
Underlying Operating Profit
                                       
Beverage Concentrates
  $ 710     $ 657             $ 53       8.1 %
Finished Goods
    172       165               7       4.2 %
Bottling Group
    84                     84        
Snapple Distributors
    46       44               2       4.5 %
Mexico and the Caribbean
    102       96               6       6.3 %
Corporate and other(1)
    (14 )     11               (25 )     NM  
Adjustments and eliminations(2)
    (295 )     (186 )             (109 )     NM  
                                         
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy as reported
  $ 805     $ 787             $ 18       2.3 %
                                         
 
 
(1) Consists of equity in earnings of unconsolidated subsidiaries and general and administrative expenses not allocated to the segments. The change was primarily due to a decrease in our equity in earnings of unconsolidated subsidiaries for 2006 as a result of our purchase of the remaining 55% of DPSUBG in May 2006, and an increase in general and administrative expenses related to our IT operations.
 
(2) For 2006, adjustments consist principally of net interest expense of $211 million, restructuring costs of $27 million and depreciation and amortization of $69 million. These adjustments were partially offset by the $32 million gain on disposal of the Grandma’s Molasses brand and Slush Puppie business. For 2005, adjustments consist principally of net interest expense of $170 million, restructuring costs of $10 million and depreciation and amortization of $26 million. These adjustments were partially offset by the $36 million gain on the disposal of the Holland House brand and foreign currency translation. Eliminations in these periods were not material. Information on restructuring charges by segment is available in note 12 and information on depreciation and amortization is provided in note 15, in each case to our audited combined financial statements.
 
The following is a discussion of the results of each of our segments.
 
Beverage Concentrates
 
                                 
            Dollar
   
            Amount
  Percentage
    2006   2005   Change   Change
    (In millions, except % data)
 
Net sales
  $ 1,330     $ 1,304     $ 26       2.0 %
Gross contribution before marketing
  $ 1,206     $ 1,169     $ 37       3.2 %
Underlying operating profit
  $ 710     $ 657     $ 53       8.1 %
 
The $26 million net sales increase was due primarily to price increases, offset by volume declines of 1.8%. Dr Pepper volumes increased 0.6% as the result of “Soda Fountain Classics” line extensions and Sunkist, A&W and Canada Dry volumes increased by single digit percentages, but were more than offset by 7UP and Diet Rite volume declines.
 
The $37 million GCBM increase was primarily due to the net sales growth and lower cost of sales driven by a favorable sales mix shift away from higher cost beverage concentrates products, such as 7UP Plus and Diet Rite, to non-diet products.
 
The $53 million UOP growth was due to the increase in GCBM, and a reduction in marketing investments, primarily advertising costs. The GCBM increase was partially offset by higher selling, general and administrative expenses relating mainly to an increase in corporate costs following our bottling acquisitions.

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Bottler case sales increased 0.9% primarily due to growth in Dr Pepper following the launch of Dr Pepper Berries & Cream, the second offering of the “Soda Fountain Classics” line extensions, and single digit percentage increases on Diet Dr Pepper as a result of the “Diet Try It” promotion. Sunkist had a double digit volume percentage increase due to a line extension, and A&W had a single digit volume percentage increase due to new packaging. These increases were partially offset by a decline in 7UP and Diet Rite. The 7UP decline was primarily due to the discontinuation of 7UP Plus which was partially offset by the volume gains in the relaunch of 7UP “with natural flavors” in the third quarter of 2006. The Diet Rite decline was due to a reallocation of marketing investments from Diet Rite to Diet 7UP, Diet Sunkist, Diet A&W and Diet Canada Dry.
 
Finished Goods
 
                                 
            Dollar
   
            Amount
  Percentage
    2006   2005   Change   Change
    (In millions, except % data)
 
Net sales
  $ 1,337     $ 1,342     $ (5 )     (0.4 )%
Gross contribution before marketing
  $ 686     $ 674     $ 12       1.8 %
Underlying operating profit
  $ 172     $ 165     $ 7       4.2 %
 
The $5 million net sales decrease was primarily due to volume declines of 3.0%, which were partially offset by price increases. Volume declines in Snapple and Yoo-Hoo more than offset an increase in Hawaiian Punch. The impact of the price increases were partially offset by an unfavorable sales mix.
 
The $12 million GCBM increase was primarily due to reduced cost of sales. These cost of sales reductions, driven by supply chain initiatives, include lower ingredient costs from product reformulation and lower production costs as certain products, which were previously co-packed externally, were manufactured in-house. These cost of sales reductions were partially offset by an increase in our cost of HFCS, plastic and glass.
 
The $7 million UOP increase was due to the increase in GCBM, partially offset by higher marketing costs mainly associated with the launch of Snapple super premium teas.
 
Bottling Group
 
                                 
            Dollar
   
            Amount
  Percentage
    2006   2005   Change   Change
    (In millions, except % data)
 
Net sales
  $ 1,701           $ 1,701        
Gross contribution before marketing
  $ 590           $ 590        
Underlying operating profit
  $ 84           $ 84        
 
Bottling Group was not a reportable segment prior to our bottling acquisitions in 2006, and therefore we have not presented any Bottling Group segment results of operations for 2005.
 
UOP from May to December 2006 was $84 million on $590 million of GCBM and $1,701 million of net sales. UOP included $2 million of income from payments with respect to termination of brand distribution rights.
 
Snapple Distributors
 
                                 
            Dollar
   
            Amount
  Percentage
    2006   2005   Change   Change
    (In millions, except % data)
 
Net sales
  $ 271     $ 241     $ 30       12.5 %
Gross contribution before marketing
  $ 53     $ 52     $ 1       1.9 %
Underlying operating profit
  $ 46     $ 44     $ 2       4.6 %


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The net sales increase of $30 million primarily reflects a $21 million increase attributable to the acquisition of certain distribution rights for Snapple in June 2006. In addition, net sales increased due to volume increases of 0.4% and price increases.
 
The $1 million GCBM increase was due to higher net sales, almost completely offset by higher cost of sales from purchased finished beverages.
 
The $2 million UOP increase was due to the reasons described above.
 
Mexico and the Caribbean
 
                                 
            Dollar
   
            Amount
  Percentage
    2006   2005   Change   Change
    (In millions, except % data)
 
Net sales
  $ 408     $ 354     $ 54       15.3 %
Gross contribution before marketing
  $ 234     $ 208     $ 26       12.5 %
Underlying operating profit
  $ 102     $ 96     $ 6       6.3 %
 
The $54 million net sales increase was due to 3.4% volume growth, increased pricing, improved sales mix and favorable foreign currency translation. Volumes increased due to growth in Aguafiel, Clamato and Squirt following our improved penetration of large retail stores and growth in the third-party distributor channel. Foreign currency translation favorably impacted net sales by $15 million.
 
The $26 million GCBM increase was primarily due to the net sales growth, partially offset by increases in HFCS and plastic costs. Foreign currency translation negatively impacted cost of sales by $6 million.
 
The $6 million UOP increase was due to the higher GCBM, partially offset by higher transportation and distribution costs, increased selling, general and administrative expenses, and unfavorable foreign currency translation.


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Results of Operations for 2005 Compared to 2004
 
The following table set forth our combined results of operations for 2005 and 2004.
 
Combined Operations
 
                                 
                Dollar
       
                Amount
    Percentage
 
    2005     2004     Change     Change  
    (In millions, except % data)  
 
Net sales
  $ 3,205     $ 3,065     $ 140       4.6 %
Cost of sales
    1,120       1,051       69       6.6 %
                                 
Gross profit
    2,085       2,014       71       3.5 %
                                 
Selling, general and administrative expenses
    1,179       1,135       44       3.9 %
Depreciation and amortization
    26       10       16       NM  
Restructuring costs
    10       36       (26 )     NM  
Gain on disposal of property and intangible assets
    (36 )     (1 )     (35 )     NM  
                                 
Income from operations
    906       834       72       8.6 %
                                 
Interest expense
    210       177       33       18.6 %
Interest income
    (40 )     (48 )     8       16.7 %
Other expense (income)
    (51 )     2       (53 )     NM  
                                 
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
    787       703       84       11.9 %
Provision for income taxes
    321       270       51       18.9 %
                                 
Income before equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
    466       433       33       7.6 %
Equity in earnings of unconsolidated subsidiaries, net of tax
    21       13       8       61.5 %
                                 
Income before cumulative effect of change in accounting principal
    487       446       41       9.2 %
Cumulative effect of change in accounting policy, net of tax
    10             10       NM  
                                 
Net income
  $ 477     $ 446     $ 31       7.0 %
                                 
 
Net Sales.   The $140 million increase was driven by volume growth primarily due to the national introduction of Dr Pepper “Soda Fountain Classics” line extensions in the Beverage Concentrates segment as well as Mott’s and Hawaiian Punch due to increased promotional activity in the Finished Goods segment. In our Mexico and the Caribbean segment, volume and net sales grew primarily through expanded distribution and successful product innovation. Net sales in 2004 benefited by approximately $30 million due to the inclusion of a 53 rd  week.
 
Gross Profit.   The $71 million increase reflected the increase in net sales offset by higher cost of sales due primarily to an increase in volume as well as increased costs of raw materials, particularly glass.
 
Gross margin was 65% in 2005 and 66% in 2004. The slight decrease in gross margin primarily reflects the impact of increased commodity costs in 2005.
 
Selling, General and Administrative Expenses.   The $44 million increase was primarily due to higher transportation costs from increased volume in the Finished Goods segment and increased fuel costs, as well as higher stock option and pension expenses.


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Depreciation and Amortization.   The $16 million decrease was primarily due to lower depreciation following the retirement of certain information systems in 2004.
 
Restructuring Costs.   In 2005, the $10 million expense was primarily related to continuing costs from the restructuring of our four North American businesses that occurred in 2004 and the further consolidation of our back office functions. In 2004, the $36 million expense was primarily related to restructuring of our four North American businesses into a combined management reporting unit, the creation of a back office operations service center which replaced multiple operations, and the closure of our North Brunswick plant.
 
Gain on Disposal of Property and Intangible Assets.   In 2005, we recognized a $36 million gain on the disposal of the Holland House brand. In 2004, we recognized a $1 million gain attributed to various asset disposals.
 
Income from Operations.   The $72 million increase was primarily due to strong performances from our Beverage Concentrates, Finished Goods, and Mexico and the Caribbean segments, the gain from a brand disposal, and lower restructuring costs.
 
Interest Expense.   The $33 million increase was primarily due to higher interest rates on our variable rate related party debt.
 
Interest Income.   The $8 million decrease was primarily due to fluctuations in related party note receivable balances with subsidiaries of Cadbury Schweppes.
 
Other expense (income).   The $53 million increase was primarily due to the non-recurring foreign currency translation gain generated in 2005 from the redenomination of a related party debt payable by our Mexico and the Caribbean segment.
 
Income Taxes.   Our effective tax rate was 39.7% and 37.7% for 2005 and 2004, respectively. The higher effective rate in 2005 was due to changes in state, local and foreign income tax rates and shifts in the relative jurisdictional mix of taxable profits.
 
Equity in Earnings of Unconsolidated Subsidiaries, Net of Tax.   The $8 million increase in earnings of unconsolidated subsidiaries was due primarily to our share of higher earnings from DPSUBG.
 
Cumulative Effect of Change in Accounting Policy, Net of Tax.   In 2005, we adopted SFAS No. 123(R), Share-Based Payment and selected the prospective method of transition. Accordingly, prior period results were not restated and the cumulative impact for additional expense of $10 million was reflected in 2005.
 
Results of Operations by Segment for 2005 Compared to 2004
 
The following tables set forth net sales, GCBM and UOP for our segments for 2005 and 2004, as well as adjustments necessary to reconcile our total segment results to our combined results presented in accordance with U.S. GAAP and the elimination of intersegment transactions.
 
                                 
                Dollar
       
                Amount
    Percentage
 
    2005     2004     Change     Change  
    (In millions, except % data)  
 
Operating Segment Data:
                               
Net sales
                               
Beverage Concentrates
  $ 1,304     $ 1,238     $ 66       5.3 %
Finished Goods
    1,342       1,287       55       4.3 %
Bottling Group
                       
Snapple Distributors
    241       241              
Mexico and the Caribbean
    354       310       44       14.2 %
Adjustments and eliminations(1)
    (36 )     (11 )     (25 )     NM  
                                 
Net sales as reported
  $ 3,205     $ 3,065     $ 140       4.6 %
                                 


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(1) Consists principally of eliminations of net sales made by our Beverage Concentrates and Finished Goods segments to DPSUBG, which was an unconsolidated subsidiary prior to our increase in ownership to 100% in 2006. These eliminations totaled $41 million in 2005 and $20 million in 2004. Adjustments in these periods were due to the impact of foreign currency translation.
 
                                 
                Dollar
       
                Amount
    Percentage
 
    2005     2004     Change     Change  
    (In millions, except % data)  
 
Gross contribution before marketing
                               
Beverage Concentrates
  $ 1,169     $ 1,117     $ 52       4.7 %
Finished Goods
    674       665       9       1.4 %
Bottling Group
                       
Snapple Distributors
    52       54       (2 )     (3.7 )%
Mexico and the Caribbean
    208       184       24       13.0 %
Adjustments and eliminations(1)
    (18 )     (6 )     (12 )     NM  
                                 
Gross profit as reported
  $ 2,085     $ 2,014     $ 71       3.5 %
                                 
 
 
(1) Eliminations consist principally of eliminations of intersegment profit in inventory. These eliminations totaled $11 million in 2005 and $2 million in 2004. Adjustments consist primarily of LIFO inventory revaluation, other cost of goods sold adjustments and foreign currency translation.
 
                                 
                Dollar
       
                Amount
    Percentage
 
    2005     2004     Change     Change  
    (In millions, except % data)  
 
Underlying operating profit
                               
Beverage Concentrates
  $ 657     $ 626     $ 31       5.0 %
Finished Goods
    165       242       (77 )     (31.8 )%
Bottling Group
                       
Snapple Distributors
    44       1       43       NM  
Mexico and the Caribbean
    96       83       13       15.7 %
Corporate and other(1)
    11       (20 )     31       NM  
Adjustments and eliminations(2)
    (186 )     (229 )     43       NM  
                                 
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy as reported
  $ 787     $ 703     $ 84       11.9 %
                                 
 
 
(1) Consists of equity in earnings of unconsolidated subsidiaries and general and administrative expenses not allocated to the segments. The change was primarily due to an increase in general and administrative expenses related to our IT and procurement functions and increases in our equity in earnings of unconsolidated subsidiaries.
 
(2) For 2005, adjustments consist principally of net interest expense of $170 million, restructuring costs of $10 million and depreciation and amortization of $26 million. These adjustments were partially offset by the $36 million gain on disposal of the Holland House brand and foreign currency translation. For 2004, adjustments consist principally of net interest expense of $129 million, restructuring costs of $36 million and depreciation and amortization of $10 million. Eliminations in these periods were not material. Information on restructuring charges by segment is available in note 12 and information on depreciation and amortization by segment is provided in note 15, in each case to our audited combined financial statements.


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The following is a discussion of the results of each of our segments.
 
Beverage Concentrates
 
                                 
            Dollar
   
            Amount
  Percentage
    2005   2004   Change   Change
    (In millions, except % data)
 
Net sales
  $ 1,304     $ 1,238     $ 66       5.3 %
Gross contribution before marketing
  $ 1,169     $ 1,117     $ 52       4.7 %
Underlying operating profit
  $ 657     $ 626     $ 31       5.0 %
 
The $66 million net sales increase was due primarily to volume growth of 3.6% and price increases. Volume growth was primarily due to Dr Pepper following the launch of “Soda Fountain Classics” line extensions, and new A&W packaging, partially offset by declines in 7UP and Diet Rite. Net sales in 2004 benefited by approximately $16 million due to the inclusion of a 53rd week.
 
The $52 million GCBM increase was due primarily to the growth in net sales, partially offset by higher cost of sales from increased sweetener costs.
 
The $31 million UOP increase was due to the higher GCBM, partially offset by higher transportation costs from fuel cost increases, and by higher selling, general and administrative expenses resulting from the change in our method of allocating corporate costs from the Finished Goods segment to better reflect management reporting lines. These cost increases were partially offset by a reduction in marketing investments.
 
Bottler case sales were flat. Dr Pepper case sales increased 6% primarily as a result of the successful launch of the “Soda Fountain Classics” line extensions, and A&W case sales were up due to new packaging. However, these increases were offset by a 9% decline in 7UP and a 28% decline in Diet Rite. The Diet Rite decline resulted from our decision not to repeat aggressive promotional activity in 2005 at a major retailer for Diet Rite which had favorably impacted net sales in 2004.
 
Finished Goods
 
                                 
            Dollar
   
            Amount
  Percentage
    2005   2004   Change   Change
    (In millions, except % data)
 
Net sales
  $ 1,342     $ 1,287     $ 55       4.3 %
Gross contribution before marketing
  $ 674     $ 665     $ 9       1.4 %
Underlying operating profit
  $ 165     $ 242     $ (77 )     (31.8 )%
 
The $55 million net sales increase was primarily due to volume growth of 4.1% and price increases. The volume growth was primarily due to Hawaiian Punch, Mott’s and Clamato. Net sales in 2004 benefited by approximately $12 million due to the inclusion of a 53 rd  week.
 
The $9 million GCBM increase was due to an increase in net sales, which was mostly offset by an increase in costs of sales from higher volumes and an increase in raw material costs, principally glass and HFCS.
 
The $77 million UOP decrease was primarily due to a $55 million allocation of profit from the Finished Goods segment to the Snapple Distributors segment for internal segment reporting purposes. This allocation reduced the profitability of this segment as it effectively treated net sales made to the Snapple Distributors segment as if such net sales were made at cost rather than on an arm’s length basis. In addition, higher transportation costs resulting, primarily from higher volumes and increased fuel costs also contributed to the UOP decrease. This UOP decrease was partially offset by lower selling, general and administrative expenses resulting from the change in our method of allocating corporate costs from the Finished Goods segment to the Beverage Concentrates and Snapple Distributors segments to better reflect management reporting lines.


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Bottling Group
 
Bottling Group was not a reportable segment prior to our bottling acquisitions in May 2006 and therefore we have not presented any Bottling Group segment results of operations for 2005 and 2004.
 
Snapple Distributors
 
                                 
            Dollar
   
            Amount
  Percentage
    2005   2004   Change   Change
    (In millions, except % data)
 
Net sales
  $ 241     $ 241              
Gross contribution before marketing
  $ 52     $ 54     $ (2 )     (3.7 )%
Underlying operating profit
  $ 44     $ 1     $ 43       NM  
 
Net sales declined slightly due to a small decrease in volume. Net sales in 2004 benefited by $2 million due to the inclusion of a 53 rd  week.
 
GCBM decreased by $2 million.
 
The $43 million UOP increase was primarily due to a $55 million allocation of profit from the Finished Goods segment to the Snapple Distributors segment for internal reporting purposes. This allocation increased the profitability of this segment as it effectively treated purchases of finished beverages from the Finished Goods segment as if such purchases were made at cost rather than on an arm’s length basis. This increase was partially offset by a higher allocation of management costs from the Finished Goods segment, increased bad debts, and wage and benefit increases.
 
Mexico and the Caribbean
 
                                 
            Dollar
   
            Amount
  Percentage
    2005   2004   Change   Change
    (In millions, except % data)
 
Net sales
  $ 354     $ 310     $ 44       14.2 %
Gross contribution before marketing
  $ 208     $ 184     $ 24       13.0 %
Underlying operating profit
  $ 96     $ 83     $ 13       15.7 %
 
The $44 million net sales increase was primarily due to volume growth of 5.4%, higher pricing and improved mix. Peñafiel and Aguafiel volumes were higher due to increased penetration of the modern food channel, strong performance by third-party distributors, and the launches of Peñafiel Naturel and Aguafiel Frutal Orange, partially offset by a decrease in Squirt volumes. In addition, business arrangements with certain third-party distributors were revised, which increased net sales.
 
The $24 million GCBM increase was due to higher net sales, partially offset by higher cost of sales, primarily from higher plastic and glass costs.
 
The $13 million UOP increase was due to higher GCBM and lower selling, general and administrative expenses, which was partially offset by higher transportation expenses.
 
The impact of foreign currency translation did not materially impact the changes in net sales, GCBM and UOP in 2005 and 2004.
 
Critical Accounting Policies
 
The process of preparing our financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses. These estimates and judgments are based on historical experience, future expectations and other factors and assumptions we believe to be reasonable under the circumstances. The most significant estimates and judgments are reviewed on an ongoing basis and are revised when necessary. Actual amounts may differ from these estimates and judgments. A summary


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of our significant accounting policies is contained in note 2 to our audited combined financial statements included elsewhere in this information statement.
 
The most significant estimates and judgments relate to:
 
  •  revenue recognition,
 
  •  valuations of goodwill and other indefinite lived intangibles,
 
  •  stock based compensation,
 
  •  pension and postretirement benefits and
 
  •  income taxes.
 
Revenue Recognition
 
We recognize sales revenue when all of the following have occurred: (1) delivery, (2) persuasive evidence of an agreement exists, (3) pricing is fixed or determinable, and (4) collection is reasonably assured. Delivery is not considered to have occurred until the title and the risk of loss passes to the customer according to the terms of the contract between us and the customer. The timing of revenue recognition is largely dependent on contract terms. For sales to other customers that are designated in the contract as free-on-board destination, revenue is recognized when the product is delivered to and accepted at the customer’s delivery site.
 
In addition, we offer a variety of incentives and discounts to bottlers, customers and consumers through various programs to support the distribution and promotion of our products. These incentives and discounts include cash discounts, price allowances, volume based rebates, product placement fees and other financial support for items such as trade promotions, displays, new products, consumer incentives and advertising assistance. These incentives and discounts, which we collectively refer to as trade spend, are reflected as a reduction of gross sales to arrive at net sales. Trade spend for 2006 includes the effect of our bottling acquisitions where the amounts of such spend are larger than those related to other parts of our business. The aggregate deductions from gross sales recorded by us in relation to these programs were approximately $2,440 million, $928 million and $861 million in 2006, 2005 and 2004, respectively. Net sales are also reported net of sales taxes and other similar taxes.
 
Goodwill and Other Indefinite Lived Intangible Assets
 
The majority of our intangible asset balances are made up of goodwill and brands which we have determined to have indefinite useful lives. In arriving at the conclusion that a brand has an indefinite useful life, we review factors such as size, diversification and market share of each brand. We expect to acquire, hold and support brands for an indefinite period through consumer marketing and promotional support. We also consider factors such as our ability to continue to protect the legal rights that arise from these brand names indefinitely or the absence of any regulatory, economic or competitive factors that could truncate the life of the brand name. If the criteria are not met to assign an indefinite life, the brand is amortized over its expected useful life.
 
We conduct impairment tests on goodwill and all indefinite lived intangible assets annually, as of December 31, or more frequently if circumstances indicate that the carrying amount of an asset may not be recoverable. We use present value and other valuation techniques to make this assessment. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
 
Impairment tests for goodwill include comparing the fair value of the respective reporting units, which are our segments, with their carrying amount, including goodwill. Goodwill is evaluated using a two-step impairment test at the reporting unit level. The first step compares the carrying amount of a reporting unit, including goodwill, with its fair value. If the carrying amount of a reporting unit exceeds its fair value, a second step is completed to determine the amount of goodwill impairment loss to record. In the second step, an implied fair value of the reporting unit’s goodwill is determined by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill. The amount of impairment loss is equal to the excess of the carrying amount of the goodwill over the implied fair value of that goodwill. See note 8 to our audited combined financial statements included elsewhere in this information statement.


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The tests for impairment include significant judgment in estimating fair value primarily by analyzing future revenues and profit performance. Assumptions used on our impairment calculations, such as our cost of capital and the appropriate discount rates are based on the best available market information and are consistent with our internal operating forecasts. These assumptions could be negatively impacted by various of the risks discussed in “Risk Factors” in this information statement.
 
Stock-Based Compensation
 
On January 3, 2005, we adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment (“SFAS 123(R)”). SFAS 123(R) requires the recognition of compensation expense in our Combined Statements of Operations related to the fair value of employee share-based awards. We have selected the modified prospective method of transition; accordingly, prior periods have not been restated. Upon adoption of SFAS 123(R), for awards which are classified as liabilities we were required to reclassify the APB 25 (as defined below) historical compensation cost from equity to liability and to recognize the difference between this and the fair value liability through the statement of operations.
 
We selected the Black-Scholes option pricing model as the most appropriate method for determining the estimated fair value for stock-based awards. The Black-Scholes option pricing model requires the use of highly subjective and complex assumptions which determine the fair value of stock-based awards, including the option’s expected term, expected volatility of the underlying stock, risk-free rate, and expected dividends. These assumptions significantly affect the stock compensation charges associated with each grant and in the case of liability plans, the cost associated with remeasuring the liability at each balance sheet date. Moreover, changes in forfeiture rates affect the timing and amount of stock compensation expense recognized over the requisite service period.
 
Under SFAS 123(R), we recognize the cost of all unvested employee stock options on a straight-line attribution basis over their respective vesting periods, net of estimated forfeitures. In addition, we have certain employee share plans that contain inflation indexed earnings growth performance conditions. SFAS 123(R) requires plans with such performance criteria to be accounted for under the liability method. The liability method, as set out in SFAS 123(R), requires a liability be recorded on the balance sheet until awards have vested. Also, in calculating the income statement charge for share awards under the liability method as set out in SFAS 123(R), the fair value of each award must be remeasured at each reporting date until vesting.
 
In 2004, stock compensation expense was determined based on Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) and related interpretations. Under APB 25, compensation expense was determined as the difference between the market price and exercise price of the share-based award. For fixed plans, compensation cost was determined on the date of grant. For variable plans, compensation was remeasured at each balance sheet date until the award vested.
 
The compensation expense related to our stock-based compensation plans is included within “selling, general and administrative expenses” in our Combined Statements of Operations. We recognized approximately $17 million ($10 million net of tax), $22 million ($13 million net of tax) and $7 million ($4 million net of tax) of expense in 2006, 2005 and 2004, respectively. See note 14 to our audited combined financial statements for a further description of the stock-based compensation plans.
 
Pension and Postretirement Benefits
 
We have several pension and postretirement plans covering our employees who satisfy age and length of service requirements. There are nine stand-alone and five multi-employer pension plans and five stand-alone and one multi-employer postretirement plans. Depending on the plan, pension and postretirement benefits are based on a combination of factors, which may include salary, age and years of service. One of the nine stand-alone plans is an unfunded pension plan that provides supplemental pension benefits to certain senior executives, and is accounted for as a defined contribution plan.
 
Pension expense has been determined in accordance with the principles of SFAS No. 87, Employers’ Accounting for Pensions which requires use of the “projected unit credit” method for financial reporting. We


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adopted the provisions of SFAS No. 158 Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of Financial Accounting Standards Board Statements No. 87, 88, 106, and 132(R) (“SFAS 158”) related to recognizing the funded status of a benefit plan and the disclosure requirements on December 31, 2006. We have elected to defer the change of measurement date as permitted by SFAS 158. Our policy is to fund pension plans in accordance with the requirements of the Employee Retirement Income Security Act. Employee benefit plan obligations and expenses included in the combined financial statements are determined from actuarial analyses based on plan assumptions, employee demographic data, years of service, compensation, benefits and claims paid and employer contributions. These funds are funded as benefits are paid, and thus do not have an investment strategy or target allocations for plan assets.
 
Cadbury Schweppes sponsors the five multi-employer pension plans for which our employees participate, and therefore we account for these as defined contribution plans.
 
The expense related to the postretirement plans has been determined in accordance with SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions (“SFAS 106”). As provided in SFAS 106, we accrue the cost of these benefits during the years that employees render service to us.
 
The calculation of pension and postretirement plan obligations and related expenses is dependent on several assumptions used to estimate the present value of the benefits earned while the employee is eligible to participate in the plans. The key assumptions we use in determining the plan obligations and related expenses include: (1) the interest rate used to calculate the present value of the plan liabilities, (2) employee turnover, retirement age and mortality and (3) the expected return on plan assets. Our assumptions reflect our historical experience and our best judgment regarding future performance. Due to the significant judgment required, our assumptions could have a material impact on the measurement of our pension and postretirement obligations and expenses.
 
See note 13 to our audited combined financial statements for more information about the specific assumptions used in determining the plan obligations and expenses.
 
Income Taxes
 
Our income taxes are computed and reported on a separate return basis as if we were not a part of Cadbury Schweppes. Our tax rate is based on our net income before tax, statutory tax rates and tax planning benefits available to us in the jurisdictions in which we operate. Significant judgment is required in determining our annual tax rate and in evaluating our tax positions. We establish reserves when we believe certain positions may be subject to challenge. We adjust these reserves as the facts and circumstances of each position changes.
 
Deferred taxes are recognized for future tax effects of temporary differences between financial and income tax reporting using rates in effect for the years in which the differences are expected to reverse. We establish valuation allowances for our deferred tax assets when we believe expected future taxable income is not likely to support the use of a deduction or credit in that tax jurisdiction.
 
We have adopted the provisions of FIN 48, Accounting for Uncertainty in Income Taxes (“FIN 48”) effective January 1, 2007. FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS No. 109, Accounting for Income Taxes. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition.
 
The establishment of a liability for unrecognized tax benefits requires us to identify whether a tax position is more likely than not to be sustained upon examination by tax authorities and also required us to estimate the largest amount of tax benefit that is greater than 50% likely to be realized upon settlement. Whether a tax position is more likely than not to be sustainable, and determining the largest amount that is more likely than not to be realizable upon settlement, are subject to judgment. Changes in judgment can occur between initial recognition through settlement or ultimate de-recognition based upon changes in facts, circumstances and information available at each reporting date.


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The cumulative effect of adopting FIN 48 was a $16 million increase in tax reserves and a corresponding decrease to operating retained earnings at January 1, 2007. Upon adoption, the amount of gross unrecognized tax benefit at January 1, 2007 was $85 million. Of this amount, $45 million, if recognized, would impact our effective tax rate.
 
Our effective tax rate for the nine months ended September 30, 2007 was 37.8%. See note 7 to our unaudited interim combined financial statements.
 
Liquidity and Capital Resources
 
Trends and Uncertainties Affecting Liquidity
 
Upon our separation from Cadbury Schweppes, our capital structure, long-term commitments, and sources of liquidity will change significantly from our historical capital structure, long-term commitments and sources of liquidity. After the separation, our primary source of liquidity will be cash provided from operating activities. We believe that the following will negatively impact liquidity:
 
  •  We will incur significant third party debt in connection with the separation;
 
  •  We will continue to make capital expenditures to build new manufacturing capacity, upgrade our existing plants and distribution fleet of trucks, replace and expand our cold drink equipment, make IT investments for IT systems, and from time-to-time invest in restructuring programs in order to improve operating efficiencies and lower costs;
 
  •  We will assume significant pension obligations; and
 
  •  We may make further acquisitions.
 
New Financing Arrangements
 
We expect to incur $      million of third party debt in connection with the separation, as described under “Description of Indebtedness.” We intend to use proceeds of this debt to repay an aggregate of $      of the debt, and $      of payables, in each case, owed by us to Cadbury Schweppes. The amount of related party debt we currently have outstanding is not indicative of the debt we will have outstanding following the separation.
 
Capital Expenditures and Restructuring
 
Capital expenditures were $158 million in 2006 compared to $44 million in 2005. The increase was primarily due to inclusion of our bottling acquisitions and our capital expenditures for 2006 primarily consisted of manufacturing and distribution equipment, cold drink equipment and IT investments for new systems. In the nine months ended September 30, 2007, our capital expenditures were $123 million, and were for similar items. We plan to incur capital expenditures of approximately $      million in 2008. In addition, we plan to incur capital expenditures in 2009 and beyond to implement elements of our strategy, which include an increase in our investment in cold drink equipment and various manufacturing improvements.
 
We expect to complete the restructuring and integration plans that we have undertaken following the bottling acquisitions. These plans are designed to improve operating efficiencies and lower costs, and they will result in further significant restructuring costs. We also expect to incur additional restructuring costs as we outsource certain transactional activities to third party service providers and integrate and upgrade our information technology systems.
 
On October 10, 2007, we announced a restructuring of our organization. The restructuring will result in a reduction of approximately 470 employees in our corporate, sales and supply chain functions and will include approximately 150 employees in Plano, Texas, 150 employees in Rye Brook, New York and 80 employees in Aspers, Pennsylvania. The remaining reductions will occur at a number of sites located in the United States, Canada and Mexico. The restructuring will also include the closure of two manufacturing facilities in Waterloo, New York and Denver, Colorado. As a result of this restructuring, we expect to recognize a charge of approximately $70 million, primarily in 2007, with the balance in 2008. We expect this restructuring to generate annual cost


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savings of approximately $70 million, most of which are expected to be realized in 2008 with the full annual benefit realized from 2009 onwards.
 
Pension Obligations
 
We are currently finalizing our pension arrangements for our employees. We expect to assume significant unfunded employee benefit liabilities for pension benefit and postretirement obligations from Cadbury Schweppes for qualified and non-qualified plans. These obligations will be reflected in our historical financial statements when the assets and liabilities relating to these plans are divided between Cadbury Schweppes and us prior to the separation.
 
Acquisitions
 
We may make further acquisitions. For example, we may make further acquisitions of regional bottling companies to further extend our geographic coverage. Any acquisitions may require future capital expenditures and restructuring expenses.
 
Liquidity
 
Based on our current and anticipated level of operations, we believe that our proceeds from operating cash flows, together with amounts we expect to be available under our new financing arrangements, will be sufficient to meet our anticipated liquidity needs over at least the next twelve months.
 
Net Cash From Operating Activities
 
Net cash from operating activities was $757 million for the nine months ended September 30, 2007 compared to $521 million for the nine months ended September 30, 2006. This $236 million increase was primarily due to an increase in our cash flows from working capital of $167 million and increases in other non-current liabilities of $64 million, which is attributable to implementation of FIN 48. Changes in working capital were an increased source of cash flow from operations for the nine months ended September 30, 2007 as compared to the nine months ended September 30, 2006, primarily as a result of increases in both related parties payables of $219 million and accounts payable and accrued expenses of $45 million. These increases were partially offset by increases in inventories of $50 million and other accounts receivable of $50 million.
 
Net cash from operating activities was $581 million in 2006 compared to $583 million in 2005. The $2 million decrease was primarily due to an increase in net earnings of $33 million, partially offset by a decrease in our cash flows from working capital of $89 million. Changes in working capital were a decreased source of cash flow from operations in 2006 compared to 2005, primarily as a result of a $138 million decrease from accounts payables and accrued expenses, partially offset by a $20 million decrease from receivables.
 
Net cash from operating activities was $583 million in 2005 compared to $610 million in 2004. The $27 million decrease was primarily due to an increase in net earnings of $31 million, partially offset by a decrease in our cash flows from working capital of $6 million. Changes in working capital were a decreased source of cash flow from operations in 2005 compared to 2004, primarily as a result of a $44 million increase in accounts receivable, partially offset by a $34 million increase in accounts payables and accrued expenses.
 
Net Cash Used in Investing Activities
 
Net cash used in investing activities was $1,450 million for the nine months ended September 30, 2007 compared to $550 million in the nine months ended September 30, 2006. The increase of $900 million was primarily attributable to the issuance of notes receivable for $1,773 million, partially offset by $515 million due to the repayment of notes receivable and a decrease of $416 million for acquisitions, principally the acquisition in 2006 of the remaining 55% interest in DPSUBG.
 
Net cash used in investing activities was $502 million in 2006 compared to $283 million provided by investing activities in 2005 and $184 million provided by investing activities in 2004. The $785 million increase in 2006 was primarily due to the acquisition of the remaining 55% interest in DPSUBG, higher purchases of property, plant, and


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equipment, and lower proceeds from asset sales. The increase of $99 million in 2005 was primarily due to lower purchases of property, plant, and equipment.
 
Net Cash Used in Financing Activities
 
Net cash provided by financing activities was $691 million for the nine months ended September 30, 2007 compared to $81 million for the nine months ended September 30, 2006. The $610 million increase in 2007 was due to higher levels of debt issuances and net investment transactions with Cadbury Schweppes, partially offset by increases in debt repayment.
 
Net cash used in financing activities was $72 million in 2006 compared to $815 million in 2005 and $799 million in 2004. The $743 million decrease in 2006 was primarily due to increases in net long-term debt and net investment transactions with, and cash distributions to, Cadbury Schweppes. The increase of $16 million in 2005 was primarily due to lower levels of debt repayment and net investment transactions with Cadbury Schweppes, partially offset by cash distributions to Cadbury Schweppes.
 
Cash and Cash Equivalents
 
Cash and cash equivalents were $34 million at September 30, 2007 and decreased $1 million in the nine months ended September 30, 2007 from $35 million at the prior year end. The decrease was primarily due to transactions with Cadbury Schweppes.
 
Contractual Commitments and Obligations
 
We enter into various contractual obligations that impact, or could impact, our liquidity. The following table summarizes our contractual obligations and contingencies at December 31, 2006. See notes 10 and 13 to our audited combined financial statements included elsewhere in this information statement for additional information regarding the items described in this table.
 
                                                         
          Payments Due in Fiscal Year  
    Total     2007     2008     2009     2010     2011     After 2011  
          (In millions)  
 
Long-term debt obligations(1)
  $ 3,770     $ 708     $ 695     $ 22     $ 128     $ 1,982     $ 235  
Capital leases(2)
    24       2       2       3       3       3       11  
Interest payments(3)
    907       218       203       174       167       110       35  
Operating leases(4)
    249       48       45       40       36       30       50  
Purchase obligations(5)
    218       98       35       23       20       11       31  
Other long-term liabilities(6)
    52       6       5       5       5       4       27  
                                                         
Total
  $ 5,220     $ 1,080     $ 985     $ 267     $ 359     $ 2,140     $ 389  
                                                         
 
 
(1) Amounts represent scheduled principal payments for long-term debt.
 
(2) Amounts represent capitalized lease obligations, net of interest. Interest in respect of capital leases is included under the caption “Interest payments” on this table.
 
(3) Amounts represent our estimated interest payments based on: (1) projected LIBOR rates; (2) specified interest rates for fixed rate debt; (3) capital lease amortization schedules; and (4) debt amortization schedules.
 
(4) Amounts represent minimum rental commitment under non-cancellable operating leases.
 
(5) Amounts represent payments under agreements to purchase goods or services that are legally binding and that specify all significant terms, including long-term contractual obligations.
 
(6) Amounts represent estimated pension and postretirement benefit payments for U.S. and non-U.S. defined benefit plans. In addition, on January 1, 2007, we adopted the provisions of FIN 48. The cumulative effect of adopting FIN 48 was a $16 million increase in tax reserves. The table above does not reflect any payments we may be required to make in respect of tax matters for which we have established reserves in accordance with FIN 48.


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Inflation
 
The principal effect of inflation on our operating results is to increase our costs. Subject to normal competitive market pressures, we seek to mitigate the impact of inflation by raising prices.
 
Effect of Recent Accounting Pronouncements
 
In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”). SFAS 141(R) will significantly change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. Some of the changes, such as the accounting for contingent consideration, will introduce more volatility into earnings. SFAS 141(R) is effective for us beginning January 1, 2009. We are currently evaluating the provisions of SFAS 141(R) and have not determined the impact, if any, on our combined financial statements.
 
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”). SFAS 160 improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling interests in subsidiaries as equity in the consolidated financial statements. SFAS 160 is effective for us beginning January 1, 2009. We are currently evaluating the provisions of SFAS 160 and have not determined the impact, if any, on its combined financial statements.
 
In June 2007, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 06-11 Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (“EITF 06-11”), which requires entities to record tax benefits on dividends or dividend equivalents that are charged to retained earnings for certain share-based awards to additional paid-in capital. In a share-based payment arrangement, employees may receive dividends or dividend equivalents on awards of nonvested equity shares, nonvested equity share units during the vesting period, and share options until the exercise date. Generally, the payment of such dividends can be treated as deductible compensation for tax purposes. The amount of tax benefits recognized in additional paid-in capital should be included in the pool of excess tax benefits available to absorb tax deficiencies on share-based payment awards. EITF 06-11 is effective for fiscal years beginning after December 15, 2007, and interim periods within those years. We believe the adoption of EITF 06-11 will not have a material impact on our combined financial statements.
 
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 is effective for us January 1, 2008. We believe that the adoption of SFAS 159 will not have a material impact on our combined financial statements.
 
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. SFAS 157 is effective for us January 1, 2008. A one-year deferral is in effect for non financial assets and liabilities that are measured on a nonrecurring basis. We believe that the adoption of SFAS 157 will not have a material impact on our combined financial statements.
 
Quantitative and Qualitative Disclosures About Market Risk
 
Foreign Exchange Risk
 
Historically, Cadbury Schweppes has managed foreign currency risk on a centralized basis on our behalf. Our primary exposure to foreign exchange rates is the Canadian dollar and Mexican peso against the U.S. dollar. In order to manage exposures and mitigate the impact of currency fluctuations on the operations of our foreign subsidiaries, Cadbury Schweppes historically has entered into foreign exchange forward contracts for all forecasted receipts and payments. All of these hedged transactions are against firmly committed or forecasted exposure. Cadbury Schweppes does not hedge translation exposure and earnings because any benefit obtained from such hedging can only be temporary.


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Following the separation, we currently intend to continue Cadbury Schweppes’ practice of using foreign exchange forward and option contracts to manage our exposure to changes in foreign exchange rates.
 
Interest Rate Risk
 
Historically, Cadbury Schweppes has managed interest rate risk on a centralized basis on our behalf through the use of interest rate swaps, cross currency interest rate swaps and forward rate agreements. The objectives for the mix between fixed and floating rate borrowings have been set to reduce the impact of an upward change in interest rates while enabling benefits to be enjoyed if interest rates fall.
 
Our historic interest rate exposure relates primarily to intercompany loans or other amounts due to, or from, Cadbury Schweppes. We expect to incur $      million of third party debt in connection with the separation, as described under “Description of Indebtedness.” The third party debt may bear fixed, floating or a combination of fixed and floating interest rates. To the extent a portion of the debt has a fixed rate of interest, there can be no assurance that we will be able to refinance this debt at the same or lower rates upon maturity. To the extent a portion of the debt has a floating rate of interest, we will be exposed to interest rate risk. As a result, a 25 basis point movement in the interest rate charged for the $      million we expect to be outstanding at separation will result in a change of interest expense of $     per annum.
 
Following the separation, we currently intend to continue Cadbury Schweppes’ practice of using interest rate swaps, cross currency interest rate swaps and forward rate agreements to manage our exposure to changes in interest rates.
 
Commodity Risk
 
Historically, Cadbury Schweppes has managed hedging of certain commodity costs on a centralized basis on our behalf through forward contracts for commodities. The use of commodity forward contracts enables Cadbury Schweppes to obtain the benefit of guaranteed contract performance on firm priced contracts offered by banks, the exchanges and their clearing houses.
 
The commodities forward contracts manage Cadbury Schweppes exposure to adverse movements in cash flow, and gains or losses due to the market risk arising from changes in prices for commodities traded on commodity exchanges.
 
Following the separation, commodities forward contracts in existence relating to our business will be transferred to us and we currently intend to continue Cadbury Schweppes’ practice in this area.


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INDUSTRY
 
Overview
 
United States
 
In the United States, we operate primarily within the non-alcoholic liquid refreshment beverage market. This market consists of CSDs, non-CSDs (including ready-to-drink teas, juices, juice drinks and sports drinks) and bottled water. The U.S. liquid refreshment beverage market has grown over the last five years, with average annual volume growth of 3.9% between 2001 and 2006 and average annual retail sales growth of 5.1% over the same period. In 2006, the market grew by 4.1% in volume and 6.6% in retail sales. Total retail sales in 2006 in the U.S. liquid refreshment beverage market were $106 billion, with CSDs accounting for 66.1%, non-CSDs accounting for 19.7% and bottled water accounting for 14.2%.
 
CSDs.   In 2006, CSD retail sales grew by 2.9% despite a 0.6% decline in volume. The rise in retail sales was primarily due to price increases in CSDs combined with strong growth of premium-priced energy drinks. The decline in volume was primarily attributable to a combination of increased pricing and consumers switching to non-CSDs and bottled water. Diet CSDs’ share of the overall CSD market segment increased from 25.1% in 2001 to 29.5% in 2006.
 
Colas and Flavored CSDs.   Flavored CSDs have become increasingly popular and have gained volume share versus cola CSDs. Within the CSD market segment, colas represented 57.4% of total CSD volume in 2006. Flavored CSDs have increased their share of the overall CSD market segment (as measured by volume) from 40.1% in 2001 to 42.6% in 2006, and colas have lost volume share from 59.9% in 2001 to 57.4% in 2006.
 
Non-CSDs.   Non-CSDs have experienced strong market share, volume and retail sales growth over the last five years. Non-CSD retail sales experienced an average annual growth rate of 8.9% from 2001 to 2006, and non-CSD volume share of the overall U.S. liquid refreshment beverage market increased from 12.7% in 2001 to 16.3% in 2006. Non-CSD volume and retail sales increased by 13.2% and 14.8%, respectively, in 2006, with strong growth in ready-to-drink teas, sports drinks and juice drinks.
 
Bottled Water.   The bottled water market segment consists of both spring waters and purified waters in packages of 1.5 liters or less. Bottled water pricing declined 2% in 2006 as a result of competitive pressures. Volume and retail sales increased by 16.5% and 14.5%, respectively, in 2006. Retail sales of bottled water increased by an average annual growth rate of 14.9% from 2001 to 2006.
 
All U.S. market and industry data set forth above is from Beverage Digest. See “— Use of Market Data in this Information Statement.”
 
Canada and Mexico
 
In the Canadian and Mexican markets, we operate in market segments similar to those in which we operate in the United States. The Canadian and Mexican markets have exhibited broadly similar trends to those in the United States, except that the Mexican CSD volume grew 4.9% in 2006, according to Canadean.
 
Total Canadian soft drink retail sales in 2006, including CSDs, non-CSDs and bottled water, were $16.1 billion. CSDs accounted for 41.6% of total volume in the Canadian soft drink market, or $4.4 billion in retail sales, followed by non-CSDs and bottled water with 37.4% and 21.0% of total volume, and $8.3 billion and $3.4 billion in retail sales, respectively.
 
Total Mexican soft drink retail sales in 2006, including CSDs, non-CSDs and bottled water, were $20.9 billion. CSDs accounted for 70.1% of total volume in the Mexican soft drink market in 2006 or $13.7 billion in retail sales, followed by non-CSDs and bottled water with 20.5% and 9.5% of total volume, and $5.2 billion and $2.0 billion in retail sales, respectively.
 
All Canadian and Mexican market and industry data set forth above is from Canadean. See “— Use of Market Data in this Information Statement.”


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Beverage Market Trends
 
We believe the key trends influencing the North American liquid refreshment beverage market include:
 
  •  Increased health consciousness.   Consumers have become more health conscious in their food and beverage consumption. This trend is a result of increased consumer awareness of health issues, media attention regarding obesity, focus on nutrition in schools and aging trends among consumers. We believe the main beneficiaries of this trend include diet drinks, ready-to-drink teas, enhanced waters and bottled waters.
 
  •  Changes in lifestyle.   Consumers are increasingly looking for convenience due to hurried lifestyles, an increasing number of women in the work force, the rise in single-occupancy households, the increasing urbanization of populations and the decline in formal family meals. We believe changes in lifestyle will continue to drive increased sales of single-serve beverages, which typically have higher margins.
 
  •  Growing demographic segments in the United States.   The growth of various U.S. demographic segments will be increasingly important to the growth of the U.S. liquid refreshment beverage market. For example, according to the U.S. Census Bureau, over the next 20 years, more than 40% of the U.S. population growth is expected to come from the Hispanic population. We believe marketing and product innovations that target fast growing population segments, such as the Hispanic community in the United States, will drive further market growth.
 
  •  Product and packaging innovation.   We believe brand owners and bottling companies will continue to create new products and packages such as beverages with new ingredients and new premium flavors, as well as innovative convenient packaging that address changes in consumer tastes and preferences.
 
  •  Changing retailer landscape.   As retailers continue to consolidate, we believe partnering with key retailers will be instrumental for future success in the beverage industry. We believe retailers will support consumer product companies that can provide an attractive portfolio of products, a strong value proposition and efficient delivery.
 
  •  Recent increases in raw material costs.   The costs of a substantial proportion of the raw materials used in the beverage industry, such as aluminum cans and ends, glass bottles, plastic bottles and caps, paperboard packaging, HFCS and other sweeteners, juices and fruits, are dependent on commodity prices for aluminum, natural gas, resins, corn, pulp and other commodities. Recently, these costs on the whole have increased significantly and this has exerted pressure on industry margins.
 
Industry Manufacturing, Sales and Distribution
 
The U.S. beverage industry is comprised of many participants including brand owners, bottling companies and distributors. Market participants adopt different business models, ranging from being exclusively a brand owner, bottler or distributor, to an integrated brand owner, bottler and distributor. Retailers also participate in the beverage industry directly through their own private label products.
 
Traditionally, the CSD industry has employed a licensing model comprised of brand owners who grant licenses to bottling companies. This structure effectively separated the management and marketing of brands, as well as the production of beverage concentrates, from the more capital intensive manufacturing, bottling and distribution of finished beverages. In contrast, brand owners of non-CSDs traditionally have manufactured a larger percentage of


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finished beverages themselves, which are then sold primarily to distributors and retailers. These manufacturing and distribution models are summarized in the following charts:
 
(PERFORMANCE GRAPH)
 
The bottled water market segment includes spring water and purified water. Purified water is typically filtered by the bottler, who bottles the water and sells it to a distributor or retailer. Spring water is typically bottled at the source by the brand owner and is distributed by both the brand owner and by bottlers and distributors.
 
Brand Owners.   Brand owners own beverage brands, formulas and the proprietary know-how required for the preparation of their beverages, either in concentrate form or as a finished beverage. In a traditional CSD licensing model, brand owners manufacture the beverage concentrates, which are highly condensed liquids or powders that contain all of the proprietary flavors and ingredients that make up the unique taste of the beverage. The concentrates are sold to bottling companies pursuant to a license from the brand owner. Brand owners may also manufacture and package the finished beverages for some of their brands and sell the finished beverages direct to retailers, distributors and other third parties. Brand owners maintain strong brands by promoting brand awareness through marketing, advertising and promotion, and by developing new and innovative products and product line extensions that address changes in consumer tastes and preferences.
 
Bottlers and Distributors.   Bottlers are manufacturers and distributors of branded canned or bottled beverages that are ready to be sold to retailers as finished beverages. For CSDs, bottlers purchase beverage concentrates from brand owners and combine it with sweeteners, carbonation and water to create the finished beverages. For non-CSDs, bottlers purchase finished beverages from brand owners and may also manufacture finished beverages. Distributors are independent companies that solely distribute the finished beverages. Bottlers and distributors sell and distribute finished beverages in the territories where they hold brand licenses. These territories may be exclusive or non-exclusive depending on the license arrangements.


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Bottling Systems.   The U.S. bottling industry consists of the following four systems:
 
  •  Coca-Cola Affiliated System.   The Coca-Cola affiliated system includes Coca-Cola Enterprises and Coca-Cola Bottling Co. Consolidated, both of which are partially-owned by Coca-Cola, as well as smaller independent Coca-Cola affiliated bottlers. The Coca-Cola affiliated system primarily manufactures, markets and distributes Coca-Cola branded products, but also manufactures and distributes other brands. For example, Coca-Cola Enterprises is the second largest bottler of our products and the largest Dr Pepper bottler.
 
  •  PepsiCo Affiliated System.   The PepsiCo affiliated system includes Pepsi Bottling Group, PepsiAmericas and Pepsi Bottling Ventures, which are partially-owned by PepsiCo, as well as smaller independent PepsiCo affiliated bottlers. The PepsiCo affiliated system primarily manufactures, markets and distributes PepsiCo branded products. These bottlers also manufacture and distribute other brands. For example, Pepsi Bottling Group is the third largest bottler of our products and the third largest Dr Pepper bottler.
 
  •  DPS System.   The DPS system consists of our Bottling Group segment, which is the largest bottler of our products and the second largest Dr Pepper bottler. Our Bottling Group is further described in this information statement.
 
  •  Independent Bottler System.   The independent bottler system includes smaller independent bottlers that are not part of the other three systems. The independent system is primarily involved with the bottling of our brands.
 
As the CSD industry has matured, brand owners have begun diversifying into higher growth non-CSDs. Today brand owners manufacture a higher percentage of finished beverages than in the past. This has led to an increased focus on alignment of economic interests through the entire manufacturing and distribution chain, which in some cases has resulted in more vertical integration of brand owners, bottlers and distributors.
 
Sales Channels.   The primary retail sales channels for liquid refreshment beverages in the United States include supermarkets, fountains, mass merchandisers, club stores, vending machines, convenience stores, gas stations, small groceries, drug chains, dollar stores and small retail stores. CSD sales are largely concentrated in the supermarkets, fountain and mass merchandisers channels. The consolidation of retailers and the growth of club stores over the last few years has increased the power and influence of these retailers on price, promotional and marketing programs and delivery requirements. The fountain channel, which constituted 23% of the U.S. CSD market segment in 2006 according to Beverage Digest, represents beverages sold at retail that come in disposable cups or glasses, such as CSDs at restaurants, convenience stores or gas stations.
 
Distribution of Finished Beverages.   Finished beverages are distributed to the retail sales channels through four main methods:
 
  •  Direct store delivery.   Finished beverages are delivered directly to the retail stores by bottlers or distributors. In many cases, the bottler or distributor is responsible for stocking and merchandising the product directly on the retail shelf.
 
  •  Warehouse delivery.   Finished beverages are shipped to retailer warehouses, and then delivered by the retailer through its own delivery system to its stores.
 
  •  Fountain foodservice.   Fountain syrup is delivered to fountain customers either through direct store delivery or the customer’s warehouse.
 
  •  Vending operations.   Finished beverages are delivered to vending machines and stocked and filled by vending service operators or bottlers.
 
Canada
 
The Canadian beverage industry is similar to the U.S. industry. However, the Canadian industry consists primarily of two CSD bottling systems (compared to four in the United States): the Coca-Cola affiliated system and the PepsiCo affiliated system. The Canadian beverage industry is also characterized by more consolidated retail sales channels than in the United States.


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Mexico
 
The Mexican beverage industry is similar to the U.S. industry in its manufacturing, bottling and distribution model. However, unlike the United States, the Mexican retail channels are comprised largely of “mom and pop” stores or traditional trade, accounting for approximately 60% of total sales outlets in Mexico according to Canadean. In the past few years, the traditional trade has faced increasing competition from the expansion of the modern food channel (including supermarkets and hypermarkets) and convenience stores. The on-premise channel, which includes restaurants, street stalls, kiosks, hotels and cinemas, is another growing sales channel in Mexico.
 
Use of Market Data in this Information Statement
 
The market and industry data in this information statement is from independent industry sources, including ACNielsen, Beverage Digest and Canadean. Although we believe that these independent sources are reliable, we have not verified the accuracy or completeness of this data or any assumptions underlying such data.
 
ACNielsen, a business of The Nielsen Company, is a marketing information provider, primarily serving consumer packaged goods manufacturers and retailers. We use ACNielsen data as our primary management tool to track market performance because it has broad and deep data coverage, is based on consumer transactions at retailers, and is reported to us monthly. ACNielsen data provides measurement and analysis of marketplace trends such as market share, retail pricing, promotional activity and distribution across various channels, retailers and geographies. Measured categories provided to us by ACNielsen Scantrack include CSDs, energy drinks, single-serve bottled water, non-alcoholic mixers and non-carbonated beverages, including ready-to-drink teas, single-serve and multi-serve juice and juice drinks, and sports drinks. ACNielsen also provides data on other food items such as apple sauce. The ACNielsen data we present in this information statement is from ACNielsen’s Scantrack service, which compiles data based on scanner transactions in certain sales channels, including grocery stores, mass merchandisers, drug chains, convenience stores and gas stations. However, this data does not include the fountain or vending channels, Wal-Mart or small independent retail outlets, which together represent a meaningful portion of the U.S. liquid refreshment beverage market and of our net sales and volume.
 
Beverage Digest is an independent beverage research company that publishes an annual Beverage Digest Fact Book. We use Beverage Digest primarily to track market share information and broad beverage and channel trends. This annual publication provides a compilation of data supplied by beverage companies. Beverage Digest covers the following categories: CSDs, energy drinks, bottled water and non-carbonated beverages (including ready-to-drink teas, juice and juice drinks and sports drinks). Beverage Digest data does not include multi-serve juice products or bottled water in packages of 1.5 liters or more. Data is reported for certain sales channels, including grocery stores, mass merchandisers, club stores, drug chains, convenience stores, gas stations, fountains, vending machines and the “up-and-down-the-street” channel consisting of small independent retail outlets.
 
We use both ACNielsen and Beverage Digest to assess both our own and our competitors’ performance and market share in the United States. Different market share rankings can result for a specific beverage category depending on whether data from ACNielsen or Beverage Digest is used, in part because of the differences in the sales channels reported by each source. For example, because the fountain channel (where we have a relatively small business except for Dr Pepper) is not included in ACNielsen data, our market share using the ACNielsen data is generally higher for our CSD portfolio than the Beverage Digest data, which does include the fountain channel.
 
Canadean is a market research and data management company focusing on the international beverage industry and its suppliers. Beverage categories measured by Canadean include packaged water, carbonates, juice, nectars, still drinks, iced/ready-to-drink tea drinks, squash/syrups and fruit powders, sports drinks and energy drinks. Canadean provides data for certain sales channels, including off-premise distribution such as supermarkets, hypermarkets, department stores, “mom and pop” outlets, delicatessens, pharmacies/drugstores, street stalls, specialist drink shops and on-premise distribution such as vending machines, quick service restaurants, eating, drinking and accommodation establishments and institutions. We use Canadean data to assess both our own and our competitors’ performance and market share in Canada and Mexico.


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BUSINESS
 
Overview
 
We are a leading integrated brand owner, bottler and distributor of non-alcoholic beverages in the United States, Canada and Mexico with a diverse portfolio of flavored (non-cola) CSDs and non-CSDs, including ready-to-drink teas, juices, juice drinks and mixers. We have some of the most recognized beverage brands in North America, with significant consumer awareness levels and long histories that evoke strong emotional connections with consumers.
 
The following table provides highlights about our company and our key brands:
 
Our Company
 
     
   
•   #1 flavored CSD company in the United States

   
•   More than 75% of our volume from brands that are either #1 or #2 in their category

   
•   #3 North American liquid refreshment beverage business

   
•   $4.7 billion of net sales in 2006 from the United States (88%), Canada (4%) and Mexico and the Caribbean (8%)

   
•   $1.0 billion of income from operations in 2006

 
Our Key Brands
 
     
LOGO
 
•   #1 in its flavor category and #2 overall flavored CSD in the United States

•   Distinguished by its unique blend of 23 flavors and loyal consumer following

•   Flavors include regular, diet and “Soda Fountain Classics” line extensions

•   Oldest major soft drink in the United States, introduced in 1885

 
     
 
•   A leading ready-to-drink tea in the United States

•   Teas include premium Snapple teas and super premium white, green, red and black teas

•   Brand also includes premium juices, juice drinks and recently launched enhanced waters

•   Founded in Brooklyn, New York in 1972

 
     
 
•   #2 lemon-lime CSD in the United States

•   Re-launched in 2006 as the only major lemon-lime CSD with all-natural flavors and no artificial preservatives

•   Flavors include regular, diet and cherry

•   The original “Un-Cola,” created in 1929

 
     
  •   #1 apple juice and #1 apple sauce brand in the United States

•   Juice products include apple and other fruit juices, Mott’s Plus and Mott’s for Tots

•   Apple sauce products include regular, unsweetened, flavored and organic

•   Brand began as a line of apple cider and vinegar offerings in 1876

 
     
 
•   #1 orange CSD in the United States

•   Flavors include orange, diet and other fruits

•   Licensed to us as a soft drink by the Sunkist Growers Association since 1986

 
     
 
•   #1 fruit punch brand in the United States

•   Brand includes a variety of fruit flavored and reduced calorie juice drinks

•   Developed originally as an ice cream topping known as “Leo’s Hawaiian Punch” in 1934

 


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•   #1 root beer in the United States

•   Flavors include regular and diet root beer and cream soda

•   A classic all-American soda first sold at a veteran’s parade in 1919

 
     
 
•   #1 ginger ale in the United States and Canada

•   Brand includes club soda, tonic and other mixers

•   Created in Toronto, Canada in 1904 and introduced in the United States in 1919

 
     
 
•   #2 ginger ale in the United States and Canada

•   Brand includes club soda, tonic and other mixers

•   First carbonated beverage in the world, invented in 1783

 
     
 
•   #1 grapefruit CSD in the United States and #2 grapefruit CSD in Mexico

•   Flavors include regular, diet and ruby red

•   Founded in 1938

 
     
 
•   A leading spicy tomato juice brand in the United States, Canada and Mexico

•   Key ingredient in Canada’s popular cocktail, the Bloody Caesar

•   Created in 1969

 
     
 
•   #1 carbonated mineral water brand in Mexico

•   Brand includes Flavors, Twist and Naturel

•   Mexico’s oldest mineral water, founded in 1928

 
     
 
•   #1 portfolio of mixer brands in the United States

•   #1 mixer brand (Mr & Mrs T) in the United States

•   Leading mixers (Margaritaville and Rose’s) in their flavor categories

 
 
Note:   All information regarding our company’s market positions is for 2006 and from Beverage Digest and Canadean. All information regarding our brand market positions in the United States is for 2006 and from ACNielsen. All information regarding our brand market positions in Canada and Mexico is for 2006 and from Canadean. For a description of the different methodologies used by these sources (including sales channels covered), see “Industry — Use of Market Data in this Information Statement.”
 
The Sunkist, Rose’s and Margaritaville logos are registered trademarks of Sunkist Growers, Inc., Cadbury Ireland Limited and Margaritaville Enterprises, LLC, respectively, in each case used by us under license. All other logos in the table above are registered trademarks of DPS or its subsidiaries.
 
Creation of Our Business
 
We have built our business over the last 25 years, through a series of strategic acquisitions, into an integrated brand owner, bottler and distributor that is now the third largest liquid refreshment beverage company in North America, according to Beverage Digest and Canadean. These acquisitions include:
 
  •  1980’s-mid-1990’s — We began building on our then existing Schweppes business by adding brands such as Mott’s, Canada Dry, Sunkist and A&W. We also acquired the Peñafiel business in Mexico.
 
  •  1995 — We acquired Dr Pepper/Seven Up, Inc. (having previously made minority investments in the company), increasing our share of the U.S. CSD market segment from under 5% to approximately 15%, as measured by volume, according to Beverage Digest.
 
  •  1999 — We acquired a 40% (increased to 45% in 2005) interest in DPSUBG, which was then our largest independent bottler.

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  •  2000 — We acquired Snapple and other brands, significantly increasing our share of the U.S. non-CSD market segment.
 
  •  2003 — We created Cadbury Schweppes Americas Beverages by integrating the way we manage our four North American businesses (Mott’s, Snapple, Dr Pepper/Seven Up and Mexico).
 
  •  2006/2007 — We acquired the remaining 55% of DPSUBG and several smaller bottlers and integrated them into our Bottling Group operations, thereby expanding our geographic coverage.
 
Our Business Today
 
Today, we are a leading integrated brand owner, bottler and distributor of non-alcoholic beverages in the United States, Mexico and Canada, the first, second and tenth, largest beverage markets by CSD volume, respectively, according to Beverage Digest and Canadean. We also distribute our products in the Caribbean. In 2006, 88% of our net sales were generated in the United States, 4% in Canada and 8% in Mexico and the Caribbean. We sold 1.5 billion equivalent 288 ounce cases in 2006.
 
In the CSD market segment in the United States and Canada, we participate primarily in the flavored CSD category. Our key brands are Dr Pepper, 7UP, Sunkist, A&W and Canada Dry, and we also sell regional and smaller niche brands. In the CSD market segment we are primarily a manufacturer of beverage concentrates and fountain syrups. Beverage concentrates are highly concentrated proprietary flavors used to make syrup or finished beverages. We manufacturer beverage concentrates that are used by our own bottling operations as well as sold to third-party bottling companies. According to ACNielsen, we had an 18.5% share of the U.S. CSD market segment in 2006 (measured by retail sales), which increased from 18.1% in 2005. We also manufacture fountain syrup that we sell to the foodservice industry directly, through bottlers or through third parties.
 
In the non-CSD market segment in the United States, we participate primarily in the ready-to-drink tea, juice, juice drinks and mixer categories. Our key non-CSD brands are Snapple, Mott’s, Hawaiian Punch and Clamato, and we also sell regional and smaller niche brands. We manufacture most of our non-CSDs as ready-to-drink beverages and distribute them through our own distribution network and through third parties or direct to our customers’ warehouses. In addition to non-CSD beverages, we also manufacture Mott’s apple sauce as a finished product.
 
In Mexico and the Caribbean, we participate primarily in the carbonated mineral water, flavored CSD, bottled water and vegetable juice categories. Our key brands in Mexico include Peñafiel, Squirt, Clamato and Aguafiel. In Mexico, we manufacture and sell our brands through both our own bottling operations and third-party bottlers, as we do in our U.S. CSD business. In the Caribbean, we distribute our products solely through third-party distributors and bottlers. According to Canadean, we are the #3 CSD company in Mexico (as measured by volume in 2006) and had a 15.6% share of the Mexican flavored CSD category.
 
In the six months ended June 30, 2007, we bottled and/or distributed approximately 45% of our total products sold in the United States (as measured by volume). In addition, our bottling and distribution businesses distribute a variety of brands owned by third parties in specified licensed geographic territories.
 
We believe our brand ownership, bottling and distribution are more integrated than the U.S. operations of our principal competitors and that this differentiation provides us with a competitive advantage. We believe our integrated business model:
 
  •  Strengthens our route-to-market by creating a third consolidated bottling system, our Bottling Group, in addition to the Coca-Cola affiliated and PepsiCo affiliated systems. In addition, by owning a significant portion of our bottling and distribution network we are able to improve focus on our brands, especially certain of our brands such as 7UP, Sunkist, A&W and Snapple, which do not have a large presence in the Coca-Cola affiliated and PepsiCo affiliated bottler systems.
 
  •  Provides opportunities for net sales and profit growth through the alignment of the economic interests of our brand ownership and our bottling and distribution businesses. For example, we can focus on maximizing profitability for our company as a whole rather than focusing on profitability generated from either the sale of concentrates or the bottling and distribution of our products.


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  •  Enables us to be more flexible and responsive to the changing needs of our large retail customers including by coordinating sales, service, distribution, promotions and product launches.
 
  •  Allows us to more fully leverage our scale and reduce costs by creating greater geographic manufacturing and distribution coverage.
 
Recent Developments
 
New President and Chief Executive Officer
 
Larry Young was appointed President and Chief Executive Officer of Cadbury Schweppes’ Americas Beverages business on October 10, 2007. Mr. Young was previously our Chief Operating Officer, as well as President, Bottling Group, and has more than 30 years of experience in the bottling and beverages industry.
 
Organizational Restructuring
 
On October 10, 2007, we announced a restructuring of our organization that is intended to create a more efficient organization. This restructuring will result in a reduction of approximately 470 employees in our corporate, sales and supply chain functions and will include approximately 150 employees in Plano, Texas, 150 employees in Rye Brook, New York and 80 employees in Aspers, Pennsylvania. The remaining reductions will occur at a number of sites located in the United States, Canada and Mexico. The restructuring will also include the closure of two manufacturing facilities in Waterloo, New York and Denver, Colorado. The employee reductions and facilities closures are expected to be completed by June 2008.
 
As a result of this restructuring, we expect to recognize a charge of approximately $70 million primarily in 2007, with the balance in 2008. We expect this restructuring to generate annual cost savings of approximately $70 million, most of which are expected to be realized in 2008 with the full annual benefit realized from 2009 onwards. As part of this restructuring, our Bottling Group segment has assumed management and operational control of our Snapple Distributors segment. These operations are currently being integrated and will be reported in our 2007 annual results as a single segment.
 
Accelerade Launch
 
We launched our new, ready-to-drink Accelerade sports drink in the first half of 2007. The launch represented an introduction of a new product into a new beverage category for us and has been supported by significant national product placement and marketing investments, predominantly in the third quarter. Net sales have been well below expectations despite these investments. We incurred an operating loss of approximately $40 million from the Accelerade launch in the nine months ended September 30, 2007. Going forward, we intend to focus on selling Accelerade to informed athletes, trainers and exercisers, and targeting retailers that are frequented by these consumers, such as health and nutrition outlets, where we expect the product to be financially viable.
 
Glacéau Termination
 
Following its acquisition by Coca-Cola on August 30, 2007, Energy Brands, Inc. notified us that it was terminating our distribution agreements for glacéau products, including vitaminwater, fruitwater and smartwater, effective November 2, 2007. Pursuant to the terms of the agreement, we received a payment of approximately $92 million from Energy Brands, Inc. for this termination in December 2007. Our glacéau net sales for the nine months ended September 30, 2007 were approximately $200 million and are reflected in our Bottling Group and Snapple Distributors segments.
 
SeaBev Acquisition
 
On July 11, 2007, we acquired the Jacksonville, Florida-based SeaBev, the second largest independent bottling and distribution company in the United States, for approximately $53 million. SeaBev has 2 manufacturing facilities and 16 warehouses and distribution centers located from Miami to Atlanta. It distributes many of our CSDs and non-CSDs throughout Florida and Northern Georgia, providing us with expanded geographic coverage for our Bottling Group operations and a more integrated business. SeaBev’s results of operations are reported as part of our Bottling Group segment.


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Our Strengths
 
The key strengths of our business are:
 
Strong portfolio of leading, consumer-preferred brands.   We own a diverse portfolio of well-known CSD and non-CSD brands. Many of our brands enjoy high levels of consumer awareness, preference and loyalty rooted in their rich heritage, which drive their market positions. Our diverse portfolio provides our bottlers, distributors and retailers with a wide variety of products and provides us with a platform for growth and profitability. We are the #1 flavored CSD company in the United States. In addition, we are the only major beverage concentrate manufacturer with year-over-year market share growth in the CSD market segment in each of the last four years. Our largest brand, Dr Pepper, is the #2 flavored CSD in the United States, according to ACNielsen, and our Snapple brand is a leading ready-to-drink tea. Overall, in 2006, more than 75% of our volume was generated by brands that hold either the #1 or #2 position in their category. The strength of our key brands has allowed us to launch innovations and brand extensions such as Dr Pepper Soda Fountain Classics, Mott’s for Tots and Snapple Antioxidant Waters.
 
Integrated business model.   We believe our brand ownership, bottling and distribution are more integrated than the U.S. operations of our principal competitors and that this differentiation provides us with a competitive advantage. Our integrated business model strengthens our route-to-market and enables us to improve focus on our brands, especially certain of our brands such as 7UP, Sunkist, A&W and Snapple, which do not have a large presence in the Coca-Cola affiliated and PepsiCo affiliated bottler systems. Our integrated business model also provides opportunities for net sales and profit growth through the alignment of the economic interests of our brand ownership and our bottling and distribution businesses. For example, we can focus on maximizing profitability for our company as a whole rather than focusing on profitability generated from either the sale of concentrates or the bottling and distribution of our products.
 
Strong customer relationships.   Our brands have enjoyed long-standing relationships with many of our top customers. We sell our products to a wide range of customers, from bottlers and distributors to national retailers, large foodservice and convenience store customers. We have strong relationships with some of the largest bottlers and distributors, including those affiliated with Coca-Cola and PepsiCo, some of the largest and most important retailers, including Wal-Mart, Safeway, Kroger and Target, some of the largest food service customers, including McDonald’s, Yum! and Burger King, and convenience store customers, including 7-Eleven. Our portfolio of strong brands, operational scale and experience across beverage segments have enabled us to maintain strong relationships with our customers.
 
Attractive positioning within a large, growing and profitable market.   We hold the #3 position in each of the United States, Canada and Mexico, three of the top ten beverage markets by CSD volume, according to Beverage Digest and Canadean. We believe that these markets are well-positioned to benefit from emerging consumer trends such as the need for convenience and the demand for products with health and wellness benefits. In addition, we participate in many of the growing categories in the liquid refreshment beverage market, such as ready-to-drink teas. We do not participate significantly in colas, which have declined in CSD volume share from 70.0% in 1991 to 57.4% in 2006 in the United States, according to Beverage Digest. We also do not participate significantly in the bottled water market segment, which we believe is a highly competitive and generally low margin market segment.
 
Broad geographic manufacturing and distribution coverage.   As of December 31, 2007, we had 21 manufacturing facilities and more than 250 distribution centers in the United States, as well as 4 manufacturing facilities and more than 25 distribution centers in Mexico. These facilities use a variety of manufacturing processes. In addition, our warehouses are generally located at or near bottling plants and geographically dispersed across the region to ensure our product is available to meet consumer demand. We actively manage transportation of our products using our own fleet of more than 5,000 delivery trucks, as well as third-party logistics providers on a selected basis. Following our recent bottling acquisitions and manufacturing investments, we now have greater geographic coverage with strategically located manufacturing and distribution capabilities, enabling us to better align our operations with our customers, reduce transportation costs and have greater control over the timing and coordination of new product launches.
 
Strong operating margins and significant, stable cash flows.   The breadth and strength of our brand portfolio have enabled us to generate strong operating margins which, combined with our relatively modest capital


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expenditures, have delivered significant and stable cash flows. These cash flows create stockholder value by enabling us to consider a variety of alternatives, such as investing in our business, reducing debt and returning capital to our stockholders.
 
Experienced executive management team .  Our executive management team has an average of more than 20 years of experience in the food and beverage industry. The team has broad experience in brand ownership, bottling and distribution, and enjoys strong relationships both within the industry and with major customers. In addition, our management team has diverse skills that support our operating strategies, including driving organic growth through targeted and efficient marketing, reducing operating costs, enhancing distribution efficiencies, aligning manufacturing and bottling and distribution interests and executing strategic acquisitions.
 
Our Strategy
 
The key elements of our business strategy are to:
 
Build and enhance leading brands.   We have a well-defined portfolio strategy to allocate our marketing and sales resources. We use an on-going process of market and consumer analysis to identify key brands that we believe have the greatest potential for profitable sales growth. For example, in 2006, we relaunched 7UP with 100% natural flavors and no artificial preservatives, thereby differentiating the 7UP brand from other major lemon-lime CSDs. We intend to continue to invest most heavily in our key brands to drive profitable and sustainable growth by strengthening consumer awareness, developing innovative products and brand extensions to take advantage of evolving consumer trends, improving distribution and increasing promotional effectiveness.
 
Focus on opportunities in high growth and high margin categories.   We are focused on driving growth in our business in selected profitable and emerging categories. These categories include ready-to-drink teas, energy drinks and other functional beverages. For example, we recently launched Snapple super premium teas and juices and Snapple enhanced waters. We also intend to capitalize on opportunities in these categories through brand extensions, new product launches and selective acquisitions of brands and distribution rights. For example, we believe we are well-positioned to enter into new distribution agreements for emerging, high-growth third party brands in new categories that can use our bottling and distribution network. We can provide these new brands with distribution capability and resources to grow, and they provide us with exposure to growing segments of the market with relatively low risk and capital investment.
 
Increase presence in high margin channels and packages.   We are focused on improving our product presence in high margin channels, such as convenience stores, vending machines and small independent retail outlets, through increased selling activity and investments in coolers and other cold drink equipment. We intend to significantly increase the number of our branded coolers and other cold drink equipment over the next few years, which we believe will provide an attractive return on investment. We also intend to increase demand for high margin products like single-serve packages for many of our key brands through increased promotional activity and innovation such as the successful introduction of our A&W “vintage” 20 ounce bottle.
 
Leverage our integrated business model.   We believe our integrated brand ownership, bottling and distribution business model provides us opportunities for net sales and profit growth through the alignment of the economic interests of our brand ownership and our bottling and distribution businesses. We intend to leverage our integrated business model to reduce costs by creating greater geographic manufacturing and distribution coverage and to be more flexible and responsive to the changing needs of our large retail customers by coordinating sales, service, distribution, promotions and product launches. For example, we intend to concentrate more of our manufacturing in multi-product, regional manufacturing facilities, including by opening a new plant in Southern California and investing in expanded capabilities in several of our existing facilities within the next several years.
 
Strengthen our route-to-market through acquisitions.   The acquisition and creation of our Bottling Group is part of our longer-term initiative to strengthen the route-to-market for our products. We believe additional acquisitions of regional bottling companies will broaden our geographic coverage in regions where we are currently under-represented, enhance coordination with our large retail customers, more quickly address changing customer demands, accelerate the introduction of new products, improve collaboration around new product innovations and expand our coverage of high margin channels.


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Improve operating efficiency.   We believe our recently announced restructuring will reduce our selling, general and administrative expenses and improve our operating efficiency. In addition, the integration of recent acquisitions into our Bottling Group has created the opportunity to improve our manufacturing, warehousing and distribution operations. For example, we have been able to create multi-product manufacturing facilities (such as our Irving, Texas facility) which provide a region with a wide variety of our products at reduced transportation and co-packing costs.
 
Our Business
 
We operate our business in five segments: Beverage Concentrates, Finished Goods, Bottling Group, Snapple Distributors, and Mexico and the Caribbean.
 
Beverage Concentrates
 
Our Beverage Concentrates segment is a brand ownership business. In this segment we manufacture beverage concentrates and syrups in the United States and Canada. Most of the brands in this segment are CSD brands. In 2006, our Beverage Concentrates segment had net sales of $1.3 billion (before elimination of intersegment transactions).
 
In 2006, Dr Pepper, our largest CSD brand, represented approximately 50% of our Beverage Concentrates segment net sales and volume of over half a billion case sales, with each case representing 288 fluid ounces of finished beverage. 7UP, Sunkist, A&W and Canada Dry together represented 27% of our Beverage Concentrates net sales. Other brands in our Beverage Concentrates segment include: Schweppes, RC, Diet Rite, Vernors, Squirt, Sundrop, Welch’s and Country Time and the concentrate forms of Hawaiian Punch and Snapple.
 
We are the industry leader in flavored CSDs with a 36.4% market share in the United States, as measured by retail sales according to ACNielsen. We are also the third largest CSD brand owner as measured by 2006 retail sales in the United States and Canada and we own a leading brand in most of the CSD categories in which we compete.
 
Almost all of our beverage concentrates are manufactured at our plant in St. Louis, Missouri. The beverage concentrates are shipped to third-party bottlers, as well as to our own Bottling Group, who combine the beverage concentrates with carbonation, water and sweeteners, package it in plastic and glass bottles and aluminum cans, and sell it as a finished CSD to retailers.
 
Syrup is shipped to fountain customers, such as fast food restaurants, who mix the syrup with water and carbonation to create a finished beverage at the point of sale to consumers. Dr Pepper represents most of our fountain channel net sales. In 2006, net sales to the fountain channel constituted approximately a third of our Dr Pepper beverage concentrates and syrup net sales and approximately 19% of our total CSD concentrates and syrup net sales were to the fountain channel.
 
Our Beverage Concentrates brands are sold by our bottlers, including our own Bottling Group, through all major retail channels including supermarkets, fountains, mass merchandisers, club stores, vending machines, convenience stores, gas stations, small groceries, drug chains and dollar stores. Unlike the majority of our other CSD brands, approximately two-thirds of Dr Pepper volumes are distributed through the Coca-Cola affiliated and PepsiCo affiliated bottler systems.
 
Coca-Cola Enterprises and Pepsi Bottling Group each constitute 10% to 15% of the volume of our Beverage Concentrates segment.
 
We expect that our CSD brands will continue to play a central role in our brand portfolio. We intend to continue to invest in our CSD brands and focus on expanding distribution, increasing our offerings of CSDs packaged for immediate consumption, concentrating on growing demographics such as the Hispanic population and broadening our brands’ consumer base to geographic regions of the United States where we are under-represented. For example, we plan to capitalize on the opportunities that we believe exist for the Dr Pepper brand on the east and west coasts and elsewhere in the Northeast, while continuing to develop increased consumption in the heartland markets (including Texas, Oklahoma, Louisiana and Arkansas) where the brand historically has enjoyed strong consumer


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appeal. In addition, we plan to continue to grow Diet Dr Pepper through increased fountain availability, consumer trial and selective product innovation.
 
Finished Goods
 
Our Finished Goods segment is a brand ownership and a bottling business and, to a lesser extent, a distribution business. In this segment, we primarily manufacture and distribute finished beverages and other products in the United States and Canada. Most of the beverages in this segment are non-CSDs (such as ready-to-drink teas, juice and juice drinks). Although there are sales of Snapple in all of our segments, most of our sales of Snapple are included in the Finished Goods segment. In 2006, our Finished Goods segment had net sales of $1.3 billion (before elimination of intersegment transactions).
 
In 2006, Snapple, our largest brand in our Finished Goods segment, represented approximately 25% of our Finished Goods segment net sales. Mott’s, Hawaiian Punch and Clamato together represented approximately 40% of our Finished Goods segment net sales. The other brands in our Finished Goods segment include: Nantucket Nectars, Yoo-Hoo, Orangina, Mistic, Mr and Mrs T, Rose’s, Margaritaville, Stewart’s, Crush and IBC.
 
We are the third largest manufacturer of non-CSDs by retail sales in the U.S. behind Coca-Cola and PepsiCo., according to ACNielsen.
 
Our Finished Goods products are manufactured in several facilities across the United States and are distributed to retailers and their warehouses by our own distribution network or third-party distributors. The raw materials used to manufacture our finished beverages include aluminum cans and ends, glass bottles, plastic bottles and caps, HFCS and juices.
 
We sell our Finished Goods brands through all major retail channels, including supermarkets, fountains, mass merchandisers, club stores, vending machines, convenience stores, gas stations, small groceries, drug chains and dollar stores. In 2006, Wal-Mart, the largest customer of our Finished Goods segment, accounted for approximately 16% of our net sales in this segment.
 
We plan to continue to invest in our non-CSD brands and focus on enhancing our leading non-CSD brands and capitalizing on opportunities in high growth products and high margin product categories. For example, we plan to continue to revitalize the Snapple brand as a complete line of ready-to-drink teas, juices and waters by building on the momentum from the recent launches of super premium teas and investing in a new Snapple functional water offering while continuing to develop our existing premium tea and juice businesses.
 
Bottling Group
 
Our Bottling Group segment is a bottling and distribution business. In this segment, we manufacture and distribute finished beverages, including our brands, third-party owned brands and certain private label beverages in the United States. The Bottling Group’s primary business is manufacturing, bottling, selling and distributing finished beverages using beverage concentrates purchased from brand owners (including our Beverage Concentrates segment). In addition, a small portion of our Bottling Group net sales come from bottling beverages and other products for private label owners or others for a fee (which we refer to as co-packing). In 2006, our Bottling Group segment had net sales of $1.7 billion (before elimination of intersegment transactions).
 
We are the fourth largest bottler in the United States by net sales.
 
Approximately three-fourths of our 2006 Bottling Group net sales of branded products come from our own brands, with the remaining from the distribution of third-party brands such as Monster energy drink, FIJI mineral water and Big Red soda. Although the majority of our Bottling Group’s net sales relate to our brands, we also provide a route-to-market for many third-party brand owners seeking effective distribution for their new and emerging brands. These brands give us exposure in certain markets to fast growing segments of the beverage industry with minimal capital investment.
 
The majority of the Bottling Group’s sales are through direct store delivery supported by a fleet of more than 5,000 trucks and 9,000 employees, including sales representatives, merchandisers, drivers and warehouse workers. Our Bottling Group’s product portfolio is sold within the United States through approximately 200,000 retailer


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accounts across all major retail channels. In 2006, Wal-Mart accounted for approximately 10% of our Bottling Group’s net sales.
 
Our integrated business model provides opportunities for net sales and profit growth through the alignment of the economic interests of our brand ownership and our bottling and distribution businesses. Our strengthened route-to-market following our 2006 bottling acquisitions has enabled us to increase the market share of our brands (as measured by volume) in many of those markets served by the bottlers we acquired. We plan to continue to invest in our Bottling Group and focus on strengthening our route-to-market and by creating greater geographic manufacturing and distribution coverage.
 
Snapple Distributors
 
Our Snapple Distributors segment is a distribution business. This segment reflects sales from the distribution of finished beverages, primarily Snapple, in New York City and the surrounding regions to retailers and distributors. Our Snapple Distributors segment purchases most of its finished beverages from our Finished Goods segment. In 2006, our Snapple Distributors segment had net sales of $271 million.
 
The Snapple Distributors segment distributes our own finished beverage brands, such as Snapple, Mistic, Stewart’s, Nantucket Nectars and Yoo-Hoo, and third-party finished beverage brands, such as FIJI mineral water.
 
On October 10, 2007, we announced a restructuring of our organization, and as part of this restructuring, our Bottling Group segment has assumed management and operational control of our Snapple Distributors segment. These operations are currently being integrated and will be reported in our 2007 annual results as a single segment.
 
Mexico and the Caribbean
 
Our Mexico and the Caribbean segment is a brand ownership and a bottling and distribution business. This segment participates mainly in the carbonated mineral water, flavored CSD, bottled water and vegetable juice categories, with particular strength in carbonated mineral water and grapefruit flavored CSDs. In 2006, our Mexico and the Caribbean segment had net sales of $408 million. In 2006, our operations in Mexico represented 90% of the net sales of this segment.
 
We are the #3 CSD company in Mexico (as measured by volume in 2006) behind Coca-Cola and PepsiCo, with a 5.2% market share according to Canadean.
 
In 2006, Peñafiel, Squirt, Clamato and Aguafiel together represented more than 80% of our Mexico and the Caribbean segment’s net sales.
 
In Mexico, we manufacture and distribute our products through our bottling operations and third-party bottlers and distributors. In the Caribbean, we distribute our products through third-party bottlers and distributors. In Mexico, we also participate in a joint venture to manufacture Aguafiel brand water with Acqua Minerale San Benedetto. We provide expertise in the Mexican beverage market and Acqua Minerale San Benedetto provides expertise in water production and new packaging technologies.
 
We sell our finished beverages through all major Mexican retail channels, including the “mom and pop” stores, supermarkets, hypermarkets, and on premise channels.
 
Marketing
 
Our marketing strategy is to grow our brands through continuously providing new solutions to meet consumers’ changing preferences and needs. We identify those preferences and needs and develop innovative solutions to address those opportunities. These solutions include new and reformulated products, improved packaging design, pricing and enhanced availability. We use advertising, media, merchandising, public relations and promotion to provide maximum impact for our brands and messages.


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Research and Development
 
Our research and development team is focused on developing high quality products and packaging which have broad consumer appeal, can be sold at competitive prices and can be safely and consistently produced across a diverse manufacturing network. Our research and development team engages in activities relating to: product development, microbiology, analytical chemistry, structural packaging design, process engineering, sensory science, nutrition, clinical research and regulatory compliance. We have particular expertise in flavors and sweeteners.
 
Our research and development team is composed of scientists and engineers in the United States and Mexico. We are in the process of relocating our research and development center to our headquarters in Plano, Texas, which we expect to be completed in the second quarter of 2008. By having the core research and development capability at our headquarters, we expect to be able to move more rapidly and reliably from prototype to full commercialization.
 
Customers
 
We primarily serve two groups of customers: bottlers and distributors, and retailers.
 
Bottlers buy beverage concentrates from us and, in turn, they manufacture, bottle, sell and distribute finished beverages. Bottlers also manufacture and distribute syrup for the fountain foodservice channel. In addition, bottlers and distributors purchase finished beverages from us and sell them to retail and other customers. We have strong relationships with bottlers affiliated with Coca-Cola and PepsiCo primarily because of the strength and market position of our key Dr Pepper brand.
 
Retailers also buy finished beverages directly from us. Our portfolio of strong brands, operational scale and experience in the beverage industry has enabled us to maintain strong relationships with major retailers in the United States, Canada and Mexico. In 2006, our largest retailer was Wal-Mart, representing approximately 9.5% of our net sales.
 
Competition
 
The liquid refreshment beverage industry is highly competitive and continues to evolve in response to changing consumer preferences. Competition is generally based upon brand recognition, taste, quality, price, availability, selection and convenience. We compete with multinational corporations with significant financial resources. Our two largest competitors in the liquid refreshment beverage market are Coca-Cola and PepsiCo, each representing more than 30% of the U.S. liquid refreshment beverage market by volume, according to Beverage Digest. We also compete against other large companies, including Nestlé, S.A. and Kraft Foods, Inc. As a bottler, we compete with bottlers such as Coca-Cola Enterprises, Pepsi Bottling Group and PepsiAmericas and a number of smaller bottlers and distributors. We also compete with a variety of smaller, regional and private label manufacturers, such as Cott Corp. In Canada and Mexico, we compete with many of these same international companies as well as a number of regional competitors.
 
Manufacturing
 
As of December 31, 2007, we operated 25 manufacturing facilities across the United States and Mexico. Almost all of our CSD beverage concentrates are manufactured at a single plant in St. Louis, Missouri. All of our manufacturing facilities are either regional manufacturing facilities, with the capacity and capabilities to manufacture many brands and packages, facilities with particular capabilities that are dedicated to certain brands or products, or smaller bottling plants with a more limited range of packaging capabilities.
 
We employ approximately 3,500 full-time manufacturing employees in our facilities. We have a variety of production capabilities, including hot fill, cold-fill and aseptic bottling processes, and we manufacture beverages in a variety of packaging materials, including aluminum, glass and plastic cans and bottles and a variety of package formats, including single-serve and multi-serve packages and “bag-in-box” fountain syrup packaging.
 
In 2006, 87% of our manufactured volumes were related to our brands and 13% to third-party and private-label products. We also use third-party manufacturers to co-pack for us on a limited basis.


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We own property, plant and equipment, net of accumulated depreciation, totaling $681 million and $251 million in the United States and $74 million and $75 million in international locations as of December 31, 2006 and January 1, 2006, respectively.
 
Raw Materials
 
The principal raw materials we use in our business are aluminum cans and ends, glass bottles, plastic bottles and caps, paperboard packaging, HFCS and other sweeteners, juice, fruit, electricity, fuel and water. The cost of the raw materials can fluctuate substantially. For example, aluminum, glass, plastic and HFCS prices increased significantly in 2006 and 2007. In addition, we are significantly impacted by increases in fuel costs due to the large truck fleet we operate in our distribution businesses.
 
Approximately 70% of our total 2006 direct manufacturing costs were for packaging, including aluminum cans and ends, glass bottles, plastic bottles and caps and paperboard packaging. The remainder of the costs were primarily for ingredients, including HFCS, juice and fruit. Under many of our supply arrangements for these supplies, the price we pay fluctuates along with certain changes in underlying commodities costs, such as aluminum in the case of cans, natural gas in the case of glass bottles, resin in the case of plastic bottles and caps, corn in the case of HFCS and pulp in the case of paperboard packaging. Manufacturing costs for our Finished Goods segment, where we manufacture and bottle finished beverages, are higher (as a percentage of our net sales) than our Beverage Concentrates segment, as the Finished Goods segment requires the purchase of a much larger portion of the packaging and ingredients.
 
Warehousing and Distribution
 
As of December 31, 2007, our warehouse and distribution network consisted of 21 manufacturing facilities and more than 250 distribution centers in the United States, as well as 4 manufacturing facilities and more than 25 distribution centers in Mexico. Our warehousing is generally located at or near bottling plants and is geographically dispersed across the region to ensure product is available to meet consumer demand. We actively manage transportation of our products using our own fleet of more than 5,000 delivery trucks, as well as third-party logistics providers on a selected basis.
 
Information Technology and Transaction Processing Services
 
We use a variety of information technology (“IT”) systems and networks configured to meet our business needs. Historically, IT support has been provided as a corporate service by the Cadbury Schweppes’ IT team and external suppliers. We are forming our own standalone, dedicated IT function to support our business separate from Cadbury Schweppes and are in the process of separating our systems, services and contracts. Our primary IT data center will be hosted in Toronto, Canada by a third-party provider. We also use two primary vendors for application support and maintenance, both of which are based in India and provide resources offshore and onshore.
 
We also use a business process provider located in India to provide certain back office transactional processing services, including accounting, order entry and other transactional services.
 
Intellectual Property and Trademarks
 
Our Intellectual Property.   We possess a variety of intellectual property rights that are important to our business. We rely on a combination of trademarks, copyrights, patents and trade secrets to safeguard our proprietary rights, including our brands and ingredient and production formulas for our products.
 
Our Trademarks.   Our trademark portfolio includes more than 2,000 registrations and applications in the United States, Canada, Mexico and other countries. Brands we own through various subsidiaries in various jurisdictions include: Dr Pepper, 7UP, A&W, Canada Dry, RC, Schweppes, Squirt, Crush, Peñafiel, Aguafiel, Snapple, Mott’s, Hawaiian Punch, Clamato, Mistic, Nantucket Nectars, Mr & Mrs T, ReaLemon, Accelerade and Deja Blue. We own trademark registrations for all of these brands in the United States, and we own trademark registrations for some but not all of these brands in Canada and Mexico. We also own a number of smaller regional brands. Some of our other trademark registrations are in countries where we do not currently have any significant


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level of business. In addition, in many countries outside the United States, Canada and Mexico, our rights in many of our brands have been sold to third parties including, in certain cases, to competitors such as Coca-Cola.
 
Trademarks Licensed from Others.   We license various trademarks from third parties, which licenses generally allow us to manufacture and distribute on a country-wide basis. For example, we license from third parties the Sunkist, Welch’s, Country Time, Orangina, Stewart’s, Holland House and Margaritaville trademarks, and we license from Cadbury Schweppes the Rose’s trademark. Although these licenses vary in length and other terms, they generally are long-term, cover the entire United States and include a royalty payment to the licensor.
 
Licensed Distribution Rights.   We have rights in certain territories to bottle and/or distribute various brands we do not own, such as Monster energy drink, FIJI mineral water and Big Red soda. Some of these arrangements are relatively shorter in term, are limited in geographic scope and the licensor may be able to terminate the agreement upon an agreed period of notice, in some cases without payment to us.
 
Intellectual Property We License to Others.   We license some of our intellectual property, including trademarks, to others. For example, we license the Dr Pepper trademark to certain companies for use in connection with food, confectionery and other products. We also license certain brands, such as Dr Pepper and Snapple, to third parties for use in beverages in certain countries where we own the brand but do not otherwise operate our business.
 
Cadbury Schweppes Name.   We have agreed to remove “Cadbury” from the names of our companies after our separation from Cadbury Schweppes. Cadbury Schweppes can continue to use the “Schweppes” name as part of its companies’ names outside of the United States, Canada and Mexico (and for a transitional period, inside of the United States, Canada and Mexico).
 
Bottler and Distributor Agreements
 
In the United States and Canada, we generally grant perpetual, exclusive license agreements for CSD brands and packages to bottlers for specific geographic areas. These agreements prohibit bottlers from selling the licensed products outside their exclusive territory and selling any imitative products in that territory. Generally, we may terminate bottling agreements only for cause and the bottler may terminate without cause upon giving certain specified notice and complying with other applicable conditions. Fountain agreements for bottlers generally are not exclusive for a territory, but do restrict bottlers from carrying imitative product in the territory. Many of our brands such as Snapple, Mistic, Stewart’s, Nantucket Nectars, Yoo-Hoo and Orangina, are licensed for distribution in various territories to bottlers and a number of smaller distributors such as beer wholesalers, wine and spirit distributors, independent distributors and retail brokers. We may terminate some of these distribution agreements only for cause and the distributor may terminate without cause upon certain notice and other conditions. Either party may terminate some of the other distribution agreements without cause upon giving certain specified notice and complying with other applicable conditions.
 
Real Property
 
United States.   Our United States principal offices are located in Plano, Texas, in a facility that we own. We also have a leased office in Rye Brook, New York. Our research and development center is currently located in a leased facility in Trumbull, Connecticut, but we are relocating it to Plano in 2008. As of December 31, 2007, we owned or leased 21 manufacturing facilities across the United States. Our largest manufacturing facilities are in St. Louis, Missouri; Northlake, Illinois; Irving, Texas; Ottumwa, Iowa; Houston, Texas; Williamson, New York; Carteret, New Jersey; Carlstadt, New Jersey and Aspers, Pennsylvania. We also operate more than 250 distribution centers across the United States.
 
Canada.   Our last plant in Canada, St. Catharines, was closed in 2007. Beverage concentrates sold to bottlers and finished beverages sold to retailers and distributors are supplied principally from our U.S. locations.
 
Mexico.   Our Mexico and Caribbean operations’ principal office is leased in Mexico City. In Mexico, as of December 31, 2007, we operated three manufacturing facilities, one joint venture facility and more than 25 direct distribution centers, 6 of which are owned and 21 of which are leased.


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We believe our facilities in the United States, Canada and Mexico are well-maintained and adequate for our present operations. We periodically review our space requirements, and we believe we will be able to acquire new space as and when needed on reasonable terms. We also look to consolidate and dispose or sublet facilities we no longer need, as and when appropriate.
 
Employees
 
At September 30, 2007, we employed approximately 20,000 full-time employees, including seasonal workers.
 
In the United States, we have approximately 17,000 full-time employees. We have many union collective bargaining agreements covering approximately 5,000 full-time employees. Several agreements cover multiple locations. These agreements often address working conditions as well as wage rates and benefits. In Mexico and the Caribbean, we employ approximately 3,000 full-time employees and are also party to collective bargaining agreements. We do not have a significant number of employees in Canada.
 
We believe we have good relations with our employees.
 
Regulatory Matters
 
We are subject to a variety of federal, state and local laws and regulations in the countries in which we do business. Regulations apply to many aspects of our business including our products and their ingredients, manufacturing, safety, labeling, transportation, recycling, advertising and sale. For example, our products, and their manufacturing, labeling, marketing and sale in the United States are subject to various aspects of the Federal Food, Drug, and Cosmetic Act, the Federal Trade Commission Act, the Lanham Act, state consumer protection laws and state warning and labeling laws. In Canada and Mexico, the manufacture, distribution, marketing and sale of our many products are also subject to similar statutes and regulations.
 
We and our bottlers use various refillable and non-refillable, recyclable bottles and cans in the United States and other countries. Various states and other authorities require deposits, eco-taxes or fees on certain containers. Similar legislation or regulations may be proposed in the future at local, state and federal levels, both in the United States and elsewhere. In Mexico, the government has encouraged the soft drinks industry to comply voluntarily with collection and recycling programs of plastic material, and we have taken steps to comply with these programs.
 
Environmental, Health and Safety Matters
 
We operate many manufacturing, bottling and distribution facilities. In these and other aspects of our business, we are subject to a variety of federal, state and local environment, health and safety laws and regulations. We maintain environmental, health and safety policies and a quality, environmental, health and safety program designed to ensure compliance with applicable laws and regulations.
 
Legal Matters
 
We are occasionally subject to litigation or other legal proceedings relating to our business. Set forth below is a description of our three most significant pending legal matters. Although the estimated range of loss, if any, for the three pending legal matters described below cannot be estimated at this time, we do not believe that the outcome of any of these, or any other, pending legal matters, individually or collectively, will have a material adverse effect on our business or financial condition although such matters may have a material adverse effect on our results of operations in a particular period.
 
Snapple Distributor Litigation
 
In 2004, one of our subsidiaries, Snapple Beverage Corp. and several affiliated entities of Snapple Beverage Corp., including Snapple Distributors, Inc., were sued in United States District Court, Southern District of New York, by 57 area route distributors for alleged price discrimination, breach of contract, retaliation, tortious interference and breach of the implied duty of good faith and fair dealing arising out of their respective area route distributor agreements. Each plaintiff sought damages in excess of $225 million. The plaintiffs initially filed the case as a class action but withdrew their class certification motion. They are proceeding as individual plaintiffs


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but the cases have been consolidated for discovery and procedural purposes. On September 14, 2007, the court granted our motion for summary judgment, dismissing the plaintiffs’ federal claims of price discrimination and dismissing, without prejudice, the plaintiffs’ remaining claims under state law. The plaintiffs have filed a notice to appeal the decision and may decide to re-file the state law claims in state court. We believe we have meritorious defenses with respect to the appeal and will defend ourselves vigorously. However, there is no assurance that the outcome of the appeal, or any trial, if claims are refiled, will be in our favor.
 
Holk & Weiner Snapple Litigation
 
In 2007, Snapple Beverage Corp. was sued by Stacy Holk, in New Jersey Superior Court, Monmouth County, and by Hernant Mehta in the U.S. District Court, Southern District of New York. The plaintiffs filed these cases as class actions. The plaintiffs allege that Snapple’s labeling of certain of its drinks is misleading and/or deceptive. The plaintiffs seek unspecified damages on behalf of the class, including enjoining Snapple from various labeling practices, disgorging profits, reimbursing of monies paid for product and treble damages. The Mehta case in New York has since been dropped by the plaintiff. However, the attorneys in the Holk, New Jersey case and a new plaintiff, Evan Weiner, have since filed a new action in New York substantially similar to the New Jersey action. In each case, we have filed motions to dismiss the plaintiffs’ claims on a variety of grounds. We believe we have meritorious defenses to the claims asserted and will defend ourselves vigorously. However, there is no assurance that the outcome of our motions or at trial will be in our favor.
 
Nicolas Steele v. Seven Up/RC Bottling Company Inc.
Robert Jones v. Seven Up/RC Bottling Company of Southern California, Inc.
California Wage Audit
 
In 2007, one of our subsidiaries, Seven Up/RC Bottling Company Inc., was sued by Nicolas Steele, and in a separate action, by Robert Jones, in each case in Superior Court in the State of California (Orange County), alleging that our subsidiary failed to provide meal and rest periods and itemized wage statements in accordance with applicable California wage and hour law. The cases have been filed as class actions. The classes, which have not yet been certified, consist of all employees of one of our subsidiaries who have held a merchandiser or delivery driver position in southern California in the past three years. On behalf of the classes, the plaintiffs claim lost wages, waiting time penalties and other penalties for each violation of the statute. We believe we have meritorious defenses to the claims asserted and will defend ourselves vigorously. However, there is no assurance that the outcome of this matter will be in our favor.
 
We have been requested to conduct an audit of our meal and rest periods for all non-exempt employees in California at the direction of the California Department of Labor. At this time, we have declined to conduct such an audit until there is judicial clarification of the intent of the statute.
 
Corporate Information
 
We were incorporated in Delaware on October 24, 2007. The address of our principal executive offices is 5301 Legacy Drive, Plano, Texas 75024. Our telephone number is (972) 673-7000. We were recently formed for the purpose of holding Cadbury Schweppes’ Americas Beverages business in connection with the separation and distribution described herein and had no operations prior to the separation and distribution.


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OUR RELATIONSHIP WITH CADBURY PLC AFTER THE DISTRIBUTION
 
Description of Various Separation and Transition Arrangements
 
Separation Agreement
 
We intend to enter into a separation and distribution agreement (the “separation agreement”) with Cadbury Schweppes before the distribution of our shares of common stock to Cadbury Schweppes’ shareholders. The separation agreement will set forth our agreements with Cadbury Schweppes regarding the principal transactions necessary to effect the separation and distribution. It will also set forth other agreements (the “ancillary agreements”) that govern certain aspects of our relationship with Cadbury plc after completion of the separation.
 
Transfer of Assets and Assumption of Liabilities.   The separation agreement will identify assets to be retained, transferred, liabilities to be assumed and contracts to be assigned to each of us and Cadbury Schweppes as part of our separation and will describe when and how these transfers, assumptions and assignments will occur. In particular, the separation agreement will provide that, subject to the terms and conditions contained in the separation agreement:
 
  •  all assets to the extent related to our business (including the stock of subsidiaries, real property and intellectual property) will be retained by or transferred to us, subject to any licenses between the parties;
 
  •  all assets to the extent related to Cadbury Schweppes’ global confectionery business and its other beverages business (located principally in Australia) (including stock of subsidiaries, real property and intellectual property) will be retained by or transferred to Cadbury Schweppes, subject to any licenses between the parties;
 
  •  liabilities will be allocated to, and assumed by, us to the extent they are related to our business;
 
  •  liabilities will be allocated to, and assumed by, Cadbury Schweppes to the extent they are related to its global confectionery business and its other beverages business (located principally in Australia);
 
  •  each party or one of its subsidiaries will assume or retain any liabilities relating to any of its or its subsidiaries’ or controlled affiliates’ debt, regardless of the issuer of such debt, to the extent relating to its business or secured exclusively by its assets;
 
  •  except as may be set forth in or contemplated by the separation agreement or any ancillary agreement, the one-time transaction costs and expenses incurred on or prior to the separation will be borne by Cadbury Schweppes and after the separation will be borne by the party incurring such costs; and
 
  •  other liabilities will be allocated to either Cadbury Schweppes or us as set forth in the separation agreement.
 
Except as may expressly be set forth in the separation agreement or any ancillary agreement, all assets will be transferred on an “as is,” “where is” basis and the respective transferees will bear the economic and legal risks associated with the use of such respective assets both prior to and following the separation.
 
Certain of the liabilities and obligations to be assumed by one party or for which one party will have an indemnification obligation under the separation agreement and the other agreements relating to the separation are, and following the separation may continue to be, the legal or contractual liabilities or obligations of another party. Each such party that continues to be subject to such legal or contractual liability or obligation will rely on the applicable party that assumed the liability or obligation or the applicable party that undertook an indemnification obligation with respect to the liability or obligation, as applicable, under the separation agreement, to satisfy the performance and payment obligations or indemnification obligations with respect to such legal or contractual liability or obligation.
 
To the extent that any transfers contemplated by the separation agreement have not been consummated on or prior to the distribution date, the parties will agree to cooperate to effect such transfers as promptly as practicable. In addition, each of the parties will agree to cooperate with each other and use commercially reasonable efforts to take or to cause to be taken all actions, and to do, or to cause to be done, all things reasonably necessary under applicable


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law or contractual obligations to consummate and make effective the transactions contemplated by the separation agreement and the ancillary agreements.
 
Intercompany Balances.   On or prior to the date of the separation and distribution, we will settle with Cadbury Schweppes all of the outstanding intercompany balances as of the distribution date, estimated to be $           as of          , 2008, other than intercompany balances arising from payables and receivables generated in the ordinary course of business or under agreements specifically contemplated by the separation agreement or any ancillary agreement to remain in effect following the separation.
 
Releases and Indemnification.   Except as otherwise provided in the separation agreement or any ancillary agreement, each party will release and forever discharge each other party and its affiliates and any person who was at any time prior to the distribution date a shareholder, director, officer, agent or employee of a member of the other party or one of its affiliates from all obligations and liabilities existing or arising from any acts or events occurring or failing to occur or alleged to have occurred or to have failed to occur or any conditions existing or alleged to have existed on or before the separation. The releases will not extend to, among other things, obligations or liabilities under any agreements between the parties that remain in effect following the separation pursuant to the separation agreement or any ancillary agreement, liabilities specifically retained or assumed by or transferred to a party pursuant to the separation agreement or any ancillary agreement or to ordinary course trade payables and receivables.
 
In addition, the separation agreement will provide for cross-indemnities principally designed to place financial responsibility for the obligations and liabilities of our business with us and financial responsibility for the obligations and liabilities of the global confectionery business and its other beverages business (located principally in Australia) with Cadbury Schweppes. Specifically, each party will, and will cause its affiliates to, indemnify, defend and hold harmless the other party and its affiliates and each of their respective officers, directors, employees and agents for any losses arising out of or otherwise in connection with:
 
  •  the liabilities each such party assumed or retained pursuant to the separation agreement;
 
  •  any breach by such party of any shared contract between the companies;
 
  •  any liability for a misstatement or omission or alleged misstatement or omission of a material fact made after the distribution date contained in a document filed with the SEC or the UK Financial Services Authority by the other party after the distribution date based upon information that is furnished in writing by such party for inclusion in a filing by the other party; and
 
  •  any breach by such party of the separation agreement, the ancillary agreements or any agreements between the parties specifically contemplated by the separation agreement or any ancillary agreement to remain in effect following the separation.
 
Legal Matters.   In general, each party to the separation agreement will assume liability for all pending and threatened legal matters related to its own business or assumed or retained liabilities and will indemnify the other parties for any liability to the extent arising out of or resulting from such assumed legal matters. Each party will cooperate in defending any claims against the other for events that took place prior to, on or after the date of the separation of us from Cadbury plc.
 
Non-Solicitation of Employees.   During the 18-month period following the distribution date, neither party will solicit for employment any of the employees of the other party, provided that this provision shall not prevent either party from advertising in publications of general circulation or soliciting or hiring any employees who were terminated by the other party.
 
Intellectual Property Licenses.   We currently use the Cadbury trademark, including variations and acronyms thereof (the “Cadbury Marks”). In addition, Cadbury Schweppes and its affiliates currently use various marks that we own or will own following the separation (the “DPS Marks”). Under the separation agreement, each party will, among other things, have a royalty-free license of limited scope to continue to use the Cadbury Marks or the DPS Marks, as applicable, for up to one year in connection with its ongoing business. The separation agreement also will include licenses of certain copyrights from us to Cadbury Schweppes and its affiliates, and from Cadbury Schweppes to us.


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Insurance.   The separation agreement will provide for the rights of the parties to report claims under existing insurance policies for occurrences prior to the separation and set forth procedures for the administration of insured claims. In addition, the separation agreement will allocate among the parties the right to insurance policy proceeds based on reported claims and the obligations to incur deductibles under certain insurance policies.
 
Other Matters.   Other matters governed by the separation agreement include, among others, access to financial and other records and information, intellectual property, legal privilege, confidentiality and resolution of disputes between the parties relating to the separation agreement and the ancillary agreements and the agreements and transactions contemplated thereby.
 
Transition Services Agreement
 
We will enter into a transition services agreement with Cadbury Schweppes pursuant to which each party will provide certain specified services to the other on an interim basis for terms ranging generally from one month to one year following the separation. The specified services include services in the following: human resources, finance and accounting, intellectual property, information technology and certain other services consistent with past practices. The services will be paid for by the receiving party at a charge equal to the cost of the providing party as calculated in the transition services agreement.
 
Tax-Sharing and Indemnification Agreement
 
We will enter into a tax-sharing and indemnification agreement with Cadbury Schweppes under which tax liabilities relating to taxable periods before and after the separation and distribution will be computed and apportioned between the parties, and responsibility for payment of those tax liabilities (including any subsequent adjustments to such tax liabilities) will be allocated between the parties. In general, under the terms of the tax-sharing and indemnification agreement, we and Cadbury Schweppes will each be responsible for taxes imposed on its respective business for all taxable periods, whether ending on, before or after the date of separation and distribution, except that taxes attributable to certain restructuring transactions undertaken in anticipation of the separation and distribution and various other transactions will be specially allocated to (and indemnified against by) Cadbury Schweppes or ourselves depending on the transaction. Furthermore, the tax-sharing and indemnification agreement will set forth the rights of the parties in respect of the preparation and filing of tax returns, the handling of audits or other tax proceedings and assistance and cooperation and other matters, in each case, for taxable periods ending on or before or that otherwise include the date of separation.
 
Under the tax-sharing and indemnification agreement, we will be generally liable for any liabilities, taxes and other charges that are imposed on Cadbury Schweppes as a result of the separation and distribution (and certain related restructuring transactions) failing to qualify for nonrecognition treatment for U.S. federal income tax purposes, if such failure is the result of a breach by us of any representation or covenant made by us in the tax-sharing and indemnification agreement. The covenants contained in the tax-sharing and indemnification agreement generally contain restrictions on our ability to (a) discontinue the active conduct of the historic business relied upon for purposes of the private letter ruling request submitted to the IRS, or liquidate, merge or consolidate any of our companies conducting such active business, (b) undertake certain transactions pursuant to which our stockholders would dispose of a substantial amount of our common stock for cash, (c) take actions that would cause certain restructuring transactions to fail to qualify for nonrecognition treatment, and (d) take any action inconsistent with the information and representations furnished to the IRS in connection with the private letter ruling request. Notwithstanding the foregoing, we will be permitted to take any of the actions restricted by such covenants if Cadbury Schweppes provides us with prior written consent for such action, or we provide Cadbury Schweppes with a private letter ruling or rulings from the IRS, or an unqualified opinion of counsel, in each case acceptable to Cadbury Schweppes, to the effect that such action will not affect the tax-free nature of the separation and distribution (and certain related restructuring transactions), but we will remain liable for any liabilities, taxes and other charges imposed on Cadbury Schweppes as a result of the separation and distribution (and certain related restructuring transactions) failing to qualify as tax-free transactions as a result of such action.


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Employee Matters Agreement
 
We will enter into an employee matters agreement with Cadbury Schweppes providing for our respective obligations to our employees and former employees and for other employment and employee benefits matters. Under the terms of the employee matters agreement, we will generally assume all liabilities and assets relating to employee benefits for our current and former employees, and Cadbury Schweppes will generally retain all liabilities and assets relating to employee benefits for current and former Cadbury Schweppes employees other than current or former beverages employees.
 
On or prior to the date of separation, sponsorship of the Cadbury Schweppes benefit plans that solely cover our current and former employees will be transferred to us, and the Cadbury Schweppes benefit plans that cover our current and former employees and also cover current and former Cadbury Schweppes employees will be split into two separate plans, one covering Cadbury Schweppes employees and one covering our employees. Sponsorship of the plans covering our employees will be transferred to us.
 
For transferred plans that are funded, assets allocable to the liabilities of such plans also will be transferred to related trusts established by us. As of the date of separation, current and former employees of us and Cadbury Schweppes will receive credit for service for all periods of employment prior to the date of separation for purposes of vesting, eligibility and benefit levels under any pension or welfare plan in which they participate following the separation. The employee matters agreement also provides for sharing of certain employee and former employee information to enable us and Cadbury Schweppes to comply with our respective obligations.
 
In addition, we will provide for the treatment of holders of Cadbury Schweppes ordinary shares and share options who are our eligible current and former employees at the time of separation.
 
Intellectual Property Agreements
 
Various agreements are in effect between us and Cadbury Schweppes relating to the use of certain trademarks, patents and other intellectual property. These include licenses from Cadbury Schweppes to us for the use of the Rose’s trademark and certain technology in our business, and licenses from us to Cadbury Schweppes for the use of the Canada Dry trademark with Cadbury Schweppes’ Halls product in the U.S. and the Snapple, Mott’s, Clamato and Holland House trademarks in Cadbury Schweppes’ beverage business located principally in Australia.
 
Debt and Payables
 
The following are descriptions of current related party debt arrangements. All or some portion of the following debt will be repaid in connection with the separation.
 
Cadbury Ireland Limited.   The total principal we owed to Cadbury Ireland Limited was $40 million at September 30, 2007 and December 31, 2006. The debt bears interest at a floating rate based on 3-month LIBOR. The interest rates were 5.95% and 5.36% at September 30, 2007 and December 31, 2006, respectively. The outstanding principal balance is due in November 2007 and is included in the current portion of long-term debt. We recorded $2 million and $2 million of interest expense related to the debt for the nine months ended September 30, 2007 and the nine months ended September 30, 2006, respectively.
 
Cadbury Schweppes Finance plc.   We have a variety of debt agreements with Cadbury Schweppes Finance plc with maturity dates ranging from May 2008 to May 2011. These agreements had a combined outstanding principal balance of $566 million and $2.9 billion at September 30, 2007 and December 31, 2006, respectively. At September 30, 2007 and December 31, 2006, $566 million and $2.4 billion of the debt were based upon a floating rate ranging between LIBOR plus 1.5% to LIBOR plus 2.5%. The remaining principal balance of $550 million at December 31, 2006 had stated fixed interest rates ranging from 5.76% to 5.95%. We recorded $53 million and $121 million of interest related to the debt for the nine months ended September 30, 2007 and the nine months ended September 30, 2006, respectively.
 
Cadbury Schweppes Overseas Limited.   The total principal we owed to Cadbury Schweppes Overseas Limited was $23 million and $22 million at September 30, 2007 and December 31, 2006, respectively. The debt bears interest at a floating rate based on Mexican LIBOR plus 1.5% and matures in 2009. Actual rates were 9.89% at


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September 30, 2007 and December 31, 2006. The Company recorded $2 million and $15 million of interest expense related to the debt for the nine months ended September 30, 2007 and the nine months ended September 30, 2006, respectively.
 
Cadbury Adams Canada, Inc.   The total principal we owed to Cadbury Adams Canada, Inc. was $67 million and $15 million at September 30, 2007 and December 31, 2006, respectively and is payable on demand. The debt bears interest at a floating rate based on 1 month Canadian LIBOR. The interest rates were 5.15% and 4.26% at September 30, 2007 and December 31, 2006, respectively. The Company recorded $1 million and less than $1 million of interest expense related to this debt for the nine months ended September 30, 2007 and the nine months ended September 30, 2006, respectively.
 
Cadbury Schweppes Americas Holding BV.   During 2007, Cadbury Schweppes Americas Holding BV issued us a variety of debt agreements with maturity dates ranging from 2009 to 2017. These agreements had a combined outstanding principal balance of $2.5 billion at September 30, 2007 and bear interest at a floating interest rate ranging between 6 month USD LIBOR plus .75% and 6 month USD LIBOR plus 1.75%. We recorded $107 million of interest related to this debt for the nine months ended September 30, 2007.
 
Cadbury Schweppes Treasury America.   The total principal we owed to Cadbury Schweppes Treasury America was $0 million and $235 million at September 30, 2007 and December 31, 2006, respectively. The debt bore interest at a rate of 7.25% per annum. We repurchased the debt on May 23, 2007. We recorded $7 million and $7 million of interest expense related to this debt for the nine months ended September 30, 2007 and the nine months ended September 30, 2006, respectively.
 
The related party payable balances of $509 million and $183 million at September 30, 2007 and December 31, 2006, respectively, represent non-interest bearing payable balances with companies owned by Cadbury Schweppes and related party accrued interest payable associated with interest bearing notes described in note 8 to our unaudited combined financial statements. The non-interest bearing payable balance was $448 million and $158 million at September 30, 2007 and December 31, 2006, respectively, and the payables are due within one year. The accrued interest payable balance was $61 million and $25 million at September 30, 2007 and December 31, 2006, respectively. All or some portion of the related party payable will be repaid in connection with the separation.
 
Notes Receivable
 
We had a notes receivable balance from wholly owned subsidiaries of Cadbury Schweppes with outstanding principal balances of $1,931 million and $579 million at September 30, 2007 and December 31, 2006, respectively. We recorded $37 million and $29 million of interest income related to these notes for the nine months ended September 30, 2007 and the nine months ended September 30, 2006, respectively.
 
Allocated Expenses
 
We have been allocated corporate overhead expenses from Cadbury Schweppes and its subsidiaries for corporate-related functions based on the most relevant allocation method to the service provided. To the extent expenses have been paid by Cadbury Schweppes and its subsidiaries on our behalf, they have been allocated based upon the direct costs incurred. Where specific identification of expenses has not been practicable, the costs of such services has been allocated based upon the most relevant allocation method that management believes is reasonable, which is primarily either revenue or headcount. We were allocated $113 million and $104 million of overhead costs in the nine months ended September 30, 2007 and the nine months ended September 30, 2006, respectively.
 
Cash Management
 
Cadbury Schweppes historically has used a centralized approach to cash management and financing of operations. As part of this approach, our cash is available for use by, and is regularly swept by, Cadbury Schweppes’ operations in the United States at its discretion. Cadbury Schweppes also funds our operating and investing activities as needed. Transfers of cash, both to and from Cadbury Schweppes’ cash management system, are reflected as a component of “Cadbury Schweppes’ net investment” in our combined balance sheets.


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Royalties
 
We earn royalties from other Cadbury Schweppes-owned companies for the use of certain brands owned by us. The total royalties we recorded were $0 and $1 million for the nine months ended September 30, 2007 and the nine months ended September 30, 2006, respectively.
 
Purchase of Intangibles
 
We purchased several trademarks from Cadbury Schweppes for a total purchase price of $19 million in the nine months ended September 30, 2006. These purchases were on terms substantially equivalent to those that we believe would prevail in an arm’s length transaction and were determined to have indefinite lives.


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MANAGEMENT
 
Executive Officers and Directors
 
Set forth below is information concerning the individuals we currently expect will serve as our executive officers and directors upon the separation. We will identify additional individuals who will serve on our board of directors prior to our separation.
 
             
Name
 
Age*
 
Position
 
Larry D. Young
    53     President, Chief Executive Officer and Director
John O. Stewart
    49     Executive Vice President, Chief Financial Officer and Director
James L. Baldwin, Jr.
    46     Executive Vice President and General Counsel
Rodger L. Collins
    49     President — Bottling Group Sales
Randall E. Gier
    46     Executive Vice President — Marketing and R&D
Pedro Herrán Gacha
    46     President — Mexico and the Caribbean
Derry L. Hobson
    57     Executive Vice President — Supply Chain
James J. Johnston, Jr.
    51     President — Finished Goods and Concentrate Sales
Lawrence N. Solomon
    52     Executive Vice President — Human Resources
 
 
As of December 31, 2007
 
Larry D. Young, President, Chief Executive Officer and Director.   Mr. Young has served as President and Chief Executive Officer of Cadbury Schweppes’ Americas Beverages business since October 2007. Mr. Young joined Cadbury Schweppes’ Americas Beverages as Chief Operating Officer, as well as President, Bottling Group, in 2006 after our acquisition of DPSUBG, where he had been President and Chief Executive Officer since May 2005. From 1997 to 2005, Mr. Young served as President and Chief Operating Officer of Pepsi-Cola General Bottlers, Inc. and Executive Vice President of Corporate Affairs at PepsiAmericas, Inc.
 
John O. Stewart, Executive Vice President, Chief Financial Officer and Director.   Mr. Stewart has served as Executive Vice President and Chief Financial Officer of Cadbury Schweppes’ Americas Beverages business since November 2006. From 1990 to 2004, Mr. Stewart worked for Diageo PLC and its subsidiaries, serving as Senior Vice President and Chief Financial Officer of Diageo North America from 2001 to 2004. From 2004 to 2005, Mr. Stewart was an independent consultant, providing mergers and acquisitions advice to Diageo PLC.
 
James L. Baldwin, Jr., Executive Vice President and General Counsel.   Mr. Baldwin has served as Executive Vice President and General Counsel of Cadbury Schweppes’ Americas Beverages business since July 2003. From June 2002 to July 2003, he served as Senior Vice President and General Counsel of Dr Pepper/Seven Up, Inc., and from August 1998 to June 2002 as General Counsel of Mott’s LLP.
 
Rodger L. Collins, President — Bottling Group Sales.   Mr. Collins has served as President of Sales for the Bottling Group segment of Cadbury Schweppes’ Americas Beverages business since October 2007. He had previously served as Midwest Division President for the Bottling Group since January 2005. He also was Regional Vice President (North/East) at DPSUBG from October 2001 to December 2004.
 
Randall E. Gier, Executive Vice President — Marketing and R&D.   Mr. Gier has served as Executive Vice President of Marketing and R&D of Cadbury Schweppes’ Americas Beverages business since March 2004. From 2002 to 2004, he was the Chief Marketing Officer for Yum! Brands International. From 1997 to 2002, Mr. Gier was Chief Marketing Officer for Pizza Hut Inc., and from 1996 to 1997 was Chief Marketing Officer for KFC.
 
Pedro Herrán Gacha, President — Mexico and the Caribbean.   Mr. Herrán has served as President of the Mexico and the Caribbean segment of Cadbury Schweppes’ Americas Beverages business since January 2004. Prior to that, he was President of Cadbury Schweppes Beverages Mexico, a position he had held since January 2000.
 
Derry L. Hobson, Executive Vice President — Supply Chain.   Mr. Hobson has served as Executive Vice President of Supply Chain for Cadbury Schweppes’ Americas Beverages business since October 2007. Mr. Hobson


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joined the business as Senior Vice President of Manufacturing in 2006 through our acquisition of DPSUBG where he had been Executive Vice President since 1999. Prior to joining our Bottling Group, Mr. Hobson was President and Chief Executive Officer of Sequoia Pacific Systems from 1993 to 1999. From 1988 to 1993, Mr Hobson was Senior Vice President of Operations at Perrier Group.
 
James J. Johnston, Jr., President — Finished Goods and Concentrate Sales.   Mr. Johnston has served as President of Finished Goods and Concentrate Sales for Cadbury Schweppes’ Americas Beverages business since October 2007. Prior to that, he was Executive Vice President of Sales, a position he had held since January 2005. From December 2003 to January 2005, he was Senior Vice President of Strategy. From October 1997 to December 2003, Mr. Johnston served as Senior Vice President of Licensing. From November 1993 to October 1997, Mr. Johnston served as Senior Vice President of System Marketing.
 
Lawrence N. Solomon, Executive Vice President — Human Resources.   Mr. Solomon has served as Executive Vice President of Human Resources of Cadbury Schweppes’ Americas Beverages business since July 2003. From May 1999 to June 2003, he served as Senior Vice President of Human Resources for Dr Pepper/Seven Up, prior to which he served on Cadbury Schweppes’ global human resources team.
 
Board of Directors
 
At the time of the distribution, we expect that our board of directors will consist of           directors. The New York Stock Exchange requires that a majority of our board of directors qualify as “independent” according to the rules and regulations of the SEC and the New York Stock Exchange by no later than the first anniversary of the separation. We intend to comply with these requirements.
 
Committees of Our Board of Directors
 
Upon completion of the separation, the committees of our board of directors will consist of an audit committee, nominating and corporate governance committee and a compensation committee. Each of these committees will be required to comply with the requirements of the SEC and the New York Stock Exchange applicable to companies engaging in their initial listing, including for the audit committee the independence requirements and the designation of an “audit committee financial expert.” Our board of directors intends to adopt a written charter for each of these committees, which will each be posted on our website prior to our separation from Cadbury Schweppes.
 
In addition, we may establish special committees under the direction of the board of directors when necessary to address specific issues.
 
Audit Committee
 
Our audit committee will be responsible for, among other things, making recommendations concerning the engagement of our independent registered public accounting firm, reviewing with the independent registered public accounting firm the plans and results of the audit engagement, approving professional services provided by the independent registered public accounting firm, reviewing the independence of the independent registered public accounting firm, considering the range of audit and non-audit fees and oversight of management’s review of the adequacy of our internal accounting controls. Our audit committee currently consists of          ,           and          , with           serving as chair. We expect that, upon completion of the separation from Cadbury Schweppes,          will qualify as the audit committee financial expert.
 
Nominating and Corporate Governance Committee
 
Our nominating and corporate governance committee will be responsible for recommending persons to be selected by the board as nominees for election as directors, recommending persons to be elected to fill any vacancies on the board, considering and recommending to the board qualifications for the office of director and policies concerning the term of office of directors and the composition of the board and considering and recommending to the board other actions relating to corporate governance. We expect that, upon completion of the separation, our


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nominating and corporate governance committee will consist of          ,           and          , with           serving as chair.
 
Compensation Committee
 
Our compensation committee will be charged with the responsibilities, subject to full board approval, of establishing, periodically re-evaluating and, where appropriate, adjusting and administering policies concerning compensation structure and benefit plans for our employees, including the Chief Executive Officer and all of our other executive officers. We expect that upon completion of the separation our compensation committee will consist of          ,           and          , with           serving as chair.
 
Code of Ethics
 
Prior to the completion of the separation, we will adopt a written code of ethics that is designed to deter wrongdoing and to promote:
 
  •  honest and ethical conduct;
 
  •  full, fair, accurate, timely and understandable disclosure in reports and documents that we file with the SEC and in our other public communications;
 
  •  compliance with applicable laws, rules and regulations, including insider trading compliance; and
 
  •  accountability for adherence to the code and prompt internal reporting of violations of the code, including illegal or unethical behavior regarding accounting or auditing practices.
 
A copy of our code of ethics will be posted on our website immediately prior to our separation from Cadbury Schweppes.
 
Director Compensation
 
Non-executive directors will receive compensation from us for their services on the board of directors or committees. Executive directors will not receive compensation for their services as a director. We expect to compensate our non-executive directors as follows: an annual fee of $      and an annual equity grant of $     . In addition, the chairperson of the board of directors and the chairperson of each committee will receive an annual incremental fee of $      for the chairperson of the board of directors, $      for the chairperson of the audit committee and $     , for the chairperson of any other committee. We also expect to adopt expense reimbursement and related policies for all directors customary for similar public companies. No director compensation was paid in 2007.
 
Compensation Discussion and Analysis
 
Introduction
 
In 2007, our named executive officers (the “NEOs”) were Larry Young, John Stewart, Randall Gier, James Johnston, Pedro Herrán, Gilbert Cassagne and John Belsito. Historically, each NEO has been covered by the Cadbury Schweppes executive compensation program. This Compensation Discussion and Analysis describes the historical compensation arrangements for our NEOs. The remuneration committee of the board of directors of Cadbury Schweppes is currently in the process of establishing the compensation arrangements for our current NEOs for 2008 as we transition to being an independent public company and to the extent they are now established, they are described in this information statement. Following our separation from Cadbury Schweppes, our board of directors and its compensation committee will establish the future compensation arrangements for our company. As a result, we are not currently able to describe the post separation compensation arrangements that will be established by our board of directors and its compensation committee.
 
We are also in the process of determining how existing awards granted to our employees under Cadbury Schweppes’ plans will be treated following the separation, and will describe how they will be treated in this information statement prior to the distribution.


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During the last half of 2007, there were a number of changes with regard to our NEOs. On October 12, 2007, Mr. Cassagne, our former President and Chief Executive Officer, left the company and Mr. Young, our Chief Operating Officer and President, Bottling Group, was appointed President and Chief Executive Officer. In addition, on December 19, 2007, Mr. Belsito, the former President, Snapple Distributors, left the company. As a result of the changes in certain of our NEOs’ duties and responsibilities, certain elements of their compensation were adjusted, as further described below.
 
Objectives of the Executive Compensation Program
 
Historically, as administered by the remuneration committee of the board of directors of Cadbury Schweppes, the Cadbury Schweppes executive compensation program was designed to achieve the following core objectives:
 
  •  Total compensation was designed to be competitive in the relevant market, thereby enabling Cadbury Schweppes to attract, retain, motivate and reward high caliber executives;
 
  •  Total compensation awarded to executives was designed to reflect and reinforce Cadbury Schweppes’ focus on financial management and bottom-line performance;
 
  •  The achievement of short and long-term business objectives was recognized through a combination of incentives and rewards with a significant weighting on performance-based compensation versus fixed pay; and
 
  •  Equity incentive awards were designed to align the interests of management with those of shareholders of Cadbury Schweppes.
 
Material Elements of the Executive Compensation Program
 
Historically, Cadbury Schweppes’ executive compensation program for the NEOs in 2007 consisted of the following three major elements:
 
  •  Base Salary  — base salary provided NEOs with a fixed level of cash compensation intended to aid in the attraction and retention of talent in a competitive market. Base salary is reflected in the “Salary” column in the Summary Compensation Table.
 
  •  Annual Cash Incentive Compensation  — annual cash incentive compensation encouraged NEOs to focus on our annual financial plan and motivated the performance of the NEOs in alignment with the short-term interests of shareholders of Cadbury Schweppes. Annual cash incentive compensation is reflected in the “Non-Equity Incentive Plan Compensation” column in the Summary Compensation Table.
 
  •  Long-Term Share-Based Incentive Compensation  — long-term share-based incentive compensation rewarded NEOs for achieving quantitative goals that are key drivers of long-term performance. Long-term share-based incentives aligned the interests of executives with those of shareholders of Cadbury Schweppes and provided strong retention and motivational incentives. Long-term share-based incentive compensation is reflected in the “Stock Awards” and “Option Awards” columns in the Summary Compensation Table.
 
Other forms of compensation were also provided to NEOs in 2007 under the Cadbury Schweppes executive compensation program, and included grants under an additional share plan, participation in health plans, retirement plans, perquisites and severance arrangements.
 
Setting Executive Compensation
 
Historically, the compensation of Mr. Cassagne was based on recommendations by Todd Stitzer, the Chief Executive Officer of Cadbury Schweppes, related to Mr. Cassagne’s performance during the year, and approved by the remuneration committee of the board of directors of Cadbury Schweppes. The compensation of the other NEOs was based on recommendations by Mr. Cassagne and approved by Mr. Stitzer. Among the factors considered in setting compensation were individual performance, skill and experience, the NEO’s success in achieving targets set by Cadbury Schweppes, compensation previously granted to the NEO, planned changes in responsibilities and competitive practices.


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Benchmarking of Compensation
 
In 2007, the remuneration committee of the board of directors of Cadbury Schweppes reviewed compensation awarded to Mr. Cassagne against compensation awarded to executives in similar positions in the Towers Perrin 2007 U.S. CDB General Industry Executive Database Survey (the “Towers Perrin Survey”), a proprietary survey of approximately 45 multinational companies and global consumer goods companies with whom Cadbury Schweppes believes it competes for executive talent. In making assessments, the potential value of the total compensation package, which included base salary, annual cash incentives and long-term share-based incentives, was considered. A similar process was followed by Mr. Stitzer and Mr. Cassagne for purposes of benchmarking the compensation of other NEOs. In addition to the Towers Perrin Survey, Mr. Stitzer and Mr. Cassagne also considered the Hay Group 2007 Executive Compensation Report: Fast-Moving Consumer Goods Industry, a proprietary survey of approximately 50 multinational consumer goods companies.
 
In October 2007, Cadbury Schweppes also reviewed the base salaries awarded to Mr. Young, in connection with his promotion to President and Chief Executive Officer of our company, and to Mr. Stewart, whose role was expanded to include information technology and shared business services along with additional duties that he will undertake as the Chief Financial Officer of a public company, against similar executive officers in 16 multinational consumer goods companies of similar market capitalization to our business (the “Comparator Group”). The Comparator Group was prepared in consultation with PricewaterhouseCoopers and consisted of the following companies:
 
                   
Anheuser-Busch
    ConAgra     Hershey Foods     Pepsi Bottling Group
Brown-Forman
    Constellation Brands     Kellogg     Sara Lee
Campbell Soup
    General Mills     Molson Coors Brewing     Smucker
Coca-Cola Enterprises
    Heinz     PepsiAmericas     Wrigley
                   
 
The Executive Compensation Program
 
Overview
 
Historically, Cadbury Schweppes generally targeted a competitive level of total compensation, including base salary, annual cash incentive compensation, and long-term share-based incentive compensation, based on the attainment of certain pre-established performance measures.
 
Base Salary
 
Cadbury Schweppes provided a base salary to each NEO, which was reviewed on an annual basis. NEOs were eligible for merit-based increases based on their prior year performance, market competitiveness of their salary and peer group data.
 
In setting the base salary of Mr. Cassagne in 2007, the remuneration committee of the board of directors of Cadbury Schweppes considered Mr. Cassagne’s performance and benchmark information from the Towers Perrin Survey. In setting the base salary of the other NEOs in 2007, Mr. Stitzer and Mr. Cassagne considered each individual’s performance and the market competitiveness of their salary as described above.
 
In October 2007, Mr. Young’s base salary was increased from $647,000 to $800,000 and Mr. Stewart’s base salary was increased from $420,000 to $500,000. Mr. Young’s increase was attributable to his promotion to President and Chief Executive Officer of our company and Mr. Stewart’s increase was attributable to his expanded role to include information technology and shared business services along with additional duties he will undertake as the Chief Financial Officer of a public company. The increases for Mr. Young and Mr. Stewart were established taking into account median base salaries of similar executive officers in the Comparator Group.


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Annual Cash Incentive Compensation
 
NEOs participated in the Cadbury Schweppes annual incentive plan, a short-term cash incentive plan based on the attainment of overall short-term business results. Each NEO was assigned an annual incentive target between 65% and 100% of each NEO’s annual base salary (the “Target Award”). In the event performance targets were met for each fiscal year, the NEOs were eligible to receive a cash payment equal to their Target Award. Performance measures were determined by the remuneration committee of the board of directors of Cadbury Schweppes to take account of current business plans and conditions and to provide incentives to NEOs to achieve key short-term performance targets.
 
In 2007, Target Awards were based on the achievement of financial performance targets for underlying economic profit (defined as underlying operating profit from operations less a charge for the weighted average cost of capital) and growth in revenue. The remuneration committee of the board of directors of Cadbury Schweppes believed that these performance targets were key drivers of our business in the short-term.
 
In 2007, Mr. Cassagne was eligible for a Target Award based 50% on the performance targets achieved by Cadbury Schweppes and 50% on the performance targets achieved by our business. Mr. Herrán, who has primary responsibility for our Mexico and the Caribbean segment, was eligible for a Target Award based 50% on the performance targets achieved by our Mexico and the Caribbean segment and 50% on the performance targets achieved by our business. Each of the other NEOs, including Mr. Young, was eligible for Target Awards based only upon the performance targets achieved by our business. In each case, the weighting of the performance targets was based 60% on underlying economic profit and 40% on growth in revenue.
 
In 2007, each NEO was provided the opportunity to voluntarily defer all or part of his 2006 annual incentive plan award (which otherwise would have been paid in cash in March 2007) and invest such award in Cadbury Schweppes ordinary shares pursuant to the Cadbury Schweppes bonus share retention plan, which is further described below under the section “— Long-Term Share-Based Incentives — Bonus Share Retention Plan.”
 
The determination of the annual incentive amounts for 2007 will be made in February 2008, after the full year results for 2007 are available, and will be paid in March 2008.
 
Long-Term Share-Based Incentives
 
Bonus Share Retention Plan.   The Cadbury Schweppes bonus share retention plan enabled participants to elect to defer all or part of their annual incentive plan awards in the form of an investment in Cadbury Schweppes ordinary shares. Senior executives, including the NEOs, were eligible to participate in the bonus share retention plan. To the extent that participants elected to invest in shares, the plan enabled them to earn an additional matching grant of Cadbury Schweppes ordinary shares (up to 100% of their investment), provided that Cadbury Schweppes attained certain performance targets over a three-year performance period and the participant was continuously employed by Cadbury Schweppes through the date that the award is settled. All of our current NEOs participated in the bonus share retention plan, with a deferral ranging from 25% to 100% of their annual incentive plan award.
 
The determination of shares awarded in 2008 will be made in February 2008, after the results for the 2005-2007 performance period are available, and will be paid in March 2008.
 
Long Term Incentive Plan.   Under the Cadbury Schweppes’ long term incentive plan, NEOs and other senior executives were eligible, at the discretion of the remuneration committee of the board of directors of Cadbury Schweppes, to receive a designated number of Cadbury Schweppes ordinary shares conditional on the achievement of certain performance targets.
 
The vesting of the shares awarded under Cadbury Schweppes’ long term incentive plan in 2007 was based 50% on underlying earnings per share growth and 50% on total shareholder return growth relative to an international group of peer companies equally weighted over a performance period beginning on January 1, 2007 and ending on December 31, 2009. Total shareholder return is defined as share price growth assuming reinvested dividends. At the end of the three-year performance period, the remuneration committee of the board of directors of Cadbury Schweppes will determine how much of the award has been earned. These shares accrue dividend equivalents through the end of the performance period (which will only be paid to the extent the performance targets are


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achieved). The vesting of these shares is dependent on the executive being continuously employed with Cadbury Schweppes through the date the award was settled.
 
In 2007, the remuneration committee of the board of directors of Cadbury Schweppes granted shares under the long term incentive plan to NEOs. Mr. Cassagne was entitled to shares with a value ranging up to 120% of his base salary and the other NEOs were entitled to shares with a value ranging up to 100% of their base salaries based on the performance targets achieved during the performance period.
 
The determination of shares awarded in 2008 will be made in February 2008, after the results for the 2005-2007 performance period are available, and will be paid in March 2008.
 
Other Equity Plans
 
Historically, up to and including 2005, annual awards of share options were granted to the NEOs under the Cadbury Schweppes share option plan. In addition, restricted share awards were granted to certain NEOs under the Cadbury Schweppes international share award plan.
 
Other Compensation Benefits Plans and Programs
 
Historically, Cadbury Schweppes provided the following employee benefit plans and programs to NEOs consistent with local practices and those of comparable companies.
 
Employee Stock Purchase Plan.   Cadbury Schweppes sponsored the employee stock purchase plan that provided employees with an option to purchase Cadbury Schweppes ADRs at a 15% discount over a two-year period from the date of grant. The discount price, which was fixed each September, was based on the closing price of Cadbury Schweppes ADRs on the day before enrollment for the plan began.
 
Retirement Benefits.   Cadbury Schweppes sponsored a qualified defined benefit plan (the personal pension account plan) and two non-qualified defined benefit plans (the pension equalization plan and the supplemental executive retirement plan). In 2007, the personal pension account plan and the pension equalization plan were closed to new participants. In addition, Cadbury Schweppes sponsored a qualified defined contribution plan, and a non-qualified defined contribution plan. The defined benefit plans and defined contribution plans are discussed below in further detail in the narrative following the Pension Benefits Table and the Non-Qualified Deferred Compensation Table, respectively.
 
Perquisites.   Cadbury Schweppes provided some or all of the NEOs with the following additional benefits and perquisites, which are more fully described under the Summary Compensation Table:
 
  •  An automobile allowance;
 
  •  A service allowance to offset the costs of items such as financial, estate and tax planning; and
 
  •  Annual physicals and disability income premiums.
 
In addition, our expatriate NEO, Mr. Herrán, was provided with an expatriate package, including tax equalization and other payments. Certain club membership dues and expenses were also paid on behalf of Mr. Young.
 
Executive Employment Agreements
 
Consistent with our past practices, we have entered into executive employment agreements with our NEOs at the time they became an executive officer. These executive employment agreements are updated from time-to-time, including most recently to principally address changes in tax laws. We believe that it is appropriate for our senior executives to have employment agreements because they provide us with certain contractual protections, including provisions relating to non-competition, non-solicitation of our employees and confidentiality of proprietary information. We also believe that executive employment agreements are useful in recruiting and retaining senior employees. For information regarding the executive employment agreements, see “Historical Executive Compensation Information — Executive Employment Agreements.”


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Pursuant to their executive employment agreements, we provided Mr. Cassagne and Mr. Belsito with certain benefits when they left the company. For information regarding these benefits, see ‘‘Historical Executive Compensation Information — Separation Arrangements Related to Mr. Cassagne and Mr. Belsito.”
 
Historical Executive Compensation Information
 
The executive compensation disclosure contained in this section reflects compensation information for 2007.
 
The following disclosure tables provide compensation information for (1) Mr. Young and Mr. Cassagne, each of whom served as our President and Chief Executive Officer during 2007; (2) Mr. Stewart, our Executive Vice President and Chief Financial Officer; (3) Mr. Gier, Mr. Johnston and Mr. Herrán, the three other executive officers who were our most highly compensated executive officers; and (4) Mr. Belsito, who would have been one of our three most highly compensated officers if he was serving as an executive officer as of December 31, 2007 (collectively, the named executive officers, or “NEOs”). All references to stock options and stock-based awards, other than the employee stock purchase plan, relate to equity awards granted by Cadbury Schweppes to acquire Cadbury Schweppes ordinary shares.
 
Summary Compensation Table
 
The following table sets forth information regarding the compensation earned by NEOs in 2007.
 
Summary Compensation Table
 
                                                                 
                        Change in
       
                        Pension
       
                        Value and
       
                        Non-
       
                        Qualified
       
                    Non-Equity
  Deferred
       
            Stock
  Option
  Incentive Plan
  Compensation
  All Other
   
        Salary
  Awards
  Awards
  Compensation
  Earnings
  Compensation
  Total
Name & Principal Position
  Year   ($)(4)   ($)(5)   ($)(6)   ($)(7)   ($)(8)   ($)(9)   ($)
 
Larry D. Young,
    2007       672,266                               35,000       160,908          
President and Chief Executive Officer(1)
                                                               
John O. Stewart,
    2007       425,654                               5,000       76,544          
Executive Vice President and
Chief Financial Officer
                                                               
Randall E. Gier,
    2007       456,577                               55,000       57,042          
Executive Vice President, Marketing and R&D
                                                               
James J. Johnston, Jr.,
    2007       435,962                               70,000       51,192          
President, Finished Goods and Concentrate Sales
                                                               
Pedro Herrán Gacha,
    2007       431,427                               50,000       572,990          
President, Mexico and the Caribbean
                                                               
Gilbert M. Cassagne,
    2007       714,808                               880,000       2,257,202          
Former President and Chief Executive Officer(2)
                                                               
John L. Belsito,
    2007       474,000                               115,000       70,515          
Former President, Snapple Distributors(3)
                                                               
 
 
(1) Mr. Young was appointed President and Chief Executive Officer on October 12, 2007.
 
(2) Mr. Cassagne, formerly President and Chief Executive Officer, left the company on October 12, 2007.
 
(3) Mr. Belsito, formerly President, Snapple Distributors, left the company on December 19, 2007.
 
(4) The amounts shown in this column represent the base salary reported on each Form W-2 for each of our NEOs for 2007. Due to our payroll practices, the amounts shown reflect base salary earned between December 21, 2006 and December 22, 2007. Base salary earned between December 23, 2007 and December 31, 2007 will be


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reported on the 2008 Form W-2 and reflected in the Summary Compensation Table in our 2009 proxy statement.
 
(5) The amounts shown in this column represent the dollar amount of the accounting expense recognized for financial statement reporting purposes for 2007 for all outstanding stock awards granted to the NEOs pursuant to the international share award plan, the bonus share retention plan and the long-term incentive plan, in accordance with the rules of SFAS 123(R). For Mr. Cassagne and Mr. Belsito, these amounts also include the dollar amount of the accounting expense recognized for outstanding stock awards granted pursuant to the integration share success plan. The amounts disregard adjustment for forfeiture assumptions and do not reflect amounts realized or paid to the NEOs in 2007 or prior years. Assumptions used to calculate these amounts (disregarding forfeiture assumptions) are included in note       to our audited financial statements for 2007. For further information on the stock awards granted in 2007, see the Grants of Plan-Based Awards Table.
 
(6) The amounts shown in this column represent the dollar amount of the accounting expense recognized for financial statement reporting purposes for 2007 for all outstanding option awards granted to the NEOs pursuant to the Cadbury Schweppes share option plan in accordance with SFAS 123(R). The amounts disregard adjustment for forfeiture assumptions and do not reflect amounts realized or paid to the NEOs in 2007 or prior years. Assumptions used to calculate these amounts (disregarding forfeiture assumptions) are included in note    to our audited financial statements for 2007. No option awards were granted to the NEOs in 2007.
 
(7) The amounts shown in this column represent the annual incentive awards for 2007 that will be paid to our NEOs in March 2008 pursuant to the annual incentive plan.
 
(8) The amounts shown in this column represent an estimate of the aggregate change during 2007 in the actuarial present value of accumulated benefits under the personal pension account plan, the pension equalization plan and the supplemental executive retirement plan (as applicable), as described in more detail below in the Pension Benefits Table. The change in the actuarial present value of the accumulated benefits under the plans was determined in accordance with SFAS 87. Assumptions used to calculate these amounts are included in note    to our audited financial statements for 2007 and include amounts that the NEOs may not be currently entitled to receive because such amounts are not vested.
 
(9) The amounts shown in this column represent the following components:
 
                                                 
    Perquisites ($)            
            Disability
  Company
       
    Automobile
  Service
  Income
  Contributions
  Other
   
    Allowance   Allowance   Premiums   ($)(a)   ($)(b)   Total ($)
 
Mr. Young
    26,308       19,000       4,214       27,002       84,383       160,908  
Mr. Stewart
    19,800       14,000       1,986       16,883       23,875       76,544  
Mr. Gier
    19,800       14,000       3,314       18,120       1,808       57,042  
Mr. Johnston
    13,760       14,000       2,965       17,549       2,918       51,192  
Mr. Herrán
    65,413       14,000       3,307       17,114       473,157       572,990  
Mr. Cassagne
    25,627       24,000       2,531       28,703       2,176,341       2,257,202  
Mr. Belsito
    13,750       21,000             18,688       17,077       70,515  
 
 
  (a)  The amounts shown represent Cadbury Schweppes’ matching contributions to the tax-qualified defined contribution plan and non-tax qualified defined contribution plan. The contributions to the tax-qualified defined contribution plan are as follows: for Mr. Young, $9,111; for Mr. Stewart, $8,857; for Mr. Gier, $8,857; for Mr. Johnston, $9,111; for Mr. Herrán, $8,857; for Mr. Cassagne, $9,111; and for Mr. Belsito, $8,857. The contributions to the non-tax qualified plan are as follows: for Mr. Young, $17,891; for Mr. Stewart, $8,026; for Mr. Gier, $9,263; for Mr. Johnston, $8,438; for Mr. Herrán, $8,257; for Mr. Cassagne, $19,592; and for Mr. Belsito, $9,831.
 
  (b)  The amounts shown reflect the following costs: for Mr. Young, $84,383 for club membership dues and expenses; for Mr. Stewart, $1,875 for executive physical and $22,000 for home sale bonus; for Mr. Gier, $1,808 for executive physical; for Mr. Johnston, $2,918 for sporting events; for Mr. Herrán, $23,450 for education expenses, $84,155 for security expenses, $164,056 for tax equalization expenses, $43,156 for location allowance, $54,250 for foreign service premium, $101,789 for housing allowance dues and $2,300 for tax preparation expenses; for Mr. Cassagne, $2,171,154 for separation payments and $5,187 for 25-year service award; and for Mr. Belsito, $2,075 for executive physical and $15,002 for merit bonus. For additional information about further amounts payable to Mr. Cassagne and Mr. Belsito, see “— Separation Arrangements Related to Mr. Cassagne and Mr. Belsito.”


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Grants of Plan-Based Awards
 
The following table sets forth information regarding equity plan awards and non-equity incentive plan awards by Cadbury Schweppes to our NEOs for 2007.
 
Grants of Plan-Based Awards
 
                                                                                 
                                Grant Date
       
                                Fair Value of
       
        Estimated Future Payouts Under
  Estimated Future Payouts Under
  Equity
       
        Non-Equity Incentive Plan Awards(1)   Equity Incentive Plan Awards(2)   Incentive
       
    Grant
  Threshold
  Target
  Maximum
  Threshold
  Target
  Maximum
  Plan Awards
       
Name
  Date   ($)   ($)   ($)   (#)   (#)   (#)   (3)($)        
 
Larry D. Young
    2/15/07       200,000       800,000       1,200,000                                                  
      3/29/07                               18,968               63,230                          
      3/4/07                               23,745               59,363                          
John O. Stewart
    2/15/07       85,514       342,055       513,083                                                  
      3/29/07                               9,616               32,054                          
      3/4/07                               1,354               3,385                          
Randall E. Gier
    2/15/07       74,588       298,350       447,525                                                  
      3/29/07                               10,764               35,886                          
      3/4/07                               7,470               18,675                          
James J. Johnston, Jr. 
    2/15/07       71,500       286,000       429,000                                                  
      3/29/07                               10,320               34,400                          
      3/4/07                               2,351               5,878                          
Pedro Herrán Gacha
    2/15/07       70,525       282,100       423,150                                                  
      3/29/07                               10,178               33,930                          
      3/4/07                               4,886               12,215                          
Gilbert M. Cassagne
    2/15/07       175,073       700,290       1,050,435                                                  
      3/29/07                               8,322               27,740                          
John L. Belsito
    2/15/07       94,319       377,275       565,912                                                  
      3/29/07                               4,632               15,440                          
      3/4/07                               878               2,196                          
 
 
(1) The amounts shown in the first row of these columns for each NEO represent the potential payouts of annual cash incentive compensation granted to our NEOs in 2007 under the annual incentive plan subject to the achievement of certain performance measures. The actual amount of the awards made to the NEOs and paid in cash will be set forth in the “Non-Equity Incentive Plan Compensation” column of the Summary Compensation Table after payment is made.
 
(2) The amounts shown in the second row of these columns for each NEO represent the threshold and maximum payouts of conditional shares granted to our NEOs pursuant to the long term incentive plan, subject to the achievement of certain performance measures. The performance measures are applied over a three-year performance period beginning on January 1, 2007 and ending on December 31, 2009. For more information regarding the terms of the conditional share awards, see the section entitled “— Long-Term Share-Based Incentives — Long Term Incentive Plan.”
 
The amounts shown in the third row of these columns for each NEO represent matched shares granted by Cadbury Schweppes on the portion of the annual incentive award that each NEO earned in 2006 and elected to defer under the bonus share retention plan on March 4, 2007 in the form of Cadbury Schweppes ordinary shares (“basic shares”). In accordance with the terms of the bonus share retention plan, each NEO is eligible for (i) an award equal to 40% of the number of his basic shares if he remains employed through the date the award is paid in the first quarter of 2010 (as shown in the column “Threshold — Estimated Future Payouts Under Equity Incentive Plan Awards”) and (ii) an award equal to 60% of the number of his basic shares if certain performance measures are achieved during the three-year period beginning on January 1, 2007 and ending on December 31, 2009 and the NEO remains employed through the date the award is paid in the first quarter of 2010. The amounts shown in the column “Maximum — Estimated Future Payouts Under Equity Incentive Plan Awards” represent the total maximum number of matched shares that the NEO is eligible to receive.
 
(3) The amounts shown in this column represent the grant date fair value of various awards in accordance with SFAS 123(R) based on a potential payout of maximum award. The grant date fair value generally reflects the amount we would expense in our financial statements over the award’s vesting schedule, and does not correspond to the actual value that may be realized by or paid to the NEOs.


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Outstanding Equity Awards
 
The following table sets forth information regarding exercisable and unexercisable stock options and vested and unvested equity awards held by each NEO as of December 31, 2007. All such awards relate to Cadbury Schweppes ordinary shares.
 
Outstanding Equity Awards at Year-End
 
                                                                                 
    Option Awards   Stock Awards    
            Equity
                      Equity Incentive
   
            Incentive
              Market
  Equity Incentive
  Plan Awards:
   
            Plan Awards:
          Number
  Value of
  Plan Awards:
  Market or Payout
   
    Number of
  Number of
  Number of
          of Shares
  Shares
  Number of
  Value of
   
    Securities
  Securities
  Securities
          or Units
  or Units
  Unearned Shares,
  Unearned
   
    Underlying
  Underlying
  Underlying
  Option
      of Stock
  of Stock
  Units, or Other
  Shares, Units, or
   
    Unexercised
  Unexercised
  Unexercised
  Exercise
  Option
  That Have
  That Have
  Rights That Have
  Other Rights
   
    Options
  Options
  Unearned
  Price
  Expiration
  Not Vested
  Not Vested
  Not Vested
  That Have Not
   
Name
  Exercisable (#)   Unexercisable (#)   Options (#)   ($)(1)   Date   (#)   ($)(2)   (#)   Vested($)(2)   Grant Date
 
Larry D. Young
            96,000               10.50       4/1/15                                       4/1/05 (3)
                                              23,745       294,515       35,618       441,778       3/4/07 (4)
                                                              61,666       764,858       4/7/06 (5)
                                                              63,230       784,256       3/29/07 (5)
John O. Stewart
                                            20,000       248,065                       11/30/06 (6)
                                              1,354       16,794       2,031       25,191       3/4/07 (4)
                                                              22,668       281,156       11/6/06 (5)
                                                              32,054       397,573       3/29/07 (5)
Randall E. Gier
    150,000                       8.48       3/26/14                                       3/26/04 (3)
      59,000                       8.78       8/27/14                                       8/27/04 (3)
              41,000               10.50       4/1/15                                       4/1/05 (3)
                                              20,000       248,065                       8/29/06 (6)
                                              4,354       54,004       6,531       81,006       3/4/05 (4)
                                              1,973       24,492       2,960       36,714       3/4/06 (4)
                                              7,470       92,652       11,205       138,978       3/4/07 (4)
                                                              22,206       275,426       4/8/05 (5)
                                                              33,546       416,079       4/7/06 (5)
                                                              35,886       445,102       3/29/07 (5)
James J. Johnston, Jr. 
    32,000                       8.86       9/11/08                                       9/11/98 (3)
      40,000                       8.15       9/3/09                                       9/3/99 (3)
      60,000                       8.17       9/1/10                                       9/1/00 (3)
      65,000                       9.53       8/31/11                                       8/31/01 (3)
      70,000                       9.64       8/23/12                                       8/23/02 (3)
      90,000                       7.02       5/9/13                                       5/9/03 (3)
      64,000                       8.78       8/27/14                                       8/27/04 (3)
              41,000               10.50       4/1/15                                       4/1/05 (3)
                                              1,352       16,769       2,028       25,154       3/4/05 (4)
                                              2,565       31,814       3,848       47,728       3/4/06 (4)
                                              2,351       29,160       3,527       43,746       3/4/07 (4)
                                                              21,024       260,766       4/8/05 (5)
                                                              33,546       416,079       4/7/06 (5)
                                                              34,400       426,671       3/29/07 (5)
Pedro Herrán Gacha
    30,000                       8.86       9/11/08                                       9/11/98 (3)
      40,000                       8.15       9/3/09                                       9/3/99 (3)
      60,000                       8.17       9/1/10                                       9/1/00 (3)
      55,000                       9.53       8/31/11                                       8/31/01 (3)
      55,000                       9.64       8/23/12                                       8/23/02 (3)
      12,500                       6.62       3/14/13                                       3/14/03 (3)
      75,000                       7.02       5/9/13                                       5/9/03 (3)
      43,000                       8.78       8/27/14                                       8/27/04 (3)
              41,000               10.50       4/1/15                                       4/1/05 (3)
                                              20,000       248,065                       8/29/06 (6)
                                              12,000       148,839                       2/16/06 (6)
                                              3,995       49,551       5,993       74,333       3/4/06 (4)
                                              4,886       60,602       7,329       90,903       3/4/07 (4)
                                                              18,092       224,399       4/8/05 (5)
                                                              27,626       342,652       4/7/06 (5)
                                                              33,930       420,842       3/29/07 (5)


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    Option Awards   Stock Awards    
            Equity
                      Equity Incentive
   
            Incentive
              Market
  Equity Incentive
  Plan Awards:
   
            Plan Awards:
          Number
  Value of
  Plan Awards:
  Market or Payout
   
    Number of
  Number of
  Number of
          of Shares
  Shares
  Number of
  Value of
   
    Securities
  Securities
  Securities
          or Units
  or Units
  Unearned Shares,
  Unearned
   
    Underlying
  Underlying
  Underlying
  Option
      of Stock
  of Stock
  Units, or Other
  Shares, Units, or
   
    Unexercised
  Unexercised
  Unexercised
  Exercise
  Option
  That Have
  That Have
  Rights That Have
  Other Rights
   
    Options
  Options
  Unearned
  Price
  Expiration
  Not Vested
  Not Vested
  Not Vested
  That Have Not
   
Name
  Exercisable (#)   Unexercisable (#)   Options (#)   ($)(1)   Date   (#)   ($)(2)   (#)   Vested($)(2)   Grant Date
 
Gilbert M. Cassagne
    150,000                       8.17       9/1/10                                       9/1/00 (3)
      160,000                       9.53       8/31/11                                       8/31/01 (3)
      175,000                       9.64       8/23/12                                       8/23/02 (3)
      250,000                       7.02       5/9/13                                       5/9/03 (3)
      160,000                       8.78       8/27/14                                       8/27/04 (3)
              145,500               10.50       4/1/15                                       4/1/05 (3)
                                                              56,084       695,623       3/15/02 (5)
                                                              57,748       716,262       3/13/03 (5)
                                                              68,369       847,997       4/8/05 (5)
                                                              60,351       748,548       4/7/06 (5)
                                                              27,740       344,066       3/29/07 (5)
                                                              50,000       620,162       6/30/06 (7)
John L. Belsito
    75,000                       8.93       3/16/11                                       3/16/01 (3)
      100,000                       9.53       8/31/11                                       8/31/01 (3)
      100,000                       9.64       8/23/12                                       8/23/02 (3)
      150,000                       7.02       5/9/13                                       5/9/03 (3)
      43,000                       8.78       8/27/14                                       8/27/04 (3)
              34,000               10.50       4/1/15                                       4/1/05 (3)
                                              2,103       26,084       3,155       39,132       3/4/06 (4)
                                                              37,004       458,969       3/15/02 (5)
                                              878       10,890       1,318       16,347       3/4/07 (4)
                                                              36,720       455,447       3/13/03 (5)
                                                              40,074       497,047       4/8/05 (5)
                                                              31,178       386,708       4/7/06 (5)
                                                              15,440       191,506       3/29/07 (5)
                                                              10,000       124,032       6/30/06 (7)
 
 
(1) The option exercise prices were converted from pounds sterling to U.S. dollars based on a December 31, 2007 currency exchange rate of 1 pound sterling to 1.9973 U.S. dollars.
 
(2) The amount for each row represents the total number of shares or other rights awarded under an equity incentive plan that have not vested multiplied by the closing price of a Cadbury Schweppes ordinary share on the London Stock Exchange on December 31, 2007. The price of an ordinary share was converted from pounds sterling to U.S. dollars based on a December 31, 2007 currency exchange rate of 1 pound sterling to 1.9973 U.S. dollars.
 
(3) Share Option Plan. An option grant does not become exercisable until performance vesting criteria have been satisfied. No portion of the option may be exercised unless the performance measure is satisfied on the third anniversary of the grant date.
 
(4) Bonus Share Retention Plan. The amounts in the “Number of Shares or Units of Stock That Have Not Vested” column will vest on the third anniversary of the applicable grant date if the NEO is employed with Cadbury Schweppes on such date. The amounts in “Equity Incentive Plan Awards: Number of Unearned Shares, Units or Other Rights That Have Not Vested” column will vest based on Cadbury Schweppes achieving the maximum compound annual growth in aggregate underlying economic profit target over a three-year performance period. Payout could range up to 100% of the conditional shares disclosed. Pursuant to these terms:
 
  •  Mr. Gier and Mr. Johnston were each granted an award subject to a performance period from January 1, 2005 to December 31, 2007 and a vesting date of March 2008;
 
  •  Mr. Gier, Mr. Johnston, Mr. Herrán and Mr. Belsito were each granted an award subject to a performance period from January 1, 2006 to December 31, 2008 and a vesting date of March 2009; and
 
  •  Mr. Young, Mr. Stewart, Mr. Gier, Mr. Johnston, Mr. Herrán and Mr. Belsito were each granted an award subject to a performance period from January 1, 2007 to December 31, 2009 and a vesting date of March 2010.

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In addition, the amounts shown in the following table represent the number of Cadbury Schweppes ordinary shares (the “basic shares”) that each NEO received on the applicable grant date upon his election to defer all or a portion of their prior year annual incentive plan awards into the bonus share retention plan.
 
                 
    Grant Date   Number of Basic Shares
 
Mr. Young
    3/4/07       59,363  
Mr. Stewart
    3/4/07       3,385  
Mr. Gier
    3/4/05       10,885  
      3/4/06       4,933  
      3/4/07       18,675  
Mr. Johnston
    3/4/05       3,380  
      3/4/06       6,413  
      3/4/07       5,878  
Mr. Herrán
    3/4/06       9,988  
      3/4/07       12,215  
Mr. Cassagne
           
Mr. Belsito
    3/4/06       5,258  
      3/4/07       2,196  
 
(5) Long Term Incentive Plan. Share grants will vest on the third anniversary of the applicable grant date if the NEO is employed with Cadbury Schweppes on such date and based on the achievement of compound annual growth in the aggregate underlying earnings per share target of Cadbury Schweppes and total shareholder return relative to an index of peer companies of Cadbury Schweppes over the applicable performance period. Vesting could range up to 100% of the conditional shares disclosed. Pursuant to these terms:
 
  •  Mr. Young, Mr. Gier, Mr. Johnston, Mr. Herrán, Mr. Cassagne and Mr. Belsito were each granted an award subject to a three-year performance period from January 1, 2005 to December 31, 2007 and a vesting date of March 2008;
 
  •  all of the NEOs were granted an award subject to a three-year performance period from January 1, 2006 to December 31, 2008 and a vesting date of March 2009;
 
  •  all the NEOs were granted an award subject to a three-year performance period from January 1, 2007 to December 31, 2009 and a vesting date of March 2010; and
 
  •  Mr. Cassagne and Mr. Belsito were each granted an award, subject initially to a three-year performance period from January 1, 2003 to December 31, 2005, and subsequently extended in accordance with the plan rules to a five-year performance period ending December 31, 2007 and a vesting date of March 2008.
 
(6) International Share Award Plan . For Mr. Gier and Mr. Herrán, the share awards will vest on the third anniversary of the grant date. For Mr. Stewart, the share award will vest in equal installments on the second and third anniversary of the grant date.
 
(7) Integration Success Share Plan . Awards under the integration success share plan are payable in the first quarter of 2008, subject to compliance with restrictive covenants in the individual’s employment agreement. For further information, see “Separation Arrangements Related to Mr. Cassagne and Mr. Belsito.”


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Option Exercises and Stock Vested
 
The following table sets forth information regarding Cadbury Schweppes ordinary shares acquired in 2007 by each NEO upon the exercise of stock options and vesting of stock awards during 2007.
 
Option Exercises and Stock Vested
 
                                 
    Option Awards   Stock Awards
    Number of
      Number of Shares
   
    Shares Acquired
  Value Realized on
  Acquired on
  Value on
    on Exercise
  Exercise
  Vesting
  Vesting
Name
  (#)(1)   ($)(2)   (#)   ($)(3)
 
Larry D. Young
                               
John O. Stewart
                    20,000 (4)     258,780  
Randall E. Gier
                    20,151 (5)     204,686  
James J. Johnston, Jr. 
                    19,531 (5)     198,389  
                      2,384 (6)     24,216  
Pedro Herrán Gacha
    30,000       200,931       16,489 (5)     167,489  
Gilbert M. Cassagne
                    65,959 (5)     669,987  
John L. Belsito
    20,000       28,440       38,309 (5)     389,128  
 
 
(1) The amounts shown in this column reflect the aggregate number of Cadbury Schweppes ordinary shares underlying the options that were exercised in 2007.
 
(2) The amounts shown in this column are calculated by multiplying (x) the difference between the closing price on the London Stock Exchange of a Cadbury Schweppes ordinary share on the date of exercise and the exercise price of the options by (y) the number of Cadbury Schweppes ordinary shares acquired upon exercise. The amounts shown in this column were converted from pounds sterling to U.S. dollars based on the currency exchange rate on the date of exercise.
 
(3) The amounts shown in this column are calculated by multiplying (x) the closing price of a Cadbury Schweppes ordinary share on the London Stock Exchange on the date of vesting by (y) the number of Cadbury Schweppes ordinary shares acquired upon vesting. The amounts shown in this column were converted from pounds sterling to U.S. dollars based on the currency exchange rate on the date of vesting.
 
(4) The amount shown reflects the number of awards under the international share award plan that vested in 2007.
 
(5) The amounts shown reflect the number of Cadbury Schweppes ordinary shares that vested in 2007 under the long term incentive plan.
 
(6) The amount shown reflects the number of Cadbury Schweppes ordinary shares that vested in 2007 under the bonus share retention plan.


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Pension Benefits Table
 
The following table sets forth information regarding pension benefits accrued by each NEO under our defined benefit plans and supplemental contractual arrangements for 2007.
 
Pension Benefits
 
                                 
        Number of
       
        Years
  Present Value of
  Payments
        Credited
  Accumulated
  During Last
        Service
  Benefit
  Fiscal Year
Name
  Plan Name   (#)   ($)(1)   ($)
 
Larry D. Young
    Personal Pension Account Plan       1.67       15,000          
      Pension Equalization Plan       1.67       20,000          
John O. Stewart
    Personal Pension Account Plan       1.15       5,000          
      Pension Equalization Plan       1.15       0          
Randall E. Gier
    Personal Pension Account Plan       3.78       45,000          
      Pension Equalization Plan       3.78       100,000          
James J. Johnston, Jr. 
    Personal Pension Account Plan       15.08       240,000          
      Pension Equalization Plan       15.08       235,000          
Pedro Herrán Gacha
    Personal Pension Account Plan       10.39       135,000          
      Pension Equalization Plan       10.39       220,000          
Gilbert M. Cassagne
    Personal Pension Account Plan       25.74       680,000          
      Pension Equalization Plan       25.74       3,430,000          
      Supplemental Executive Retirement Plan       25.74       450,000          
John L. Belsito
    Personal Pension Account Plan       20.20       330,000          
      Pension Equalization Plan       20.20       595,000          
 
 
(1) The amounts shown reflect the actuarial present value of benefits accumulated under the respective plans in accordance with the assumptions included in note    to our audited financial statements for 2007. These amounts assume that each NEO retires at age 65. The discount rate used to determine the present value of accumulated benefits is 6.25%. The present values assume no pre-retirement mortality and utilize the RP 2000 healthy white collar male and female mortality tables projected to calendar year 2015.
 
Personal Pension Account Plan
 
NEOs are provided with retirement benefits under the Cadbury Schweppes personal pension account plan (the “PPA Plan”), a tax-qualified defined benefit pension plan covering full-time and part-time employees with at least one year of service who were actively employed as of December 31, 2006. The PPA Plan was closed to employees who were hired after December 31, 2006.
 
The PPA Plan provides a retirement benefit to participants based on a percentage of the participant’s annual compensation (which includes base salary and annual incentive award). The percentage, which is based on age and years of service, varies as follows:
 
                 
    Age/Service Credit Percentage
    Compensation up to
  Compensation over
Age Plus Years of Service
  Taxable Wage Base   Taxable Wage Base
 
Less than 35
    2 3 / 4 %     5 1 / 2 %
35 but less than 45
    3 3 / 4 %     7 1 / 2 %
45 but less than 55
    4 1 / 2 %     9 %
55 but less than 65
    6 %     11 %
65 but less than 75
    8 %     13 %
75 or more
    10 %     15 %


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Participants fully vest in their retirement benefits after five years of service or upon attaining age 65. Participants are also eligible for early retirement benefits if they separate from service on or after attaining age 55 with 10 years of service. Participants who leave Cadbury Schweppes before they are fully vested in their retirement benefits forfeit their accrued benefit under the PPA Plan.
 
The Internal Revenue Code places limitations on compensation and pension benefits for tax-qualified defined benefit plans such as the PPA Plan. We have established two non-qualified supplemental defined benefit pension programs (the Cadbury Schweppes pension equalization plan and the Cadbury Schweppes supplemental executive retirement plan), as discussed below, to restore some of the pension benefits limited by the Internal Revenue Code.
 
Pension Equalization Plan
 
Cadbury Schweppes sponsors a pension equalization plan (the “PEP”), an unfunded, non-tax qualified excess defined benefit plan covering key employees who were actively employed as of December 31, 2006 and whose base salary exceeded certain statutory limits imposed by the Internal Revenue Code. As with the PPA Plan, the PEP was closed to employees who were hired after December 31, 2006.
 
The purpose of the PEP is to restore to PEP participants any PPA Plan benefits that are limited by statutory restrictions imposed by the Internal Revenue Code that are taken into consideration when determining their PPA Plan benefits. Participants fully vest in their benefits under the PEP after five years of service. Participants who voluntarily resign from service before they are vested in their benefits under the PEP forfeit their unvested accrued benefit. Participants who are terminated without “cause” or resign for “good reason” are entitled to have their unvested accrued benefits under the PEP automatically vested.
 
In addition, pursuant to the terms of the executive employment agreements, if a NEO is terminated without “cause” or resigns for “good reason” and is not vested in his accrued benefit under the PPA Plan, such NEO will be entitled to have his accrued and unvested benefits under the PPA Plan paid under the PEP. As of December 31, 2007, Mr. Young, Mr. Stewart and Mr. Gier have not vested in their accrued benefits under the PPA Plan.
 
Supplemental Executive Retirement Plan
 
Cadbury Schweppes sponsored a supplemental executive retirement plan (the “SERP”), a non-tax qualified defined benefit plan covering certain senior executives. The SERP was designed to ensure that the total pension benefits due to participants, including benefits under the PPA Plan and PEP, provided a certain level of income at retirement. Combined benefits range from 50% of a participant’s final average compensation after 15 years of service to 60% of final average compensation after 25 years of service. Benefits under the SERP vest after 10 years of service. In 2007, only Mr. Cassagne and Mr. Belsito participated in the SERP. Only Mr. Cassagne’s SERP benefit is fully vested. Mr. Belsito did not satisfy the vesting conditions under the SERP as of the date he left the company and forfeited the amount accrued under the SERP. No current or future employees are eligible to participate in the SERP.
 
Deferred Compensation
 
Savings Incentive Plan
 
Cadbury Schweppes sponsors a savings incentive plan (the “SIP”), a tax-qualified 401(k) defined contribution plan. The plan permits participants to contribute up to 75% of their base salary in the SIP within certain statutory limitations under the Internal Revenue Code and Cadbury Schweppes matches 100% of the first 4% of base salary that is deferred to the SIP by a participant. Employees participating in the SIP are always fully vested in their, as well as the employer’s, contributions to the plan.
 
Supplemental Savings Plan
 
The only nonqualified deferred compensation plan sponsored by Cadbury Schweppes for NEOs is the supplemental savings plan (the “SSP”), a non-tax qualified defined contribution plan. The SSP is for employees who are actively enrolled in the SIP and whose deferrals under the SIP are limited by Internal Revenue Code compensation limitations. Employees may elect to defer up to 75% of their base salary over the Internal Revenue


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Code compensation limit to the SSP, and Cadbury Schweppes matches 100% of the first 4% of base salary that is contributed by these employees. Employees participating in the SSP are always fully vested in their, as well as the employer’s, contributions to the plan. Participants self-direct the investment of their account balances among various mutual funds.
 
The following table sets forth information regarding the nonqualified deferred compensation under the SSP for each NEO for 2007.
 
Nonqualified Deferred Compensation
 
                                         
    Executive
  Registrant
      Aggregate
   
    Contributions in
  Contributions in
  Aggregate Earnings
  Withdrawals/
  Aggregate Balance
    Last Year
  Last Year
  in Last Year
  Distributions
  at Last Year-End
Name
  ($)(1)   ($)(2)   ($)(3)   ($)   ($)
 
Larry D. Young
    53,672       17,891       267               71,829  
John O. Stewart
    150,491       8,026       510               159,327  
Randall E. Gier
    37,737       9,263       7,500               156,323  
James J. Johnston, Jr. 
    18,987       8,438       3,706               73,105  
Pedro Herrán Gacha
    14,450       8,257       (182 )             51,154  
Gilbert M. Cassagne
    146,942       19,592       58,338               1,556,013  
John L. Belsito
    14,746       9,831       12,872               229,612  
 
 
(1) The amounts shown in this column represent the aggregate amount of contributions made by our NEOs to the SSP in 2007. These amounts are included in the “Salary” column of the Summary Compensation Table.
 
(2) The amounts shown in this column represent the aggregate amount of employer contributions to the NEOs’ accounts under the SSP in 2007. These amounts are also included in the “All Other Compensation” column of the Summary Compensation Table.
 
(3) The amounts shown in this column represent the aggregate amount of interest or other earnings credited to the NEOs’ accounts under the SSP in 2007.
 
Executive Employment Agreements
 
Consistent with our past practices, we have entered into executive employment agreements with each of our NEOs at the time they became an executive officer. The current executive employment agreements each have a term of 10 years. In addition to setting forth their basic duties, the executive employment agreements provide the NEOs with a base salary and entitle them to participate in the annual incentive plan and all other applicable employee compensation and benefit plans and programs. In the event we terminate Mr. Young or Mr. Stewart “without cause” or they resign for “good reason” during the employment term, they are entitled to (1) a lump sum severance payment equal to 12 months of their annual base salary and their Target Award under the annual incentive plan; (2) a lump sum cash payment equal to their annual incentive plan payment, pro-rated through the employment termination date and based on the actual performance targets achieved for the year in which such termination of employment occurred; (3) salary continuation for up to 12 months equal to their annual base salary and their Target Award under the annual incentive plan (subject to mitigation for new employment); and (4) medical, dental and vision benefits for the salary continuation period. In the event we terminate Mr. Gier, Mr. Johnston or Mr. Herrán “without cause” or they resign for “good reason” during the employment term, they are entitled to (1) a lump sum severance payment equal to nine months of their annual base salary and 75% of their Target Award under the annual incentive plan; (2) a lump sum cash payment equal to their annual incentive plan payment, pro-rated through the employment termination date and based on the actual performance targets achieved for the year in which such termination of employment occurred; (3) salary continuation for up to nine months equal to their annual base salary and Target Award under the annual incentive plan (subject to mitigation for new employment); and (4) medical, dental and vision benefits for the salary continuation period. The NEOs are also entitled to outplacement services for their salary continuation period and certain payments under the qualified and non-qualified pension plans. In the event a NEO is terminated without “cause” or resigns for “good reason,” he is entitled to have his unvested accrued benefits


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under the PEP automatically vested. Such NEO will also be entitled to have his accrued and unvested benefits under the PPA Plan paid under the PEP. In addition, in the event the NEO is terminated due to death or disability, he is entitled to his Target Award, pro rated through the date on which his death or disability occurs.
 
Generally, “cause” is defined as termination of the NEO’s employment for his: (1) willful failure to substantially perform his duties; (2) breach of a duty of loyalty toward the company; (3) commission of an act of dishonesty toward the company, theft of our corporate property, or usurpation of our corporate opportunities; (4) unethical business conduct including any violation of law connected with the NEO’s employment; or (5) conviction of any felony involving dishonest or immoral conduct. Generally, “good reason” is defined as a resignation by the NEO for any of the following reasons: (1) our failure to perform any of our material obligations under the employment agreement; (2) a relocation by us of the NEO’s principal place of employment to a site outside a 50 mile radius of the current site of the principal place of employment; or (3) the failure by a successor to assume the employment agreement.
 
The employment agreements include non-competition and non-solicitation provisions. These provisions state that the NEO will not, for a period of one year after termination of employment, become engaged with companies that are in competition with us, including but not limited to a predetermined list of companies. Also, the NEO agrees for a period of one year after termination of employment not to solicit or attempt to entice away any of our employees or directors.
 
Potential Payments upon Certain Terminations of Employment
 
The following tables below outline the potential payments to Mr. Young, Mr. Stewart, Mr. Gier, Mr. Johnston and Mr. Herrán upon the occurrence of various termination events, including “termination for cause” or “not for good reason,” “termination without cause” or “for good reason” or termination due to death or disability. The following assumptions apply with respect to the tables below and any termination of employment of a NEO:
 
  •  The tables include estimates of amounts that would have been paid to Mr. Young, Mr. Stewart, Mr. Gier, Mr. Herrán and Mr. Johnston assuming a termination event occurred on December 31, 2007. The employment of these NEOs did not actually terminate on December 31, 2007, and as a result, these NEOs did not receive any of the amounts shown in the tables below. The actual amounts to be paid to a NEO in connection with a termination event can only be determined at the time of such termination event.
 
  •  The tables assume that the price of Cadbury Schweppes ordinary shares is $12.40 per share, the closing market price per share on December 31, 2007. The price of an ordinary share was converted from pounds sterling to U.S. dollars based on a December 31, 2007 currency exchange rate of £1 to $1.9973.
 
  •  Each NEO is entitled to receive amounts earned during the term of his employment regardless of the manner of termination. These amounts include accrued base salary, accrued vacation time and other employee benefits to which the NEO was entitled on the date of termination, and are not shown in the tables below.
 
  •  For purposes of the tables below, the specific definitions of “cause” and “good reason” are defined in the employment agreements of each NEO and are described below in the section entitled “Employment Agreements.”
 
  •  To receive the benefits under the employment agreements, each of the NEOs is required to provide a general release of claims against us and our affiliates and subject to mitigation for new employment. In addition, if NEOs receive severance payments under the employment agreements, they will not be entitled to receive any severance benefits under the Cadbury Schweppes general severance pay plan.
 


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        Termination
      Termination
        for Cause
      Without Cause
        or Resignation
      or Resignation
        without
      for
Name
 
Compensation Element
 
Good Reason
 
Death/Disability
 
Good Reason
 
Larry D. Young
  Salary Continuation Payments(1)   $ 0     $ 0     $ 1,600,000  
    Lump Sum Cash Payments(2)   $ 0     $ 0     $ 800,000  
    Lump Sum Target Award Annual Incentive Plan Payment(3)   $ 0     $ 800,000     $ 800,000  
    Lump Sum 2007 Annual Incentive Plan Payment(4)                        
    Accelerated Equity Vesting
  •   Stock Options(5)
  $ 0     $ 183,112     $ 183,112  
   
  •   Bonus Share Retention Plan(6)
  $ 0     $ 940,190     $ 940,190  
   
  •   Long Term Incentive Plan(7)
  $ 0     $ 1,208,249     $ 1,208,249  
    Other(9)   $ 0     $ 0     $ 125,756  
                             
    Total   $ 0     $ 3,131,551     $ 5,657,307  
                             
                             
John O. Stewart
  Salary Continuation Payments(1)   $ 0     $ 0     $ 900,000  
    Lump Sum Cash Payments(2)   $ 0     $ 0     $ 500,000  
    Lump Sum Target Award Annual Incentive Plan Payment(3)   $ 0     $ 400,000     $ 400,000  
    Lump Sum 2007 Annual Incentive Plan Payment(4)                        
    Accelerated Equity Vesting
  •   Bonus Share Retention Plan(6)
  $ 0     $ 53,607     $ 53,607  
   
  •   Long Term Incentive Plan(7)
  $ 0     $ 283,116     $ 283,116  
   
  •   International Share Award Plan(8)
  $ 0     $ 115,995     $ 115,995  
    Other(9)   $ 0     $ 0     $ 28,006  
                             
    Total   $ 0     $ 852,718     $ 2,280,724  
                             
                             
Randall E. Gier
  Salary Continuation Payments(1)   $ 0     $ 0     $ 568,013  
    Lump Sum Cash Payments(2)   $ 0     $ 0     $ 344,250  
    Lump Sum Target Award Annual Incentive Plan Payment(3)   $ 0     $ 298,350     $ 223,763  
    Lump Sum 2007 Annual Incentive Plan Payment(4)                        
    Accelerated Equity Vesting
  •   Stock Options(5)
  $ 0     $ 78,204     $ 78,204  
   
  •   Bonus Share Retention Plan(6)
  $ 0     $ 656,838     $ 656,838  
   
  •   Long Term Incentive Plan(7)
  $ 0     $ 820,226     $ 820,226  
   
  •   International Share Award Plan(8)
  $ 0     $ 114,246     $ 114,246  
    Other(9)   $ 0     $ 0     $ 164,067  
                             
    Total   $ 0     $ 1,967,864     $ 2,969,606  
                             

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        Termination
      Termination
        for Cause
      Without Cause
        or Resignation
      or Resignation
        without
      for
Name
 
Compensation Element
 
Good Reason
 
Death/Disability
 
Good Reason
 
                             
James J.
Johnston, Jr. 
  Salary Continuation Payments(1)   $ 0     $ 0     $ 544,500  
    Lump Sum Cash Payments(2)   $ 0     $ 0     $ 330,000  
    Lump Sum Target Award Annual Incentive Plan Payment(3)   $ 0     $ 286,000     $ 214,500  
    Lump Sum 2007 Annual Incentive Plan Payment(4)                        
    Accelerated Equity Vesting
  •   Stock Options(5)
  $ 0     $ 78,204     $ 78,204  
   
  •   Bonus Share Retention Plan(6)
  $ 0     $ 302,713     $ 302,713  
   
  •   Long Term Incentive Plan(7)
  $ 0     $ 795,767     $ 795,767  
    Other(9)   $ 0     $ 0     $ 19,067  
                             
    Total   $ 0     $ 1,462,684     $ 2,284,751  
                             
                             
Pedro Herrán Gacha
  Salary Continuation Payments(1)   $ 0     $ 0     $ 537,075  
    Lump Sum Cash Payments(2)   $ 0     $ 0     $ 325,500  
    Lump Sum Target Award Annual Incentive Plan Payment(3)   $ 0     $ 282,100     $ 211,575  
    Lump Sum 2007 Annual Incentive Plan Payment(4)                        
    Accelerated Equity Vesting                        
   
  •   Stock Options(5)
  $ 0     $ 78,204     $ 78,204  
   
  •   Bonus Share Retention Plan(6)
  $ 0     $ 392,947     $ 392,947  
   
  •   Long Term Incentive Plan(7)
  $ 0     $ 690,600     $ 690,600  
   
  •   International Share Award Plan(8)
  $ 0     $ 266,856     $ 266,856  
    Other(9)   $ 0     $ 0     $ 19,067  
                             
    Total   $ 0     $ 1,710,706     $ 2,521,823  
                             
 
(1) The amount shown represents salary continuation in an amount equal to (x) annual base salary and (y) Target Award. The amount shown represents 100% for Mr. Young and Mr. Stewart and 75% for Mr. Gier, Mr. Johnston and Mr. Herrán, in each case, according to the terms of their respective executive employment agreements.
 
(2) The amount shown represents a lump sum cash payment equal to the annual base salary for Mr. Young and Mr. Stewart and 75% of the annual base salary for Mr. Gier, Mr. Johnston and Mr. Herrán.
 
(3) The amount shown under the “Death/Disability” column represents each NEO’s Target Award, pro-rated through the assumed employment termination date. The amount shown under the “Termination Without Cause or Resignation for Good Reason” column represents a lump sum payment under the annual incentive plan equal to the Target Award for Mr. Young and Mr. Stewart and equal to 75% of the Target Award for Mr. Gier, Mr. Johnston and Mr. Herrán.

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(4) The amount shown represents a lump sum cash payment equal to each NEO’s 2007 annual incentive plan payment, pro-rated through the assumed employment termination date and based on the actual performance targets achieved for the year in which such assumed termination of employment occurred.
 
(5) The amount shown represents the value of the unvested stock options as of December 31, 2007 assuming the performance targets have been achieved. These stock options remain exercisable for 12 months from the employment termination date.
 
(6) The amount shown represents the combined value of (i) Cadbury Schweppes ordinary shares that each NEO elected to defer under the bonus share retention plan (the “basic shares”), (ii) a matched share award equal to 40% of the number of his basic shares, pro-rated through the assumed employment termination date and (iii) a matched share award equal to 60% of the number of his basic shares, pro-rated through the employment termination date and assuming that the maximum performance targets were achieved.
 
(7) The amount shown represents the value of unvested equity awards under the long term incentive plan as of December 31, 2007, assuming the achievement of performance targets and pro-rated through the employment termination date.
 
(8) The amount shown represents the value of unvested share awards under the international share award plan, pro-rated through the employment termination date.
 
(9) The amounts shown in the “Termination Without Cause or Resignation for Good Reason” column reflect the following elements:
 
                                 
            Unvested
   
            Accrued
   
    Medical, Dental
  Outplacement
  Pension
   
    and Vision Benefits
  Services
  Benefit
   
    ($)(a)   ($)   ($)(b)   Total
 
Mr. Young
    12,156       78,600       35,000       125,756  
Mr. Stewart
    12,156       10,850       5,000       28,006  
Mr. Gier
    9,117       9,950       145,000       164,067  
Mr. Johnston
    9,117       9,950               19,067  
Mr. Herrán
    9,117       9,950               19,067  
 
 
  (a)  Estimated combined cash value over the salary continuation period.
 
  (b)  Unvested accrued benefits under the Cadbury Schweppes PPA Plan and PEP to be paid to the NEO under the PEP.
 
Separation Arrangements Related to Mr. Cassagne and Mr. Belsito
 
Mr. Cassagne’s Separation.   Pursuant to the terms of his executive employment agreement, Mr. Cassagne is entitled to (1) a lump sum payment of $1,800,000, which is equal to the sum of his annual base salary and his full Target Award under the annual incentive plan; (2) a lump sum payment equal to his annual incentive plan payment, pro-rated through his employment termination date and based on the actual performance targets achieved for the year in which such termination of employment occurred; (3) salary continuation for up to 12 months equal to a total of $1,800,000 (subject to mitigation for new employment); (4) medical, dental and vision benefits continuation for the salary continuation period; (5) his accrued vested awards under the bonus share retention plan and long term incentive plan; (6) an award under the integration success share plan of 50,000 Cadbury Schweppes ordinary shares in the first quarter of 2008; and (7) transitional employment services for 12 months. Pursuant to the terms of the Cadbury Schweppes share option plan, Mr. Cassagne will be able to exercise all of his vested stock options, as of his departure date, until October 11, 2008. In addition, Mr. Cassagne will be able to exercise all of his unvested performance options for 12 months following the third anniversary of the date of grant, to the extent the performance targets are met at the end of the three-year performance period. To the extent the performance targets are not met at the end of the third anniversary of the date of grant, the performance targets will be reviewed again at the fifth anniversary of the date of grant. If the performance targets are met, Mr. Cassagne will be entitled to exercise the options for 12 months following the satisfaction of the performance period. If the performance targets are not met, all of his unvested options will be forfeited.
 
Mr. Belsito’s Separation.   Pursuant to the terms of his executive employment agreement, Mr. Belsito is entitled to (1) a lump sum payment of $853,200, which is equal to the sum of his annual base salary and his full


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Target Award under the annual incentive plan; (2) a lump sum payment equal to his annual incentive plan payment, pro-rated through his employment termination date and based on the actual performance targets achieved for the year in which such termination of employment occurred; (3) salary continuation for up to 12 months equal to a total of $853,200 (subject to mitigation for new employment); (4) medical, dental and vision benefits continuation for the salary continuation period; (5) his accrued vested award under the bonus share retention plan and long term incentive plan; (6) an award under the integration success share plan of 10,000 Cadbury Schweppes ordinary shares in the first quarter of 2008; and (7) transitional employment services for 12 months. Pursuant to the terms of the Cadbury Schweppes share option plan, Mr. Belsito will be able to exercise all of his vested stock options, as of his departure date, until December 18, 2008. In addition, Mr. Belsito will be able to exercise 100% of his unvested performance options for 12 months following the third anniversary of the date of grant, to the extent the performance targets are met at the end of the three-year performance period. To the extent the performance targets are not met at the end of the third anniversary, the performance targets will be reviewed again at the fifth anniversary of the date of grant. If the performance targets are met, Mr. Belsito will be entitled to exercise the options for 12 months following the satisfaction of the performance period. If the performance targets are not met, all of his unvested options will be forfeited.
 
The tables below include the actual termination payments accrued by Mr. Cassagne and Mr. Belsito as of their date of separation on October 12, 2007 and December 19, 2007, respectively.
 
             
        Separation from
Name
 
Compensation Element
 
Service Payment
 
Gilbert M. Cassagne
  Salary Continuation Payments(1)   $ 1,800,000  
    Lump Sum Cash Payments(2)   $ 900,000  
    Lump Sum Annual Incentive Plan Payment(3)   $ 900,000  
    Lump Sum 2007 Annual Incentive Plan Payment(4)        
    Accelerated Equity Vesting        
   
  •   Stock Options(5)
  $ 227,868  
   
  •   Long Term Incentive Plan(6)
  $ 3,686,262  
   
  •   Integration Success Share Plan(7)
  $ 612,717  
    Other(9)   $ 90,756  
             
    Total   $ 8,217,598  
             
             
John L. Belsito
  Salary Continuation Payments(1)   $ 853,200  
    Lump Sum Cash Payments(2)   $ 474,000  
    Lump Sum Annual Incentive Plan Payment(3)   $ 379,200  
    Lump Sum 2007 Annual Incentive Plan Payment(4)        
    Accelerated Equity Vesting        
   
  •   Stock Options(5)
  $ 49,586  
   
  •   Long Term Incentive Plan(6)
  $ 2,219,987  
   
  •   Integration Success Share Plan(7)
  $ 124,588  
   
  •   Bonus Share Retention Plan(8)
  $ 304,729  
    Other(9)   $ 23,006  
             
    Total   $ 4,428,295  
             
 
(1) The amount shown represents salary continuation in an amount equal to (x) the annual base salary and (y)  Target Award.
 
(2) The amount shown represents a lump sum cash payment equal to the annual base salary.


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(3) The amount shown represents a lump sum payment under the annual incentive plan equal to the Target Award.
 
(4) The amount shown represents a lump sum cash payment equal to each NEO’s 2007 annual incentive plan payment, pro-rated through the employment termination date and based on the actual performance targets achieved for 2007.
 
(5) The amount shown represents the value of the unvested stock options through the employment termination date for Mr. Cassagne and Mr. Belsito, October 17, 2007 and December 19, 2007, respectively assuming the performance targets were achieved. To the extent the performance targets are not met at the end of the third anniversary of the date of grant, the performance targets will be reviewed again at the fifth anniversary of the date of grant. If the performance targets are met, each NEO will be entitled to exercise the options for 12 months following the satisfaction of the performance period. If the performance targets are not met, all of their unvested options will be forfeited.
 
(6) The amount shown represents the value of the unvested equity awards under the long term incentive plan through the employment termination date.
 
(7) The amount shown represents the value of the unvested award under the integration success share plan pro-rated through the employment termination date.
 
(8) The amount shown represents the combined value of (i) Cadbury Schweppes ordinary shares that Mr. Belsito elected to defer under the bonus share retention plan (the “basic shares”), (ii) a matched share award equal to 40% of the number of his basic shares, pro-rated through the employment termination date and (iii) a matched share award equal to 60% of the number of his basic shares, pro-rated through the employment termination date and assuming that the maximum performance targets were achieved.
 
(9) This amount represents the estimated combined cash value over the salary continuation period of the continuation of medical, dental and vision benefits for Mr. Cassagne ($12,156) and Mr. Belsito ($12,156) and transitional employment services for Mr. Cassagne ($78,600) and for Mr. Belsito ($10,850).
 
New Plans
 
Prior to the separation, we intend to adopt the following plans: the Dr Pepper Snapple Group, Inc. Omnibus Stock Incentive Plan of 2008 (the “stock incentive plan”), the Dr Pepper Snapple Group, Inc. Annual Cash Incentive Plan (the “cash incentive plan”) and the Dr Pepper Snapple Group, Inc. employee stock purchase plan (the “ESPP”).
 
Omnibus Stock Incentive Plan of 2008
 
Prior to the separation, we intend to adopt the Dr Pepper Snapple Group, Inc. Omnibus Stock Incentive Plan of 2008, which will allow us to reward employees, non-employee directors and consultants by enabling them to acquire shares of common stock of Dr Pepper Snapple Group, Inc. The following is a summary of the expected terms of the stock incentive plan, which is qualified in its entirety to the provisions of the stock incentive plan that may be approved by the Cadbury Schweppes share incentive committee.
 
Common Stock Available for Awards.   The maximum number of shares of common stock available for issuance under the stock incentive plan will be           shares. In the discretion of our compensation committee,           shares of common stock may be granted in the form of incentive stock options. If any shares covered by an award are cancelled, forfeited, terminated, expire unexercised or are settled through issuance of consideration other than shares of our common stock (including, without limitation, cash), these shares will again become available for award under the stock incentive plan.
 
Eligibility.   Awards may be made under the stock incentive plan to any employee of the company or its subsidiaries, or any of our non-employee directors or consultants. Because participation and the types of awards under the stock incentive plan are subject to the discretion of our compensation committee, the number of participants in the plan and the benefits or amounts that will be received by any participant or groups of participants, if the stock incentive plan is approved, are not currently determinable.
 
Administration.   Prior to the separation, the remuneration committee of the board of directors of Cadbury Schweppes will administer the stock incentive plan. After the separation, our compensation committee will administer the stock incentive plan. Subject to the terms of the stock incentive plan, the administrator of the plan


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may select participants to receive awards, determine the types of awards and the terms and conditions of awards, interpret provisions of the plan and make all factual and legal determinations regarding the plan and any award agreements.
 
Types of Awards.   The stock incentive plan provides for grants of stock options (which may consist of incentive stock options or nonqualified stock options), stock appreciation rights, stock awards (which may consist of restricted stock and restricted stock awards) or performance awards. The terms of the awards will be embodied in an award agreement and awards may be granted singly, in combination or in tandem. All or part of an award may be subject to such terms and conditions established by our compensation committee, including, but not limited to, continuous service with the company and its subsidiaries, achievement of specific business objectives and attainment of performance goals. No award may be repriced without shareholder approval.
 
  •  Stock Options and Stock Appreciation Rights.   The stock incentive plan permits the granting of stock options to purchase shares of common stock and stock appreciation rights. The exercise price of each stock option and stock appreciation right may not be less than the fair market value of our common stock on the date of grant. The term of each stock option or stock appreciation right will be set by our compensation committee and may not exceed ten years from the date of grant. Our compensation committee will determine the date each stock option or stock appreciation right may be exercised and the period of time, if any, after retirement, death, disability or other termination of employment during which stock options or stock appreciation rights may be exercised. In general, a grantee may pay the exercise price of an option in cash or shares of common stock. Our compensation committee may allow the grantee to exercise an option by means of a cashless exercise.
 
  •  Stock Awards.   The stock incentive plan permits the granting of stock awards. Stock awards that are not performance awards will be restricted for a minimum period of three years from the date of grant; provided, however, that our compensation committee may provide for earlier vesting following an employee’s termination of employment for death, disability or retirement or upon a change of control or other specified events. The three-year restricted period does not apply to stock awards that are granted in lieu of salary or bonus or to replace awards forfeited in connection with the separation. Vesting of the stock awards may occur incrementally over the three-year restricted period.
 
  •  Performance Awards.   The stock incentive plan permits the granting of performance awards. Performance awards will be restricted for a minimum period of one year from the date of grant; provided, however, our compensation committee may provide for earlier vesting following an employee’s termination of employment for death, disability or retirement or upon a change of control or other specified events. Our compensation committee will determine the terms, conditions and limitations applicable to the performance awards and set the performance goals in its discretion. The performance goals will determine the value and amount of performance awards that will be paid to participants and the portion of an award that may be exercised to the extent such performance goals are met. Performance awards may be designed by our compensation committee to qualify as performance-based compensation under Section 162(m) of the Internal Revenue Code (“Section 162(m)”) but are not required to qualify under Section 162(m). For purposes of Section 162(m), performance goals will be designated by our compensation committee and will be based upon one or more of the following performance goal measures:
 
  •  revenue and income measures (including those relating to revenue, gross margin, income from operations, net income and earnings per share);
 
  •  expense measures (including those relating to costs of goods sold, selling, general and administrative expenses and overhead costs);
 
  •  operating measures (including those relating to volume, margin, productivity and market share);
 
  •  cash flow measures (including those relating to net cash flow from operating activities and working capital);
 
  •  liquidity measures (including those relating to earnings before or after the effect of certain items such as interest, taxes, depreciation and amortization, and free cash flow);


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  •  leverage measures (including those relating to debt-to-equity ratio and net debt);
 
  •  market measures (including those relating to stock price, total shareholder return and market capitalization measures);
 
  •  return measures (including those relating to return on equity, return on assets and return on invested capital);
 
  •  corporate value measures (including those relating to compliance, safety, environmental and personnel matters); and
 
  •  other measures such as those relating to acquisitions, dispositions or customer satisfaction.
 
Any performance criteria selected by our compensation committee may be used to measure our performance as a whole or the performance of any of our segments, and may be measured for the company alone or relative to a peer group or index.
 
Awards to Non-Employee Directors.   Our compensation committee may grant non-employee directors one or more awards and establish the terms of the award in the applicable award agreement. No award will confer upon any director any right to serve as a director for any period of time or to continue at any rate of compensation.
 
Award Payments.   Awards may be paid in cash, common stock or a combination of cash and common stock. At the discretion of our compensation committee, the payment of awards may also be deferred, subject to compliance with Section 409A of the Internal Revenue Code. In addition, in the discretion of our compensation committee, rights to dividends or dividend equivalents may be extended to any shares of common stock or units denominated in shares of common stock.
 
Adjustments.   If any changes in shares of common stock resulting from stock splits, stock dividends, reorganizations, recapitalizations, any merger or consolidation of the company, or any other event that affects our capitalization occurs, the terms of any outstanding awards and the number of shares of common stock issuable under the stock incentive plan may be adjusted in order to prevent enlargement or dilution of the benefits or potential benefits intended to be made available under the stock incentive plan.
 
Section 162(m) of the Internal Revenue Code.   Section 162(m) limits us to an annual deduction for federal income tax purposes of $1,000,000 for compensation paid to covered employees. Performance-based compensation is excluded from this limitation. The stock incentive plan is designed to permit our compensation committee to grant awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m).
 
Assignability.   No award under the stock incentive plan is assignable or otherwise transferable, unless otherwise determined by our compensation committee.
 
Amendment, Modification and Termination.   The stock incentive plan will terminate automatically ten years after its effective date, which will be the date of the separation. Our board or our compensation committee may amend, modify, suspend or terminate the stock incentive plan, to the extent that no such action will materially adversely affect the rights of a participant holding an outstanding award under the stock incentive plan without such participant’s consent, and no such action will be taken without shareholder approval, to the extent shareholder approval is legally required.
 
Federal Income Tax Consequences of Awards .
 
  •  Incentive Stock Options.   The grant of an incentive stock option under the stock incentive plan will not be a taxable event for the grantee or the company. A grantee will not recognize taxable income upon exercise of an incentive stock option, except that the alternative minimum tax may apply, and any gain realized upon a disposition of shares of common stock received pursuant to the exercise of an incentive stock option will be taxed as long-term capital gain if the grantee holds the shares for at least two years after the date of grant and for one year after the date of exercise, or the applicable capital gains holding period requirement. We will not be entitled to any tax deduction with respect to the exercise of an incentive stock option, except as discussed below.


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      For the exercise of a stock option to qualify for the foregoing tax treatment, the grantee generally must be an employee of the company from the date the stock option is granted through a date within three months before the date of exercise of the stock option.
 
      If all of the foregoing requirements are met, except the applicable capital gains holding period requirement discussed above, the grantee will recognize ordinary income upon the disposition of the shares in an amount generally equal to the excess of the fair market value of the shares at the time the stock option was exercised over the stock option exercise price, but not in excess of the gain realized on the sale. The balance of the realized gain, if any, will be short-term or long-term capital gain. We will be allowed a tax deduction to the extent the grantee recognizes ordinary income, subject to our compliance with Section 162(m) and to certain tax reporting requirements.
 
  •  Nonqualified Stock Options.   The grant of a nonqualified stock option under the stock incentive plan will not be a taxable event for the grantee or the company. Upon exercising a nonqualified stock option, a grantee will recognize ordinary income in an amount equal to the difference between the exercise price and the fair market value of the shares on the date of exercise. Upon a subsequent sale or exchange of shares acquired pursuant to the exercise of a non-qualified stock option, the grantee will have taxable capital gain or loss, measured by the difference between the amount realized on the disposition and the tax basis of the shares, generally, the amount paid for the shares plus the amount treated as ordinary income at the time the stock option was exercised. If we comply with applicable reporting requirements and with the restrictions of Section 162(m), we will be entitled to a tax deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.
 
  •  Stock Appreciation Rights.   There are no immediate tax consequences of receiving an award of stock appreciation rights under the stock incentive plan. Upon exercising a stock appreciation right, a grantee will recognize ordinary income in an amount equal to the difference between the exercise price and the fair market value of the shares on the date of exercise. If we comply with applicable reporting requirements and with the restrictions of Section 162(m), we will be entitled to a tax deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.
 
  •  Restricted Stock.   A grantee who is awarded restricted stock under the stock incentive plan will not recognize any taxable income for federal income tax purposes in the year of the award, provided that the shares are nontransferable and subject to a substantial risk of forfeiture. However, the grantee may elect under Section 83(b) of the Internal Revenue Code to recognize ordinary income in the year of the award in an amount equal to the fair market value of the shares on the date of the award, less the purchase price, if any, determined without regard to the restrictions. If the grantee does not make such a Section 83(b) election, the fair market value of the shares on the date the restrictions lapse, less the purchase price, if any, will be treated as ordinary income to the grantee and will be taxable in the year the restrictions lapse. We will be entitled to a tax deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.
 
  •  Restricted Stock Units.   A grantee who is awarded a restricted stock unit under the stock incentive plan will not recognize any taxable income for federal income tax purposes and the company will not be entitled to a tax deduction, in each case at that time. When the restricted stock unit award vests and shares are transferred to the grantee, the grantee will recognize ordinary income in an amount equal to the fair market value of the transferred shares at such time less any cash consideration which the grantee paid for the shares, and the company will be entitled to a corresponding deduction. Any gain or loss realized upon the grantee’s sale or exchange of the shares will be treated as long-term or short-term capital gain or loss. The grantee’s basis for the shares will be the amount recognized as taxable compensation plus any cash consideration which the grantee paid for the shares. The grantee’s holding period for the shares will begin on the day after the date the shares are transferred to the grantee.
 
  •  Performance Awards.   The grant of a performance award under the stock incentive plan will not be a taxable event for the company. The payment of the award is taxable to a grantee as ordinary income. If we comply with applicable reporting requirements and with the restrictions of Section 162(m), we will be entitled to a tax deduction in the same amount and generally at the same time as the grantee recognizes ordinary income.


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Cash Incentive Plan
 
Prior to the separation, we intend to adopt the Dr Pepper Snapple Group, Inc. Annual Cash Incentive Plan, which will allow us to reward employees by enabling them to receive performance-based cash compensation. The following is a summary of the expected terms of the cash incentive plan, which is qualified in its entirety to the provisions of the cash incentive plan that may be approved by Cadbury Schweppes.
 
Eligibility.   Awards may be made under the cash incentive plan to any employee of the company or its subsidiaries, in the discretion of our compensation committee. Because participation and the types of awards under the cash incentive plan are subject to the discretion of our compensation committee, the number of participants in the plan and the benefits or amounts that will be received by any participant, or groups of participants, if the plan is approved, are not currently determinable.
 
Administration.   Prior to the separation, the remuneration committee of the board of directors of Cadbury Schweppes will administer the cash incentive plan. After the separation, our compensation committee will administer the cash incentive plan. Subject to the terms of the cash incentive plan, the administrator of the plan may select participants to receive awards, determine the terms and conditions of awards, interpret provisions of the plan and make factual and legal determinations regarding the plan and any award agreements.
 
Awards.   The terms of the cash awards will be embodied in an award agreement. All or part of an award may be subject to such terms and conditions established by our compensation committee, including, but not limited to, continuous service with the company and its subsidiaries and the attainment of performance goals. For purposes of Section 162(m), performance goals for the performance-based awards will be designated by our compensation committee and will be based upon one or more of the performance goals set forth under “— Omnibus Stock Incentive Plan of 2008 — Types of Awards — Performance Awards.”
 
Our compensation committee will determine the terms, conditions and limitations applicable to the awards. With respect to individuals participating in the cash incentive plan for 2008, the weighting of the performance goals will be based 60% on our underlying operating profit and 40% on our growth in revenue in 2008. The maximum annual award that may be made to any participant under the cash incentive plan may not exceed $5,000,000.
 
Award Payments.   Awards will be paid in cash. At the discretion of our compensation committee, the payment of awards may also be deferred, subject to compliance with Section 409A of the Internal Revenue Code.
 
Adjustments.   If, during a performance period, any merger, consolidation, acquisition, separation, reorganization, liquidation or any other event occurs which has the effect of distorting the applicable performance measures, the performance goals may be adjusted or modified to the extent permitted by Section 162(m) in order to prevent enlargement or dilution of the benefits or potential benefits intended to be made available under the cash incentive plan.
 
Section 162(m) of the Internal Revenue Code.   The incentive plan is designed to permit our compensation committee to grant awards that qualify as performance-based for purposes of satisfying the conditions of Section 162(m).
 
Assignability.   No award under the cash incentive plan is assignable or otherwise transferable, unless otherwise determined by our compensation committee.
 
Amendment, Modification and Termination.   The cash incentive plan will terminate automatically ten years after its effective date, which will be the date of the separation. Our board or our compensation committee may amend, modify, suspend or terminate the cash incentive plan, to the extent that no such action will materially adversely affect the rights of a participant entitled to an award under the incentive plan without such participant’s consent, and no such action will be taken without shareholder approval, to the extent shareholder approval is legally required.
 
Employee Stock Purchase Plan
 
Prior to the separation, we intend to adopt the Dr Pepper Snapple Group, Inc. Employee Stock Purchase Plan that provides for the purchase of shares of our common stock by eligible employees. The following is a summary of


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the expected terms of the ESPP, which is qualified in its entirety to the provisions of the ESPP that may be approved by the Cadbury Schweppes share incentive committee.
 
Reserved Shares Available for Purchase.   Subject to adjustment, the maximum number of shares available for purchase under the ESPP is           shares.
 
Eligibility.   Eligible employees may include certain employees of the company or its subsidiaries that meet certain requirements defined by our compensation committee (excluding otherwise eligible employees whose participation in the ESPP would cause them to own common stock equaling 5% or more of the combined voting power or value of all classes of our stock).
 
Participation.   Participation in the ESPP will be voluntary and dependent upon each eligible employee’s election to contribute a portion of his or her compensation to an ESPP account, subject to limits set forth in the Internal Revenue Code.
 
Administration.   Our compensation committee will administer the ESPP. Subject to the terms of the ESPP, our compensation committee will have the authority to interpret provisions of the plan and make all factual and legal determinations regarding the plan.
 
Stock Purchases.   At the determination of our compensation committee, subject to limits set forth in the Internal Revenue Code, shares of our common stock may be purchased on the last business day of the purchase period at between 85% to 100% of the fair market value of the common stock on any of (1) the first business day of the purchase period, (2) the last business day of the purchase period or (3) the lower of the first or last business day of the purchase period, as determined by our compensation committee. Our compensation committee may specify the maximum number of shares of common stock that each participant may purchase during any purchase period. A “purchase period” shall be the 12-month period commencing on each January 1, or such other period as may be determined by our compensation committee not to exceed 27 months.
 
Withdrawal of Participation / Termination of Employment.   A participant may elect to cease participation in the ESPP at any time and withdraw all contributions credited to his or her ESPP account. If a participant’s employment with us terminates for any reason, the participant will automatically cease to participate in the ESPP and we will refund all contributions credited to his or her ESPP account without interest.
 
Adjustments.   If, during a purchase period, any changes in shares of common stock resulting from stock splits, stock dividends, reorganizations, recapitalizations, any merger or consolidation of the company, or any other event that affects our capitalization occurs, the right to purchase shares during any purchase period, the maximum number and price of the shares of common stock that may be purchased and the number of shares authorized under the ESPP may be adjusted in order to prevent enlargement or dilution of the benefits or potential benefits intended to be made available under the ESPP.
 
Amendment and Termination.   Our board or our compensation committee may amend, modify, suspend or terminate the ESPP; provided, however, that no such action will be taken without shareholder approval, to the extent shareholder approval is legally required.
 
Federal Income Tax Consequences of Awards.   The ESPP is intended to qualify as an “Employee Stock Purchase Plan” under Section 423 of the Internal Revenue Code (“Section 423”). Under Section 423, a participant who purchases common stock through the ESPP will not recognize any income at the time of the purchase for the difference between the fair market value of the common stock at the time of purchase and the purchase price. If a participant disposes of common stock purchased through the ESPP two or more years after the first day of the purchase period or one year or more after the date the purchase right is exercised, whichever is later, the participant will recognize ordinary income equal to the lesser of (1) the amount by which the fair market value of the common stock when purchased exceeds the purchase price, and (2) the amount, if any, by which the common stock’s fair market value at the time of disposition exceeds the purchase price. The participant’s tax basis in the common stock will be increased by the amount recognized as ordinary income and any further gain recognized on the disposition will be treated as long- term capital gain or loss. In general, we will not be entitled to a tax deduction with respect to the disposition of common stock described in this paragraph.


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If the participant disposes of shares of common stock acquired under the ESPP within two years after the first day of the purchase right period or within one year after the date the purchase right is exercised, whichever is later, the participant will recognize ordinary income, and we will be entitled to a tax deduction in an amount equal to the excess of the fair market value of the common stock on the last day of the purchase right period over the purchase price of the common stock under the ESPP. The participant’s tax basis in the common stock will be increased by the amount recognized as ordinary income. In addition, upon disposition of the common stock, the participant will recognize ordinary income or loss equal to the difference between the price at which the common stock is disposed of and the cost basis of the common stock, as so increased. We will be entitled to any tax deduction with respect to the amount recognized by the participant as ordinary income.


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OWNERSHIP OF OUR COMMON STOCK
 
The following table sets forth the expected beneficial ownership of our common stock calculated as of          , 2008, based upon the distribution of           shares of our common stock for each Cadbury Schweppes ordinary share, by:
 
  •  each stockholder who is expected following the distribution to beneficially own more than 5% of our common stock;
 
  •  each named executive officer;
 
  •  each of our directors; and
 
  •  all of our executive officers and directors as a group.
 
To the extent our directors and executive officers own ordinary shares of Cadbury Schweppes at the time of the distribution, they will participate in the distribution on the same terms as other holders of ordinary shares of Cadbury Schweppes.
 
Following the distribution, we will have an aggregate of approximately           million shares of common stock outstanding, based on approximately           million ordinary shares of Cadbury Schweppes outstanding on          , 2008. Following the distribution, we will have approximately           holders of our common stock, based upon such number of Cadbury Schweppes shareholders as of          , 2008. The percentage ownership of each beneficial owner of Cadbury Schweppes will be the same in DPS after the distribution.
 
The number of shares beneficially owned by each stockholder, director or officer is determined according to the rules of the SEC and the information is not necessarily indicative of beneficial ownership for any other purpose. The mailing address for each of the directors and executive officers listed below is c/o Dr Pepper Snapple Group, Inc., 5301 Legacy Drive, Plano, Texas 75024.
 
                 
    Shares of Common Stock
 
    Beneficially Owned  
Name of Beneficial Owner
  Number     Percent  
 
Larry D. Young
                         
John O. Stewart
                         
James L. Baldwin, Jr.
                         
Rodger L. Collins
                         
Randall E. Gier
                         
Pedro Herrán Gacha
                         
Derry L. Hobson
                         
James J. Johnston, Jr.
                         
Lawrence N. Solomon
                         
                 
All executive officers and directors as a group (      persons)          
               


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DESCRIPTION OF INDEBTEDNESS
 
New Financing Arrangements
 
We intend to enter into new financing arrangements prior to the separation. We will describe the terms of these new financing arrangements when they have been negotiated with the lenders, which will be prior to the distribution. The description will address, among other terms, the extent to which the financing arrangements will be secured by our assets or guaranteed by our subsidiaries and will describe any applicable affirmative and negative covenants.


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DESCRIPTION OF CAPITAL STOCK
 
Our certificate of incorporation and by-laws will be amended and restated prior to the separation. The following description of the material terms of our capital stock contained in the amended and restated certificate of incorporation and by-laws is only a summary. You should refer to our amended and restated certificate of incorporation and by-laws, which are included as exhibits to the registration statement of which this information statement is a part, along with the applicable provisions of Delaware law.
 
General
 
Our authorized capital stock consists of           shares of common stock, par value $0.01 per share, and           shares of preferred stock, all of which shares of preferred stock are undesignated. Our board of directors may establish the rights and preferences of the preferred stock from time to time. After the distribution, there will be           shares of our common stock issued and outstanding and no shares of preferred stock issued and outstanding.
 
Common Stock
 
Each holder of our common stock is entitled to one vote for each share on all matters to be voted upon by the common stockholders and there are no cumulative voting rights. Subject to any preferential rights of any outstanding preferred stock, holders of our common stock will be entitled to receive ratably the dividends, if any, as may be declared from time to time by the board of directors out of funds legally available. If there is a liquidation, dissolution or winding up of our company, holders of our common stock would be entitled to share in our assets remaining after the payment of liabilities and any preferential rights of any outstanding preferred stock.
 
Holders of our common stock have no preemptive or conversion rights or other subscription rights and there are no redemption or sinking fund provisions applicable to the common stock. After the distribution, all outstanding shares of our common stock will be fully paid and non-assessable. The rights, preferences and privileges of the holders of our common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock which we may designate and issue in the future.
 
Preferred Stock
 
Under the terms of our amended and restated certificate of incorporation, our board of directors is authorized, subject to limitations prescribed by the Delaware General Corporation Law (“DGCL”), and by our amended and restated certificate of incorporation, to issue preferred stock in one or more series without stockholder approval. Our board of directors has the discretion, subject to limitations prescribed by the DGCL and by our amended and restated certificate of incorporation, to determine the rights, preferences, privileges and restrictions, including voting rights, dividend rights, conversion rights, redemption privileges and liquidation preferences, of each series of preferred stock.
 
Anti-Takeover Effects of Various Provisions of Delaware Law and Our Certificate of Incorporation and By-laws
 
Provisions of the DGCL and our amended and restated certificate of incorporation and by-laws could make it more difficult to acquire us by means of a tender offer, a proxy contest or otherwise, or to remove incumbent officers and directors. These provisions, summarized below, are expected to discourage certain types of coercive takeover practices and takeover bids our board of directors may consider inadequate and to encourage persons seeking to acquire control of us to first negotiate with us. We believe that the benefits of increased protection of our ability to negotiate with the proponent of an unfriendly or unsolicited proposal to acquire or restructure us outweigh the disadvantages of discouraging takeover or acquisition proposals because, among other things, negotiation of these proposals could result in an improvement of their terms.
 
Delaware Anti-Takeover Statute.   We are subject to Section 203 of the DGCL, an anti-takeover statute. In general, Section 203 of the DGCL prohibits a publicly-held Delaware corporation from engaging in a “business combination” with an “interested stockholder” for a period of three years following the time the person became an


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interested stockholder, unless (with certain exceptions) the business combination or the transaction in which the person became an interested stockholder is approved in a prescribed manner. Generally, a “business combination” includes a merger, asset or stock sale, or other transaction resulting in a financial benefit to the interested stockholder. Generally, an “interested stockholder” is a person who, together with affiliates and associates, owns (or within three years prior to the determination of interested stockholder status did own) 15% or more of a corporation’s voting stock. The existence of this provision would be expected to have an anti-takeover effect with respect to transactions not approved in advance by the board of directors, including discouraging attempts that might result in a premium over the market price for the shares of common stock held by stockholders.
 
No Cumulative Voting.   The DGCL provides that stockholders are denied the right to cumulate votes in the election of directors unless our certificate of incorporation provides otherwise. Our certificate of incorporation does not provide for cumulative voting.
 
Limitations on Liability and Indemnification of Officers and Directors.   The DGCL authorizes corporations to limit or eliminate the personal liability of directors to corporations and their stockholders for monetary damages for breaches of directors’ fiduciary duties as directors. Our certificate of incorporation includes provisions that indemnify, to the fullest extent allowable under the DGCL, the personal liability of directors or officers for monetary damages for actions taken as a director or officer of our company, or for serving at our request as a director or officer or another position at another corporation or enterprise, as the case may be. Our certificate of incorporation also provides that we must indemnify and advance reasonable expenses to our directors and officers, subject to our receipt of an undertaking from the indemnified party as may be required under the DGCL. We are also expressly authorized to carry directors’ and officers’ insurance to protect our company, our directors, officers and certain employees for some liabilities.
 
The limitation of liability and indemnification provisions in our certificate of incorporation may discourage stockholders from bringing a lawsuit against directors for breach of their fiduciary duty. These provisions may also have the effect of reducing the likelihood of derivative litigation against directors and officers, even though such an action, if successful, might otherwise benefit us and our stockholders. However, this provision does not limit or eliminate our rights, or those of any stockholder, to seek non-monetary relief such as injunction or rescission in the event of a breach of a director’s duty of care. The provisions will not alter the liability of directors under the federal securities laws. In addition, your investment may be adversely affected to the extent that, in a class action or direct suit, we pay the costs of settlement and damage awards against directors and officers pursuant to these indemnification provisions. There is currently no pending material litigation or proceeding against any of our directors, officers or employees for which indemnification is sought.
 
Authorized but Unissued Shares.   Our authorized but unissued shares of common stock and preferred stock will be available for future issuance without your approval. We may use additional shares for a variety of purposes, including future public offerings to raise additional capital, to fund acquisitions and as employee compensation. The existence of authorized but unissued shares of common stock and preferred stock could render more difficult or discourage an attempt to obtain control of us by means of a proxy contest, tender offer, merger or otherwise.
 
Listing
 
We intend to apply to have our common stock authorized for listing on the New York Stock Exchange under the symbol “DPS.”
 
Transfer Agent and Registrar
 
After the distribution, the transfer agent and registrar for our common stock will be Computershare Trust Company, N.A.


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THE DISTRIBUTION
 
Background and Reasons for the Distribution
 
On March 15, 2007, Cadbury Schweppes announced that it intended to separate its Americas Beverages business from its global confectionery business and its other beverages business (located principally in Australia). The board of directors of Cadbury Schweppes initially determined to simultaneously explore the potential for both a sale of our company to a third party and a distribution of our common stock to Cadbury Schweppes shareholders as alternatives for the separation of the businesses. After determining that difficult debt market conditions would not facilitate an acceptable sale process for the foreseeable future, Cadbury Schweppes announced on October 10, 2007 that it intended to focus on the separation of its Americas Beverages business through the distribution of the common stock of Dr Pepper Snapple Group, Inc. to Cadbury Schweppes’ shareholders. On          , 2008, Cadbury Schweppes’ board of directors approved the distribution of our common stock to the shareholders of Cadbury Schweppes. Cadbury Schweppes believes that the separation of its Americas Beverages business from its global confectionery business and its other beverages business (located principally in Australia) will enhance value for stockholders of Dr Pepper Snapple Group, Inc. and shareholders of Cadbury plc, the new parent company of Cadbury Schweppes, by creating significant opportunities and benefits, including:
 
  •  Enhancing focus.   The management of each company will be allowed to focus on its own business and strategic priorities. We will be able to continue building our beverage brands by adding scale through new products and strengthening its route-to-market. Cadbury plc will be able to focus on priorities in its global confectionery business and its other beverages business (located principally in Australia).
 
  •  Enabling more efficient capital allocation.   The separation will enable each company to allocate its capital more efficiently.
 
  •  Providing direct access to capital.   The separation will provide us with direct access to the debt and equity capital markets to finance expansion and growth opportunities.
 
  •  Improving ability to pursue strategic transactions.   Our ability to use our shares as consideration will improve our ability to pursue our own strategic initiatives, including acquisitions, joint ventures and investments.
 
  •  Enhancing market recognition with investors.   Following the separation, investors will be able to better assess our strengths and more accurately evaluate our performance compared to companies in the same or similar industry.
 
  •  Increasing ability to attract and retain employees.   The separation will enable us to offer key employees equity-based compensation tied directly to the performance of our business. Incentive compensation arrangements for key employees tied directly to the market performance of our common stock will enhance our ability to attract and retain qualified personnel.
 
Neither we nor Cadbury plc can assure you that any of these benefits will be realized to the extent anticipated, or at all.
 
We do not anticipate any material changes to our operations as a result of the distribution. The Americas Beverages operations conducted by Cadbury Schweppes immediately before the distribution will be the same as the operations conducted by us immediately after the distribution. However, our capital structure and expenses will be different after the distribution. See “Capitalization,” “Unaudited Pro Forma Combined Financial Data” and “Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
 
Reorganization of Cadbury Schweppes and Distribution of Shares of Our Common Stock
 
On March 15, 2007, Cadbury Schweppes announced its intention to separate its Americas Beverages business from its global confectionery business and its other beverages business (located principally in Australia). On October 10, 2007, Cadbury Schweppes further announced that it was focusing on a distribution of the common stock of the Americas Beverages business to the shareholders of Cadbury Schweppes as the method by which it would separate the Americas Beverages business from its global confectionery business and its other beverages


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business (located principally in Australia). The distribution will be effected through a series of steps, which ultimately will result in shareholders of Cadbury Schweppes owning:
 
  •  shares of common stock in Dr Pepper Snapple Group, Inc., which will be listed on the New York Stock Exchange; and
 
  •  shares in Cadbury plc, which will be listed on the London Stock Exchange, with American depositary receipts representing Cadbury plc ordinary shares listed on the New York Stock Exchange. 
 
Cadbury Schweppes has scheduled an extraordinary general meeting of shareholders for          , 2008 to consider proposals related to the reorganization, separation and the distribution. Approval by 75% of votes cast at the shareholder meeting is necessary. Immediately before the extraordinary general meeting, there will be a shareholder meeting convened by the High Court of Justice of England and Wales (the “U.K. Court”), at which meeting the minimum vote required for the approval of the proposals is not less than 75% of votes (by value) cast at such meeting.
 
Following these shareholder meetings, Cadbury Schweppes currently intends to effect the separation and the distribution through the following steps:
 
  •  Scheme of Arrangement.   Cadbury Schweppes intends to implement a corporate reorganization pursuant to which a new company, Cadbury plc, will become the parent company of Cadbury Schweppes. This corporate reorganization is known as a “scheme of arrangement” under UK law. Pursuant to the scheme of arrangement, all outstanding Cadbury Schweppes ordinary shares will be cancelled and holders will receive Cadbury plc ordinary shares, which will be the ongoing ownership interest in the global confectionery business and its other beverages business (located principally in Australia), and Cadbury plc “beverage shares,” which, ultimately, will entitle the holders, if the Cadbury plc reduction of capital becomes effective, to receive shares of our common stock in connection with the distribution.
 
  •  Reduction of Capital and the Distribution of Our Common Stock .  Shortly after the scheme of arrangement becomes effective, Cadbury plc will cancel the Cadbury plc “beverage” shares (known as a “reduction of capital”) and transfer its Americas Beverages business to DPS. In return for the transfer of the Americas Beverages business to it, we will distribute shares of its common stock to holders of Cadbury plc beverage shares.
 
The scheme of arrangement, the reduction of capital, the distribution and the other conditions to the completion of the distribution are explained in more detail below.
 
Scheme of Arrangement and the Issue of Cadbury plc Shares
 
Cadbury Schweppes intends to implement a corporate reorganization pursuant to which Cadbury plc, a new company incorporated under the laws of England and Wales, will become the holding company of Cadbury Schweppes. This corporate reorganization will be effected by way of a formal procedure under the United Kingdom Companies Act of 1985 known as a “scheme of arrangement” under UK law.
 
If the scheme of arrangement becomes effective, the following will occur:
 
  •  Cadbury Schweppes will become a wholly owned subsidiary of Cadbury plc.
 
  •  Cadbury Schweppes ordinary shares will be cancelled and each holder of Cadbury Schweppes ordinary shares will be entitled to receive:
 
  •             Cadbury plc ordinary shares for every           Cadbury Schweppes ordinary shares that they hold at the Scheme Record Time (as defined below); and
 
  •             Cadbury plc “beverage shares” for every           Cadbury Schweppes ordinary shares that they hold at the Scheme Record Time. The Cadbury plc “beverage shares” will be non-transferable and each will represent the right to receive          shares of our common stock if the Cadbury plc reduction of capital is approved by the U.K. Court.


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The number of Cadbury plc ordinary shares and Cadbury plc “beverage shares” to be received may change. The Scheme Record Time will be 6:00 p.m. on the business day immediately preceding the date on which the scheme of arrangement becomes effective. The Scheme Record Time is expected to be 6:00 p.m. (United Kingdom time) on           , 2008.
 
The scheme of arrangement is subject to various conditions, including, among others, the approval by Cadbury Schweppes shareholders at an extraordinary general meeting and at the U.K. Court convened shareholder meeting, approval by the U.K. Listing Authority and London Stock Exchange to admit the Cadbury plc ordinary shares to trading on the London Stock Exchange, the approval of the U.K. Court and approval by the NYSE to list the Cadbury plc ADRs.
 
The U.K. Court hearing for the scheme of arrangement is scheduled for          , 2008.
 
Cadbury plc Reduction of Capital and the Issue of Shares of Our Common Stock
 
Shortly after the scheme of arrangement becomes effective, Cadbury plc intends to implement a reduction of capital, pursuant to which, ultimately, the shares of our common stock will be distributed.
 
If the capital reduction is implemented, the following will occur:
 
  •  the share capital of Cadbury plc will be reduced by decreasing the nominal value of each Cadbury plc ordinary share from           to            in order to create distributable reserves in Cadbury plc;
 
  •  the Cadbury plc “beverage shares” will be cancelled; and
 
  •  the holders of the Cadbury plc “beverage shares” will receive           shares of our common stock for every           Cadbury plc beverage share that they hold at the Cadbury plc Reduction of Capital Record Time. The shares of our common stock will be distributed by us in consideration of the transfer by Cadbury plc of its Americas Beverages business to us.
 
The record date for the cancellation of the Cadbury plc “beverage shares” and the distribution of shares of our common stock will be at 6:00 p.m. on the business day immediately preceding the date on which the order of the U.K. Court confirming the Cadbury plc reduction of capital is registered by the U.K. Registrar of Companies, which is expected to be on           , 2008. This date is referred to as the Cadbury plc Reduction of Capital Record Time.
 
The reduction of capital is subject to various conditions, including, among others, the scheme of arrangement having become effective and the approval of the U.K. Court.
 
The U.K. Court hearing for the Cadbury plc reduction of capital is scheduled for            , 2008.
 
Conditions to the Distribution
 
We expect that the distribution will be completed in the second quarter of 2008; provided that, among other things, the following conditions have been satisfied or, to the extent possible, waived by Cadbury Schweppes:
 
  •  the SEC has declared effective our registration statement on Form 10 under the Exchange Act, of which this information statement forms a part, and no stop orders relating to this registration statement are in effect;
 
  •  Cadbury Schweppes, Cadbury plc and we have received all permits, registrations and consents required under the securities or blue sky laws of states or other political subdivisions of the United States or of foreign jurisdictions in connection with the distribution;
 
  •  Cadbury Schweppes, Cadbury plc and we have received all material permits, registrations, clearances and consents from governmental authorities and third persons necessary to permit the operation of our businesses thereafter;
 
  •  the New York Stock Exchange has approved our common stock for listing, subject to official notice of issuance;
 
  •  Cadbury plc has completed the contribution to us of the assets and operations of its Americas Beverages business described in this information statement;


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  •  no order, injunction or decree issued by any court of competent jurisdiction or other legal restraint or prohibition preventing consummation of the distribution or any of the transactions related thereto, including the transfers of assets and liabilities contemplated by the separation and distribution agreement, is in effect;
 
  •  the scheme of arrangement having become effective;
 
  •  the Cadbury plc reduction of capital having become effective;
 
  •  we have completed the financing described in “Description of Indebtedness,” and
 
  •  no other events or developments shall have occurred that, in the judgment of the board of directors of Cadbury Schweppes, in its sole and absolute discretion, would result in the distribution having a material adverse effect on Cadbury Schweppes or its shareholders.
 
You will not be required to take any further action in order to receive our common stock, nor will you be required to make any payment for the shares of our common stock you receive.
 
Manner of Effecting the Distribution
 
The general terms and conditions of the distribution will be set forth in the separation agreement to be entered into by Cadbury Schweppes and us. For a description of the expected terms of that agreement, see “Our Relationship with Cadbury plc After the Distribution — Description of Various Separation and Transition Arrangements — Separation Agreement.”
 
Cadbury Schweppes will contribute the subsidiaries that operate its Americas Beverages business to us, and we will issue our common stock to holders of the Cadbury plc “beverage shares”. The distribution will be made in book-entry form on the basis of           shares of our common stock for each Cadbury plc “beverage share” held at the Cadbury plc Reduction of Capital Record Time. Fractional shares of our common stock will not be delivered. Instead, the distribution agent will, as soon as is practicable on or after the distribution date, aggregate into whole shares of common stock all the fractional shares of our common stock that otherwise would have been distributed and sell them in the open market at the prevailing market prices. The distribution agent, in its sole discretion, without any influence by Cadbury plc or us, will determine when, through which broker-dealer and at what price to sell these whole shares. Any broker-dealer used by the distribution agent will not be an affiliate of either Cadbury plc or us. Following the sale, the distribution agent will distribute the aggregate sale proceeds ratably to holders who were entitled to a fractional interest in our common stock. The amount of this payment will depend on the prices at which the aggregated fractional shares of our common stock are sold by the distribution agent in the open market. We will be responsible for any payment of brokerage fees. For a description of our common stock that you will receive in the distribution, see “Description of Capital Stock.”
 
A book-entry account statement reflecting your ownership of shares of our common stock will be mailed to you, or your brokerage account will be credited for the shares, on or about          , 2008. We will not issue actual stock certificates.
 
Results of the Distribution
 
Following the distribution, we will be an independent, publicly-traded company owning and operating what had previously been Cadbury Schweppes’ Americas Beverages business. We expect that approximately           shares of our common stock will be issued and outstanding immediately following the distribution, based upon the distribution of           shares of our common stock for each Cadbury Schweppes ordinary share, and the anticipated number of outstanding Cadbury Schweppes ordinary shares prior to the Scheme Record Time. The actual number of shares to be distributed will be determined based on the number of Cadbury plc beverage shares outstanding at the Cadbury plc Reduction of Capital Record Time.
 
On          , 2008, the distribution was approved by a vote of Cadbury Schweppes ordinary shareholders. You will not be required to take any further action in order to receive shares of our common stock in the distribution, nor will you be required to make any payment for the shares of our common stock you receive. The distribution remains contingent on the approval of the scheme of arrangement by the U.K. Court and the subsequent confirmation by the U.K. Court of the Cadbury plc reduction of capital.


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Cadbury Schweppes American Depositary Receipts
 
Certain holders of Cadbury Schweppes ordinary shares beneficially own their ordinary shares of Cadbury Schweppes through Cadbury Schweppes ADRs. Pursuant to the scheme of arrangement, the holders of Cadbury Schweppes ADRs will receive new Cadbury plc ADRs. Holders of Cadbury Schweppes ADRs at the Scheme Record Time will be entitled to the Cadbury plc ordinary shares and the Cadbury plc “beverage shares” to which the Cadbury Schweppes ordinary shares underlying their ADRs are entitled. These Cadbury plc ordinary shares and Cadbury plc “beverage shares” will be held on their behalf by JPMorgan Chase Bank, N.A., the ADR Depositary. Pursuant to the Cadbury plc capital reduction, the Cadbury plc “beverage shares” will be cancelled, as described above, and the Depositary will be entitled to receive the shares of our common stock. In lieu of distributing our shares to the Depositary, the Depositary will provide our transfer agent with records to enable such transfer agent to distribute the shares of our common stock to the former holders of Cadbury Schweppes ADRs entitled thereto. The Depositary will not be responsible for the distribution of any of our shares.
 
Pursuant to the separation and distribution, holders of Cadbury Schweppes ADRs who own their Cadbury Schweppes ADRs at the Scheme Record Time will:
 
  •  receive   ADRs of Cadbury plc, which will be listed on the New York Stock Exchange for each Cadbury Schweppes ADR; and
 
  •  be entitled to receive   shares of our common stock, which will be listed on the New York Stock Exchange, for each Cadbury Schweppes ADR.
 
Market for Our Common Stock
 
There is currently no trading market for our common stock. We intend to apply to have our common stock authorized for listing on the New York Stock Exchange under the symbol “DPS.” We have not and will not set the initial price of our common stock. The initial price will be established by the public markets.
 
We cannot predict the price at which our common stock will trade after the distribution. In fact, the combined trading prices after the separation of the shares of our common stock and the Cadbury plc ordinary shares that each Cadbury Schweppes shareholder will receive in the separation may not equal the trading price of a Cadbury Schweppes ordinary share immediately prior to the separation. The price at which our common stock trades is likely to fluctuate significantly, particularly until an orderly public market develops. Trading prices for our common stock will be determined in the public markets and may be influenced by many factors. See “Risk Factors — Risks Related to Our Common Stock — Our common stock has no existing public market and the price of our common stock may be subject to volatility.”
 
Shares of our common stock distributed to holders of Cadbury plc “beverage shares” in connection with the distribution will be transferable without registration under the Securities Act except for shares received by persons who may be deemed to be our affiliates. Persons who may be deemed to be our affiliates after the distribution generally include individuals or entities that control, are controlled by or are under common control with us, which may include certain of our executive officers, directors or principal stockholders. Securities held by our affiliates will be subject to resale restrictions under the Securities Act. Our affiliates will be permitted to sell shares of our common stock only pursuant to an effective registration statement or an exemption from the registration requirements of the Securities Act, such as the exemption afforded by Rule 144 under the Securities Act.
 
Reason for Furnishing this Information Statement
 
This information statement is being furnished solely to provide information to shareholders of Cadbury Schweppes who will receive shares of our common stock in connection with the distribution. It is not provided as an inducement or encouragement to buy or sell any of our securities. You should not assume that the information contained in this information statement is accurate as of any date other than the date set forth on the cover. Changes to the information contained in this information statement may occur after that date, and we undertake no obligation to update the information.


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MATERIAL TAX CONSIDERATIONS
 
The following is a discussion, subject to the limitations and qualifications set forth therein, of the material U.K. and material U.S. federal tax consequences of the receipt of Cadbury plc “beverage shares” and Cadbury plc ordinary shares or Cadbury plc ADRs and the receipt, ownership and disposition of our common stock and is for general information only and is subject to the qualifications and limitations set forth herein. This discussion is based upon current U.K. and U.S. federal tax law, regulations, administrative practice, rulings and court decisions, the current U.S.-U.K. income tax treaty and the current U.S.-U.K. estate tax treaty and interpretations thereof, all as they exist as of the date of this information statement. All of the foregoing may be repealed, revoked or modified at any time, possibly with retroactive effect, so as to result in U.K. and U.S. federal tax consequences different from those discussed below. This discussion assumes that the transaction will be consummated in accordance with the separation and distribution agreement, this information statement and the private letter ruling request submitted to the IRS.
 
U.K. Holders
 
The following is a discussion for U.K. Holders, as defined below, of the material U.K. and U.S. federal tax consequences of the receipt of Cadbury plc “beverage shares” and Cadbury plc ordinary shares and their receipt, ownership and disposition of our common stock. A U.K. Holder for this purpose is a beneficial owner of Cadbury Schweppes ordinary shares that is, for U.K. tax purposes, resident or, in the case of individuals, ordinarily resident in (and only in) the United Kingdom for tax purposes and who holds our common stock and Cadbury plc ordinary shares as an investment (and not as securities to be realized in the course of a trade). This discussion is for general information only and does not purport to be a complete description of the consequences of the receipt of Cadbury plc “beverage shares” and Cadbury plc ordinary shares and the receipt, ownership and disposition of our common stock nor does it address the effects of any non-U.K. and non-U.S. tax laws. The tax treatment of a U.K. Holder may vary depending upon such U.K. Holder’s particular situation, and certain U.K. Holders (including, but not limited to, dealers in securities, broker-dealers, insurance companies, collective investment schemes and persons who have acquired (or are deemed for U.K. tax purposes to have acquired) our common stock and Cadbury plc ordinary shares by reason of an office or employment) may be subject to special rules not discussed below.
 
U.K. Holders are urged to consult their own tax advisors as to the specific tax consequences to them of the receipt of Cadbury plc “beverage shares” and Cadbury plc ordinary shares and the receipt, ownership and disposition of our common stock, including the effect of any non-U.K. and non-U.S. tax laws.
 
Receipt of Cadbury plc “Beverage Shares,” Cadbury plc Ordinary Shares and Our Common Stock
 
U.K. Tax Consequences.   U.K. Holders should not be treated as making a disposal or part disposal of their Cadbury Schweppes ordinary shares as a result of receiving Cadbury plc “beverage shares” and Cadbury plc ordinary shares in exchange for Cadbury Schweppes ordinary shares pursuant to the scheme of arrangement, and so no chargeable gain or allowable loss should arise for U.K. tax purposes. Cadbury plc “beverage shares” and Cadbury plc ordinary shares should be treated as the same asset, and having been acquired at the same time and for the same consideration, as those Cadbury Schweppes ordinary shares from which they are derived.
 
Furthermore, U.K. Holders should not be treated as making a disposal or part disposal of their “beverage shares” as a result of receiving our common stock in exchange for “beverage shares” pursuant to the Cadbury plc reduction of capital, and so no chargeable gain or allowable loss should arise for U.K. tax purposes. Our common stock should be treated as the same asset, and having been acquired at the same time and for the same consideration, as those Cadbury plc “beverage shares” from which they are derived.
 
In summary, our common stock and Cadbury plc ordinary shares that will be held by a U.K. Holder following the separation should be treated as the same asset, and having been acquired at the same time and for the same consideration, as Cadbury Schweppes ordinary shares.
 
Accordingly, following the separation, a U.K. Holder’s original base cost in their Cadbury Schweppes ordinary shares should be apportioned between our common stock and their Cadbury plc ordinary shares by reference to the market quotations of our common stock and the Cadbury plc ordinary shares on the first day of dealings in such shares.


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In the case of any U.K. Holder who, alone or together with persons connected with him, holds more than 5 per cent of, or any class of, shares in or debentures of Cadbury Schweppes, it is a condition for the treatment described in each of the first two paragraphs above that the transactions are being effected for bona fide commercial reasons and do not form part of a scheme or arrangement of which the main purpose, or one of the main purposes, is an avoidance of liability to U.K. corporation tax or capital gains tax.
 
A U.K. Holder who receives cash in lieu of a fractional share of our common stock or Cadbury plc ordinary shares will normally be treated as having (i) received that fractional share and then (ii) sold the fractional share for cash, thereby making a part disposal of his holding of common stock or Cadbury plc ordinary shares, as the case may be, which will in effect be treated as a part disposal of his original holding of Cadbury Schweppes ordinary shares. However, where the amount of cash received is “small” as compared to the value of his holding, a U.K. Holder may, under current practice of the U.K. H.M. Revenue and Customs (“HMRC”), treat the cash received as a deduction from the base cost of the U.K. Holder’s holding of our common stock or Cadbury plc ordinary shares, as the case may be, rather than as a partial disposal of such holding. HMRC considers the amount of cash received to be “small” when such amount is 5% or less of the value of such holding or is less than £3,000.
 
U.S. Federal Income Tax Consequences.   A U.K. Holder generally will not be subject to U.S. federal income tax with respect to the receipt of Cadbury plc “beverage shares,” Cadbury plc ordinary shares or our common stock including, any cash received in lieu of a fractional share of Cadbury plc ordinary shares or our common stock. See “U.K. Holders — Taxation of Dispositions of Our Common Stock” for a discussion of the circumstances under which a U.K. Holder would be subject to U.S. federal income tax with respect to cash received in lieu of a fractional share of our common stock.
 
Taxation of Dividends on Our Common Stock
 
U.K. Tax Consequences.   No amounts in respect of U.K. tax will be withheld at source from any dividend payments on our common stock made to U.K. Holders.
 
Holders of our common stock who are resident for tax purposes in the U.K. will, in general, be subject to UK income tax or corporation tax on the gross amount of dividends paid on our common stock, rather than on the amount actually received net of any U.S. withholding tax. Dividends received by such holders who are within the charge to U.K. corporation tax will be taxed at the prevailing U.K. corporation tax rate. An individual will generally be chargeable to U.K. income tax on dividends paid on our common stock at the dividend ordinary rate (currently 10%) or, to the extent that the amount of the gross dividend when treated as the top slice of his or her income exceeds the threshold for higher rate tax, at the dividend upper rate (currently 32.5%).
 
Credit will generally be available for U.S. tax required to be deducted or withheld from the dividends paid on our common stock against U.K. income tax or U.K. corporation tax to which the holder of our common stock is liable, broadly limited to the amount of such tax attributable to the dividends. As a result, individual U.K. Holders who are chargeable to U.K. income tax at the dividend ordinary rate on the whole of such dividends and who claim such credit through their tax return should have no further U.K. tax to pay in respect of those dividends. Individual U.K. Holders who are chargeable to U.K. income tax on all or any portion of the dividends at the dividend upper rate and who claim that credit through their tax return should be able to offset the amount of the available credit against their U.K. income tax liability. U.K. Holders who are chargeable to U.K. corporation tax on the dividends and who claim that credit should generally be able to offset the amount of the available credit against their U.K. corporation tax liability.
 
U.K. Holders should be aware that the U.K. government is presently consulting on changes to the tax regime for foreign dividends.
 
U.S. Federal Income Tax Consequences.   If we make distributions on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent not paid from our current or accumulated earnings and profits, distributions on our common stock will constitute a tax-free return of capital and will first be applied against and reduce a U.K. Holder’s adjusted basis in our common stock, but not below zero, and then the excess, if any, will be treated as gain from the sale of common stock. Dividends paid on our common stock to a U.K. Holder (who is not otherwise subject to U.S. federal income tax) generally will be subject to withholding of U.S. federal income tax at a 30% rate. However, assuming such a U.K. Holder satisfies the


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requirements of the U.S.-U.K. income tax treaty, the rate of withholding on dividends generally is 15%. In order for a U.K. Holder to claim benefits under the U.S.-U.K. income tax treaty in respect of dividends paid by us, the U.K. Holder generally will be required to complete IRS Form W-8BEN and certify under penalties of perjury that it is not a U.S. person for U.S. federal income tax purposes. Special certification and other requirements apply to certain U.K. Holders that are pass-through entities and to U.K. Holders whose stock is held through certain non-U.S. intermediaries. A U.K. Holder that is eligible for the reduced rate of U.S. withholding tax pursuant to the U.S.-U.K. income tax treaty generally may obtain a refund of any excess amounts withheld by timely filing an appropriate claim with the IRS.
 
Taxation of Dispositions of Our Common Stock
 
U.K. Tax Consequences.   A subsequent disposal or deemed disposal of our common stock by a stockholder who is resident or, in the case of individuals, ordinarily resident in the U.K. may, depending on individual circumstances (including the availability of exemptions and reliefs), give rise to a chargeable gain or allowable loss for the purposes of U.K. taxation on chargeable gains.
 
A stockholder who is an individual and who is resident or ordinarily resident in the U.K. but not domiciled in the U.K., will be liable to U.K. capital gains tax only to the extent that chargeable gains made on the disposal of our common stock are remitted or deemed to be remitted to the U.K.
 
U.S. Federal Income Tax Consequences.   A U.K. Holder generally will not be subject to U.S. federal income tax with respect to any gain realized on the sale or other disposition of our common stock unless: (i) the gain is effectively connected with the conduct of a trade or business in the United States and, if the U.S.-U.K. income tax treaty applies, is attributable to a U.S. permanent establishment of the U.K. Holder (in this case, the U.K. Holder will be subject to U.S. federal income tax on the net gain derived from the disposition in the same manner as if the U.K. Holder was U.S. person for U.S. federal income tax purposes, and if the U.K. Holder is a corporation, it may be subject to the additional “branch profits tax” at a 30% rate or a lower rate specified by U.S.-U.K. income tax treaty, if applicable); (ii) the U.K. Holder is an individual present in the United States for 183 days or more in the taxable year in which the disposition occurs and certain other conditions are met (in this case, the individual U.K. Holder will be subject to a flat 30% U.S. federal income tax on the gain derived from the disposition, which tax may be offset by U.S. source capital losses); or (iii) we are or have been a “United States real property holding corporation” for U.S. federal income tax purposes at any time during the shorter of the U.K. Holder’s holding period for our common stock and the five-year period ending on the date of disposition and one or more other conditions are satisfied. We are not and do not anticipate becoming a United States real property holding corporation.
 
U.S. Federal Estate Tax Considerations
 
An individual who is domiciled in the U.K. for purposes of the U.S.-U.K. estate tax treaty and who is not a national of or domiciled in the United States for purposes of the U.S.-U.K. estate tax treaty generally will not be subject to U.S. federal estate tax with respect to our common stock on the individual’s death provided that any applicable U.K. inheritance tax liability is paid unless the common stock is part of the business property of a permanent establishment of the individual in the United States or pertains to a fixed base of the individual in the United States used for the performance of independent personal services. In the case where the common stock is subject to both U.S. federal estate tax and U.K. inheritance tax, the U.S.-U.K. estate tax treaty generally provides for the U.S. federal estate tax paid to be credited against tax payable in the U.K. or for the tax paid in the U.K. to be credited against the U.S. federal estate tax payable based on priority rules set out in the U.S.-U.K. estate tax treaty.
 
U.S. Information Reporting and Backup Withholding
 
Dividends paid to a U.K. Holder may be subject to information reporting and backup withholding of U.S. federal income tax. A U.K. Holder will be exempt from backup withholding if such U.K. Holder properly provides IRS Form W-8BEN certifying that such U.K. Holder is a non-U.S. person or otherwise meets documentary


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evidence requirements for establishing that such U.K. Holder is a non-U.S. person or otherwise qualifies for an exemption.
 
The gross proceeds from the disposition of our common stock may be subject to information reporting and backup withholding. If a U.K. Holder sells its common stock outside the United States through a non-U.S. office of a non-U.S. broker and the sales proceeds are paid to such U.K. Holder outside the United States, then backup withholding and information reporting requirements generally will not apply to that payment. However, information reporting but not backup withholding generally will apply to a payment of sale proceeds, even if that payment is made outside the United States, if a U.K. Holder sells our common stock through a non-U.S. office of a broker that: (i) is a U.S. person for U.S. federal income tax purposes; (ii) derives 50% or more of its gross income in specific periods from the conduct of a trade or business in the United States; (iii) is a “controlled foreign corporation” for U.S. federal income tax purposes; or (iv) is a non-U.S. partnership, if at any time during its tax year (A) one or more of its partners are U.S. persons who in the aggregate hold more than 50% of the income or capital interests in the partnership; or (B) the non-U.S. partnership is engaged in a U.S. trade or business, unless, in each case, the broker has documentary evidence in its files that the non-U.S. holder is a non-U.S. person and certain other conditions are met, or the non-U.S. holder otherwise establishes an exemption.
 
If a U.K. Holder receives payments of the proceeds of a sale of our common stock to or through a U.S. office of a broker, the payment is subject to both information reporting and backup withholding unless such U.K. Holder properly provides IRS Form W-8BEN certifying that such U.K. Holder is a non-U.S. person or otherwise establishes an exemption. A U.K. Holder generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed such U.K. Holder’s U.S. federal income tax liability by timely filing an appropriate claim with the IRS.
 
U.K. Stamp Duty and Stamp Duty Reserve Tax
 
No U.K. stamp duty or stamp duty reserve tax should be payable by a U.K. Holder as a result of the cancellation of Cadbury Schweppes ordinary shares and the issue of Cadbury plc “beverage shares” and Cadbury plc ordinary shares under the scheme of arrangement or as a result of the issue of our common stock in connection with the separation.
 
No U.K. stamp duty will be payable by a U.K. Holder on the transfer of our common stock, provided that any instrument of transfer is not executed in the United Kingdom and does not relate to any property situated, or to any matter or thing done or to be done, in the United Kingdom.
 
No U.K. stamp duty reserve tax will be payable by a U.K. Holder in respect of any agreement to transfer our common stock unless they are registered in a register kept in the United Kingdom by or on our behalf. It is not intended that such a register will be kept in the United Kingdom.
 
Where Cadbury plc ordinary shares are issued or transferred: (i) to, or to a nominee for, a person whose business is or includes the provision of clearance services; or (ii) to, or to a nominee or agent for, a person whose business is or includes issuing depositary receipts, stamp duty (in the case of a transfer to such persons) or stamp duty reserve tax may be payable at the higher rate of 1.5% of the amount or value of the consideration payable or, in certain circumstances, the value of the Cadbury plc ordinary shares or, in the case of an issue to such persons, the issue price of the Cadbury plc ordinary shares (rounded up to the next £5 in the case of stamp duty). This liability for stamp duty or stamp duty reserve tax will strictly be payable by the depositary or clearance service operator or their nominee, as the case may be, but will in practice generally be reimbursed by participants in the clearance service or depositary receipt scheme. Clearance services may opt, under certain circumstances, for the normal rate of stamp duty or stamp duty reserve tax (0.5% of the consideration paid) to apply to issues or transfers of Cadbury plc ordinary shares into, and to transactions within, such services instead of the higher rate of 1.5% generally applying to an issue or transfer of Cadbury plc ordinary shares into the clearance service and the exemption from stamp duty and stamp duty reserve tax on transfer of Cadbury plc ordinary shares while in the service. U.K. Holders who hold their Cadbury Schweppes ordinary shares in the form of Cadbury Schweppes American Depositary Shares should not suffer a 1.5% charge on the issue of Cadbury plc ordinary shares to the Cadbury plc depository and the receipt of Cadbury plc American Depositary Shares.


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U.S. Holders
 
The following is a discussion of the material U.S. federal and U.K. tax consequences of the receipt of Cadbury plc “beverage shares,” Cadbury plc ordinary shares or Cadbury plc ADRs and the receipt, ownership and disposition of our common stock to U.S. Holders that is for general information only and is subject to the qualifications and limitations set forth herein. A “U.S. Holder” for this purpose is a beneficial owner of Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs that is, for U.S. federal income tax purposes (i) a citizen or resident of the United States, (ii) a corporation (or an entity treated for U.S. federal tax purposes as a corporation) created or organized under the laws of the United States or of any state thereof or the District of Columbia, (iii) an estate the income of which is subject to U.S. federal income tax regardless of its source, or (iv) a trust if (a) (I) a court within the United States is able to exercise primary supervision over the trust, and (II) one or more U.S. persons have authority to control all substantial decisions of the trust, or (b) the trust has made an election under applicable Treasury regulations to be treated as a U.S. person.
 
This discussion is for general information only and does not purport to be a complete description of the consequences of the receipt of Cadbury plc “beverage shares” and Cadbury plc ordinary shares or Cadbury plc ADRs and the receipt, ownership and disposition of our common stock nor does it address the effects of any state, local or, except as set forth herein, non-U.S. tax laws. This discussion does not address the tax consequences to a U.S. Holder (i) that is a resident in, or in the case of individuals, ordinarily resident in the United Kingdom for U.K. tax purposes, (ii) where the holding of our common stock is effectively connected with the conduct of a trade or business in the U.K., and, if the U.S.-U.K. income tax treaty applies, is attributable to a U.K. permanent establishment of the U.S. Holder, or (iii) that owns or controls, directly or indirectly (including by attribution from or through related parties), at least 10% of the voting stock of Cadbury Schweppes or Cadbury plc. The tax treatment of a U.S. Holder may vary depending upon such U.S. Holder’s particular situation, and certain U.S. Holders (including, but not limited to, insurance companies, tax-exempt organizations, financial institutions, broker-dealers, partners in partnerships that hold Cadbury Schweppes ordinary shares or ADRs, pass-through entities, traders in securities who elect to apply a mark-to-market method of accounting, U.S. Holders who hold their Cadbury Schweppes ordinary shares or ADRs as part of a “hedge,” “straddle,” “conversion,” or “constructive sale transaction,” individuals who received Cadbury Schweppes ordinary shares upon the exercise of employee stock options or otherwise as compensation) may be subject to special rules not discussed below. The discussion assumes that U.S. Holders hold their Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs and our common stock as capital assets within the meaning of Section 1221 of the Internal Revenue Code.
 
Under general U.S. federal income tax principles, a U.S. Holder of Cadbury Schweppes ADRs or Cadbury plc ADRs should be treated as the beneficial owner of the corresponding number of Cadbury Schweppes ordinary shares or Cadbury plc ordinary shares held by the ADR depositary and this summary is based on such treatment.
 
U.S. Holders are urged to consult their own tax advisors as to the specific tax consequences to them of the receipt of Cadbury plc “beverage shares,” Cadbury plc ordinary shares or Cadbury plc ADRs and the receipt, ownership and disposition of our common stock, including the effect of any state, local or non-U.S. tax laws.
 
Receipt of Cadbury plc “beverage shares,” Cadbury plc Ordinary Shares or Cadbury plc ADRs and Our Common Stock
 
U.S. Federal Income Tax Consequences.   Cadbury Schweppes has requested a private letter ruling from the IRS that, subject to the facts, representations and qualifications contained therein, the receipt of Cadbury plc ordinary shares and our common stock by Cadbury Schweppes stockholders (along with certain related restructuring transactions) will qualify for non-recognition treatment under Sections 355 and 368(a)(1)(F) of the Internal Revenue Code, except for cash received in exchange for fractional shares of Cadbury plc ordinary shares or our common stock, which cash generally will be treated as capital gain. Any eventual private letter ruling will be based on various facts and representations, including that certain conditions necessary to obtain favorable tax treatment under the Internal Revenue Code have been satisfied, but the private letter ruling will not represent an independent determination by the IRS that these conditions have in fact been satisfied. However, as a matter of practice, the IRS generally will revoke a private letter ruling only in situations involving an omission or material


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misstatement of a controlling fact or a change of law. Thus, if one or more of the controlling facts or representations contained in any eventual private letter ruling is incorrect in any material respect, our ability to rely on the private letter ruling would be jeopardized and the private letter ruling could be revoked or modified retroactively by the IRS and the receipt of our common stock found taxable. Cadbury Schweppes is not aware of any facts or circumstances that would cause the facts or representations set forth in the request for the private letter ruling to be untrue or incomplete in any material respect. In addition, we have covenanted to refrain from taking certain actions following the distribution that would cause the distribution to fail to qualify for non-recognition treatment under Section 355 of the Internal Revenue Code; however, if one or more of these covenants are breached, the distribution of our common stock could be taxable to U.S. Holders.
 
The approach in the private letter ruling request submitted to the IRS is to disregard the issuance and subsequent cancellation of the Cadbury plc “beverage shares” as transitory and without effect for U.S. federal income tax purposes. Following this approach and assuming that the receipt of Cadbury plc ordinary shares or Cadbury plc ADRs and our common stock by holders of Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs (and certain related restructuring transactions) qualifies for non-recognition treatment under Sections 355 and 368(a)(1)(F) of the Internal Revenue Code, the following will result for U.S. federal income tax purposes:
 
(1) No gain or loss will be recognized by (and no amount will be included in the income of) a U.S. Holder upon the receipt of Cadbury plc ordinary shares or Cadbury plc ADRs and our common stock;
 
(2) Subject to clause (3) below, the aggregate tax basis of the Cadbury plc ordinary shares or Cadbury plc ADRs in the hands of a U.S. Holder immediately after the receipt of the Cadbury plc ordinary shares will be the same as the tax basis at which the U.S. Holder held its Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs immediately before the receipt of the Cadbury plc ordinary shares or Cadbury plc ADRs;
 
(3) The aggregate tax basis of the Cadbury plc ordinary shares or Cadbury plc ADRs (as determined pursuant to clause (2) above) and our common stock in the hands of a U.S. Holder immediately after the receipt of our common stock, including any fractional share interest for which cash is received, will be the same as the tax basis at which the U.S. Holder held its Cadbury plc ordinary shares or Cadbury plc ADRs immediately before the receipt of our common stock, and such aggregate tax basis will be allocated between the Cadbury plc ordinary shares or Cadbury plc ADRs and our common stock based upon their respective fair market values immediately after the receipt of our common stock;
 
(4) The holding period for each of the Cadbury plc ordinary shares or Cadbury plc ADRs and our common stock received by a U.S. Holder will include the period during which the U.S. Holder held its Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs; and
 
(5) A U.S. Holder who receives cash in lieu of a fractional share of Cadbury plc ordinary shares or our common stock will be treated as having sold such fractional share for cash and generally will recognize capital gain or loss for U.S. federal income tax purposes in an amount equal to the difference between the amount of cash received and the U.S. Holder’s tax basis in the fractional share. That capital gain or loss generally will be U.S. source long-term capital gain or loss if the U.S. Holder’s holding period for its Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs exceeds one year. The deductibility of capital losses is subject to limitations under the Internal Revenue Code. Any cash received from sales of fractional shares of Cadbury plc ordinary shares in pounds sterling will be included in income in a U.S. dollar amount calculated by reference to the exchange rate in effect on the day the disposition proceeds are received by a U.S. Holder, regardless of whether the pounds sterling are converted into U.S. dollars at that time. Gain or loss, if any, recognized on the sale or disposition of pounds sterling generally will be ordinary U.S. source income or loss. However, if cash received in pounds sterling is converted into U.S. dollars on the day received, a U.S. Holder generally will not be required to recognize foreign currency gain or loss in respect of such cash; and
 
(6) Neither we nor Cadbury plc will recognize gain or loss in respect of the issuance and distribution of our common stock.
 
Treasury regulations governing Sections 355 and 368(a)(1)(F) of the Internal Revenue Code require that certain U.S. Holders with significant ownership in Cadbury Schweppes that receive Cadbury plc ordinary shares


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and our common stock attach a statement to their U.S. federal income tax return for the taxable year in which such receipt occurs, providing certain information with respect to the receipt of Cadbury plc ordinary shares and our common stock. To the extent required by Treasury regulations, U.S. Holders will be provided with the information necessary to comply with this requirement. U.S. Holders should consult their tax advisors in respect to the foregoing requirement.
 
If, in contrast to the statement above, the receipt of our common stock by holders of Cadbury plc ordinary shares or Cadbury plc ADRs did not qualify for non-recognition treatment under Section 355 of the Internal Revenue Code, then contrary to such statements, each U.S. Holder that receives our common stock will have: (1) a taxable dividend (provided, as is expected, Cadbury plc has sufficient current and accumulated earnings and profits (including the current and accumulated earnings and profits of Cadbury Schweppes) as determined for U.S. federal income purposes, or, if not so determined, dividend treatment will be presumed) in an amount equal to the fair market value of our common stock that was distributed to such U.S. Holder and the amount of cash received in lieu of a fractional share of our common stock (without reduction for any portion of such U.S. Holder’s tax basis in its Cadbury plc ordinary shares or Cadbury plc ADRs); and (2) a tax basis in our common stock received equal to the fair market value of such common stock on the date of receipt, and the holding period for that stock would begin the day after the date of receipt. Further, there would be no adjustment in tax basis for a U.S. Holder’s Cadbury plc ordinary shares or Cadbury plc ADRs and the tax basis of the Cadbury plc ordinary shares or Cadbury plc ADRs would equal the U.S. Holder’s tax basis in its Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs.
 
Under current law, assuming certain holding period and other requirements are met, U.S. Holders that are individual citizens or residents of the United States are subject to preferential U.S. federal income tax rates on dividends.
 
U.K. Tax Consequences.   A U.S. Holder will incur no U.K. tax upon the receipt of Cadbury plc “beverage shares” Cadbury plc ordinary shares or Cadbury plc ADRs, or our common stock, including cash received in lieu of a fractional share of Cadbury plc ordinary shares or our common stock, if such U.S. Holder is neither resident nor, in the case of individuals, ordinarily resident in the United Kingdom.
 
Taxation of Dividends on Our Common Stock
 
U.S. Federal Income Tax Consequences.   If we make distributions on our common stock, such distributions will constitute dividends for U.S. federal income tax purposes to the extent paid from our current or accumulated earnings and profits, as determined under U.S. federal income tax principles. To the extent not paid from our current or accumulated earnings and profits, distributions on our common stock will constitute a tax-free return of capital and will first be applied against and reduce a U.S. Holder’s adjusted basis in our common stock, but not below zero, and then the excess, if any, will be treated as gain from the sale of common stock. Dividends received by a corporate U.S. Holder will be eligible for the dividends received deduction if the U.S. Holder meets certain holding period and other applicable requirements. Dividends received by a non-corporate U.S. Holder will qualify for reduced rates of taxation if the U.S. Holder meets certain holding period and other applicable requirements.
 
Taxation of Dispositions of Our Common Stock
 
U.S. Federal Income Tax Consequences.   A U.S. Holder generally will recognize capital gain or loss on the sale or other taxable disposition of our common stock equal to the difference between (i) the sum of any cash received and the fair market value of any other property received, and (ii) the U.S. Holder’s adjusted tax basis in the common stock. Any capital gain or loss that a U.S. Holder recognizes will be long-term capital gain or loss if the U.S. Holder has held the stock for more than one year. Long-term capital gain of a non-corporate U.S. Holder is eligible for a reduced rate of taxation. The deductibility of capital losses is subject to limitations under the Internal Revenue Code.
 
U.K. Tax Consequences.   A U.S. Holder who is neither resident nor, in the case of individuals, ordinarily resident for tax purposes in the U.K. will not be liable for U.K. tax on chargeable gains on the disposal of our common stock unless the U.S. Holder carries on a trade, profession or vocation in the U.K. through a branch or agency or, in the case of a company, a permanent establishment and our common stock has been used, held or acquired for the purpose of such branch, agency or permanent establishment.


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U.K. Stamp Duty and Stamp Duty Reserve Tax
 
No U.K. stamp duty or stamp duty reserve tax should be payable by a U.S. Holder as a result of the cancellation of Cadbury Schweppes ordinary shares and the issue of Cadbury plc “beverage shares” and Cadbury plc ordinary shares under the scheme of arrangement or as a result of the issue of our common stock in connection with the separation.
 
A U.S. Holder will not be subject to U.K. stamp duty reserve tax on the disposition of our common stock, nor will it generally be necessary to pay stamp duty on any such disposition, provided that any instrument of transfer of our common stock is executed outside the U.K. and does not relate to any property situated, or to any matter or thing done or to be done, in the U.K.
 
No U.K. stamp duty reserve tax will be payable by a U.S. Holder in respect of any agreement to transfer our common stock unless they are registered in a register kept in the United Kingdom by or on our behalf. It is not intended that such a register will be kept in the United Kingdom.
 
Where Cadbury plc ordinary shares are issued or transferred: (i) to, or to a nominee for, a person whose business is or includes the provision of clearance services; or (ii) to, or to a nominee or agent for, a person whose business is or includes issuing depositary receipts, stamp duty (in the case of a transfer to such persons) or stamp duty reserve tax may be payable at the higher rate of 1.5% of the amount or value of the consideration payable or, in certain circumstances, the value of the Cadbury plc ordinary shares or, in the case of an issue to such persons, the issue price of the Cadbury plc ordinary shares (rounded up to the next £5 in the case of stamp duty). This liability for stamp duty or stamp duty reserve tax will strictly be payable by the depositary or clearance service operator or their nominee, as the case may be, but will in practice generally be reimbursed by participants in the clearance service or depositary receipt scheme. Clearance services may opt, under certain circumstances, for the normal rate of stamp duty or stamp duty reserve tax (0.5% of the consideration paid) to apply to issues or transfers of Cadbury plc ordinary shares into, and to transactions within, such services instead of the higher rate of 1.5% generally applying to an issue or transfer of Cadbury plc ordinary shares into the clearance service and the exemption from stamp duty and stamp duty reserve tax on transfer of Cadbury plc ordinary shares while in the service. U.S. Holders who hold their Cadbury Schweppes ordinary shares in the form of Cadbury Schweppes ADRs should not suffer a 1.5% charge on the issue of Cadbury plc ordinary shares to the Cadbury plc depository and the receipt of Cadbury plc ADRs.
 
U.S. Information Reporting and Backup Withholding
 
Information reporting requirements will generally apply to U.S. Holders in respect of distributions on our common stock and the proceeds from a sale of our common stock, unless a U.S. Holder is a corporation or other person that is exempt from information reporting requirements. In addition, backup withholding of U.S. federal income tax will apply to those payments if a U.S. Holder fails to provide a taxpayer identification number and certain other information, or a certification of exempt status, or if the U.S. Holder fails to report in full interest and dividend income. Any amounts withheld under the backup withholding rules will be allowed as a refund or credit against a U.S. Holder’s U.S. federal income tax liability provided the required information is timely furnished to the IRS.
 
The foregoing discussion of the material U.K. and U.S. federal tax consequences of the receipt of Cadbury plc “beverage shares,” Cadbury plc ordinary shares or Cadbury plc ADRs and the receipt, ownership and disposition of our common stock under current U.K. and U.S. federal tax law is for general information only and is subject to the qualifications and limitations set forth above. The foregoing does not purport to address all U.K. and U.S. federal tax consequences or tax consequences that may arise under the tax laws of other jurisdictions or that may apply to particular categories of holders of Cadbury Schweppes ordinary shares or Cadbury Schweppes ADRs. Holders are urged to consult their own tax advisors as to the particular tax consequences of the receipt of Cadbury plc “beverage shares,” Cadbury plc ordinary shares or Cadbury plc ADRs and the receipt, ownership and disposition of our common stock to them, including the effect of any non-UK and non-U.S. tax laws, and the effect of any repeals, revocations or modifications in tax laws that may affect the tax consequences described above.


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WHERE YOU CAN FIND MORE INFORMATION
 
We have filed with the SEC a registration statement on Form 10 under the Exchange Act, of which this information statement forms a part, with respect to our shares of common stock that holders of ordinary shares and ADRs of Cadbury Schweppes will receive in the distribution. This information statement does not contain all of the information contained in the registration statement and the exhibits to the registration statement. Some items are omitted in accordance with the rules and regulations of the SEC. For additional information relating to us, reference is made to the registration statement and the exhibits to the registration statement, which are on file with the SEC.
 
You may inspect and copy the registration statement and the exhibits to the registration statement that we have filed with the SEC at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the Public Reference Room. In addition, the SEC maintains an Internet site at www.sec.gov, from which you can electronically access the registration statement, including the exhibits and schedules to the registration statement.
 
Statements contained in this information statement as to the contents of any contract or other document referred to are not necessarily complete and in each instance, if the contract or document is filed as an exhibit, reference is made to the copy of the contract or other documents filed as an exhibit to the registration statement. Each statement is qualified in all respects by the relevant reference.
 
As a result of the distribution, we will be required to comply with the full informational and reporting requirements of the Exchange Act. We will fulfill our obligations with respect to these requirements by filing Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Proxy Statements and Current Reports on Form 8-K and other information with the SEC.
 
We plan to make available, on our website      , our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q, Proxy Statements, Current Reports on Form 8-K, reports filed pursuant to Section 16 and amendments to those reports as soon as reasonably practicable after we electronically file or furnish such materials with the SEC. In addition, we will post the charters of our Audit Committee, Compensation Committee and Nominating and Corporate Governance Committee and our Code of Ethics on our website. These charters and Code of Ethics are not incorporated by reference in this information statement. We also will provide a copy of these documents free of charge to stockholders upon request by contacting Investor Relations at the address or telephone set forth in “Information Statement Summary — Questions and Answers About the Distribution — Who do I contact for information regarding Dr Pepper Snapple Group, Inc. and the distribution?”


142


 

 
DR PEPPER SNAPPLE GROUP, INC.
 
INDEX TO FINANCIAL STATEMENTS
 
         
Combined Financial Statements:
       
    F-2  
    F-3  
    F-4  
    F-5  
    F-6  
    F-7  
Unaudited Interim Condensed Combined Financial Statements:
       
    F-51  
    F-52  
    F-53  
    F-54  
    F-55  


F-1


Table of Contents

 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
To the Board of Directors of Cadbury Schweppes plc and the Board of Directors of Dr Pepper Snapple Group, Inc.:
 
We have audited the accompanying combined balance sheets of Dr Pepper Snapple Group, Inc., formerly CSAB Inc., (the “Company”) as of December 31, 2006 and January 1, 2006, and the related combined statements of operations, cash flows and changes in invested equity for the fiscal years ended December 31, 2006, January 1, 2006 and January 2, 2005. These combined financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these combined financial statements based on our audits.
 
We conducted our audits in accordance with generally accepted auditing standards as established by the Auditing Standards Board (United States) and in accordance with the auditing standards of the Public Company Accounting Oversight Board (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. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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, such combined financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2006 and January 1, 2006, and the results of its operations and its cash flows for the fiscal years ended December 31, 2006, January 1, 2006 and January 2, 2005 in conformity with accounting principles generally accepted in the United States of America.
 
As discussed in Note 1, the combined financial statements of the Company include allocation of certain general corporate overhead costs from Cadbury Schweppes plc. These costs may not be reflective of the actual level of costs which would have been incurred had the Company operated as a separate entity apart from Cadbury Schweppes plc.
 
As discussed in Note 2 to the combined financial statements, in 2005 the Company changed its method of accounting for stock based employee compensation to conform to FASB Statement No. 123(R), Share-Based Payment .
 
/s/ Deloitte & Touche LLP
Dallas, Texas
November 12, 2007


F-2


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
COMBINED BALANCE SHEETS
 
                 
    December 31,
    January 1,
 
    2006     2006  
    (U.S. Dollars in millions)  
 
Assets
Current assets:
               
Cash and cash equivalents (Note 2)
  $ 35     $ 28  
Accounts receivable (Note 2):
               
Trade (net of allowances of $14 and $10, respectively)
    562       287  
Other
    18       65  
Related party receivable
    5       3  
Note receivable from related parties (Note 16)
    579       669  
Inventories (Notes 2 and 4)
    300       176  
Deferred tax assets (Notes 2 and 9)
    61       20  
Prepaid and other current assets
    72       83  
                 
Total current assets
    1,632       1,331  
Property, plant and equipment, net (Notes 2 and 6)
    755       326  
Investments in unconsolidated subsidiaries (Note 7)
    12       245  
Goodwill, net (Notes 2 and 8)
    3,180       2,444  
Other intangible assets, net (Notes 2 and 8)
    3,651       2,949  
Other non-current assets
    107       131  
Non-current deferred tax assets (Notes 2 and 9)
    9       7  
                 
Total assets
  $ 9,346     $ 7,433  
                 
Liabilities and Invested Equity
Current liabilities:
               
Accounts payable and accrued expenses (Note 5)
  $ 788     $ 533  
Related party payable
    183       189  
Current portion of long-term debt payable to related parties (Note 10)
    708       404  
Income taxes payable (Notes 2 and 9)
    12       10  
                 
Total current liabilities
    1,691       1,136  
Long-term debt payable to third parties (Note 10)
    543       519  
Long-term debt payable to related parties (Note 10)
    2,541       2,339  
Deferred tax liabilities (Notes 2 and 9)
    1,292       986  
Other non-current liabilities
    29       27  
                 
Total liabilities
    6,096       5,007  
Commitments and contingencies (Notes 11)
               
Cadbury Schweppes’ net investment
    3,249       2,416  
Accumulated other comprehensive income
    1       10  
                 
Total invested equity
    3,250       2,426  
                 
Total liabilities and invested equity
  $ 9,346     $ 7,433  
                 
 
The accompanying notes are an integral part of these combined financial statements.


F-3


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
COMBINED STATEMENTS OF OPERATIONS
 
                         
    Fiscal Year Ended  
    December 31,
    January 1,
    January 2,
 
    2006     2006     2005  
    (U.S. Dollars in millions)  
 
Net sales
  $ 4,735     $ 3,205     $ 3,065  
Cost of sales
    1,994       1,120       1,051  
                         
Gross profit
    2,741       2,085       2,014  
Selling, general and administrative expenses
    1,659       1,179       1,135  
Depreciation and amortization
    69       26       10  
Restructuring costs (Notes 2 and 12)
    27       10       36  
Gain on disposal of property and intangible assets
    (32 )     (36 )     (1 )
                         
Income from operations
    1,018       906       834  
Interest expense
    257       210       177  
Interest income
    (46 )     (40 )     (48 )
Other expense (income)
    2       (51 )     2  
                         
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
    805       787       703  
Provision for income taxes (Notes 2 and 9)
    298       321       270  
                         
Income before equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
    507       466       433  
Equity in earnings of unconsolidated subsidiaries, net of tax
    3       21       13  
                         
Income before cumulative effect of change in accounting policy
    510       487       446  
Cumulative effect of change in accounting policy, net of tax (Note 14)
          10        
                         
Net income
  $ 510     $ 477     $ 446  
                         
 
The accompanying notes are an integral part of these combined financial statements.


F-4


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
COMBINED STATEMENTS OF CASH FLOWS
 
                         
    Fiscal Year Ended  
    December 31,
    January 1,
    January 2,
 
    2006     2006     2005  
    (U.S. Dollars in millions)  
 
Operating activities:
                       
Net income
  $ 510     $ 477     $ 446  
Adjustments to reconcile net income to net cash provided by operations:
                       
Depreciation expense
    94       48       53  
Amortization expense
    45       31       31  
Provision for doubtful accounts
    4       1       9  
Employee stock-based compensation expense
    17       22       7  
Excess tax benefit on stock-based compensation
    (1 )     (3 )      
Deferred income taxes
    14       56       72  
Gain on disposal of property and intangible assets
    (32 )     (36 )     (1 )
Equity in earnings of unconsolidated subsidiaries, net of tax
    (3 )     (21 )     (13 )
Cumulative effect of change in accounting policy, net of tax
          10        
Other, net
    (6 )     8       5  
Changes in operating assets and liabilities, net of acquisitions:
                       
(Increase) decrease in trade accounts receivable
    (42 )     8       23  
(Increase) decrease in related party receivables
    (2 )     14       8  
Decrease (increase) in other accounts receivable
    46       (40 )     (5 )
Decrease (increase) decrease in inventories
    13       18       (26 )
Decrease (increase) in prepaid expenses other current assets
    8       (29 )     11  
Increase in other non-current assets
    (3 )     (19 )     (28 )
(Decrease) increase in accounts payable and accrued expenses
    (104 )     34       (50 )
Increase in related party payables
    13       17       89  
Increase (decrease) in income taxes payable
    2       1       (21 )
Increase (decrease) in other non-current liabilities
    8       (14 )      
                         
Net cash provided by operating activities
    581       583       610  
                         
Investing activities:
                       
Acquisition of subsidiaries, net of cash
    (435 )            
Purchases of investments and intangible assets
    (53 )     (35 )     (1 )
Proceeds from disposals of investments and other assets
    53       36        
Purchases of property, plant and equipment
    (158 )     (44 )     (71 )
Proceeds from disposals of property, plant and equipment
    16       5       8  
Payments on notes receivables
    166       680       617  
Issuances of notes receivables
    (91 )     (359 )     (369 )
                         
Net cash (used in) provided by investing activities
    (502 )     283       184  
                         
Financing activities
                       
Proceeds from issuance of long-term debt
    2,086       124       1,333  
Repayment of long-term debt
    (2,056 )     (279 )     (1,557 )
Excess tax benefit on stock-based compensation
    1       3        
Cash distributions
    (80 )     (381 )      
Change in Cadbury Schweppes’ net investment
    (23 )     (282 )     (575 )
                         
Net cash used in financing activities
    (72 )     (815 )     (799 )
                         
Cash and cash equivalents — net change from:
                       
Operating, investing and financing activities
    7       51       (5 )
Currency translation
          (42 )     0  
Cash and cash equivalents at beginning of period
    28       19       24  
                         
Cash and cash equivalents at end of period
  $ 35     $ 28     $ 19  
                         
Supplemental cash flow disclosures of non-cash investing and financing activities:
                       
Non-cash transfers of property, plant and equipment to other Cadbury Schweppes companies
  $ 15     $ 14     $ 34  
Non-cash transfers of operating assets and liabilities to other Cadbury Schweppes companies
    16       22       10  
Non-cash conversion of debt to equity contribution
          300        
Non-cash reduction in long-term debt from Cadbury Schweppes net investment
    383              
Cadbury Schweppes or related entities acquisition payments reflected through Cadbury Schweppes’ net investment
    23       27       4  
Supplemental cash flow disclosures:
                       
Interest paid
  $ 204     $ 165     $ 130  
Income taxes paid
    14       14       18  
 
The accompanying notes are an integral part of these combined financial statements.


F-5


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
COMBINED STATEMENTS OF CHANGES IN INVESTED EQUITY
 
                                 
    Cadbury
    Accumulated
             
    Schweppes’
    Other
    Total
       
    Net
    Comprehensive
    Invested
    Comprehensive
 
    Investment     Income (Loss)     Equity     Income  
    (U.S. Dollars in millions)  
 
Balance at December 28, 2003
  $ 2,272     $ (5)   $ 2,267          
Net income
    446               446     $ 446  
Movement in Cadbury Schweppes’ investment, net
    (602 )             (602 )        
Other comprehensive income:
                               
Net change in minimum pension liability
            (2 )     (2 )     (2 )
Foreign currency translation adjustment
            (2 )     (2 )     (2 )
                                 
Comprehensive income
                          $ 442  
                                 
Balance at January 2, 2005
    2,116       (9 )     2,107          
Net income
    477               477     $ 477  
Distributions
    (381 )             (381 )        
Movement in Cadbury Schweppes’ investment, net
    204               204          
Other comprehensive income:
                               
Net change in minimum pension liability
            (1 )     (1 )     (1 )
Foreign currency translation adjustment
            20       20       20  
                                 
Comprehensive income
                          $ 496  
                                 
Balance at January 1, 2006
    2,416       10       2,426          
Net income
    510               510     $ 510  
Distributions
    (80 )             (80 )        
Movement in Cadbury Schweppes’ investment, net
    403               403          
Adoption of FAS 158 (Note 13)
            (4 )     (4 )        
Other comprehensive income:
                               
Net change in minimum pension liability
            3       3       3  
Foreign currency translation adjustment
            (8 )     (8 )     (8 )
                                 
Comprehensive income
                          $ 505  
                                 
Balance at December 31, 2006
  $ 3,249     $ 1     $ 3,250          
                                 
 
The accompanying notes are an integral part of these combined financial statements.


F-6


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.

NOTES TO COMBINED FINANCIAL STATEMENTS
As of December 31, 2006 and January 1, 2006 and for the fiscal years
ended December 31, 2006, January 1, 2006 and January 2, 2005
(U.S. Dollar amounts in millions except per share amounts)
 
1.   Background and Basis of Presentation
 
Background
 
Dr Pepper Snapple Group, Inc. (formerly known as CSAB, Inc.) (the “Company”) is a wholly-owned subsidiary of Cadbury Schweppes plc (“Cadbury Schweppes”) that was incorporated as a Delaware corporation on October 24, 2007 to own Cadbury Schweppes’ Americas Beverages business. This business will be transferred to the Company prior to the distribution of all its outstanding shares of common stock to shareholders of Cadbury Schweppes. The initial capitalization was two dollars. Prior to its ownership of Cadbury Schweppes’ Americas Beverages business, the Company does not have any operations. The Company conducts operations in the United States, Canada, Mexico and the Caribbean.
 
The Company’s key brands include Dr Pepper, Snapple, 7UP, Mott’s, Sunkist, Hawaiian Punch, A&W, Canada Dry, Schweppes, Squirt, Clamato, Peñafiel, Mr & Mrs T, Margaritaville and Rose’s.
 
Basis of Presentation
 
The accompanying combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
 
The financial statements have been prepared on a “carve-out” basis from Cadbury Schweppes’ consolidated financial statements using the historical results of operations, assets and liabilities attributable to Cadbury Schweppes’ Americas Beverages business and including allocations of expenses from Cadbury Schweppes. This historical Cadbury Schweppes Americas Beverage information is our predecessor financial information. The Company eliminates from its financial results all intercompany transactions between entities included in the combination and the intercompany transactions with its equity method investees.
 
The combined financial statements may not be indicative of the Company’s future performance and do not necessarily reflect what its combined results of operations, financial position and cash flows would have been had the Company operated as an independent company during the periods presented. To the extent that an asset, liability, revenue or expense is directly associated with the Company, it is reflected in the accompanying combined financial statements.
 
Cadbury Schweppes currently provides certain corporate functions to the Company and costs associated with these functions have been allocated to the Company. These functions include corporate communications, regulatory, human resources and benefit management, treasury, investor relations, corporate controller, internal audit, Sarbanes-Oxley compliance, information technology, corporate and legal compliance, and community affairs. The costs of such services have been allocated to the Company based on the most relevant allocation method to the service provided, primarily based on relative percentage of revenue or headcount. Management believes such allocations are reasonable; however, they may not be indicative of the actual expense that would have been incurred had the Company been operating as an independent company for the periods presented. The charges for these functions are included primarily in “selling, general and administrative expenses” in the Combined Statements of Operations.
 
The total invested equity represents Cadbury Schweppes’ interest in the recorded net assets of the Company. The net investment balance represents the cumulative net investment by Cadbury Schweppes in the Company through that date, including any prior net income or loss or other comprehensive income or loss attributed to the Company. Certain transactions between the Company and other related parties within the Cadbury Schweppes group, including allocated expenses, are also included in Cadbury Schweppes’ net investment.


F-7


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The fiscal years presented are the 52-week period ended December 31, 2006, which is referred to as “2006,” the 52-week period ended January 1, 2006, which is referred to as “2005,” and 53-week period ended January 2, 2005, which is referred to as “2004.” The year end dates represent the Sunday closest to December 31 of each year. Effective 2006, the Company’s fiscal year ends on December 31 of each year.
 
2.   Significant Accounting Policies
 
Use of Estimates
 
The process of preparing financial statements in conformity with U.S. GAAP requires the use of estimates and judgments that affect the reported amount of assets, liabilities, revenue and expenses. These estimates and judgments are based on historical experience, future expectations and other factors and assumptions we believe to be reasonable under the circumstances. These estimates and judgments are reviewed on an ongoing basis and are revised when necessary. Actual amounts may differ from these estimates. The most significant estimates and judgments that the Company makes include those relating to: revenue recognition, income taxes, pension and postretirement benefit obligations, stock based compensation and valuations of goodwill and other intangibles. Changes in estimates are recorded in the period of change.
 
Revenue Recognition
 
The Company recognizes sales revenue when all of the following have occurred: (1) delivery, (2) persuasive evidence of an agreement exists, (3) pricing is fixed or determinable, and (4) collection is reasonably assured. Delivery is not considered to have occurred until the title and the risk of loss passes to the customer according to the terms of the contract between the Company and the customer. The timing of revenue recognition is largely dependent on contract terms. For sales to other customers that are designated in the contract as free-on-board destination, revenue is recognized when the product is delivered to and accepted at the customer’s delivery site.
 
In addition, the Company offers a variety of incentives and discounts to bottlers, customers and consumers through various programs to support the distribution of its products. These incentives and discounts include cash discounts, price allowances, volume based rebates, product placement fees and other financial support for items such as trade promotions, displays, new products, consumer incentives and advertising assistance. These incentives and discounts, collectively referred to as trade spend, are reflected as a reduction of gross sales to arrive at net sales. Trade spend for 2006 includes the effect of the Company’s bottling acquisitions (see Note 3) where the amounts of such spend are larger than those related to other parts of its business. The aggregate deductions from gross sales recorded by the Company in relation to these programs were approximately $2,440 million, $928 million and $861 million in 2006, 2005 and 2004, respectively. Net sales are also reported net of sales taxes and other similar taxes.
 
Transportation and Warehousing Costs
 
The Company’s transportation and warehousing costs are primarily included in selling, general and administrative expenses.
 
Cash and Cash Equivalents
 
Cash and cash equivalents include cash and investments in short-term, highly liquid securities, with original maturities of three months or less.
 
Concentration of Credit Risk
 
Financial instruments which subject the Company to potential credit risk consist of its cash and cash equivalents and accounts receivable. The Company places its cash and cash equivalents with high credit quality financial institutions. Deposits with these financial institutions may exceed the amount of insurance


F-8


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
provided; however, these deposits typically are redeemable upon demand and, therefore, the Company believes the financial risks associated with these financial instruments are minimal.
 
The Company performs ongoing credit evaluations of its customers, and generally does not require collateral on its accounts receivable. The Company estimates the need for allowances for potential credit losses based on historical collection activity and the facts and circumstances relevant to specific customers and records a provision for uncollectible accounts when collection is uncertain. The Company has not experienced significant credit related losses to date.
 
No single customer accounted for 10% or more of the Company’s net sales for any period presented and no single customer accounted for 10% or more of the Company’s trade receivables.
 
The principal raw materials we use in our business are aluminum cans and ends, glass bottles, plastic bottles and caps, paperboard packaging, high fructose corn syrup and other sweeteners, juice, fruit, electricity, fuel and water. Some raw materials we use are available from only a few suppliers. If these suppliers are unable or unwilling to meet our requirements, we could suffer shortages or substantial cost increases.
 
Accounts Receivable and Allowance for Doubtful Accounts
 
Trade accounts receivable are recorded at the invoiced amount and do not bear interest. Past-due status is based on contractual terms on a customer-by-customer basis. The Company determines the required allowance using information such as its customer credit history, industry and market segment information, economic trends and conditions, credit reports and customer financial condition. The estimates can be affected by changes in the industry, customer credit issues or customer bankruptcies. Account balances are charged off against the allowance when it is determined that the receivable will not be recovered.
 
Activity in the allowance for doubtful accounts was as follows:
 
                         
    2006     2005     2004  
 
Balance, beginning of the year
  $ 10     $ 12     $ 8  
Net charge to costs and expenses
    4       1       9  
Acquisition of subsidiaries
    3             3  
Write-offs
    (3 )     (3 )     (8 )
                         
Balance, end of the year
  $ 14     $ 10     $ 12  
                         
 
Inventories
 
Inventories are stated at the lower of cost or market value. Cost is determined for all U.S. inventories by the last-in, first-out (“LIFO”) method and for non-U.S. inventories by the first-in, first-out (“FIFO”) method. Inventories include raw materials, work-in-process, finished goods, advertising materials, spare parts and other supplies. The costs of finished goods inventories include raw materials, direct labor and indirect production and overhead costs.
 
Income Taxes
 
Income taxes are computed and reported on a separate return basis and accounted for using the asset and liability approach under Statement of Financial Accounting Standards (“SFAS”) No. 109, Accounting for Income Taxes (“SFAS 109”). This method involves determining the temporary differences between combined assets and liabilities recognized for financial reporting and the corresponding combined amounts recognized for tax purposes and computing the tax-related carryforwards at the enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The resulting amounts are deferred tax assets or liabilities and the net changes represent the deferred tax expense or benefit for the year. The


F-9


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
total of taxes currently payable per the tax return and the deferred tax expense or benefit represents the income tax expense or benefit for the year for financial reporting purposes.
 
The Company periodically assesses the likelihood of realizing its deferred tax assets based on the amount of deferred tax assets that the Company believes is more likely than not to be realized. The Company bases its judgment of the recoverability of its deferred tax asset, which includes U.S. federal and, to a lesser degree, state and foreign net operating loss, or NOL, carryforwards, primarily on historical earnings, its estimate of current and expected future earnings, prudent and feasible tax planning strategies, and current and future ownership changes.
 
Property, Plant, and Equipment
 
Property, plant and equipment are stated at cost, net of accumulated depreciation and amortization, plus capitalized interest on borrowings during the actual construction period of major capital projects. Significant improvements which substantially extend the useful lives of assets are capitalized. Expenditures for maintenance and repairs are expensed as incurred. When property, plant and equipment is sold or retired, the costs and the related accumulated depreciation are removed from the accounts, and the net gains or losses are recorded in “gain on disposal of property and intangible assets.” Depreciation is provided on a straight-line basis over the estimated useful lives of depreciable assets, which range from 3 to 40 years. Leasehold improvements are amortized over the shorter of the estimated useful life of the assets or the lease term.
 
For financial reporting purposes, depreciation is computed on the straight-line method over the estimated useful asset lives as follows:
 
     
Asset
  Useful Life
 
Buildings and improvements
  25 to 40 years
Machinery and equipment
  5 to 14 years
Vehicles
  5 to 8 years
Vending machines
  5 to 7 years
Computer software
  3 to 8 years
 
Estimated useful lives are periodically reviewed and, when warranted, changes are made to them. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss would be determined when estimated undiscounted future pre-tax cash flows from the use of the asset or group of assets, as defined, are less than its carrying amount. Measurement of an impairment loss is based on the excess of the carrying amount of the asset or group of assets over the long-live asset fair value. Fair value is generally measured using discounted cash flows.
 
The costs of major rebuilds and replacements of plant and equipment are capitalized, and expenditures for repairs and maintenance which do not improve or extend the life of the assets are expensed as incurred.
 
Goodwill and Other Indefinite Lived Intangible Assets
 
The majority of the Company’s intangible asset balances are made up of goodwill and brands which the Company has determined to have indefinite useful lives. In arriving at the conclusion that a brand has an indefinite useful life, management reviews factors such as size, diversification and market share of each brand. Management expects to acquire, hold and support brands for an indefinite period through consumer marketing and promotional support. The Company also considers factors such as our ability to continue to protect the legal rights that arise from these brand names indefinitely or the absence of any regulatory, economic or competitive factors that could truncate the life of the brand name. If the criteria are not met to assign an indefinite life, the brand is amortized over its expected useful life.
 
The Company conducts impairment tests on goodwill and all indefinite lived intangible assets annually, as of December 31, or more frequently if circumstances indicate that the carrying amount of an asset may not be


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
recoverable. The Company uses present value and other valuation techniques to make this assessment. If the carrying amount of an intangible asset exceeds its fair value, an impairment loss is recognized in an amount equal to that excess.
 
Impairment tests for goodwill include comparing the fair value of the respective reporting units, which are the Company’s segments, with their carrying amount, including goodwill. Goodwill is evaluated using a two-step impairment test at the reporting unit level. The first step compares the carrying amount of a reporting unit, including goodwill, with its fair value. If the carrying amount of a reporting unit exceeds its fair value, a second step is completed to determine the amount of goodwill impairment loss to record. In the second step, an implied fair value of the reporting unit’s goodwill is determined by allocating the fair value of the reporting unit to all of the assets and liabilities other than goodwill. The amount of impairment loss is equal to the excess of the carrying amount of the goodwill over the implied fair value of that goodwill.
 
Definite Lived Intangible Assets
 
Definite lived intangible assets are those assets deemed by the Company to have determinable finite useful lives. Identifiable intangible assets with finite lives are amortized on a straight-line basis over their estimated useful lives as follows:
 
     
Intangible Asset
  Useful Life
 
Brands
  5-15 years
Bottler agreements and distribution rights
  5 years
Customer relationships and contracts
  5 -10 years
 
Other Assets
 
The Company provides support to certain customers to cover various programs and initiatives to increase net sales. Costs of these programs and initiatives are recorded in “prepaid expenses and other current assets” and “other non-current assets.” These costs include contributions to customers or vendors for cold drink equipment used to market and sell the Company’s products.
 
The long-term portion of the costs for these programs is recorded in other non-current assets and subsequently amortized over the period to be directly benefited and amounted to $100 million and $129 million, net of accumulated amortization, for 2006 and 2005, respectively. The amounts of these incentives are amortized based upon a methodology consistent with the Company’s contractual rights under these arrangements. The amortization charge for the cost of contributions to customers or vendors for cold drink equipment was $16 million, $17 million and $17 million for 2006, 2005 and 2004, respectively, and was recorded in “selling, general and administrative expenses” in the Combined Statements of Operations.
 
The amortization charge for the cost of other programs and incentives was $10 million, $11 million and $10 million for 2006, 2005 and 2004, respectively, and was recorded as a deduction from net sales.
 
Research and Development
 
Research and development costs are expensed when incurred and amounted to $24 million, $21 million and $12 million for 2006, 2005 and 2004, respectively. These expenses are recorded in “selling, general and administrative expenses” in the Combined Statements of Operations.
 
Advertising Expense
 
Advertising costs are expensed when incurred and amounted to approximately $374 million, $377 million and $388 million for 2006, 2005 and 2004, respectively. These expenses are recorded in “selling, general and administrative expenses.”


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
  Restructuring Costs
 
The Company periodically records facility closing and reorganization charges when a facility for closure or other reorganization opportunity has been identified, a closure plan has been developed and the affected employees notified, in accordance with SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities (“SFAS 146”). Refer to Note 12.
 
  Foreign Currency Translation
 
The functional currency of the Company’s operations outside the U.S. is the local currency of the country where the operations are located. The balance sheets of operations outside the U.S. are translated into U.S. Dollars at the end of year rates. The results of operations for the fiscal year are translated into U.S. Dollars at an annual average rate, calculated using month end exchange rates.
 
The following table sets forth exchange rate information for the periods and currencies indicated:
 
                 
          Average
 
Mexican Peso to US Dollar Exchange Rate
  Year End     Yearly  
 
2006
    10.79       10.86  
2005
    10.64       10.88  
2004
    11.15       11.28  
 
                 
          Average
 
Canadian Dollar to US Dollar Exchange Rate
  Year End     Yearly  
 
2006
    1.17       1.13  
2005
    1.17       1.21  
2004
    1.20       1.21  
 
Differences on exchange arising from the translation of opening balances sheets of these entities to the rate ruling at the end of the financial year are recognized in accumulated other comprehensive income. The exchange differences arising from the translation of foreign results from the average rate to the closing rate are also recognized in accumulated other comprehensive income. Such translation differences are recognized as income or expense in the period in which the operations are disposed of.
 
Transactions in foreign currencies are recorded at the approximate rate of exchange at the transaction date. Assets and liabilities resulting from these transactions are translated at the rate of exchange in effect at the balance sheet date. All such differences are recorded in results of operations and amounted to $5 million, $2 million and $6 million in 2006, 2005 and 2004, respectively.
 
For all periods prior to December 29, 2003, cumulative translation adjustments have been presented as a component of Cadbury Schweppes Net Investment and has not been set forth separately due to the complex nature of preparing these combined financial statements for operations that were legally held by different subsidiaries of Cadbury Schweppes.
 
  Fair Value of Financial Instruments
 
Pursuant to SFAS No. 107, Disclosure about Fair Value of Financial Instruments (“SFAS 107”), the Company is required to disclose an estimate of the fair value of its financial instruments as of December 31, 2006 and January 1, 2006. SFAS 107 defines the fair value of financial instruments as the amount at which the instrument could be exchanged in a current transaction between willing parties.
 
The carrying amounts reflected in the Combined Balance Sheets for cash and cash equivalents, accounts receivable, accounts payable and short-term debt approximate fair value due to the short-term nature of their maturities.


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The Company’s long-term debt was subject to variable and fixed interest rates that approximated market rates in 2006, 2005 and 2004. As a result, the Company believes the carrying value of long-term debt approximates fair value for these periods.
 
The carrying amount of the Company’s outstanding foreign-currency swaps is equivalent to fair value as of the respective dates in the Combined Balance Sheets.
 
Stock-Based Compensation
 
On January 3, 2005, the Company adopted Statement of Financial Accounting Standards No. 123(R), Share-Based Payment (“SFAS 123(R)”). SFAS 123(R) requires the recognition of compensation expense in the Combined Statement of Operations related to the fair value of employee share-based awards. The Company has selected the modified prospective method of transition; accordingly, prior periods have not been restated. Upon adoption of SFAS 123(R), for awards which are classified as liabilities, the Company was required to reclassify the APB 25 (as defined below) historical compensation cost from equity to liability and to recognize the difference between this and the fair value liability through the statement of operations.
 
Under SFAS 123(R), the Company recognizes the cost of all unvested employee stock options on a straight-line attribution basis over their respective vesting periods, net of estimated forfeitures. In addition, the Company has certain employee share plans that contain inflation indexed earnings growth performance conditions. SFAS 123(R) requires plans with such performance criteria to be accounted for under the liability method. The liability method, as set out in SFAS 123(R), requires a liability be recorded on the balance sheet until awards have vested. Also, in calculating the income statement charge for share awards under the liability method as set out in SFAS 123(R), the fair value of each award must be remeasured at each reporting date until vesting.
 
In 2004, stock compensation expense was determined based on Accounting Principles Board (“APB”) Opinion No. 25, Accounting for Stock Issued to Employees (“APB 25”) and related interpretations. Under APB 25, compensation expense was determined as the difference between the market price and exercise price of the share-based award. For fixed plans, compensation cost was determined on the date of grant. For variable plans, compensation was remeasured at each balance sheet date until the award vested.
 
The stock-based compensation plans in which the Company’s employees participate are described further in Note 14.
 
Pension and Postretirement Benefits
 
The Company has several pension and postretirement plans covering our employees who satisfy age and length of service requirements. There are nine stand-alone and five multi-employer pension plans and five stand-alone and one multi-employer postretirement plans. Depending on the plan, pension and postretirement benefits are based on a combination of factors, which may include salary, age and years of service. One of the nine stand-alone plans is an unfunded pension plan that provides supplemental pension benefits to certain senior executives, and is accounted for as a defined contribution plan.
 
Pension expense has been determined in accordance with the principles of SFAS No. 87, Employers’ Accounting for Pensions which requires use of the “projected unit credit” method for financial reporting. The Company adopted the provisions of SFAS No. 158, Employers’ Accounting for Defined Benefit Pension and Other Postretirement Plans — an amendment of Financial Accounting Standards Board Statements No. 87, 88, 106, and 132(R) (“SFAS 158”) related to recognizing the funded status of a benefit plan and the disclosure requirements on December 31, 2006. The Company has elected to defer the change of measurement date as permitted by SFAS 158. The Company’s policy is to fund pension plans in accordance with the requirements of the Employee Retirement Income Security Act. Employee benefit plan obligations and expenses included in the Combined Financial Statements are determined from actuarial analyses based on plan assumptions, employee demographic data, years


F-13


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
of service, compensation, benefits and claims paid and employer contributions. These funds are funded as benefits are paid, and thus do not have an investment strategy or target allocations for plan assets.
 
Cadbury Schweppes sponsors the five multi-employer pension plans in which the Company’s employees participate, and therefore the Company accounts for these as defined contribution plans.
 
The expense related to the postretirement plans has been determined in accordance with SFAS No. 106, Employers’ Accounting for Postretirement Benefits Other Than Pensions (“SFAS 106”). As stated in SFAS 106, the Company accrues the cost of these benefits during the years that employees render service to us.
 
  New Accounting Standards
 
In February 2007, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities — Including an amendment of FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value option has been elected will be recognized in earnings at each subsequent reporting date. SFAS 159 is effective for the Company January 1, 2008. The Company believes that the adoption of SFAS 159 will not have a material impact on its combined financial statements.
 
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. SFAS 157 is effective for the Company beginning January 1, 2008. The Company believes that the adoption of SFAS 157 will not have a material impact on its combined financial statements.
 
In September 2006, the Securities and Exchange Commission staff published Staff Accounting Bulletin (“SAB”) No. 108, Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements (“SAB 108”). SAB 108 addresses quantifying the financial statement effects of misstatements, specifically, how the effects of prior year uncorrected errors must be considered in quantifying misstatements in the current year financial statements. SAB 108 is effective for fiscal years ending after November 15, 2006. The adoption of SAB 108 by the Company in 2006 did not have a material impact on its combined financial statements.
 
In July 2006, the FASB issued FASB Interpretation (“FIN”) No. 48, Accounting for Uncertainty in Income Taxes (“FIN 48”). FIN 48 clarifies the accounting for uncertainty in income taxes recognized in an enterprise’s financial statements in accordance with SFAS 109. FIN 48 prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. FIN 48 also provides guidance on derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. For the Company, FIN 48 was effective beginning January 1, 2007. The cumulative effect of adopting FIN 48 was a $16 million increase in tax reserves and a corresponding decrease to operating retained earnings at January 1, 2007. Upon adoption, the Company’s amount of gross unrecognized tax benefit at January 1, 2007 was $85 million. Of this amount, $45 million if recognized, would impact its effective tax rate.
 
3.   Acquisitions
 
On May 2, 2006, the Company acquired approximately 55% of the outstanding shares of Dr Pepper/Seven Up Bottling Group, Inc. (“DPSUBG”), which combined with the Company’s pre-existing 45% ownership, resulted in the Company’s full ownership of DPSUBG. DPSUBG’s principal operations are the bottling and distribution of beverages produced by the Company’s Beverage Concentrates and Finished Goods operating segments, and certain beverages produced by third parties, all in North America. The Company acquired DPSUBG to strengthen the route-to-market of its North American beverage business.


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The purchase price for the approximately 55% of DPSUBG the Company did not previously own was approximately $370 million which consisted of $347 million cash paid by the Company and $23 million in related expenses paid by Cadbury Schweppes. The full purchase price was funded through related party debt with the subsidiaries of Cadbury Schweppes.
 
The acquisition was accounted for as a purchase under SFAS No. 141 Business Combinations (“SFAS 141”). The following table summarizes the allocation of the purchase price to approximately 55% of DPSUBG’s assets and liabilities:
 
         
    At
 
    May 2,
 
    2006  
 
Current assets
  $ 182  
Investments
    1  
Property, plant and equipment
    190  
Intangible assets
    410  
         
Total assets acquired
    783  
Current liabilities
    184  
Long-term debt
    358  
Deferred tax liabilities
    146  
Other liabilities
    131  
         
Total liabilities assumed
    819  
Net liabilities assumed
    (36 )
Cash acquired
    10  
Goodwill
    396  
         
Total purchase price
  $ 370  
         
 
Included within the allocation of the purchase price in the table above are $410 million of intangible assets which includes indefinite lived Company-related bottler agreements of $282 million, $70 million of customer relationships and contracts and $48 million of non-Company-related bottler agreements being amortized over 10 years and 5 years, respectively; and other intangible assets of $10 million being amortized over 10 years.
 
The results of DPSUBG have been included in the individual line items within the Combined Statement of Operations from May 2, 2006. Prior to this date, the existing investment in DPSUBG was accounted for by the equity method. Refer to Note 7.
 
The following unaudited pro forma summary presents the results of operations as if the acquisition of DPSUBG had occurred at the beginning of each fiscal year. The pro forma information may not be indicative of future performance.
 
                 
    2006     2005  
 
Net sales
  $ 5,443     $ 5,019  
                 
Net income before cumulative effect of change in accounting principle
  $ 500     $ 457  
                 
Net income
  $ 500     $ 447  
                 
 
The Company also acquired All American Bottling Company (“AABC”) for $58 million on June 9, 2006 and Seven Up Bottling Company of San Francisco (“Easley”) for $51 million on August 7, 2006. Goodwill of


F-15


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
$11 million and identifiable intangible assets of $54 million were recorded. These acquisitions further strengthen the route-to-market of the Company’s North American beverage business.
 
The goodwill associated with these transactions has been assigned to the Bottling Group, Beverage Concentrates and Finished Goods segments. The amounts assigned to these segments were $186 million, $322 million and $233 million, respectively. The goodwill represents benefits of the acquisitions that are in addition to the fair value of the net assets acquired and the anticipated increased profitability arising from the future revenue and cost synergies arising from the combination. None of the goodwill is deductible for tax purposes.
 
Supplemental schedule of noncash investing activities:
 
In conjunction with the acquisitions of DPSUBG, AABC, and Easley, the following liabilities were assumed:
 
                         
    DPSUBG     AABC     Easley  
 
Fair value of assets acquired
  $ 1,189     $ 64     $ 99  
Cash paid by the Company
    (347 )     (58 )     (51 )
Cash paid by Cadbury Schweppes
    (23 )            
                         
Liabilities assumed
  $ 819     $ 6     $ 48  
                         
 
In connection with the 2005 purchase of 5% of DPSUBG’s common stock, Cadbury Schweppes paid $27 million. This investment was transferred to the Company.
 
4.   Inventories
 
Inventories consist of the following:
 
                 
    December 31,
    January 1,
 
    2006     2006  
 
Raw materials
  $ 105     $ 77  
Work in process
    5       4  
Finished goods
    214       116  
                 
Inventories at FIFO cost
    324       197  
Reduction to LIFO cost
    (24 )     (21 )
                 
Inventories
  $ 300     $ 176  
                 
Percent of inventory accounted for by:
               
LIFO
    91 %     86 %
FIFO
    9 %     14 %
 
5.   Accounts Payable and Accrued Expenses
 
Accounts payable and accrued expenses consisted of the following:
 
                 
    December 31,
    January 1,
 
    2006     2006  
 
Trade accounts payable
  $ 256     $ 161  
Customer rebates
    184       188  
Accrued compensation
    96       69  
Other current liabilities
    252       115  
                 
Accounts payable and accrued expenses
  $ 788     $ 533  
                 


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
6.   Property, Plant and Equipment
 
                 
    December 31,
    January 1,
 
    2006     2006  
 
Land
  $ 79     $ 12  
Buildings and improvements
    265       164  
Machinery and equipment
    472       445  
Vending machines
    258       10  
Software
    105       95  
Construction-in-progress
    75       18  
                 
Gross property, plant and equipment
    1,254       744  
Less: accumulated depreciation and amortization
    (499 )     (418 )
                 
Net property, plant and equipment
  $ 755     $ 326  
                 
 
At December 31, 2006, the amount reflected in “buildings and improvements” and “machinery and equipment” at cost includes $21 million and $1 million of assets under capital lease, respectively. There were no assets under capital lease at January 1, 2006. At December 31, 2006 and January 1, 2006, the net book value of assets under capital lease was $21 million and $0 million, respectively.
 
Depreciation expense amounted to $94 million, $48 million and $53 million in 2006, 2005 and 2004, respectively.
 
Capitalized interest was $7 million, $5 million and $5 million for 2006, 2005 and 2004, respectively.
 
7.   Investments in Unconsolidated Subsidiaries
 
The Company has the following investments in companies accounted for under the equity method:
 
                 
    December 31,
    January 1,
 
    2006     2006  
 
Dr Pepper/Seven Up Bottling Group
(Ownership of 45% at January 1, 2006)
  $     $ 235  
Other
    12       10  
                 
Total
  $ 12     $ 245  
                 
 
  Dr Pepper/Seven Up Bottling Group
 
In 2005, Cadbury Schweppes purchased approximately 5% of DPSUBG, increasing its investment to approximately 45%. On May 2, 2006, the Company purchased the remaining 55% of DPSUBG. As a result DPSUBG became a fully-owned subsidiary and its results were combined from that date forward. Refer to Note 3.


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
At April 30, 2006 and at January 1, 2006, the Company owned approximately 45% of DPSUBG. At January 2, 2005, the investment in DPSUBG was approximately 40%. The following schedules summarize DPSUBG’s reported financial information:
 
         
    December 31,
 
    2005  
 
Current assets
  $ 418  
Noncurrent assets
    1,557  
         
Total assets
    1,975  
Current liabilities
    368  
Noncurrent liabilities
    1,081  
         
Total liabilities
    1,449  
Shareowner’s equity
    526  
         
Total liabilities and shareowner’s equity
  $ 1,975  
         
Company equity investment
  $ 235  
         
 
                         
    January 1,
             
    2006 to
    For the Years Ended  
    April 30,
    December 31,
    December 31,
 
    2006     2005     2004  
 
Net sales
  $ 708     $ 2,042     $ 1,873  
Cost of goods sold
    469       1,298       1,183  
                         
Gross profit
  $ 239     $ 744     $ 690  
                         
Operating income
  $ 32     $ 134     $ 104  
                         
Net income
  $ 2     $ 45     $ 31  
                         
 
8.   Goodwill and Other Intangible Assets
 
Changes in the carrying amount of the goodwill for the fiscal years ended December 31, 2006 and January 1, 2006 by reporting unit are as follows:
 
                                         
    Beverage
    Finished
    Bottling
    Mexico and
       
    Concentrates     Goods     Group     the Caribbean     Total  
 
Balance at January 2, 2005
  $ 1,415     $ 989     $     $ 36     $ 2,440  
Acquisitions (disposals)
                2             2  
Changes due to currency
                      2       2  
                                         
Balance at January 1, 2006
    1,415       989       2       38       2,444  
Acquisitions (disposals)
    318       233       186             737  
Changes due to currency
                      (1 )     (1 )
                                         
Balance at December 31, 2006
  $ 1,733     $ 1,222     $ 188     $ 37     $ 3,180  
                                         


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The gross carrying amount and accumulated amortization of the Company’s intangible assets other than goodwill as of December 31, 2006 and January 1, 2006 are as follows:
 
                                                         
    Weighted
                                     
    Average
    Beginning
                Ending
          Net
 
    Useful Life
    Gross
    Acquisitions/
    Changes Due
    Gross
    Accumulated
    Carrying
 
As of December 31, 2006
  (years)     Amount     (Disposals)     to Currency     Amount     Amortization     Amount  
 
Intangible assets with indefinite lives:
                                                       
Brands
          $ 2,929     $ 168     $ (1 )   $ 3,096     $     $ 3,096  
Bottler agreements
                  404             404             404  
Distributor Rights
            7       17             24             24  
Other
                                           
Intangible assets with finite lives:
                                                       
Brands
    7       19       10             29       (12 )     17  
Customer relationships
    7             73             73       (8 )     65  
Bottler agreements
    5             52             52       (7 )     45  
Pension asset
            2       (2 )                        
                                                         
Total
          $ 2,957     $ 722     $ (1 )   $ 3,678     $ (27 )   $ 3,651  
                                                         
 
                                                         
    Weighted
                                     
    Average
    Beginning
                Ending
          Net
 
    Useful Life
    Gross
    Acquisitions/
    Changes due
    Gross
    Accumulated
    Carrying
 
As of January 1, 2006
  (years)     Amount     (Disposals)     to Currency     Amount     Amortization     Amount  
 
Intangible assets with indefinite lives:
                                                       
Brands
          $ 2,892     $ 34     $ 3     $ 2,929     $     $ 2,929  
Distributor rights
            7                   7             7  
Intangible assets with finite lives:
                                                       
Brands
    5       19                   19       (8 )     11  
Pension asset
            2                   2             2  
                                                         
Total
          $ 2,920     $ 34     $ 3     $ 2,957     $ (8 )   $ 2,949  
                                                         
 
Amortization expense on intangible assets was $19 million, $3 million and $4 million in 2006, 2005 and 2004, respectively. No impairment expense was recognized in 2006, 2005 and 2004. Amortization expense of these intangible assets over the next five years is expected to be the following:
 
         
    Aggregate
    Amortization
Year
  Expense
 
2007
  $ 27  
2008
    27  
2009
    23  
2010
    23  
2011
    10  


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
In 2006, the Company sold the Slush Puppie business and certain related assets, which included certain brands with net book value of $14 million, to the ICEE Company for $23 million. The Company also sold the Grandma’s Molasses brand and certain related assets, which had a net book value of $0 million to B&G Foods for $30 million.
 
In 2005, the Company sold the Holland House brand, which had a net book value of $0 million, for $36 million to Mizkan Americas, Inc.
 
9.   Income Taxes
 
These financial statements reflect a tax provision (benefit) as if the Company filed its own separate tax return. The Company, however, is included in the consolidated federal income tax return of Cadbury Schweppes Holdings (U.S.) (the “Partnership”) and subsidiaries. The provision for income taxes attributable to continuing operations has the following components:
 
                         
    2006     2005     2004  
 
Current:
                       
Federal
  $ 220     $ 176     $ 147  
State
    40       32       34  
Non-U.S. 
    23       51       17  
                         
Total current provision
    283       259       198  
                         
Deferred
                       
Federal
    10       44       48  
State
    7       26       10  
Non-U.S. 
    (2 )     (8 )     14  
                         
Total deferred provision
    15       62       72  
                         
Total provision for income taxes
  $ 298     $ 321     $ 270  
                         
 
In 2006, 2005 and 2004, the reported amount of income tax expense is different from the amount of income tax expense that would result from applying the federal statutory rate due principally to state taxes.
 
The major temporary differences that give rise to the net deferred tax liabilities are intangible assets and fixed asset depreciation.
 
The following is a reconciliation of income taxes computed at the U.S. federal statutory tax rate to the income taxes reported in the Combined Statements of Operations:
 
                         
    2006     2005     2004  
 
Statutory federal income tax at 35%
  $ 283     $ 283     $ 251  
State income taxes, net
    28       30       29  
Impact of non-U.S. operations
    (18 )     7       4  
Other
    5       1       (14 )
                         
Total provision for income taxes
  $ 298     $ 321     $ 270  
                         
Effective tax rate
    36.9 %     39.7 %     37.7 %
                         


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The tax effects of temporary differences giving rise to deferred income tax assets and liabilities were:
 
                 
    December 31,
    January 1,
 
    2006     2006  
 
Deferred income tax assets:
               
Pension and postretirement benefits
  $ 10     $ 8  
Compensation accruals
    26       15  
Inventory
    10       5  
Credit and net operating loss carryforwards
    9       10  
Accrued liabilities
    40       4  
Other
    23       21  
                 
      118       63  
                 
Deferred income tax liabilities:
               
Fixed assets
    (104 )     (56 )
Intangible assets
    (1,234 )     (953 )
Other
    (2 )     (13 )
                 
      (1,340 )     (1,022 )
                 
Net deferred income tax liability
  $ (1,222 )   $ (959 )
                 
 
The Company has approximately $102 million of U.S. state and foreign net operating loss carryforwards at December 31, 2006. Of this total, $85 million are state net operating losses. Net operating losses generated in the U.S. state jurisdictions, if unused, will expire from 2007 to 2026. The non-U.S. net operating loss carryforwards of $17 million will expire from 2008 to 2016. No valuation allowance has been provided on deferred tax assets as management believes it is more likely than not that the deferred income tax assets will be fully recoverable.
 
Income before income taxes and cumulative effect of change in accounting policy comprised:
 
                         
    2006     2005     2004  
 
U.S.
  $ 698     $ 706     $ 640  
Non-U.S. 
    110       102       76  
                         
Total
  $ 808     $ 808     $ 716  
                         
 
10.   Long-term Obligations
 
Debt Payable to Related Parties
 
                 
    December 31,
    January 1,
 
    2006     2006  
 
Loans payable to related parties, with various fixed and floating interest rates(a)
  $ 3,249     $ 2,743  
Less — Current portion
    (708 )     (404 )
                 
Long-term debt payable to related parties
  $ 2,541     $ 2,339  
                 
 
 
(a) Debt agreements with related parties are as follows:


F-21


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
 
Cadbury Ireland Limited (“CIL”)
 
Total principal owed to CIL was $40 million for both 2006 and 2005. The debt bears interest at a floating rate based on 3-month LIBOR. Actual rates were 5.36% and 4.54% at December 31, 2006 and January 1, 2006, respectively. The outstanding principal balance was due in February 2007 and is included in the current portion of long-term debt. Subsequent to February 2007, the debt remains outstanding and is subject to extension on a three-month basis. The Company recorded $2 million and $1 million of interest expense related to these notes for the fiscal years ended December 31, 2006 and January 1, 2006, respectively.
 
Cadbury Schweppes Finance plc, (“CSFPLC”)
 
The Company has a variety of debt agreements with CSFPLC with maturity dates ranging from February 2007 to May 2011. These agreements had a combined outstanding principal balance of $2,937 million and $1,885 million at December 31, 2006 and January 1, 2006, respectively. At December 31, 2006 and January 1, 2006, $2,186 million and $1,135 million of the debt were based upon a floating rate ranging between LIBOR plus 1.5% to LIBOR plus 2.5%. The remaining principal balance of $750 million and $750 million at December 31, 2006 and January 1, 2006, respectively had a stated fixed rate ranging from 5.48% to 5.95%. The Company recorded $175 million and $99 million of interest expense related to these notes for the fiscal years ended December 31, 2006 and January 1, 2006, respectively.
 
Cadbury Schweppes Treasury America (“CSTA”)
 
Total principal owed to CSTA was $235 million and $0 million at December 31, 2006 and January 1, 2006, respectively. The note carries a stated rate of 7.25% per annum and matures in 2013. The Company recorded $11 million and $0 million of interest expense related to these notes for the fiscal years ended December 31, 2006 and January 1, 2006, respectively.
 
Cadbury Schweppes Overseas Limited (“CSOL”)
 
Total principal owed to CSOL was $22 million and $413 million at December 31, 2006 and January 1, 2006, respectively. The debt bears interest at a floating rate based on Mexican LIBOR plus 1.5% and matures in 2009. Actual rates were 9.89% at December 31, 2006 and January 1, 2006. The Company recorded $15 million and $40 million of interest expense related to these notes for the fiscal years ended December 31, 2006 and January 1, 2006, respectively.
 
Bruton Lane Finance Company LLC (“BLFCLLC”)
 
The Company had two debt agreements with BLFCLLC with maturity dates between December 2008 and December 2009, which bore interest at a floating rate between LIBOR plus .75% to 1.00%. Total principal owed was $376 million at January 1, 2006 and the Company paid the debt off in September 2006. The Company recorded $13 million and $21 million of interest expense related to these notes for the fiscal years ended December 31, 2006 and January 1, 2006, respectively.
 
Cadbury Adams Canada, Inc. (“CACI”)
 
Total principal owed to CACI was $15 million and $29 million at December 31, 2006 and January 1, 2006, respectively and payable on demand. The debt bears interest at a floating rate based on 1 month Canadian LIBOR. Actual rates were 4.26% and 3.30% at December 31, 2006 and January, 1, 2006, respectively. The Company recorded less than $1 million of interest expense related to this debt for the fiscal years ended December 31, 2006 and January 1, 2006, respectively.


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
 
Debt Payable to Third Parties
 
                 
    December 31,
    January 1,
 
    2006     2006  
 
Note payable to a bank. Interest payments due quarterly (interest at CDOR(1) + .325%, due April 2008, payable in Canadian Dollars)
  $ 114     $ 114  
Note payable to a bank. Interest payments due quarterly (interest at CDOR(1) + .45%, due April 2010, payable in Canadian Dollars)
    129       128  
Bonds payable, 4.90% fixed interest rate. Interest payments due semiannually. Principal due December 2008. Payable in Canadian Dollars
    278       277  
Capital Leases
    24        
                 
Total
    545       519  
Less current installments
    (2 )      
                 
Long-term debt payable to third parties
  $ 543     $ 519  
                 
 
 
(1) CDOR is the average of the annual rates for Canadian Dollar bankers’ acceptances having the specified term and face amount of the banks named in Schedule 1 of the Canadian Bank Act
 
  Long Term Debt Maturities
 
Long-term debt maturities, excluding capital leases, for the next five years are as follows:
 
         
2007
  $ 708  
2008
    695  
2009
    22  
2010
    128  
2011
    1,982  
Thereafter
    235  
         
    $ 3,770  
         
 
  Lines of Credit
 
As of December 31, 2006, the Company had available credit lines totaling $45 million. The Company had unused letters of credit totaling $7 million outstanding under its existing credit line facilities. Accordingly, the Company’s maximum borrowing base under these facilities was $38 million. The Company also had additional unused letters of credit totaling $24 million for its Bottling Group operations that were not related to any existing credit facilities.


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
  Lease Commitments
 
The Company has leases for certain facilities and equipment which expire at various dates through 2020. Operating lease expense was $39 million, $21 million and $26 million in 2006, 2005 and 2004, respectively, and was not offset by any sublease rental income. Future minimum lease payments under capital and operating leases with initial or remaining noncancellable lease terms in excess of one year as of December 31, 2006 are as follows:
 
                 
    Operating
    Capital
 
    Leases     Leases  
 
2007
  $ 48     $ 5  
2008
    45       5  
2009
    40       5  
2010
    36       5  
2011
    30       4  
Thereafter
    50       12  
                 
Total minimum lease payments
  $ 249       36  
                 
Less imputed interest at rates ranging from 6.5% to 12.6%
            (12 )
                 
Present value of minimum lease payments
          $ 24  
                 
 
The future minimum lease commitments for leases that have been expensed as part of restructuring provisions in earlier years are not included in the above table. There is $22 million included in “long-term debt payable to third parties,” and $2 million is included in “accounts payable and accrued expenses.”
 
11.   Commitments and Contingencies
 
  Legal Matters
 
The Company is occasionally subject to litigation or other legal proceedings relating to our business. The Company does not believe that the outcome of any pending legal matters, individually or collectively, will have a material adverse effect on the business or financial condition of the Company although such matters may have a materially adverse effect on the Company’s results of operations in a particular period. The following is a description of the Company’s three most significant pending legal matters and one recently settled legal matter:
 
Snapple Distributor Litigation
 
In 2004, one of the Company’s subsidiaries, Snapple Beverage Corp. and several affiliated entities of Snapple Beverage Corp., including Snapple Distributors, Inc., were sued in United States District Court, Southern District of New York, by 57 area route distributors for alleged price discrimination, breach of contract, retaliation, tortious interference and breach of the implied duty of good faith and fair dealing arising out of their respective area route distributor agreements. Each plaintiff sought damages in excess of $225 million. The plaintiffs initially filed the case as a class action but withdrew their class certification motion. They are proceeding as individual plaintiffs but the cases have been consolidated for discovery and procedural purposes. On September 14, 2007, the court granted the Company’s motion for summary judgment, dismissing the plaintiff’s federal claims of price discrimination and dismissing, without prejudice, the plaintiff’s remaining claims under state law. The plaintiffs have filed a notice to appeal the decision and may decide to re-file the state law claims in state court. The Company believes it has meritorious defenses with respect to the appeal and will defend itself vigorously. However, there is no assurance that the outcome of the appeal, or any trial, if claims are refiled, will be in the Company’s favor.


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
Holk & Weiner Snapple Litigation
 
In 2007, Snapple Beverage Corp. was sued by Stacy Holk, in New Jersey Superior Court, Monmouth County, and by Hernant Mehta in the U.S. District Court, Southern District of New York. Plaintiffs filed the case as a class action. The plaintiffs allege that Snapple’s labeling of certain of its drinks is misleading and/or deceptive. The plaintiffs seek unspecified damages on behalf of the class, including enjoining Snapple from various labeling practices, disgorging profits, reimbursing of monies paid for product and treble damages. The Mehta case in New York has since been dropped by the plaintiff. However, the attorneys in the Holk, New Jersey case and a new plaintiff, Evan Weiner, have since filed a new action in New York substantially similar to the New Jersey action. In each case, the Company has filed motions to dismiss the plaintiff’s claims on a variety of grounds. The Company believes it has meritorious defenses to the claims asserted and will defend itself vigorously. However, there is no assurance that the outcome of the Company’s motions or at trial will be in its favor.
 
Nicolas Steele v. Seven Up/RC Bottling Company Inc.
California Wage Audit
 
In 2007, one of the Company’s subsidiaries, Seven Up/RC Bottling Company Inc., was sued by Nicolas Steele in Superior Court in the State of California (Orange County), alleging that its subsidiary failed to provide meal and rest periods and itemized wage statements in accordance with applicable California wage and hour law. The class, which has not yet been certified, consists of all employees of one of the Company’s subsidiaries who have held one of the approximately 400 merchandiser positions in southern California in the past three years. The potential class size could be substantially higher, due to the number of individuals who have held these positions over the three year period. On behalf of the class, the plaintiff claims lost wages, waiting time penalties and other penalties for each violation of the statute. The Company believes it has meritorious defenses to the claims asserted and will defend itself vigorously. However, there is no assurance that the outcome of this matter will be in its favor.
 
The Company has been requested to conduct an audit of its meal and rest periods for all non-exempt employees in California at the direction of the California Department of Labor. At this time, the Company does not know what the results of an audit would be and cannot predict the outcome.
 
Dr Pepper Bottling Company of Texas, Inc. Shareholder Litigation
 
On June 1, 2007, the Company settled a lawsuit brought in 1999 by certain stockholders of Dr Pepper Bottling Company of Texas, Inc. for $47 million, which included $15 million of interest. The lawsuit was assumed as part of the DPSUBG acquisition (see Note 2) and was fully reserved at December 31, 2006.
 
Environmental, Health and Safety Matters
 
The Company operates many manufacturing, bottling and distribution facilities. In these and other aspects of the Company’s business, it is subject to a variety of federal, state and local environment, health and safety laws and regulations. The Company maintains environmental, health and safety policies and a quality, environmental, health and safety program designed to ensure compliance with applicable laws and regulations. However, the nature of the Company’s business exposes it to the risk of claims with respect to environmental, health and safety matters, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims. However, the Company is not currently named as a party in any judicial or administrative proceeding relating to environmental, health and safety matters which would materially affect its operations.


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
12.   Restructuring Costs
 
Restructuring charges during 2006, 2005 and 2004 were as follows:
 
                         
Operating Segment
  2006     2005     2004  
 
Beverage Concentrates
  $ 5     $ 1     $ 12  
Finished Goods
    3       3       11  
Bottling Group
    8              
Mexico and the Caribbean
    3       1       1  
Corporate
    8       5       12  
                         
Total Restructuring Costs
  $ 27     $ 10     $ 36  
                         
 
The Company implements restructuring programs from time to time and incurs costs that are designed to improve operating effectiveness and lower costs. These programs have included closure of manufacturing plants, reductions in workforce, integrating back office operations and outsourcing certain transactional activities. When the Company implements these programs, we incur various charges, including severance and other employment-related costs.
 
The charges recorded during 2006 are primarily related to the following:
 
  •  The integration of the Bottling Group initiated in 2006; and
 
  •  Outsourcing initiatives of the Company’s back office operations service center and a reorganization of the Company’s IT operations initiated in 2006.
 
The charges recorded during 2005 are primarily related to the following:
 
  •  The implementation of additional phases of the Company’s back office operations service center initiated in 2004; and
 
  •  The closure of its North Brunswick plant initiated in 2004.
 
The charges recorded during 2004 are primarily related to the following:
 
  •  The creation of a back office operations service center initiated in 2003;
 
  •  Costs of restructuring of the Company’s four North American businesses initiated in 2003; and
 
  •  The closure of the North Brunswick plant initiated in 2004.
 
The Company expects to incur $53 million of total pre-tax, non-recurring charges primarily related to Bottling Group integrations upon completion. Approximately $45 million of these additional charges are expected to be incurred in 2007.


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
Restructuring liabilities along with charges to expense, cash payment and non-cash charges were as follows:
 
                                                 
    Workforce
                               
    Reduction
    Asset
    External
    Closure
             
    Costs     Write-off     Consulting     Costs     Other     Total  
 
Balance at December 28, 2003
  $ 5     $ 1     $     $ 1     $ 5     $ 12  
2004 Charges
    18       3       5       7       3       36  
2004 Cash Payments
    (17 )           (9 )     (8 )     (6 )     (40 )
2004 Non-Cash Write-offs
          (4 )                       (4 )
Due to/from Cadbury Schweppes
    (1 )           4                   3  
                                                 
Balance at January 2, 2005
    5                         2       7  
2005 Charges
    2             5       1       2       10  
2005 Cash Payments
    (7 )           (10 )     (1 )     (3 )     (21 )
Due to/from Cadbury Schweppes
    1             5                   6  
                                                 
Balance at January 1, 2006
    1                         1       2  
2006 Charges
    9       3       9       1       5       27  
2006 Cash Payments
    (7 )           (12 )     (1 )     (6 )     (26 )
Due to/from Cadbury Schweppes
    (1 )     (3 )     3                   (1 )
                                                 
Balance at December 31, 2006
  $ 2     $     $     $     $     $ 2  
                                                 
 
Restructuring charges recorded by each operating segment were as follows:
 
Beverage Concentrates
 
Beverage Concentrates recorded restructuring costs of $5 million, $1 million and $12 million, in 2006, 2005 and 2004, respectively. During 2006, the costs primarily related to the integration of the Bottling Group. The Beverage Concentrates segment expects to incur additional charges related to this restructuring plan of approximately $19 million over the next two years.
 
During 2004, the costs primarily related to the restructuring of the Company’s four North American businesses initiated in 2003. The cumulative amount related to this activity incurred to date was $10 million and was significantly completed in 2005.
 
Finished Goods
 
Finished Goods recorded restructuring costs of $3 million, $3 million and $11 million in fiscal 2006, 2005 and 2004, respectively. During 2006, the costs primarily related to the integration of the Bottling Group. No significant additional costs related to this activity are expected to be incurred by Finished Goods.
 
During 2004 and 2005, the costs primarily related to the closure of the North Brunswick plant announced in 2004 and the restructuring of the Company’s four North American businesses initiated in 2003. The cumulative amount related to these activities incurred was $14 million, and the activities were completed in 2005.
 
Bottling Group
 
During 2006, the Bottling Group recorded restructuring costs of $8 million related to the integration of the Bottling Group as discussed above. Bottling Group expects to incur additional costs related to their restructuring plan of approximately $26 million over the next two years.


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
Mexico and the Caribbean
 
Mexico and the Caribbean recorded restructuring costs of $3 million, $1 million and $1 million in 2006, 2005 and 2004, respectively. The costs primarily related to restructuring actions initiated in 2003 to outsource the activities of Mexico and the Caribbean’s warehousing and distribution processes. The cumulative amount related to this activity incurred to date is $6 million. The Company expects to incur additional costs related to this restructuring plan of approximately $7 million in the next two years.
 
Corporate
 
The Company recorded corporate costs of $8 million, $5 million and $12 million in 2006, 2005 and 2004, respectively. During 2006, the costs primarily related to restructuring actions initiated in 2006, and the human resource outsourcing program that was initiated in 2005. The Company has incurred $6 million of costs to date related to the data center outsourcing restructuring plan and additional charges of approximately $1 million are expected to be incurred in 2007. The Company has incurred cumulative costs of $5 million to date and does not expect to incur any significant additional costs related to the global shared business service outsource plan.
 
During 2005, the costs mainly related to the outsourcing of human resources activities in Mexico and the Caribbean and the global outsourcing of shared business services that were both initiated in 2005. The human resource outsourcing program was significantly complete in 2005.
 
During 2004, the costs primarily related to the creation of a shared business services center initiated in 2003. The cumulative amount related to this activity incurred to date was $15 million and was completed in 2005.
 
13.   Employee Benefit Plans
 
  Pension and Postretirement Plans
 
The Company has nine stand-alone non-contributory defined benefit plans each with a measurement date of September 30. To participate in the defined benefit plans, employees must have been employed by the Company for at least one year.
 
The Company has five stand-alone postretirement health care plans, which provide benefits to a defined group of employees at the discretion of the Company. These postretirement benefits are limited to eligible expenses and are subject to deductibles, co-payment provisions, and lifetime maximum amounts on coverage. Employee benefit plan obligations and expenses included in the combined financial statements are determined from actuarial analyses based on plan assumptions; employee demographic data, including years of service and compensation; benefits and claims paid; and employer contributions. These funds are funded as benefits are paid, and therefore do not have an investment strategy or targeted allocations for plan assets.
 
Cadbury Schweppes sponsors five defined benefit plans and one postretirement health care plan in which employees of the Company participate. Expenses related to these plans were determined by specifically identifying the costs for the Company’s participants.


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
As discussed in Note 2, the Company adopted SFAS 158 on December 31, 2006. The impact of this adoption on the individual line items in the December 31, 2006 Combined Balance Sheet is summarized in the table below:
 
                         
    Before
  Adjustments
  After
    Application of
  Increase
  Application of
    FAS No. 158   (Decrease)   FAS No. 158
 
Intangible assets (excluding goodwill)
  $ 3,653     $ (2 )   $ 3,651  
Total assets
    9,348       (2 )     9,346  
Accounts payable and accrued expenses
    787       1       788  
Other non-current liabilities
    30       (1 )     29  
Deferred tax liabilities
    1,290       2       1,292  
Total liabilities
    6,094       2       6,096  
Accumulated other comprehensive income
    5       (4 )     1  
Total invested equity
    3,254       (4 )     3,250  
 
  U.S. Plans
 
The following table summarizes the components of net periodic benefit cost for the U.S. defined benefit plans recognized in the Combined Statements of Operations:
 
                         
    2006     2005     2004  
 
Service cost
  $ 1     $ 1     $ 1  
Interest cost
    2       1       1  
Expected return on assets
    (2 )     (1 )     (1 )
                         
Net periodic benefit costs
  $ 1     $ 1     $ 1  
                         
 
Total net periodic benefit cost for the U.S. post-retirement plans was less than $0.5 million for 2006, 2005 and 2004. The estimated prior service cost and estimated net loss for the U.S. plans that will be amortized from accumulated other comprehensive loss into periodic benefit cost in 2007 are each less than $0.5 million.
 
The following table summarizes the projected benefit obligation for U.S. plans as of December 31, 2006 and January 1, 2006:
 
                                 
          Post-retirement
 
    Pension Plans     Benefit Plans  
    2006     2005     2006     2005  
 
As at beginning of year
  $ 21     $ 19     $ 4     $ 4  
Service cost
    1       1              
Interest cost
    2       1              
Acquired in business combinations
    35             2        
Actuarial gain/(loss)
          1              
Benefits paid
    (1 )     (1 )            
                                 
As at end of year
  $ 58     $ 21     $ 6     $ 4  
                                 
Accumulated benefit obligations
  $ 57     $ 21     $ 5     $  
                                 


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The principal assumptions related to the U.S. defined benefit plans and postretirement benefit plans are shown below:
 
                                                 
    Pension Plans     Postretirement Benefit Plan  
    2006     2005     2004     2006     2005     2004  
 
Weighted-average discount rate
    5.72%       5.50%       5.70%       5.90%       5.50%       5.70%  
Expected long-term rate of return on assets
    7.53%       7.30%       7.50%       N/A         N/A         N/A    
Rate of increase in compensation levels
    2.01%       N/A         N/A         4.00%       4.00%       4.00%  
 
The following table is a reconciliation of the U.S. defined benefit pension plans’ assets:
 
                 
    2006     2005  
 
Fair value of plan assets
               
As at beginning of year
  $ 19     $ 15  
Actual return of plan assets
    2       2  
Employer contribution
    2       3  
Acquired in business combinations
    34        
Actuarial gain/loss
    1        
Benefits paid
    (2 )     (1 )
                 
As at end of year
  $ 56     $ 19  
                 
 
Benefits paid from the U.S. post-retirement plans were less than $0.5 million for both years. The expected long-term rate of return on U.S. pension fund assets held by the Company’s pension trusts was determined based on several factors, including input from pension investment consultants and projected long-term returns of broad equity and bond indices. The plans’ historical returns were also considered. The expected long-term rate of return on the assets in the plans was based on an asset allocation assumption of about 60% with equity managers (with expected long-term rates of return of approximately 8.5%, and 40% with fixed income managers) with an expected long-term rate of return of about 5.5%. The actual asset allocation is regularly reviewed and periodically rebalanced to the targeted allocation when considered appropriate.
 
The asset allocation for the U.S. defined benefit pension plans for 2006 and 2005 and January 1, 2006 are as follows:
 
                 
    Percentage of Plan Assets  
    December 31,
    January 1,
 
Asset Category
  2006     2006  
 
Equity securities
    60 %     60 %
Fixed income and other investments
    40 %     40 %
                 
Total
    100 %     100 %
                 


F-30


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The following table summarizes the Company’s funded status for the U.S. plans as of December 31, 2006 and January 1, 2006:
 
                                 
    Pension Plans     Postretirement Benefit Plans  
    December 31,
    January 1,
    December 31,
    January 1,
 
    2006     2006     2006     2006  
 
Projected benefit obligation
  $ (58 )   $ (21 )   $ (6 )   $ (4 )
Plan assets at fair value
    56       19              
                                 
Funded status of plan
  $ (2 )   $ (2 )   $ (6 )   $ (4 )
                                 
Funded status — overfunded
  $ 2     $     $     $  
Funded status — underfunded
    (4 )     (2 )     (6 )     (4 )
 
The following table summarizes amounts recognized in the balance sheets related to the U.S. plans as of December 31, 2006 and January 1, 2006:
 
                                 
    Pension Plans     Postretirement Benefit Plans  
    December 31,
    January 1,
    December 31,
    January 1,
 
    2006     2006     2006     2006  
 
Intangible asset
  $     $ 2     $     $  
Other assets
    2                    
Current liabilities
                (1 )      
Non-current liabilities
    (4 )     (3 )     (5 )     (4 )
Accumulated other comprehensive income
    8       5       (1 )      
                                 
Net amount recognized
  $ 6     $ 4     $ (7 )   $ (4 )
                                 
 
The following table summarizes amounts included in accumulated other comprehensive income for the U.S. plans as of December 31, 2006 and January 1, 2006:
 
                                 
    Pension Plans     Postretirement Benefit Plans  
    December 31,
    January 1,
    December 31,
    January 1,
 
    2006     2006     2006     2006  
 
Prior service cost
  $ 2     $     $     $  
Net gains (losses)
    6       5       (1 )      
                                 
Amounts in accumulated other comprehensive income (loss)
  $ 8     $ 5     $ (1 )   $  
                                 
 
The following table summarizes key pension plan information regarding plans whose accumulated benefit obligations exceed the fair value of their respective plan assets:
 
                                 
    Pension Plans   Postretirement Benefit Plans
    December 31,
  January 1,
  December 31,
  January 1,
    2006   2006   2006   2006
 
Information for plans with an ABO in excess of plan assets:
                               
Projected benefit obligation
  $ 22     $ 21     $ 6     $ 4  
Accumulated benefit obligation
    22       21              
Fair value of plan assets
    20       19              


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Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The following table summarizes the expected cash activity for the U.S. defined benefit plans and postretirement benefit plans in the future:
 
                 
Year
  Pension   Postretirement
 
Company contributions — 2007
  $ 3     $ 1  
Benefit payments
               
2007
    3       1  
2008
    3       1  
2009
    3       1  
2010
    3       1  
2011
    3        
2012 - 2016
    19       1  
 
For measuring the expected postretirement benefit obligation for the U.S. plans, the following health care cost trend rate assumptions were used:
 
     
Years
 
Rate
 
2006
  10%
2007 - 2011
  1% reduction each year
to an ultimate rate of 5%
in 2011
 
The effect of a 1% increase or decrease in health care trend rates on the U.S. post-retirement benefit plans would change the benefit obligation at the end of the year and the service cost plus interest cost by less than $0.5 million.
 
  Foreign Plans
 
The following table summarizes the components of net periodic benefit cost related to foreign defined benefit plans recognized in the Combined Statements of Operations:
 
                         
    2006     2005     2004  
 
Service cost
  $ 1     $ 1     $ 1  
Interest cost
    1       1       1  
Expected return on assets
    (1 )     (1 )     (1 )
                         
Net periodic benefit costs
  $ 1     $ 1     $ 1  
                         
 
Total net periodic benefit cost for the foreign postretirement plans was less than $0.5 million for 2006, 2005 and 2004. The estimated prior service cost and estimated net loss for the foreign plans that will be amortized from accumulated other comprehensive loss into net periodic benefit cost in 2007 are each less than $0.5 million.


F-32


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The following table summarizes the projected benefit obligation for foreign plans as of December 31, 2006 and January 1, 2006:
 
                                 
          Postretirement
 
    Pension Plans     Benefit Plans  
    2006     2005     2006     2005  
 
As at beginning of year
  $ 18     $ 15     $ 4     $ 5  
Service cost
    1       1              
Interest cost
    1       1              
Amendments
                      (1 )
Curtailments
    (1 )                  
Actuarial gain/(loss)
          2       (2 )      
Benefits paid
    (1 )     (1 )            
                                 
As at end of year
  $ 18     $ 18     $ 2     $ 4  
                                 
Accumulated benefit obligations
  $ 17     $ 15     $     $  
                                 
 
The principal assumptions related to the foreign defined benefit plans and postretirement benefit plans are shown below:
 
                                                 
    Pension Plans     Postretirement Benefit Plan  
    2006     2005     2004     2006     2005     2004  
 
Weighted-average discount rate
    5.98 %     6.09 %     6.59 %     5.98 %     6.09 %     6.59 %
Expected long-term rate of return on assets
    7.61 %     7.74 %     7.76 %     N/A       N/A       N/A  
Rate of increase in compensation levels
    4.13 %     4.27 %     4.27 %     4.50 %     5.00 %     5.00 %
 
The following table is a reconciliation of the foreign defined benefit pension plans’ assets:
 
                 
    2006     2005  
 
Fair value of plan assets
               
As at beginning of year
  $ 14     $ 13  
Actual return of plan assets
    2       1  
Employer contribution
    1       1  
Benefits paid
    (1 )     (1 )
                 
As at end of year
  $ 16     $ 14  
                 
 
Benefits paid from the foreign postretirement plans were less than $0.5 million for 2006 and 2005.
 
The expected long-term rate of return on foreign pension fund assets held by the Company’s pension trusts was determined based on several factors, including input from pension investment consultants and projected long-term returns of broad equity and bond indices. The plans’ historical returns were also considered. The expected long-term rate of return on the assets in the plans was based on an asset allocation assumption of about 43% with equity managers, with expected long-term rates of return of approximately 8.5%, and 57% with fixed income managers, with an expected long-term rate of return of about 6.7%. The actual asset allocation is regularly reviewed and periodically rebalanced to the targeted allocation when considered appropriate.


F-33


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The asset allocation for the foreign defined benefit pension plans as of December 31, 2006 and January 1, 2006 are as follows:
 
                 
    Percentage of Plan Assets  
    December 31,
    January 1,
 
Asset Category
  2006     2006  
 
Equity securities
    43 %     45 %
Fixed income and other investments
    57 %     55 %
                 
Total
    100 %     100 %
                 
 
The following table summarizes the Company’s funded status for the foreign plans as of December 31, 2006 and January 1, 2006:
 
                                 
    Pension Plans     Postretirement Benefit Plans  
    December 31,
    January 1,
    December 31,
    January 1,
 
    2006     2006     2006     2006  
 
Projected benefit obligation
  $ (18 )   $ (18 )   $ (2 )   $ (4 )
Plan assets at fair value
    16       14              
                                 
Funded status of plan
  $ (2 )   $ (4 )   $ (2 )   $ (4 )
                                 
Funded status — overfunded
  $ 2     $ 2     $     $  
Funded status — underfunded
    (4 )     (6 )     (2 )     (4 )
 
The following table summarizes amounts recognized in the Combined Balance Sheets related to the foreign plans as of December 31, 2006 and January 1, 2006:
 
                                 
    Pension Plans     Postretirement Benefit Plans  
    December 31,
    January 1,
    December 31,
    January 1,
 
    2006     2006     2006     2006  
 
Other assets
  $ 2     $ 2     $     $  
Non-current liabilities
    (4 )     (4 )     (3 )     (4 )
Accumulated other comprehensive income (loss)
    6       5       (2 )      
                                 
Net amount recognized
  $ 4     $ 3     $ (5 )   $ (4 )
                                 
 
The following table summarizes amounts included in other comprehensive income for the foreign defined benefit plans as of December 31, 2006 and January 1, 2006:
 
                                 
    Pension Plans     Postretirement Benefit Plans  
    December 31,
    January 1,
    December 31,
    January 1,
 
    2006     2006     2006     2006  
 
Prior service cost
  $     $     $ (1 )   $  
Net gains (losses)
    6       5       (1 )      
                                 
Amounts in accumulated other comprehensive income (loss)
  $ 6     $ 5     $ (2 )   $  
                                 


F-34


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The following table summarizes key pension plan information regarding plans whose accumulated benefit obligations exceed the fair value of their respective plan assets:
 
                                 
    Pension Plans   Postretirement Benefit Plans
    December 31,
  January 1,
  December 31,
  January 1,
    2006   2006   2006   2006
 
Information for plans with an ABO in excess of plan assets:
                               
Projected benefit obligation
  $ 15     $ 16     $ 2     $ 4  
Accumulated benefit obligation
    15       14              
Fair value of plan assets
    11       10              
 
The following table summarizes the expected cash activity for the foreign defined benefit plans and postretirement benefit plans in the future:
 
                 
Year
  Pension   Postretirement
 
Company contributions — 2007
  $ 1     $  
Benefit payments
               
2007
    2        
2008
    1        
2009
    1        
2010
    1        
2011
    1        
2012 - 2016
    6       1  
 
For measuring the expected postretirement benefit obligation for the foreign plans, the following health care cost trend rate assumptions were used:
 
     
Years
 
Rate
 
2006
  10%
2007 - 2011
  1% reduction each year
to an ultimate rate of 5%
in 2011
 
The effect of a 1% increase or decrease in health care trend rates on the foreign postretirement benefit plans would change the benefit obligation at the end of the year and the service cost plus interest cost by less than $0.5 million.


F-35


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
Multi-employer Plans
 
The following table summarizes the components of net periodic benefit cost related to the U.S. multi-employer plans recognized in the Combined Statements of Operations:
 
                                                 
          Postretirement
 
    Pension Plans     Benefit Plans  
    2006     2005     2004     2006     2005     2004  
 
Service cost
  $ 12     $ 15     $ 12     $ 1     $ 1     $ 1  
Interest cost
    15       14       14       1       1       1  
Expected return on assets
    (10 )     (10 )     (9 )                  
Recognition of actuarial gain
    5       5       5                    
Curtailments/settlements
    2                                
                                                 
Net periodic benefit costs
  $ 24     $ 24     $ 22     $ 2     $ 2     $ 2  
                                                 
 
The estimated prior service cost for the U.S. multi-employer plans that will be amortized from accumulated other comprehensive loss into periodic benefit cost in 2007 is less than $0.5 million. The estimated net loss for the defined benefit pension plans that will be amortized from accumulated other comprehensive loss into periodic benefit cost in 2007 is $5 million.
 
Each individual component of and total periodic benefit cost for the foreign multi-employer plans were less than $0.5 million for all periods presented in the Combined Statements of Operations. The Company does not expect any prior service costs for the foreign multi-employer plans to be amortized from accumulated other comprehensive loss into periodic benefit cost in 2007. The estimated net loss for the foreign multi-employer plans that will be amortized from accumulated other comprehensive loss into periodic benefit cost in 2007 is less than $0.5 million.
 
Contributions paid into the U.S. and foreign multi-employer plans on the Company’s behalf by Cadbury Schweppes were $98 million and $73 million as of December 31, 2006 and January 1, 2006, respectively.
 
Savings Incentive Plan
 
The Company sponsors a 401(k) Retirement Plan that covers substantially all employees who meet certain eligibility requirements. This plan permits both pretax and after-tax contributions, which are subject to limitations imposed by Internal Revenue Service regulations. The Company matches employees’ contributions up to specified levels. The Company’s contributions to this plan were approximately $6 million in each of 2006, 2005 and 2004. The Company’s contributions for 2007 are estimated to be approximately $6 million.
 
14.   Stock-Based Compensation Plan
 
Certain of the Company’s employees participate in stock based compensation plans sponsored by Cadbury Schweppes. These plans provide employees with stock or options to purchase stock in Cadbury Schweppes. Given that the Company’s employees directly benefit from participation in these plans, the expense incurred by Cadbury Schweppes for options granted to its employees has been reflected in the Company’s Combined Statements of Operations in “selling, general, and administrative expenses.” Stock compensation expense was $17 million ($10 million net of tax), $22 million ($13 million net of tax) and $7 million ($4 million net of tax) in 2006, 2005 and 2004, respectively.
 
Prior to January 2, 2005, the Company applied APB 25 and related interpretations when accounting for its stock based compensation plan. Under APB 25, compensation expense was determined as the difference between the market price and exercise price of the share-based award. For fixed plans, compensation expense was determined on the date of grant. For variable plans, compensation expense was measured at each balance sheet


F-36


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
date until the award became vested. Stock compensation expense for 2005 and 2006 has been determined based on SFAS 123(R), which the Company adopted effective, January 3, 2005. SFAS 123(R) requires the recognition of compensation expense in the Combined Statements of Operations related to the fair value of employee share-based awards. SFAS 123(R) revised SFAS 123 and supersedes APB 25. The Company has selected the modified prospective method of transition; accordingly, prior periods have not been restated. Upon adoption of SFAS 123(R), for awards which were classified as liabilities, the Company was required to reclassify the APB 25 historical compensation cost from equity to liability and to recognize the difference between this and the fair value liability through the current year statement of operations. The cumulative effect of the change in accounting policy for 2005 is recognized as a decrease in net income of $10 million net of tax ($16 million gross) in the Company’s Combined Statements of Operations, as a separate line item “cumulative effect of change in accounting policy.”
 
The pro-forma effect had the Company adopted the fair-value recognition for periods prior to the adoption of SFAS 123(R) is provided below:
 
         
    2004  
 
Net income, as reported
  $ 446  
Add: Stock-based compensation included in reported net income, net of related tax effects
    3  
Deduct: Total stock-based employee compensation expense determined under fair-value-based method for awards, net of related tax effects
    (4 )
         
Net income, as adjusted
  $ 445  
         
 
Since January 2, 2005, the Company has recognized the cost of all unvested employee stock based compensation plans on a straight-line attribution basis over their respective vesting periods, net of estimated forfeitures. Certain of the Company’s employee share plans contain inflation indexed earnings growth performance conditions. SFAS 123(R) requires plans with such performance criteria to be accounted for under the liability method. The liability method, as set out in SFAS 123(R), requires a liability be recorded on the balance sheet whereas no liability is required for employee share awards accounted for under the equity method. In addition, in calculating the income statement charge for share awards under the liability method, the fair value of each award must be re-measured at each reporting date until vesting whereas the equity method requires the charge be calculated with reference to the grant date fair value. This charge is calculated by estimating the number of awards expected to vest for each plan which is adjusted over the vesting period. This charge includes an allocation of share-based compensation costs incurred by Cadbury Schweppes but which related to employees of the Company.
 
The outstanding value of options recognized by the equity method has been reflected in “ Cadbury Schweppes’ net investment” in “total invested equity,” while the options utilizing the liability method are reflected in “accounts payable and accrued expenses” for the current portion and “other non-current liabilities” for the non-current portion in Cadbury Schweppes’ Consolidated Balance Sheets. The Company did not receive cash in any year, as a result of option exercises under share-based payment arrangements. Actual tax benefits realized for the tax deductions from option exercises were $5 million, $7 million and $2 million for 2006, 2005 and 2004, respectively. As of December 31, 2006, there was $13 million of total unrecognized before-tax compensation cost related to nonvested share-based compensation arrangements. That cost is expected to be recognized over a weighted-average period of 1.7 years. The total intrinsic value of options exercised during the year was $13 million, $17 million and $5 million for 2006, 2005 and 2004, respectively. An expense is recognized for the fair value at the date of grant of the estimated number of shares that will be awarded to settle the awards over the vesting period of each scheme.
 
The Company presents the tax benefits of deductions from the exercise of stock options as financing cash inflows in the Combined Statements of Cash Flows.
 
Awards under the plans are settled by Cadbury Schweppes, through either repurchases of publicly available shares, or awards under the Bonus Share Retention Plan (“BSRP”) and the Long-Term Incentive Plan (“LTIP”) will normally be satisfied by the transfer of shares to participants by the trustees of the Cadbury Schweppes Employee


F-37


Table of Contents

 
DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
Trust (the “Employee Trust”). The Employee Trust is a general discretionary trust whose beneficiaries include employees and former employees of Cadbury Schweppes and their dependents.
 
The Company has a number of share option plans that are available to certain senior executives, including the LTIP and BSRP, and the Discretionary Share Option Plans (“DSOP”), full details of which are included below.
 
  Long-Term Incentive Plan
 
Approximately 15 senior executives of the Company have been granted a conditional award of shares under the LTIP. This award recognizes the significant contribution they make to shareowner value and is designed to incentivize them to strive for sustainable long-term performance. In 2006, awards for the 2006-2008 performance cycles were made to senior executives. One half of the conditional shares that vest are transferred immediately. The transfer of the remaining half is deferred for two years and is contingent on the participant’s employment with the Company not being terminated for cause during that period. Participants accumulate dividend equivalent payments both on the conditional share awards (which will only be paid to the extent that the performance targets are achieved) and during the deferral period. This part of the award is calculated as follows: number of shares vested multiplied by aggregate of dividends paid in the performance period divided by the share price on the vesting date. The current LTIP has been in place since 1997. In 2004, the Compensation Committee of Cadbury Schweppes (“the Committee”) made a number of changes to the LTIP, and the table below sets forth its key features. As explained below, from 2006, performance ranges for the growth in Underlying Earnings per Share (“UEPS”) are expressed in absolute rather than post-inflation terms.
 
         
    Awards Made Prior
  Awards Made for
   
to 2004
 
2004 Forward
 
Face value of conditional share award made   80% of base salary   120% of base salary (2004 and 2005). 160% of base salary (2006 forward).
Performance conditions   Award is based on Total Stockholder Return (“TSR”) relative to the Comparator Group with a UEPS hurdle.   Half of the award is based on growth in UEPS over the three year performance period. The other half of the award is based on TSR relative to the Comparator Group.
UEPS vesting requirement 1   For the award to vest at all, UEPS must have grown by at least the rate of inflation as measured by the Retail Price Index plus 2% per annum (over three years).   The extent to which some, all or none of the award vest depends upon annual compound growth in aggregate UEPS over the performance period:
     
•   30% of this half of the award will vest if the absolute compound annual growth rate achieved is 6% or more.
     
•   100% of this half of the award will vest if the absolute compound annual growth rate achieved is 10% or more.
     
•   Between 6% and 10%, the award will vest proportionately.
TSR vesting requirement 1   The extent to which some, all or none of the award vests depends   The extent to which some, all or none of the award vests depends


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
         
    Awards Made Prior
  Awards Made for
   
to 2004
 
2004 Forward
 
    on our TSR relative to the Comparator Group:   upon our TSR relative to the Comparator Group:
   
•   The minimum award of 50% of the shares conditionally granted will vest at the 50th percentile ranking.
 
•   30% of this half of the award will vest at the 50th percentile ranking.
   
•   100% of the award will vest at the 80th percentile ranking or above.
 
•   100% of this half of the award will vest at the 80th percentile ranking or above.
   
•   Between the 50th and 80th percentiles, the award will vest proportionately.
 
•   Between the 50th and 80th percentiles, the award will vest proportionately.
Re-tests   If the TSR performance criteria is not satisfied in the initial three year performance period, the award will be deferred on an annual basis for up to three years until the performance is achieved over the extended period (i.e., either four, five or six years). If the award does not vest after six years, then it will lapse.   There are no re-tests and the award will lapse if the minimum requirements are not met in the initial three year performance period.
Comparator Group   A weighting of 75% is applied to the UK companies in the Comparator Group, and 25% to the non-UK based companies.   The Comparator Group has been simplified and amended to include companies more relevant to the Company, and there will be no weighting as between UK and non-UK companies.
 
 
1 For cycles beginning in 2004 and 2005, threshold vesting was 40% of the award, and performance ranges for the growth in UEPS was expressed in post-inflation terms.
 
The TSR measure is a widely accepted and understood benchmark of a company’s performance. It is measured according to the return index calculated by Thomson Financial on the basis that a company’s dividends are invested in the shares of that company. The return is the percentage increase in each company’s index over the performance period. UEPS is a key indicator of corporate performance. It is measured on an absolute basis (real prior to 2006 after allowing for inflation). Sustained performance is therefore required over the performance cycle as each year counts in the calculation.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
The following companies were selected as comparator companies (the “Comparator Group”) to reflect the global nature of Cadbury Schweppes business:
 
         
    Non-UK-based
  Head Office
UK-based Companies
 
Companies
 
Location
 
Allied Domecq#
  Campbell Soup   US
Associated British Foods
  Coca-Cola   US
Diageo
  Coca-Cola Enterprises+   US
Northern Foods
  Colgate-Palmolive   US
Reckitt Benckiser
  ConAgra+   US
Scottish & Newcastle+
  CSM+   Netherlands
Six Continents*
  Danone   France
Tate & Lyle
  General Mills   US
Unilever
  Heinz   US
Uniq*
  Hershey Foods   US
Whitbread*
  Kellogg   US
    Kraft Foods+   US
    Lindt & Sprungli+   Switzerland
    Nestlé   Switzerland
    Pepsi Bottling Group+   US
    PepsiCo   US
    Pernod Ricard   France
    Procter & Gamble   US
    Sara Lee   US
    Suedzucker*   Germany
    Wrigley+   US
 
 
* indicates a company dropped from the Comparator Group in 2004
 
+ indicates a company added to the Comparator Group for 2004 forward
 
# indicates a company dropped from the Comparator Group in 2005 due to it no longer being a publicly quoted company
 
Awards under the LTIP (both before and after 2004) will vest in full following a change in control in Cadbury Schweppes, but only to the extent that performance targets have been met at the time of the change in control unless Cadbury Schweppes decides that the awards would have vested to a greater or lesser extent had the performance targets been measured over the normal period.
 
The maximum number of shares issued under this plan, to all Cadbury Schweppes employees, was 3 million in each of 2006, 2005 and 2004. Awards made under this plan are classified as either equity, for those with TSR vesting conditions, or liabilities, for those with UEPS vesting conditions. The expense recognized by the Company in respect of these awards was $1 million, $2 million and $0 million in 2006, 2005 and 2004, respectively.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
  Bonus Share Retention Plan
 
The BSRP enables participants to invest all or part of their Annual Incentive Plan (“AIP”) award in Cadbury Schweppes shares (“Deferred Shares”) and earn a Cadbury Schweppes match of additional shares after three years. During the three year period, the shares are held in trust. If a participant leaves Cadbury Schweppes during the three-year period, they forfeit some of the additional shares, and in certain cases, it is possible that all of the Deferred Shares and the additional shares may be forfeited.
 
The number of matching shares that will be provided for grants from 2006 is as follows:
 
     
Absolute Compound Annual Growth
   
in Aggregate Underlying Economic
   
Profit (UEP) Over the Three Year
  Percentage of Matching Shares
Deferral Period Equivalent to:
 
Awarded at the End of the Period
 
Below 4%   40% (Threshold)
4%   40%
8%   70%
12% or more   100% (Maximum)
 
There is a straight line sliding scale between those percentages. UEP is measured on an aggregate absolute growth basis, the levels of growth required to achieve the highest levels of share match being demanding. For awards made before 2006, UEP performance was measured on a real basis, with a stepped vesting scale between the threshold and maximum. Awards under the BSRP will vest in full following a change in control in Cadbury Schweppes but only to the extent that performance targets have been met at the time of the change in control unless Cadbury Schweppes decides that the awards would have vested to a greater or lesser extent had the performance targets been measured over the normal period. The 2005-2007 and 2006-2008 cycles are currently expected to result in around two-thirds of the matching shares available being awarded. Actual vesting will depend upon performance over the full vesting period.
 
The BSRP is available to a group of senior executives of the Company. The maximum number of shares issued, to employees under this plan was 3 million, 3 million and 1 million in 2006, 2005 and 2004, respectively. The fair value of the shares under the plan is based on the market price of the Cadbury Schweppes ordinary shares on the date of the award. Where the awards do not attract dividends during the vesting period, the market price is reduced by the present value of the dividends expected to be paid during the expected life of the awards. Awards under this plan in 2004 and 2005 are classified as liabilities. Awards made in 2006 are classified as equity due to changes in the nature of the plan. The expense recognized by the Company in respect of these awards was $3 million, $2 million and $0 million in 2006, 2005 and 2004, respectively.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
Discretionary Share Option Plans (DSOP)
 
No option grants were made to Executive Directors in 2006 as discretionary share options were removed as part of the Cadbury Schweppes’ remuneration program. No rights to subscribe for shares or debentures of any Cadbury Schweppes company were granted to or exercised by any member of any of the Director’s immediate families during 2006. All existing discretionary share option plans which apply to Executive Directors use the following criteria:
 
         
    Annual Grants Made
  Annual Grants Made
   
Prior to May 21, 2004
 
After May 21, 2004
 
Market value of option grant made to Executive Directors
  Customary grant was 300% of base salary and the maximum was 400% of base salary.   Maximum of 200% of base salary. From 2006 onwards, no such grants are made other than in exceptional circumstances.
Performance condition
  Exercise is subject to UEPS growth of at least the rate of inflation plus 2% per annum over three years.   Exercise is subject to real compound annual growth in UEPS of 4% for half the award to vest and 6% real growth for the entire award to vest over three years, measured by comparison to the UEPS in the year immediately preceding grant.
Re-tests
  If required, re-testing has been on an annual basis on a rolling three-year base for the life of the option.   If the performance condition is not met within the first three years, the option will be retested in year five with actual UEPS growth in year five measured in relation to the original base year.
 
DSOP resulted in expense recognized by the Company of $10 million, $17 million and $5 million in 2006, 2005 and 2004, respectively. The DSOP consisted of the following three plans:
 
(i)  A Share Option Plan for directors, senior executives and senior managers was approved by stockholders in May 1994. Options were granted prior to July 15, 2004 and are normally exercisable within a period of seven years commencing three years from the date of grant, subject to the satisfaction of certain performance criteria.
 
(ii) A Share Option Plan for eligible executives (previously called the Cadbury Schweppes Share Option Plan 1994, as amended at the 2004 Annual General Meeting (“AGM”) held on May 21, 2004). Options were granted after July 15, 2004, and are normally exercisable up to the 10th anniversary of grant, subject to the satisfaction of certain performance criteria.
 
(iii) The Cadbury Schweppes (New Issue) Share Option Plan 2004 was established by the Directors, under the authority given by stockholders in May 2004. Eligible executives are granted options to subscribe for new shares only. Subject to the satisfaction of certain performance criteria, options are normally exercisable up to the 10th anniversary of grant.
 
There are performance requirements for the exercising of options. The plans are accounted for as liabilities until vested, then as equity until exercised or lapsed.
 
   Other Share Plans
 
Cadbury Schweppes has an International Share Award Plan (“ISAP”) which is used to reward exceptional performance of employees. Following the decision to cease granting discretionary options other than in exceptional circumstances, the ISAP is now used to grant conditional awards to employees, who previously received


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
discretionary options. Approximately 540 Cadbury Schweppes employees were granted awards in 2006. Awards under this plan are classified as liabilities until vested.
 
   Share Award Fair Values
 
The fair value is measured using the valuation technique that is considered to be the most appropriate to value each class of award; these include Binomial models, Black-Scholes calculations, and Monte Carlo simulations. These valuations take into account factors such as nontransferability, exercise restrictions and behavioral considerations. Key assumptions are detailed below:
 
                         
    2006  
    BSRP     LTIP     ISAP  
 
Expected volatility
    N/A       18%       N/A  
Expected life
    3 years       3 years       1-3 years  
Risk-free rate
    4.5%               4.2%-4.9%  
Expected dividend yield
    2.5%       2.5%       2.3%-2.5%  
Fair value per award (% of share price at date of grant)
    185.2%(1 )     92.8%UEPS       93.0%-99.3%  
              46%TSR          
Possibility of ceasing employment before
                       
vesting
                 
Expectations of meeting performance criteria
    40%       100%       N/A  
 
                                 
    2005  
    BSRP     LTIP     DSOP     ISAP  
 
Expected volatility
    N/A       22%       22%       N/A  
Expected life
    3 years       3 years       (2)       1-3 years  
Risk-free rate
    4.5%       N/A       4.8%       4.3%  
Expected dividend yield
    2.5%       3.0%       3.0%       2.3%-2.5%  
Fair value per award (% of share price at date of grant)
    185.3%(1)       91.4%UEPS       23.0%       93.0%-97.8%  
              49.6%TSR                  
Possibility of ceasing
                               
employment before vesting
                14%        
Expectations of meeting performance criteria
    40%       50%       85%       N/A  
 


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
                                 
    2004  
    BSRP     LTIP     DSOP     ISAP  
 
Expected volatility
    N/A       22%       22%       N/A  
Expected life
    3 years       3 years       (2)       1-3 years  
Risk-free rate
    4.5%       N/A       4.7%-5.0%       4.4%-5.0%  
Expected dividend yield
    2.7%       3.0%       3.0%       2.7%-3.2%  
Fair value per award (% of share price at date of grant)
    185.8%(1)       91.4%UEPS       23.3%       91.6%-99.2%  
              49.5%TSR                  
Possibility of ceasing
                               
employment before vesting
                11%        
Expectations of meeting performance criteria
    40%       50%       100%       N/A  
 
 
(1) Fair value of BSRP includes 100% of the matching shares available.
 
(2) The fair value calculation of a discretionary share option uses an expected life to the point of expected exercise. This is determined through analysis of historical evidenced exercise patterns of option holders.
 
Expected volatility was determined by calculating the historical volatility of the Company’s share price over the previous three years. The expected life used in the model has been adjusted, based on management’s best estimate, for the effects of nontransferability, exercise restrictions and behavioral considerations. The risk-free rates used reflect the implied yield on zero coupon bonds issued in the UK, with periods which match the expected term of the awards valued. The expected dividend yield is estimated using the historical dividend yield of Cadbury Schweppes.
 
A summary of the status of the Company’s non-vested shares, in relation to the BSRP, LTIP and ISAP at December 31, 2006, and changes during the year ended December 31, 2006, is presented below:
 
                 
    Number of
    Weighted
 
    Non-vested
    Average
 
    Shares
    Grant Date
 
    (’000)     Fair Value  
 
Non-vested at January 2, 2006
  $ 899     $ 5.57  
Granted
    1,310       7.89  
Vested
    (100 )     6.32  
Forfeitures
    (242 )     6.16  
                 
Non-vested at December 31, 2006
  $ 1,867       6.92  
                 
 
The total grant date fair value of shares vested during the year was $1 million in each of 2006, 2005 and 2004.

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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
A summary of option activity during 2006, in relation to the DSOP, is presented below:
 
                                 
                Weighted
       
          Weighted
    Average
       
          Average
    Remaining
    Aggregate
 
    Shares
    Exercise
    Contractual
    Intrinsic
 
    (’000)     Price     Term     Value  
 
Outstanding at the beginning of the year
    25,752     $ 7.53                  
Exercised
    (2,644 )     7.64                  
Cancelled
    (439 )     8.43                  
                                 
Outstanding at the end of the year
    22,669     $ 8.62       6.0 years     $ 47  
                                 
Exercisable at the end of the year
    14,805     $ 8.23       4.9 years     $ 37  
 
15.   Segments
 
The Company presents segment information in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS 131”), which established reporting and disclosure standards for an enterprise’s operating segments. Operating segments are defined as components of an enterprise that are businesses, for which separate financial information is available, and for which the financial information is regularly reviewed by the Company leadership team and the chief operating decision maker.
 
Segment results are based on management reports, which are prepared in accordance with International Financial Reporting Standards. Net sales, gross contribution before marketing (“GCBM”) and underlying operating profit (“UOP”) are the significant financial measures used to measure the operating performance of the Company’s operating segments. UOP is defined as income from operations before restructuring costs, non-trading items, interest, amortization and impairment of intangibles.
 
As of December 31, 2006, the Company’s operating structure consisted of the following five operating segments:
 
  •  The Beverage Concentrates segment reflects sales from the manufacture of concentrates and syrups in the United States and Canada. Most of the brands in this segment are CSD brands.
 
  •  The Finished Goods segment reflects sales from the manufacture and distribution of finished beverages and other products in the United States and Canada. Most of the brands in this segment are non-CSD brands.
 
  •  The Bottling Group segment reflects sales from the manufacture, bottling and/or distribution of finished beverages, including sales of the Company’s own brands and third-party owned brands.
 
  •  The Snapple Distributors segment reflects sales from the distribution of finished beverages primarily Snapple, in New York City and the surrounding regions.
 
  •  The Mexico and Caribbean segment reflects sales from the manufacture, bottling and/or distribution of both concentrates and finished beverages in those geographies.
 
Under management reporting, transactions between segments are eliminated except to the Bottling Group.
 
The Company’s current segment reporting structure is largely the result of acquiring and combining various portions of our business over the past several years. Although the Company continues to report its segments separately, due to the integrated nature of its business model, it manages its business to maximize profitability for the Company as a whole. As a result, profitability trends in individual segments may not be consistent with the profitability of the Company or comparable to its competitors.
 
The Company has significant intersegment transactions. For example, the Bottling Group segment purchases concentrates from the Beverage Concentrates segment. In addition, the Snapple Distributors segment purchases


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
finished beverages from the Finished Goods segment. These sales are eliminated in preparing the Company’s combined results of operations.
 
The Company incurs selling, general and administrative expenses in each of its segments. In the Company’s segment reporting, the selling, general and administrative expenses of the Bottling Group, Snapple Distributors and Mexico and the Caribbean segments relate primarily to those segments. However, as a result of the Company’s historical segment reporting policies, certain combined selling activities that support the Beverage Concentrates and Finished Goods segments have not been proportionally allocated between these two segments. The Company also incurs certain centralized finance and corporate costs that support its entire business, which have not been directly allocated to its respective segments but rather have been allocated primarily to the Beverage Concentrates segment.
 
Information about the Company’s operations by operating segment for 2006, 2005 and 2004 is as follows:
 
                         
    2006     2005     2004  
 
Net Sales
                       
Beverage Concentrates
  $ 1,330     $ 1,304     $ 1,238  
Finished Goods
    1,337       1,342       1,287  
Bottling Group
    1,701              
Snapple Distributors
    271       241       241  
Mexico and the Caribbean
    408       354       310  
                         
Segment total
    5,047       3,241       3,076  
Adjustments and eliminations
    (312 )     (36 )     (11 )
                         
Net sales as reported
  $ 4,735     $ 3,205     $ 3,065  
                         
Gross Contribution Before Marketing
                       
Beverage Concentrates
  $ 1,206     $ 1,169     $ 1,117  
Finished Goods
    686       674       665  
Bottling Group
    590              
Snapple Distributors
    53       52       54  
Mexico and the Caribbean
    234       208       184  
                         
Segment total
    2,769       2,103       2,020  
Adjustments and eliminations
    (28 )     (18 )     (6 )
                         
Gross profit as reported
  $ 2,741     $ 2,085     $ 2,014  
                         
 


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
                         
    2006     2005     2004  
 
Underlying Operating Profit
                       
Beverage Concentrates
  $ 710     $ 657     $ 626  
Finished Goods
    172       165       242  
Bottling Group
    84              
Snapple Distributors
    46       44       1  
Mexico and the Caribbean
    102       96       83  
                         
Segment total
    1,114       962       952  
Corporate and other
    (14 )     11       (20 )
Adjustments and eliminations
    (295 )     (186 )     (229 )
                         
Income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy
  $ 805     $ 787     $ 703  
                         
 
                         
    2006     2005     2004  
 
Depreciation
                       
Beverage Concentrates
  $ 11     $ 12     $ 14  
Finished Goods
    21       22       24  
Bottling Group
    46              
Snapple Distributors
    5       5       5  
Mexico and the Caribbean
    11       10       8  
                         
Segment total
    94       49       51  
Corporate and other
    (1 )     (2 )     2  
Adjustments and eliminations
    1       1        
                         
Depreciation as reported
  $ 94     $ 48     $ 53  
                         
 
                         
    2006     2005        
 
Fixed Assets
                       
Beverage Concentrates
  $ 81     $ 80          
Finished Goods
    122       122          
Bottling Group
    457                
Snapple Distributors
    19       21          
Mexico and the Caribbean
    71       71          
                         
Segment total
    750       294          
Corporate and other
    23       26          
Adjustments and eliminations
    (18 )     6          
                         
Property, plant and equipment, net as reported
    755       326          
Current assets as reported
    1,632       1,331          
All other non-current assets as reported
    6,959       5,776          
                         
Total assets as reported
  $ 9,346     $ 7,433          
                         

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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
Reconciliation of Segment Information
 
Total segment net sales include Beverage Concentrates and Finished Goods sales to the Bottling Group segment. These sales amounted to $310 million in 2006 and are eliminated in the Combined Statement of Operations.
 
Total segment GCBM in 2006 and in 2005 includes gross contribution attributable to Beverage Concentrates and Finished Goods sales to the Bottling Group segment. The portion attributed to these sales was $19 million and was eliminated in the Combined Statements of Operations. The other significant adjustment to reconcile GCBM to “gross profit” was related to inventory purchase accounting adjustments at Bottling Group.
 
The significant adjustments to reconcile UOP to “income before provision for income taxes, equity in earnings of unconsolidated subsidiaries and cumulative effect of change in accounting policy” are interest expense and restructuring charges.
 
Geographic Data
 
The Company utilizes separate legal entities for transactions with customers outside of the United States. Information about the Company’s operations by geographic region for 2006, 2005 and 2004 is below:
 
                         
    2006     2005     2004  
 
Net sales:
                       
United States
  $ 4,151     $ 2,675     $ 2,596  
International
    584       530       469  
                         
Net sales:
  $ 4,735     $ 3,205     $ 3,065  
                         
 
                 
    December 31,
    January 1,
 
    2006     2006  
 
Property, plant and equipment — net:
               
United States
  $ 681     $ 251  
International
    74       75  
                 
Property, plant and equipment — net
  $ 755     $ 326  
                 
 
Major Customers
 
None of the Company’s customers accounted for 10% or more of total net sales.
 
16.   Related Party Transactions
 
Allocated Expenses
 
The Company has been allocated corporate overhead expenses from Cadbury Schweppes and its subsidiaries for corporate-related functions based on the most relevant allocation method to the service provided. To the extent expenses have been paid by Cadbury Schweppes and its subsidiaries on behalf of the Company, they have been allocated based upon the direct costs incurred. Where specific identification of expenses has not been practicable, the costs of such services has been allocated based upon the most relevant allocation method that management believes is reasonable, primarily either as a percentage of revenue or headcount of the Company as a percentage of headcount. The Company was allocated $142 million, $115 million and $154 million of overhead costs in 2006, 2005 and 2004, respectively.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
Cash Management
 
Cadbury Schweppes uses a centralized approach to cash management and financing of operations. The Company’s cash is available for use and is regularly swept by Cadbury Schweppes operations in the U.S. at its discretion. Cadbury Schweppes also funds the Company’s operating and investing activities as needed. Transfers of cash, both to and from Cadbury Schweppes’ cash management system, are reflected as a component of “Cadbury Schweppes’ net investment” in the Company’s Combined Balance Sheets.
 
Royalties
 
The Company earns royalties from other Cadbury Schweppes-owned companies for the use of certain brands owned by the Company. Total amounts earned were $1 million, $9 million and $8 million for 2006, 2005 and 2004, respectively.
 
Purchase of Intangibles
 
The Company purchased certain trademarks from Cadbury Schweppes for a total purchase price of $34 million and $34 million in 2006 and 2005, respectively. These purchases were substantially equivalent to those that prevail in an arm’s length transaction. In both years, these trademarks were determined to be perpetual trademarks with indefinite lives.
 
Notes Receivable
 
The Company holds note receivable balances with CSFPLC (a wholly-owned subsidiary of the Cadbury Schweppes) for which CSFPLC owed the Company $579 million and $669 million in 2006 and 2005. The notes generated $25 million and $26 million of interest income for December 31, 2006 and January 1, 2006, respectively. In addition, the Company recorded $10 million of interest income in 2005 for a $300 million note receivable from Cadbury Trebor Bassett (a wholly-owned subsidiary of the Cadbury Schweppes) which the Company settled in the same year.
 
Debt and Related Items
 
The Company has entered into a variety of debt agreements with other companies owned by Cadbury Schweppes. These agreements (as well as outstanding balances under the agreements) are described in Note 10.
 
Transactions with Dr Pepper/Seven Up Bottling Group
 
Prior to the Company’s acquisition of the remaining shares of DPSUBG on May 2, 2006, the Company and DPSUBG entered into various transactions in the ordinary course of business as outlined below:
 
Marketing support, co-packing fees and other arrangements
 
The Company assisted DPSUBG in a variety of marketing programs, local media advertising and other similar arrangements to promote the sale of Company-branded products. DPSUBG charged the Company co-packing fees related to the manufacture of certain Company-branded products. The Company paid DPSUBG marketing support, co-packing fees and other fees totaling $41 million, $125 million and $123 million during 2006, 2005 and 2004, respectively.
 
Sales of beverage concentrates
 
DPSUBG bought concentrates from the Company for the manufacture of Company-branded soft drinks. The Company’s concentrates sales to DPSUBG totaled $100 million, $426 million and $393 million during 2006, 2005 and 2004, respectively.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO COMBINED FINANCIAL STATEMENTS — (Continued)
 
Sales of finished goods
 
DPSUBG purchased finished product from the Company for sale to retailers. The Company’s finished product sales totaled $16 million, $53 million and $62 million during 2006, 2005 and 2004, respectively.
 
The Company had recorded receivables from DPSUBG relating to the above transactions totaling $64 million at January 1, 2006.
 
17.   Subsequent Events
 
SeaBev Acquisition
 
On July 11, 2007, the Company acquired the Jacksonville, Florida-based Southeast-Atlantic Beverage Corp. (“SeaBev”), the second largest independent bottling and distribution company in the United States, for approximately $53 million. SeaBev has 2 manufacturing facilities and 16 warehouses and distribution centers located from Miami to Atlanta. It distributes many of the Company’s CSDs and non-CSD’s throughout Florida and Northern Georgia, providing the Company with expanded geographic coverage and a more integrated business.
 
Glacéau Termination
 
Following its acquisition by Coca-Cola on August 30, 2007, Energy Brands, Inc. notified the Company that it was terminating the Company’s distribution agreements for glacéau products, including vitaminwater, fruitwater and smartwater, effective November 2, 2007. Pursuant to the terms of the agreement, the Company expects to receive a payment from Energy Brands, Inc. of approximately $90 million for this termination.
 
Organizational Restructuring
 
On October 10, 2007, the Company announced a restructuring of its organization that is intended to create a more efficient organization. This restructuring will result in a reduction of approximately 470 employees. As a result of the restructuring, the Company expects to recognize a charge of approximately $70 million primarily in 2007, with the balance in 2008. The Company expects the restructuring to generate annual cost savings of approximately $70 million most of which are expected to be realized in 2008 with the full annual benefit realized from 2009 onwards. As part of this restructuring, the Bottling Group segment has assumed management and operational control of the Snapple Distributors segment. These operations are currently being integrated and will be reported in the Company’s 2007 annual results as a single segment.
 
* * * * *


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DR PEPPER SNAPPLE GROUP, INC.
 
CONDENSED COMBINED BALANCE SHEETS
 
                 
    September 30,
    December 31,
 
    2007     2006  
    (Unaudited)  
    (U.S. dollars in millions)  
 
ASSETS
Current assets:
               
Cash and cash equivalents
  $ 34     $ 35  
Accounts receivable:
               
Trade (net of allowances of $21 and $14, respectively)
    609       562  
Other
    30       18  
Related party receivable
    11       5  
Notes receivable from related parties (Note 14)
    1,931       579  
Inventories (Note 3)
    352       300  
Deferred tax assets
    57       61  
Prepaid and other current assets
    94       72  
                 
Total current assets
    3,118       1,632  
Property, plant and equipment, net
    795       755  
Investment in unconsolidated subsidiaries
    14       12  
Goodwill, net (Note 4)
    3,211       3,180  
Other intangible assets, net (Note 4)
    3,635       3,651  
Other non-current assets (Note 5)
    95       107  
Non-current deferred tax assets
    28       9  
                 
Total assets
  $ 10,896     $ 9,346  
                 
 
LIABILITIES AND INVESTED EQUITY
Current liabilities:
               
Accounts payable and accrued expenses (Note 6)
  $ 763     $ 788  
Related party payable
    509       183  
Current portion of long-term debt payable to third parties (Note 8)
    40        
Current portion of long-term debt payable to related parties (Note 8)
    218       708  
Income taxes payable
    24       12  
                 
Total current liabilities
    1,554       1,691  
Long-term debt payable to third parties (Note 8)
    23       543  
Long-term debt payable to related parties (Note 8)
    2,946       2,541  
Deferred tax liabilities
    1,267       1,292  
Other non-current liabilities
    114       29  
                 
Total liabilities
    5,904       6,096  
Commitments and contingencies (Notes 9) 
               
Cadbury Schweppes’ net investment
    4,964       3,249  
Accumulated other comprehensive income
    28       1  
                 
Total invested equity
    4,992       3,250  
                 
Total liabilities and invested equity
  $ 10,896     $ 9,346  
                 
 
The accompanying notes are an integral part of these unaudited condensed combined financial statements.


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DR PEPPER SNAPPLE GROUP, INC.
 
CONDENSED COMBINED STATEMENTS OF OPERATIONS
 
                 
    Nine Months Ended
    January 2, 2006 -
 
    September 30, 2007     September 30, 2006  
    (Unaudited)
 
    (U.S. Dollars in millions)  
 
Net sales
  $ 4,347     $ 3,380  
Cost of sales
    1,984       1,399  
                 
Gross profit
    2,363       1,981  
Selling, general and administrative expenses
    1,527       1,239  
Depreciation and amortization
    69       44  
Restructuring costs (Note 10)
    36       9  
Gain on disposal of property and intangible assets
          (32 )
                 
Income from operations
    731       721  
Interest expense
    195       189  
Interest income
    (38 )     (35 )
Other (income) expense
    (2 )     5  
                 
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries
    576       562  
Provision for income taxes (Note 7)
    218       206  
                 
Income before equity in earnings of unconsolidated subsidiaries
    358       356  
Equity in earnings of unconsolidated subsidiaries, net of tax
    1       3  
                 
Net income
  $ 359     $ 359  
                 
 
The accompanying notes are an integral part of these unaudited condensed combined financial statements.


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DR PEPPER SNAPPLE GROUP, INC.
 
CONDENSED COMBINED STATEMENTS OF CASH FLOWS
 
                 
    Nine Months Ended
    January 2, 2006 -
 
    September 30, 2007     September 30, 2006  
    (Unaudited)
 
    (U.S. Dollars in millions)  
 
Operating activities:
               
Net income
  $ 359     $ 359  
Adjustments to reconcile net income to net cash provided by operations:
               
Depreciation expense
    89       65  
Amortization expense
    38       33  
Provision for doubtful accounts
    10       (2 )
Employee stock-based compensation expense
    14       12  
Excess tax benefit on stock-based compensation
    (4 )     (1 )
Deferred income taxes
    (36 )     1  
Gain on disposal of intangible assets
          (32 )
Equity in earnings of unconsolidated subsidiaries, net of tax
    (2 )     (3 )
Other, net
          (4 )
Changes in operating assets and liabilities, net of acquisitions:
               
Increase in trade accounts receivable
    (38 )     (8 )
(Increase) decrease in other accounts receivable
    (9 )     41  
(Increase) in related party receivable
    (8 )     (18 )
(Increase) decrease in inventories
    (41 )     9  
Decrease (increase) in prepaid expenses other current assets
    5       (9 )
(Increase) decrease in other assets
    (6 )     32  
Decrease in other non-current assets
    4       1  
(Decrease) in accounts payable and accrued expenses
    (48 )     (93 )
Increase in related party payables
    350       131  
Increase in income taxes payable
    9        
Increase in other non-current liabilities
    71       7  
                 
Net cash provided by operating activities
    757       521  
                 
Investing activities:
               
Acquisition of subsidiaries, net of cash
    (20 )     (436 )
Purchases of investments and intangible assets
    (4 )     (54 )
Proceeds from disposals of investments and other assets
          53  
Purchases of property, plant and equipment
    (123 )     (79 )
Proceeds from disposals of property, plant and equipment
    1       12  
Issuances of notes receivable
    (1,829 )     (56 )
Repayment of notes receivables
    525       10  
                 
Net cash used in investing activities
    (1,450 )     (550 )
                 
Financing activities:
               
Proceeds from issuance of long-term debt
    2,803       1,218  
Repayment of long-term debt
    (3,232 )     (1,157 )
Excess tax benefit on stock-based compensation
    4       1  
Cash distributions
    (189 )      
Change in Cadbury Schweppes’ net investment
    1,305       19  
                 
Net cash provided by financing activities
    691       81  
                 
Cash and cash equivalents — net change from:
               
Operating, investing and financing activities
    (2 )     52  
Currency translation
    1        
Cash and cash equivalents at beginning of period
    35       28  
                 
Cash and cash equivalents at end of period
  $ 34     $ 80  
                 
Supplemental cash flow disclosures of non-cash investing and financing activities:
               
Non-cash transfers of property, plant and equipment to other Cadbury Schweppes companies
  $ 9     $ 9  
Non-cash transfers of operating assets and liabilities to other Cadbury Schweppes companies
    40       2  
Non-cash reduction in long term debt from Cadbury Schweppes net investment
    257       383  
Cadbury Schweppes or related entities acquisition payments reflected through Cadbury Schweppes’ net investment
    17       27  
Non-cash issuance of note payable related to acquisition
    38        
Operating liabilities expected to be reimbursed by Cadbury Schweppes
    12        
Supplemental cash flow disclosures:
               
Interest paid
  $ 182     $ 91  
Income taxes paid
    26       11  
 
The accompanying notes are an integral part of these unaudited condensed combined financial statements.


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DR PEPPER SNAPPLE GROUP, INC.
 
CONDENSED COMBINED STATEMENTS OF CHANGES IN INVESTED EQUITY
 
                                 
          Accumulated
             
    Parent
    Other
    Total
       
    Company
    Comprehensive
    Invested
    Comprehensive
 
    Net Investment     Income     Equity     Income  
          (Unaudited)
       
          (U.S. Dollars in millions)        
 
Balance at December 31, 2006
  $ 3,249     $ 1     $ 3,250          
Net income
    359             359     $ 359  
Distributions
    (189 )             (189 )        
Movement in Cadbury Schweppes’ investments, net
    1,561             1,561        
Adoption of FIN 48 (Note 7)
    (16 )             (16 )        
Other comprehensive income:
                               
Foreign currency translation adjustment
          27       27       27  
                                 
Comprehensive income
                          $ 386  
                                 
Balance at September 30, 2007
  $ 4,964     $ 28     $ 4,992          
                                 
 
The accompanying notes are an integral part of these unaudited condensed combined financial statements.


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DR PEPPER SNAPPLE GROUP, INC.

NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS
As of September 30, 2007 and for the nine months ended September 30, 2007 and
the period from January 2, 2006 to September 30, 2006.
(U.S. Dollar amounts in millions)
 
1.   Background and Basis of Presentation
 
Background
 
Dr Pepper Snapple Group, Inc. (formerly known as CSAB, Inc.) (the “Company”) is a wholly-owned subsidiary of Cadbury Schweppes plc (“Cadbury Schweppes”) that was incorporated as a Delaware corporation on October 24, 2007 to own Cadbury Schweppes’ Americas Beverages business. This business will be transferred to the Company prior to the distribution of all its outstanding shares of common stock to shareholders of Cadbury Schweppes. The initial capitalization was two dollars. Prior to ownership of Cadbury Schweppes’ Americas Beverages business, the Company does not have any operations. The Company conducts operations in the United States, Canada, Mexico and parts of the Caribbean.
 
The Company’s key brands include Dr Pepper, Snapple, 7UP, Mott’s, Sunkist, Hawaiian Punch, A&W, Canada Dry, Schweppes, Squirt, Clamato, Peñafiel, Mr & Mrs T, Margaritaville and Rose’s.
 
Basis of Presentation
 
The accompanying combined financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
 
The accompanying financial information as of September 30, 2007 and for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006 consist of the Company’s businesses. The Company has prepared these combined financial statements, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosure normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been condensed or omitted pursuant to such rules and regulations. These combined financial statements should be read in conjunction with the Company’s annual combined financial statements and the notes thereto.
 
In the opinion of management, the unaudited financial information reflects all adjustments, which are normal recurring adjustments, necessary to present a fair statement of financial position, results of operations and cash flows. The results of operations for the nine months ended September 30, 2007 are not necessarily indicative of the operating results that may be expected for the full year or any future period.
 
The financial statements have been prepared on a “carve-out” basis from Cadbury Schweppes’ consolidated financial statements using the historical results of operations, assets and liabilities attributable to Cadbury Schweppes’s Americas Beverages business and include allocations of expenses from Cadbury Schweppes. This historical Cadbury Schweppes Americas Beverages information is our predecessor financial information. The Company eliminates from its financial results all intercompany transactions between entities included in the combination and the intercompany transactions with its equity method investees.
 
The combined financial statements may not be indicative of the Company’s future performance and do not necessarily reflect what its combined results of operations, financial position and cash flows would have been had the Company operated as an independent company during the periods presented. To the extent that an asset, liability, revenue or expense is directly associated with the Company, it is reflected in the accompanying combined financial statements.
 
Cadbury Schweppes currently provides certain corporate functions to the Company and costs associated with these functions have been allocated to the Company.
 
These functions include corporate communications, regulatory, human resources and benefit management, treasury, investor relations, corporate controller, internal audit, Sarbanes-Oxley compliance, information


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
technology, corporate and legal compliance, and community affairs. The costs of such services have been allocated to the Company based on the most relevant allocation method to the service provided, primarily based on relative percentage of revenue or headcount. Management believes such allocations are reasonable; however, they may not be indicative of the actual expense that would be incurred had the Company been operating as an independent company for the periods presented. The charges for these functions are included primarily in “selling, general, and administrative expenses” in the Combined Statements of Operations.
 
The total invested equity represents Cadbury Schweppes’ interest in the recorded net assets of the Company. The net investment balance represents the cumulative net investment by Cadbury Schweppes in the Company through that date, including any prior net income or loss attributed to the Company. Certain transactions between the Company and other related parties within the Cadbury Schweppes group, including allocated expenses, are also included in Cadbury Schweppes’ net investment.
 
The interim periods presented are the nine months ended September 30, 2007 and the period from January 2, 2006 as the Company’s fiscal year 2006 began on January 2, 2006 due to the Company’s previous policy of utilizing year end dates which represented the Sunday closest to December 31 each year. Effective 2006, the Company’s fiscal year ends on December 31 of each year.
 
New Accounting Standards
 
In December 2007, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting Standards (“SFAS”) No. 141 (revised 2007), Business Combinations (“SFAS 141(R)”). SFAS 141(R) will significantly change how business acquisitions are accounted for and will impact financial statements both on the acquisition date and in subsequent periods. Some of the changes, such as the accounting for contingent consideration, will introduce more volatility into earnings. SFAS 141(R) is effective for the Company beginning January 1, 2009. The Company is currently evaluating the provisions of SFAS 141(R) and has not determined the impact, if any, on its combined financial statements.
 
In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interests in Consolidated Financial Statements (“SFAS 160”). SFAS 160 improves the relevance, comparability, and transparency of financial information provided to investors by requiring all entities to report noncontrolling interests in subsidiaries as equity in the consolidated financial statements. SFAS 160 is effective for the Company beginning January 1, 2009. The Company is currently evaluating the provisions of SFAS 160 and has not determined the impact, if any, on its combined financial statements.
 
In June 2007, the FASB ratified Emerging Issues Task Force (“EITF”) Issue No. 06-11 Accounting for Income Tax Benefits of Dividends on Share-Based Payment Awards (“EITF 06-11”), which requires entities to record tax benefits on dividends or dividend equivalents that are charged to retained earnings for certain share-based awards to additional paid-in capital. In a share-based payment arrangement, employees may receive dividends or dividend equivalents on awards of nonvested equity shares, nonvested equity share units during the vesting period, and share options until the exercise date. Generally, the payment of such dividends can be treated as deductible compensation for tax purposes. The amount of tax benefits recognized in additional paid-in capital should be included in the pool of excess tax benefits available to absorb tax deficiencies on share-based payment awards. EITF 06-11 is effective for fiscal years beginning after December 15, 2007, and interim periods within those years. The Company believes the adoption of EITF 06-11 will not have a material impact on its combined financial statements.
 
In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities Including an amendment to FASB Statement No. 115 (“SFAS 159”). SFAS 159 permits entities to choose to measure many financial instruments and certain other items at fair value. Unrealized gains and losses on items for which the fair value of option has been elected will be recognized in earnings at each subsequent in earnings at each subsequent reporting date. SFAS 159 is effective for the Company January 1, 2008. The Company believes that the adoption of SFAS 159 will not have a material impact on its combined financial statements.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
 
In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements (“SFAS 157”). SFAS 157 defines fair value, establishes a framework for measuring fair value and expands disclosure requirements about fair value measurements. SFAS 157 is effective for the Company January 1, 2008. A one-year deferral is in effect for nonfinancial assets and nonfinancial liabilities that are measured on a nonrecurring basis. The Company believes that the adoption of SFAS 157 will not have a material impact on its combined financial statements.
 
2.   Acquisitions
 
On May 2, 2006, the Company acquired approximately 55% of the outstanding shares of Dr Pepper/Seven-Up Bottling Group, Inc. (“DPSUBG”), which combined with the Company’s pre-existing 45% ownership, resulted in full ownership of DPSUBG. DPSUBG’s principal operations are the bottling and distribution of beverages produced by the Company’s Beverage Concentrates and Finished Goods operating segments, and certain beverages produced by third parties, all in North America. The Company acquired DPSUBG to strengthen the route-to-market of its North American beverages business.
 
The purchase price for the approximately 55% of DPSUBG the Company did not previously own was approximately $370 million, which consisted of $347 million in cash and $23 million in related expenses paid by Cadbury Schweppes. The full purchase price was funded through related party debt with the subsidiaries of Cadbury Schweppes. None of the goodwill is deductible for tax purposes.
 
The acquisition was accounted for as a purchase under SFAS No. 141, Business Combinations (“SFAS 141”). The following table summarizes the allocation of the purchase price of approximately 55% of DPSUBG’s assets and liabilities:
 
         
    At
 
    May 2, 2006  
 
Current assets
  $ 182  
Investments
    1  
Property, plant and equipment
    190  
Intangible assets
    410  
         
Total assets acquired
    783  
Current liabilities
    184  
Long-term debt
    358  
Deferred tax liabilities
    146  
Other liabilities
    131  
         
Total liabilities assumed
    819  
Net liabilities assumed
    (36 )
Cash acquired
    10  
Goodwill
    396  
         
Total purchase price
  $ 370  
         
 
Included within the allocation of the purchase price in the table above are $410 million of intangible assets, which includes indefinite lived Company-related bottler agreements of $282 million, $70 million of customer relationships and contracts and $48 million of non-Company-related bottler agreements being amortized over 10 years and 5 years, respectively; and other intangible assets of $10 million being amortized over 10 years.
 
The results of DPSUBG have been included in the individual line items within the Combined Statement of Operations from May 2, 2006. Prior to this date, the existing investment in DPSUBG was accounted for by the equity method.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
The following unaudited proforma summary presents the results of operations as if the acquisition of DPSUBG had occurred on January 2, 2006. The proforma information may not be indicative of future performance.
 
         
    January 2, 2006 –
 
    September 30, 2006  
 
Sales
  $ 4,088  
         
Net income
  $ 349  
         
 
The Company also acquired All American Bottling Company (“AABC”) for $58 million on June 9, 2006, Seven-Up Bottling Company of San Francisco (“Easley”) for $51 million on August 7, 2006, and Southeast-Atlantic Beverage Corporation (“SeaBev”) for $53 million on July 11, 2007. Goodwill of $39 million and identifiable intangible assets of $54 million were recorded. The Company has not yet completed its fair value assessment of the assets acquired and liabilities assumed of the SeaBev acquisition. We expect to have this assessment completed by the end of first quarter 2008. These acquisitions further strengthen the route-to-market of the Company’s North American beverage business.
 
The goodwill associated with these transactions has been assigned to the Bottling Group, Beverage Concentrates and Finished Goods segments. The amounts assigned to these segments were $218 million, $322 million and $233 million, respectively. The goodwill represents benefits of the acquisitions that are in addition to the fair value of the net assets acquired and the anticipated increased profitability arising from the future revenue and cost synergies arising from the combination.
 
Supplemental schedule of non-cash investing activities:
 
In conjunction with the acquisitions of DPSUBG, AABC, Easley and SeaBev the following liabilities were assumed as of September 30:
 
                                 
    2007     2006  
    SeaBev     DPSUBG     AABC     Easley  
 
Fair value of assets acquired
  $ 76     $ 1,189     $ 64     $ 99  
Cash paid by the Company
          (347 )     (58 )     (51 )
Cash paid by Cadbury Schweppes
          (23 )            
                                 
Liabilities assumed
  $ 76     $ 819     $ 6     $ 48  
                                 
 
3.   Inventories
 
Inventories consist of the following:
 
                 
    September 30,
    December 31,
 
    2007     2006  
 
Raw materials
  $ 89     $ 105  
Work in process
    1       5  
Finished goods
    293       214  
                 
Inventories at FIFO cost
    383       324  
Reduction to LIFO cost
    (31 )     (24 )
                 
Inventories
  $ 352     $ 300  
                 
Percent of inventory accounted for by:
               
LIFO
    91 %     91 %
FIFO
    9 %     9 %


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
4.   Goodwill and Other Intangible Assets
 
Changes in the carrying amount of goodwill for the nine months ended September 30, 2007 by reporting unit are as follows:
 
                                         
    Beverage
    Finished
    Bottling
    Mexico and
       
    Concentrates     Goods     Group     the Caribbean     Total  
 
Balance at December 31, 2006
  $ 1,733     $ 1,222     $ 188     $ 37     $ 3,180  
Acquisitions (disposals)
                32             32  
Changes due to currency
    (1 )                       (1 )
                                         
Balance at September 30, 2007
  $ 1,732     $ 1,222     $ 220     $ 37     $ 3,211  
                                         
 
The weighted average useful lives, as applicable, and the net carrying amounts of intangible assets other than goodwill as of September 30, 2007 and December 31, 2006 are as follows:
 
As of September 30, 2007:
 
                                 
    Weighted
                   
    Average
                Net
 
    Useful Life
    Gross
    Accumulated
    Carrying
 
    (years)     Amount     Amortization     Amount  
 
Intangible assets with indefinite lives:
                               
Brands
          $ 3,097     $     $ 3,097  
Bottler agreements
            404             404  
Distributor Rights
            27             27  
Intangible assets with finite lives:
                               
Brands
    8       29       (15 )     14  
Customer relationships
    7       73       (17 )     56  
Bottler agreements
    5       52       (15 )     37  
                                 
Total
          $ 3,682     $ (47 )   $ 3,635  
                                 
 
As of December 31, 2006:
 
                                 
    Weighted
                   
    Average
                Net
 
    Useful Life
    Gross
    Accumulated
    Carrying
 
    (years)     Amount     Amortization     Amount  
 
Intangible assets with indefinite lives:
                               
Brands
          $ 3,096     $     $ 3,096  
Bottler agreements
            404             404  
Distributor Rights
            24             24  
Intangible assets with finite lives:
                               
Brands
    7       29       (12 )     17  
Customer relationships
    7       73       (8 )     65  
Bottler agreements
    5       52       (7 )     45  
                                 
Total
          $ 3,678     $ (27 )   $ 3,651  
                                 
 
Amortization expense for intangible assets was $20 million and $13 million in the nine months ended September 30, 2007 and for the period from January 2, 2006 to September 30, 2006, respectively. No impairment expense was recognized in the nine months ended September 30, 2007 and the period from January 2, 2006 to


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
September 30, 2006. At September 30, 2007, estimated amortization expense for the remainder of 2007 and for each of the next four years is $7 million, $27 million, $23 million, $23 million and $17 million, respectively.
 
During the period from January 2, 2006 to September 30, 2006, the Company sold the Slush Puppie business, which included certain trademarks with net book value of $14 million, to the ICEE Company for $23 million. The Company also sold the Grandma’s Molasses brand and certain related assets, which had a net book value of $0 to B&G Foods for $30 million.
 
5.   Other Assets
 
The Company provides support to certain customers to cover various programs and initiatives to increase net sales. Costs of these programs and initiatives are recorded in “prepaid expenses and other current assets” and “other non-current assets.” These costs include contributions to customers or vendors for equipment used to market and sell the Company’s products as well as certain other brand placement fees.
 
The long-term portion of the costs for these programs is recorded in other non-current assets and subsequently amortized over the period to be directly benefited and amounted to $89 million and $100 million net of accumulated amortization, as of September 30, 2007 and December 31, 2006, respectively. The amounts of these incentives are amortized based upon a methodology consistent with the Company’s contractual rights under these arrangements.
 
The amortization charge for the cost of contributions to customers or vendors for equipment was $9 million and $13 million for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006, respectively, and was recorded in “selling, general and administrative expenses” in the Combined Statements of Operations.
 
The amortization charge for the cost of other programs and incentives was $8 million and $7 million for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006, respectively and was recorded as a deduction from sales.
 
6.   Accounts Payable and Accrued Expenses
 
Accounts payable and accrued expenses consisted of the following:
 
                 
    September 30,
    December 31,
 
    2007     2006  
 
Trade accounts payable
  $ 329     $ 256  
Customer rebates
    169       184  
Accrued compensation
    81       96  
Other current liabilities
    184       252  
                 
Accounts payable and accrued expenses
  $ 763     $ 788  
                 
 
7.   Income Taxes
 
The Company’s effective tax rate for the nine months ended September 30, 2007 is 37.8%. For the nine months ended September 30, 2007, the Company earned $576 million before taxes and equity in earnings and provided for income taxes of $218 million. The effective tax rate varied from the U.S. federal statutory rate for the nine months ended September 30, 2007 primarily due to the net impact of foreign operations, state income taxes and the domestic manufacturing deduction.
 
The Company’s effective tax rate for the nine months ended September 30, 2006 was 36.9%. For the period from January 2, 2006 to September 30, 2006, the Company earned $562 million before taxes and equity in earnings and provided for income taxes of $206 million. The effective tax rate varied from the U.S. federal statutory rate for


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
the period from January 2, 2006 to September 30, 2006 primarily due to the net impact of foreign operations, state income taxes, the domestic manufacturing deduction, and the favorable results from various tax audit closures.
 
In July 2006, the FASB issued FASB Interpretation No. 48, “ Accounting for Uncertainty in Income Taxes ” (“FIN 48”), which is an interpretation of the SFAS No. 109, “ Accounting for Income Taxes .” The Company has adopted the provisions of FIN 48 effective January 1, 2007, as required.
 
The cumulative effect of adopting FIN 48 was a $16 million increase in tax reserves and a corresponding decrease to opening retained earnings at January 1, 2007. Upon adoption, the amount of gross unrecognized tax benefit at January 1, 2007 was $85 million. Of this amount $45 million, if recognized, would impact the Company’s effective tax rate.
 
Interest and penalties related to income tax liabilities are included in income tax expense. The balance of accrued interest and penalties recorded on the balance sheet at January 1, 2007 was $13 million and $2 million, respectively.
 
The Company recorded an additional FIN 48 liability of $12 million in connection with tax positions taken during the nine months ended September 30, 2007. Additionally, the Company released $6 million for the settlement of various tax positions during the same period. With limited exceptions, the Company is no longer subject to U.S. federal tax audits for years through 2002. The Company’s U.S. income tax returns for 2003 through 2005 are currently under examination by the Internal Revenue Service (“IRS”). Additionally, the Company is currently under examination for various years in various state and foreign jurisdictions. It is reasonably possible that within the next 12 months it will work with taxing authorities to resolve some or all of the matters presently under examination; however, an estimate of the range of financial statement impact that may result from these examinations cannot be made at this time.
 
8.   Long-term obligations
 
Debt Payable to Related Parties
 
                 
    September 30,
    December 31,
 
    2007     2006  
 
Loans payable to related parties, with various fixed and floating interest rates(a)
  $ 3,164     $ 3,249  
Less — Current portion
    (218 )     (708 )
                 
Long-term debt payable to related parties
  $ 2,946     $ 2,541  
                 
 
 
(a) Debt agreements with related parties consist of:
 
Cadbury Ireland Limited (“CIL”)
 
Total principal owed to CIL was $40 million at September 30, 2007 and December 31, 2006. The debt bears interest at a floating rate based on 3-month LIBOR. Actual rates were 5.95% and 5.36% at September 30, 2007 and December 31, 2006, respectively. The outstanding principal balance is due in November 2007 and is included in the current portion of long-term debt. The Company recorded $2 million and $2 million of interest expense related to these notes for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006, respectively.
 
Cadbury Schweppes Finance plc (“CSFPLC”)
 
The Company has a variety of debt agreements with CSFPLC with maturity dates ranging from May 2008 to May 2011. These agreements had a combined outstanding principal balance of $566 million and $2,937 million at September 30, 2007 and December 31, 2006, respectively. At September 30, 2007 and December 31, 2006, $566 million and $2,387 million of the debt, respectively, were based upon a floating rate ranging between


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
LIBOR plus 1.5% to LIBOR plus 2.5%. The remaining principal balance of $550 million at December 31, 2006 had stated interest fixed rates ranging from 5.76% to 5.95%. The Company recorded $53 million and $121 million of interest related to these notes for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006, respectively.
 
Cadbury Schweppes Overseas Limited (“CSOL”)
 
Total principal owed to CSOL was $23 million and $22 million at September 30, 2007 and December 31, 2006, respectively. The debt bears interest at a floating rate based on Mexican LIBOR plus 1.5% and matures in 2009. Actual rates were 9.89% at September 30, 2007 and December 31, 2006. The Company recorded $2 million and $15 million of interest expense related to these notes for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006, respectively.
 
Cadbury Adams Canada, Inc. (“CACI”)
 
Total principal owed to CACI was $67 million and $15 million at September 30, 2007 and December 31, 2006, respectively and is payable on demand. The debt bears interest at a floating rate based on 1 month Canadian LIBOR. Actual rates were 5.15% and 4.26% at September 30, 2007 and December 31, 2006, respectively. The Company recorded $1 million and less than $1 million of interest expense related to this debt for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006, respectively.
 
Cadbury Schweppes Americas Holding BV (“CSAHBV”)
 
During 2007, CSAHBV issued the Company a variety of debt agreements with maturity dates ranging from 2009 to 2017. These agreements had a combined outstanding principal balance of $2,468 million at September 30, 2007 and bear interest at a floating rate ranging between 6 Month USD LIBOR plus .75% to 6 Month USD LIBOR plus 1.75%. The Company recorded $107 million of interest related to these notes for the nine months ended September 30, 2007.
 
Cadbury Schweppes Treasury America (“CSTA”)
 
Total principal owed to CSTA was $0 million and $235 million at September 30, 2007 and December 31, 2006, respectively. The note carried a stated rate of 7.25% per annum. The note was purchased by an entity within the Company on May 23, 2007. The Company recorded $7 million and $7 million of interest expense related to these notes for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006, respectively.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
 
Debt Payable to Third Parties
 
                 
    September 30,
    December 31,
 
    2007     2006  
 
Note payable to a bank. Interest payments due quarterly
  $     $ 114  
(interest at CDOR(1) + .325%, due April 2008, payable in Canadian Dollars)(2)
               
Note payable to a bank. Interest payments due quarterly
          129  
(interest at CDOR(1) + .45%, due April 2010, payable in Canadian Dollars)(2)
               
Bonds payable, 4.90% fixed interest rate. Interest payments due semiannually. Principal due December 2008. Payable in Canadian Dollars(3)
          278  
Notes payable related to the SeaBev acquisition, interest rates ranging from 4.97% to 7.50%. Interest and principal due October 2007. Payable in U.S. Dollars
    38          
Capital leases
    25       24  
                 
Total
    63       545  
Less current installments
    (40 )     (2 )
                 
Long-term debt, payable to third parties
  $ 23     $ 543  
                 
 
 
(1) CDOR is the average of the annual rates for Canadian Dollar bankers’ acceptances having the specified term and face amount of the banks named in Schedule 1 of the Canadian Bank Act.
 
(2) On August 29, 2007, the Company transferred these notes payable to a subsidiary of Cadbury Schweppes.
 
(3) On August 31, 2007, the Company paid off the outstanding balance of bonds payable.
 
9.   Commitments and Contingencies
 
Legal Matters
 
The Company is occasionally subject to litigation or other legal proceedings relating to our business. Set forth below is a description of our three most significant pending legal matters and one recently settled legal matter. Although the estimated range of loss, if any, for the three pending legal matters described below cannot be estimated at this time the Company does not believe that the outcome of any of these, or any other, pending legal matters, individually or collectively, will have a material adverse effect on the business or financial condition of the Company although such matters may have a material adverse effect on the Company’s results of operations in a particular period.
 
Snapple Distributor Litigation
 
In 2004, one of the Company’s subsidiaries, Snapple Beverage Corp. and several affiliated entities of Snapple Beverage Corp., including Snapple Distributors Inc., were sued in United States District Court, Southern District of New York, by 57 area route distributors for alleged price discrimination, breach of contract, retaliation, tortious interference and breach of the implied duty of good faith and fair dealings arising out of their respective area route distributor agreements. Each plaintiff sought damages in excess of $225 million. The plaintiffs initially filed the case as a class action but withdrew their class certification motion. They are proceeding as individual plaintiffs but the cases have been consolidated for discovery and procedural purposes. On September 14, 2007, the court granted the Company’s motion for summary judgment, dismissing the plaintiffs’ federal claims of price discrimination and dismissing, without prejudice, the plaintiffs’ remaining claims under state law. The plaintiffs have filed a notice to appeal the decision and may decide to re-file the state law claims in state court. The Company believes it has


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
meritorious defenses with respect to the appeal and will defend itself vigorously. However, there is no assurance that the outcome of the appeal, or any trial, if claims are refilled, will be in the Company’s favor.
 
Holk & Weiner Snapple Litigation
 
In 2007, Snapple Beverage Corp. was sued by Stacy Holk, in New Jersey Superior Court, Monmouth County, and by Hernant Mehta in the U.S. District Court, Southern District of New York. The plaintiffs filed these cases as class actions. The plaintiffs allege that Snapple’s labeling of certain of its drinks is misleading and/or deceptive. The plaintiffs seek unspecified damages on behalf of the class, including enjoining Snapple from various labeling practices, disgorging profits, reimbursing of monies paid for product and treble damages. The Mehta case in New York has since been dropped by the plaintiff. However, the attorneys in the Holk, New Jersey case and a new plaintiff, Evan Weiner, have since filed a new action in New York substantially similar to the New Jersey action. In each case, the Company has filed motions to dismiss the plaintiffs’ claims on a variety of grounds. The Company believes it has meritorious defenses to the claims asserted and will defend itself vigorously. However, there is no assurance that the outcome of the Company’s motions or at trial will be in its favor.
 
Nicolas Steele v. Seven Up/RC Bottling Company Inc.
Robert Jones v. Seven Up/RC Bottling Company of Southern California, Inc.
California Wage Audit
 
In 2007, one of the Company’s subsidiaries, Seven Up/RC Bottling Company Inc., was sued by Nicolas Steele, and in a separate action by Robert Jones, in each case in Superior Court in the State of California (Orange County), alleging that its subsidiary failed to provide meal and rest periods and itemized wage statements in accordance with applicable California wage and hour law. The cases have been filed as class actions. The classes, which have not yet been certified, consist of all employees of one the Company’s subsidiaries who have held a merchandiser or delivery driver position in southern California in the past three years. On behalf of the classes, the plaintiffs claim lost wages, waiting time penalties and other penalties for each violation of the statute. The Company believes it has meritorious defenses to the claims asserted and will defend itself vigorously. However, there is no assurance that the outcome of this matter will be in its favor.
 
The Company has been requested to conduct an audit of its meal and rest periods for all non-exempt employees in California at the direction of the California Department of Labor. At this time, the Company has declined to conduct such an audit until there is judicial clarification of the intent of the statute.
 
Dr Pepper Bottling Company of Texas, Inc. Shareholder Litigation
 
On June 1, 2007, the Company settled a lawsuit brought in 1999 by certain stockholders of Dr Pepper Bottling Company of Texas, Inc. for $47 million, which included $15 million of interest. The lawsuit was assumed as part of the DPSUBG acquisition (see Note 2) and was fully reserved at December 31, 2006.
 
Environmental, Health and Safety Matters
 
The Company operates many manufacturing, bottling and distribution facilities. In these and other aspects of the Company’s business, it is subject to a variety of federal, state and local environment, health and safety laws and regulations. The Company maintains environmental, health and safety policies and a quality, environmental, health and safety program designed to ensure compliance with applicable laws and regulations. However, the nature of the Company’s business exposes it to the risk of claims with respect to environmental, health and safety matters, and there can be no assurance that material costs or liabilities will not be incurred in connection with such claims. However, the Company is not currently named as a party in any judicial or administrative proceeding relating to environmental, health and safety matters which would materially affect its operations.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
 
10.   Restructuring Costs
 
Restructuring charges incurred during the nine months ended September 30, 2007 and during the period from January 2, 2006 to September 30, 2006 are as follows:
 
                 
    Nine Months
    Period From
 
    Ended
    January 2, 2006 —
 
    September 30, 2007     September 30, 2006  
 
Beverages Concentrates
  $ 8     $ 4  
Finished Goods
    9        
Bottling Group
    10        
Mexico and the Caribbean
    3       2  
Corporate
    6       3  
                 
Total restructuring costs
  $ 36     $ 9  
                 
 
The restructuring costs primarily relate to staff redundancies and closure of duplicate facilities from a significant four-year cost reduction initiative implemented by Cadbury Schweppes, which began in mid-2003 and the integration of the Bottling Group with existing businesses.
 
In conjunction with the acquisition of the Bottling Group, the Company began restructuring of the Company’s existing business to integrate the Bottling Group’s business. The restructuring charges recorded during the nine months ended September 30, 2007 and during the period from January 2, 2006 to September 30, 2006 are primarily related to the integration of the Bottling Group with existing businesses of the Company, as well as staff redundancies and closure of duplicate facilities from a significant four-year cost reduction initiative implemented by Cadbury Schweppes, which began in mid-2003. The Company has incurred $69 million of total, non-recurring charges to date related to these activities, of which $34 million relates to the Bottling Group integration. Additional restructuring charges of approximately $31 million are expected to be incurred related to these plans over the next two years, of which $22 million relates to the Bottling Group integration.
 
Restructuring liabilities along with charges to expense, cash payment and non-cash charges were as follows:
 
                                                 
    Workforce
                               
    Reduction
    Asset
    External
    Shutdown
             
    Costs     Write-off     Consulting     Costs     Other     Total  
 
Balance at December 31, 2006
  $ 2     $     $     $     $     $ 2  
Charges
    14       1       8       4       9       36  
Cash payments
    (9 )           (10 )     (4 )     (9 )     (32 )
Due to/from Cadbury Schweppes
    (1 )     (1 )     2                    
                                                 
Balance at September 30, 2007
  $ 6     $     $     $     $     $ 6  
                                                 
 
                                                 
    Workforce
                               
    Reduction
    Asset
    External
    Shutdown
             
    Costs     Write-off     Consulting     Costs     Other     Total  
 
Balance at January 1, 2006
  $ 1     $     $     $     $ 1     $ 2  
Charges
    2             6             1       9  
Cash payments
    (3 )           (11 )           (1 )     (15 )
Due to/from Cadbury Schweppes
                5                   5  
                                                 
Balance at September 30, 2006
  $     $     $     $     $ 1     $ 1  
                                                 


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
Restructuring charges recorded by each segment were as follows:
 
Beverage Concentrates
 
Beverage Concentrates recorded restructuring charges of $8 million and $4 million during the nine months ended September 30, 2007 and during the period from January 2, 2006 to September 30, 2006, respectively. During both periods presented, the charges mainly related to the integration of the Bottling Group with existing businesses of the Company. The cumulative amount related to this activity to date is $13 million. The Company expects to incur additional charges in this segment related to this restructuring plan of approximately $5 million over the next two years.
 
Finished Goods
 
Finished Goods recorded restructuring charges of $9 million and $0 during the nine months ended September 30, 2007 and during the period from January 2, 2006 to September 30, 2006, respectively. During the nine months ended September 30, 2007, the costs mainly related to the closing of the St. Catharines plant initiated during the period. The cumulative amount related to this activity incurred to date is $6 million. No significant additional costs related to this activity are expected be incurred by Finished Goods. The Company also recorded restructuring charges of $3 million related to the relocation of the Research and Development facility which was initiated in 2007. The Company expects to incur additional charges in this segment related to this restructuring plan of approximately $7 million over the next year.
 
Bottling Group
 
Bottling Group recorded restructuring charges of $10 million and $0, during the nine months ended September 30, 2007 and during the period from January 2, 2006 to September 30, 2006, respectively, related to integration of the Bottling Group with existing businesses of the Company as stated above. The cumulative amount related to this activity incurred to date is $18 million. The Company expects to incur additional charges in this segment related to this restructuring plan of approximately $17 million over the next two years.
 
Mexico and the Caribbean
 
Mexico and the Caribbean recorded restructuring charges of $3 million and $2 million during the nine months ended September 30, 2007 and during the period from January 2, 2006 to September 30, 2006, respectively. The charges mainly related to restructuring actions initiated in 2003 and extended to 2007 to outsource the activities of Mexico and the Caribbean’s warehousing and distribution processes. The cumulative amount related to this activity incurred to date is $9 million. The Company expects to incur additional charges in this segment related to this restructuring plan of approximately $2 million through the remainder of 2007.
 
Corporate
 
Corporate recorded charges of $6 million and $3 million during the nine months ended September 30, 2007 and during the period from January 2, 2006 to September 30, 2006, respectively. During both periods presented, the charges mainly related to restructuring actions to outsource data center activities and related asset write-offs that were initiated in 2006, and outsource shared business services globally that was initiated in 2005. The cumulative amount related to this activity incurred to date is $17 million. The Company does not expect to incur significant additional charges in this segment related to the data center outsourcing restructuring plan or the shared business services outsourcing plan.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
 
11.   Employee Benefit Plans
 
The following table sets forth the components of pension and other benefits cost for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006:
 
                                 
    Pension Plans     Postretirement Benefit Plans  
    Nine Months
    January 2,
    Nine Months
    January 2,
 
    Ended
    2006 -
    Ended
    2006 -
 
    September 30,
    September 30,
    September 30,
    September 30,
 
    2007     2006     2007     2006  
 
Service costs
  $ 11     $ 10     $ 1     $ 1  
Interest costs
    15       13       1       1  
Expected return on assets
    (14 )     (10 )            
Recognition of actuarial gain/loss
    4       4              
Settlements
          2              
                                 
Net periodic benefit costs
  $ 16     $ 19     $ 2     $ 2  
                                 
 
12.   Stock-Based Compensation Plan
 
Certain of the Company’s employees participate in stock-based compensation plans sponsored by Cadbury Schweppes. These plans provide employees with stock or options to purchase stock in Cadbury Schweppes. Given that the Company’s employees directly benefit from participation in these plans, the expense incurred by Cadbury Schweppes for stock or stock options granted to its employees has been reflected in the Company’s Combined Statements of Operations in “selling, general, and administrative expenses.” Stock based compensation expense was $14 million ($9 million net of tax) and $12 million ($7 million net of tax) in the nine months ended September 30, 2007 and during the period from January 2, 2006 to September 30, 2006, respectively.
 
13.   Segments
 
The Company presents segment information in accordance with SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information (“SFAS 131”), which established reporting and disclosure standards for an enterprise’s operating segments. Operating segments are defined as components of an enterprise that are businesses, for which separate financial information is available, and for which the financial information is regularly reviewed by the Company leadership team and the chief operating decision maker.
 
Segment results are based on management reports, which are prepared in accordance with International Financial Reporting Standards. Net sales, gross contribution before marketing (“GCBM”) and underlying operating profit (“UOP”) are the significant financial measures used to measure the operating performance of the Company’s operating segments. UOP is defined as income from operations before restructuring costs, non-trading items, interest, amortization and impairment of intangibles.
 
As of September 30, 2007, the Company’s operating structure consisted of the following five operating segments:
 
  •  The Beverage Concentrates segment reflects sales from the manufacturer of concentrates and syrup of our brands in the United States and Canada. Most of the brands in this segment are CSD brands.
 
  •  The Finished Goods segment reflects sales from the manufacture and distribution of finished beverages and other products in the United States and Canada. Most of the brands in this segment are non-CSD brands.
 
  •  The Bottling Group segment reflects sales from the manufacture and/or distribution of finished beverages, including sales of the Company’s own brands and third-party owned brands.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
 
  •  The Snapple Distributors segment reflects sales from the distribution of finished beverages primarily Snapple, in New York City and the surrounding regions.
 
  •  The Mexico and the Caribbean segment reflects sales from the manufacture; bottling and/or distribution of both concentrates and finished beverages.
 
The Company has significant transactions between our segments. For example, the Bottling Group purchases concentrates from the Beverage Concentrates segment. In addition, the Snapple Distributors segment purchases finished beverages from the Finished Goods segment.
 
Under management reporting, transactions between segments are eliminated except to the Bottling Group.
 
The Company’s current segment reporting structure is largely the result of acquiring and combining various portions of its business over the past several years. Although the Company continues to report its segments separately, due to the integrated nature of its business model, it manages its business to maximize profitability for the Company as a whole. As a result, profitability trends in certain segments may not be consistent with the profitability of the Company or comparable to our competitors. For example, following the Company’s bottling group acquisitions in 2006, it changed certain funding and manufacturing arrangements between the Beverage Concentrates and Finished Goods segments and its newly acquired bottling companies, which reduced the profitability of the Bottling Group segment.
 
The Company incurs selling, general and administrative expenses in each of its segments. In the Company’s segment reporting, the selling, general and administrative expenses of the Bottling Group, Snapple Distributors, and Mexico and the Caribbean segments relate solely to those segments. However, as a result of the Company’s historical segment reporting policies, it has certain combined selling activities to support the Beverage Concentrates and Finished Goods segments that have not been proportionally allocated between those two segments. The Company also incurs certain centralized functions and corporate costs that support its entire business, which have not been directly allocated to its respective segments but rather have been allocated to the Beverage Concentrates segment.
 
Information about the Company’s operations by operating segment for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006 is as follows:
 
The following table reconciles segmental data to combined data:
 
                 
    Nine Months Ended
    January 2, 2006 —
 
    September 30, 2007     September 30, 2006  
 
Net sales
               
Beverage Concentrates
  $ 1,004     $ 980  
Finished Goods
    1,036       1,014  
Bottling Group
    2,160       1,081  
Snapple Distributors
    194       205  
Mexico and the Caribbean
    313       302  
                 
Segment total
    4,707       3,582  
Adjustments and eliminations
    (360 )     (202 )
                 
Net sales as reported
  $ 4,347     $ 3,380  
                 
 


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
                 
    Nine Months Ended
    January 2, 2006 —
 
    September 30, 2007     September 30, 2006  
 
Gross Contribution Before Marketing
               
Beverages Concentrates
  $ 909     $ 886  
Finished Goods
    536       518  
Bottling Group
    723       383  
Snapple Distributors
    33       40  
Mexico and the Caribbean
    174       173  
                 
Segment total
    2,375       2,000  
Adjustments and eliminations
    (12 )     (19 )
                 
Gross profit as reported
  $ 2,363     $ 1,981  
                 
 
                 
    Nine Months Ended
    January 2, 2006 —
 
    September 30, 2007     September 30, 2006  
 
Underlying Operating Profit
               
Beverage Concentrates
  $ 541     $ 511  
Finished Goods
    116       121  
Bottling Group
    69       67  
Snapple Distributors
    34       34  
Mexico and the Caribbean
    75       72  
                 
Segment total
    835       805  
Corporate and other
    (34 )     (15 )
Adjustments and eliminations
    (225 )     (228 )
                 
Income before provision for income taxes and equity in earnings of unconsolidated subsidiaries as reported
  $ 576     $ 562  
                 
 
Reconciliation of Segmental Information
 
Total segmental revenue includes Beverage Concentrates and Finished Goods sales to Bottling Group, amounting to $362 million and $199 million in the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006, respectively, which were eliminated. The foreign exchange rate used to convert segmental revenue from Mexico and Canada was based on a budgeted amount in the management reports. The adjustment reflected above is the difference that resulted from using the budgeted amount instead of the average rate for the year.
 
Total segmental gross contribution before marketing for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006 includes gross contribution of $5 million and $10 million, respectively, attributable to Beverage Concentrates and Finished Goods sales to Bottling Group, which were eliminated in the combined results. Significant U.S. GAAP adjustments include the LIFO revaluation.
 
Major Customers
 
None of the Company’s customers accounted for 10% or more of total net sales.

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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
 
14.   Related Party Transactions
 
Allocated Expenses
 
The Company has been allocated corporate overhead expenses from Cadbury Schweppes and its subsidiaries for corporate-related functions based on the most relevant allocation method to the service provided. To the extent expenses have been paid by Cadbury Schweppes and its subsidiaries on behalf of the Company, they have been allocated based upon the direct costs incurred. Where specific identification of expenses has not been practicable, the costs of such services has been allocated based upon the most relevant allocation method that management believes is reasonable, primarily either revenue or headcount. The Company was allocated $113 million and $104 million of overhead costs in the nine months ended September 30, 2007 and during the period from January 2, 2006 to September 30, 2006, respectively.
 
Cash Management
 
Cadbury Schweppes uses a centralized approach to cash management and financing of operations. The Company’s cash is available for use and is regularly swept by Cadbury Schweppes operations in the U.S. at its discretion. Cadbury Schweppes also funds the Company’s operating and investing activities as needed. Transfers of cash, both to and from Cadbury Schweppes’ cash management system, are reflected as a component of “Cadbury Schweppes’ net investment” in the Company’s Combined Balance Sheets.
 
Royalties
 
The Company pays royalties to other Cadbury Schweppes-owned companies for the use of certain brands. Total amounts paid were $0 and $1 million for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006, respectively.
 
Purchase of Intangibles
 
The Company purchased certain trademarks from Cadbury Schweppes for a total purchase price of $19 million in the period from January 2, 2006 to September 30, 2006. These trademark purchases were substantially equivalent to those that prevail in an arm’s length transaction and were determined to have indefinite lives.
 
Notes Receivable
 
The Company held a note receivable balance with wholly owned subsidiaries of Cadbury Schweppes with outstanding principal balances of $1,931 million and $579 million at September 30, 2007 and December 31, 2006, respectively. The Company recorded $37 and $29 million of interest income related to these notes for the nine months ended September 30, 2007 and the period from January 2, 2006 to September 30, 2006, respectively.
 
Debt and Payables
 
The Company has entered into a variety of debt agreements with other companies owned by Cadbury Schweppes. These agreements (as well as outstanding balances under the agreements) are described in Note 8.
 
The related party payable balances of $509 million and $183 million at September 30, 2007 and December 31, 2006, respectively, represent non-interest bearing payable balances with companies owned by Cadbury Schweppes and related party accrued interest payable associated with interest bearing notes described in Note 8. The non-interest bearing payable balance was $448 million and $158 million at September 30, 2007 and December 31, 2006, respectively, and the payables are due within one year. The accrued interest payable balance was $61 million and $25 million at September 30, 2007 and December 31, 2006, respectively.


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DR PEPPER SNAPPLE GROUP, INC.
 
NOTES TO UNAUDITED CONDENSED COMBINED FINANCIAL STATEMENTS — (Continued)
 
15.   Subsequent Events
 
Glacéau Termination
 
Following its acquisition by Coca-Cola on August 30, 2007, Energy Brands, Inc. notified the Company that it was terminating the Company’s distribution agreements for glacéau products, including its agreement to distribute glacéau products, including vitaminwater, fruitwater and smartwater, effective November 2, 2007. Pursuant to the terms of the agreement, the Company received a payment of approximately $92 million from Energy Brands, Inc. for this termination in December 2007. The Company’s glacéau net sales for the nine months ended September 30, 2007 were approximately $200 million and are reflected in the Bottling Group and Snapple Distributors segments.
 
Organizational Restructuring
 
On October 10, 2007, the Company announced a restructuring of the organization that is intended to create a more efficient organization. This restructuring will result in a reduction of approximately 470 employees in our corporate, sales and supply chain functions located in the United States, Canada and Mexico. The restructuring will also include the closure of two manufacturing facilities. The employee reductions and facilities closures are expected to be completed by June 2008.
 
As a result of the restructuring, the Company expects to recognize a charge of approximately $70 million primarily in 2007, with the balance in 2008. The Company expects the restructuring to generate annual cost savings of approximately $70 million, most of which are expected to be realized in 2008 with the full annual benefit realized from 2009 onwards. As part of this restructuring, the Bottling Group segment has assumed management and operational control of the Snapple Distributors segment. These operations are currently being integrated and will be reported in the Company’s 2007 annual results as a single segment.


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