<PAGE>
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
__________________________
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
July 13, 1999
Date of report (Date of earliest event reported)
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
(Exact Name of Registrant as Specified in Charter)
Delaware 1-13914 ###-##-####
(State or Other (Commission (IRS Employer
Jurisdiction File Number) Identification Number)
of Incorporation)
Carretera 885, Km. 0.4
Barrio Candelaria Arenas
Toa Baja, Puerto Rico 00949
(Address of Principal Executive Offices, including Zip Code)
(787) 251-2000
(Registrant's Telephone Number, including Area Code)
<PAGE>
ITEM 5 Other Events
(a) Exchange Agreements
Pepsi-Cola Puerto Rico Bottling Company ("PPR") has entered into exchange
agreements, attached hereto as Exhibit 10.1 and Exhibit 10.2, for the
acquisition of Delta Beverage Group, Inc. ("Delta") and Dakota Beverage Company
("Dakota"). As consideration for such acquisitions, PPR plans to issue
65,070,006 shares of its Class B Common Stock to the shareholders of Delta and
Dakota. PPR is expected to issue (1) 46,760,000 shares of its Class B Common
Stock in exchange for the outstanding shares of Dakota stock, and (2) 18,310,006
shares of its Class B Common Stock in exchange for the outstanding shares of
Delta stock. PPR received executed signature pages for the exchange agreements
over the course of the last several business days.
The acquisitions continue to be subject to various substantive
contingencies beyond the control of PPR. These conditions include but are not
limited to (1) approval of the acquisitions by the shareholders of PPR, (2)
approval of an amendment to PPR's Certificate of Incorporation to increase the
number of authorized shares of PPR capital stock (which requires the affirmative
vote by a majority of those present in person or represented by proxy of the PPR
shareholders voting together and the holders of its Class B Common Stock voting
independently), and (3) the receipt of all necessary authorizations, consents,
waivers, orders and approvals, including, but not limited to, the consent of
PepsiCo, Inc. and the contribution by Pepsi-Cola Metropolitan Bottling Company,
Inc. of shares of capital stock of PepsiCo, Inc.
(b) Voting Agreement
P-PR Transfer, LLP, which owns a majority of the voting power of the PPR
common stock, has entered into a voting agreement with PPR, attached hereto as
Exhibit 10.3. Under the terms of the voting agreement, P-PR Transfer, LLP is
required to vote its shares of PPR common stock in favor of the exchange
agreements for the acquisition of Delta and Dakota. As a result, assuming that
the shareholders of PPR approve an amendment to PPR's Certificate of
Incorporation to increase the number of authorized shares of PPR capital stock,
passage of the proposal to issue 65,070,006 shares of PPR Class B Common Stock
to Delta and Dakota shareholders is assured.
ITEM 7 Financial Statements, Pro Forma Financial Information and Exhibits
(c) Exhibits
10.1 Delta Exchange Agreement, effective June 28, 1999.
10.2 Dakota Exchange Agreement, effective June 28, 1999.
10.3 Voting Agreement, dated June 28, 1999.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized on July 14, 1999.
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
By: /s/ John F. Bierbaum
John F. Bierbaum
Chief Financial Officer and
Vice President
3
<PAGE>
EXHIBIT INDEX
Exhibit
Number Description
- ------ -----------
10.1 Delta Exchange Agreement, effective June 28, 1999.
10.2 Dakota Exchange Agreement, effective June 28, 1999.
10.3 Voting Agreement, effective June 28, 1999.
4
<PAGE>
EXHIBIT 10.1
DELTA EXCHANGE AGREEMENT
June 28, 1999
A-1
<PAGE>
DELTA EXCHANGE AGREEMENT
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I - THE EXCHANGE..........................................................................................2
Section 1.1 The Exchange...........................................................................2
Section 1.2 Exchange Procedures....................................................................2
Section 1.3 Transfer Taxes. ......................................................................3
Section 1.4 Lost Certificates......................................................................3
Section 1.5 Closing................................................................................3
ARTICLE II - REPRESENTATIONS AND WARRANTIES OF PPR................................................................3
Section 2.1 Organization, Standing and Power.......................................................3
Section 2.2 Capital Structure......................................................................4
Section 2.3 Authority..............................................................................5
Section 2.4 Consents and Approvals; No Violation...................................................6
Section 2.5 SEC Documents and Other Reports........................................................7
Section 2.6 Absence of Certain Changes.............................................................7
Section 2.7 Permits; Compliance and Contracts......................................................9
Section 2.8 Tax Matters............................................................................9
Section 2.9 Actions and Proceedings...............................................................10
Section 2.10 Certain Agreements....................................................................11
Section 2.11 Employee Benefit Matters..............................................................11
Section 2.12 Compliance with Environmental Laws....................................................14
Section 2.13 Labor Matters.........................................................................15
Section 2.14 Intellectual Property.................................................................15
Section 2.15 Title to Assets; Insurance............................................................16
Section 2.16 Real Property.........................................................................16
Section 2.17 Title Insurance.......................................................................18
Section 2.18 Zoning................................................................................18
Section 2.19 Brokers...............................................................................18
Section 2.20 Relationships.........................................................................18
Section 2.21 Compliance with Quality Standards.....................................................18
Section 2.22 Year 2000 Compliance..................................................................19
Section 2.23 Delaware Business Combination Statute.................................................19
Section 2.24 Disclosure............................................................................19
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF DELTA............................................................19
Section 3.1 Organization, Standing and Power......................................................19
Section 3.2 Capital Structure.....................................................................20
Section 3.3 Authority.............................................................................20
Section 3.4 Consents and Approvals; No Violation..................................................21
Section 3.5 SEC Documents and Other Reports.......................................................21
Section 3.6 Absence of Certain Changes or Events..................................................22
Section 3.7 Permits; Compliance and Contracts.....................................................23
Section 3.8 Tax Matters...........................................................................24
Section 3.9 Actions and Proceedings...............................................................25
Section 3.10 Certain Agreements....................................................................26
</TABLE>
A-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 3.11 Employee Benefit Matters..............................................................26
Section 3.12 Compliance with Environmental Laws....................................................28
Section 3.13 Indebtedness..........................................................................29
Section 3.14 Labor Matters.........................................................................29
Section 3.15 Intellectual Property.................................................................29
Section 3.16 Title to Assets; Insurance............................................................30
Section 3.17 Real Property.........................................................................30
Section 3.18 Title Insurance.......................................................................32
Section 3.19 Zoning................................................................................32
Section 3.20 Brokers...............................................................................32
Section 3.21 Relationships.........................................................................32
Section 3.22 Compliance with Quality Standards.....................................................33
Section 3.23 Year 2000 Compliance..................................................................33
Section 3.24 Disclosure............................................................................33
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE DELTA STOCKHOLDERS............................................33
Section 4.1 Title; Authority......................................................................33
Section 4.2 No Breach.............................................................................34
Section 4.3 No Consents...........................................................................34
Section 4.4 Entire Interest.......................................................................34
Section 4.6 Unregistered Securities; Investment Intent............................................34
Section 4.7 Restrictions on Transfer..............................................................35
ARTICLE V - COVENANTS RELATING TO CONDUCT OF BUSINESS............................................................35
Section 5.1 Actions by PPR........................................................................35
Section 5.2 Actions by Delta......................................................................37
ARTICLE VI - ADDITIONAL AGREEMENTS...............................................................................39
Section 6.1 PPR Stockholder Meeting...............................................................39
Section 6.2 Preparation of the Registration Statement and the Proxy Statement.....................40
Section 6.3 Access to Information and Properties..................................................45
Section 6.4 New Credit Facility...................................................................45
Section 6.5 [This section intentionally left blank]...............................................45
Section 6.6 NYSE Listing..........................................................................45
Section 6.7 Fees and Expenses.....................................................................45
Section 6.8 Delta Senior Noteholders..............................................................46
Section 6.9 Reasonable Best Efforts to Consummate the Exchange....................................46
Section 6.10 Public Announcements..................................................................46
Section 6.11 State Takeover Laws...................................................................46
Section 6.12 Indemnification.......................................................................47
Section 6.13 Notification of Certain Matters.......................................................47
Section 6.14 Transfer Taxes........................................................................47
Section 6.15 Treatment of Delta Phantom Stock Plan Participants....................................47
Section 6.16 Title Commitments.....................................................................47
Section 6.17 Delta Preferred Stock Dividends.......................................................48
Section 6.18 Independent Directors.................................................................48
Section 6.19 Transactions with Affiliates..........................................................48
ARTICLE VII - CONDITIONS PRECEDENT TO CLOSING....................................................................49
Section 7.1 Conditions to Each Party's Obligation to Effect the Exchange..........................49
</TABLE>
A-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 7.2 Conditions to Obligation of the Delta Stockholders to Effect
the Exchange..........................................................................50
Section 7.3 Conditions to Obligations of PPR to Effect the Exchange...............................52
ARTICLE VIII - TERMINATION, AMENDMENT AND WAIVER................................................................53
Section 8.1 Termination...........................................................................53
Section 8.2 Effect of Termination.................................................................54
Section 8.3 Amendment.............................................................................54
Section 8.4 Waiver................................................................................54
ARTICLE IX - GENERAL PROVISIONS..................................................................................55
Section 9.1 Non-Survival of Representations, Warranties and Agreements............................55
Section 9.2 Notices...............................................................................55
Section 9.3 Interpretation........................................................................56
Section 9.4 Counterparts..........................................................................56
Section 9.5 Entire Agreement; No Third-Party Beneficiaries........................................56
Section 9.6 Governing Law.........................................................................56
Section 9.7 Assignment............................................................................56
Section 9.8 Severability..........................................................................57
Section 9.9 Enforcement of this Agreement.........................................................57
Section 9.10 Rule of Construction..................................................................57
Section 9.11 Effect of Execution...................................................................58
Section 9.12 Rights Under Amended and Restated Shareholder's Agreement.............................58
Section 9.13 Termination of Amended and Restated Co-Sale Agreement.................................58
Section 9.14 Amendment to Delta's Certificate of Incorporation.....................................58
</TABLE>
EXHIBITS
Exhibit A - Voting Agreement
Exhibit B - Lock-Up Agreement
Exhibit C - Registration Rights Agreement
Exhibit D - Names and Addresses of Delta Stockholders
A-4
<PAGE>
DELTA EXCHANGE AGREEMENT
EXCHANGE AGREEMENT, dated as of June 28, 1999 (this "Agreement"), among
PEPSI-COLA PUERTO RICO BOTTLING COMPANY, a Delaware corporation ("PPR"), DELTA
BEVERAGE GROUP, INC., a Delaware corporation ("Delta"), and the stockholders of
Delta listed on the signature pages hereto (the "Delta Stockholders").
WITNESSETH:
WHEREAS, the Board of Directors of Delta has determined that the
transactions described in this Agreement are in Delta's best interests and,
accordingly, have authorized Delta to enter into this Agreement; and
WHEREAS, a special committee of the Board of Directors of PPR (the "PPR
Special Committee") and the Board of Directors of PPR have determined that the
transactions described in this Agreement are in PPR's and its stockholders'
respective best interests and, accordingly, have authorized PPR to enter into
this Agreement and agreed to recommend to its stockholders that this Agreement
and the transactions contemplated hereby be approved by PPR's stockholders; and
WHEREAS, this Agreement provides for the issuance by PPR of shares of its
Class B common stock par value $.01 per share (the "PPR Class B Common Stock")
and for those holders of issued and outstanding shares of Delta voting common
stock and Delta nonvoting common stock (collectively, the "Delta Stock")
identified on Schedule 1 hereto to exchange their shares of Delta Stock for PPR
Class B Common Stock in the manner set forth herein (the "Exchange"), and that,
as a result, Delta will become a subsidiary of PPR; and
WHEREAS, as an inducement to PPR entering into this Agreement and incurring
the obligations set forth herein, concurrently with the execution and delivery
of this Agreement, P-PR Transfer, LLP, a Delaware limited liability partnership
("P-PRT"), and PPR are entering into a Voting Agreement in the form of Exhibit A
hereto, pursuant to which P-PRT has agreed to vote its shares of PPR Class A
common stock par value $.01 per share (the "PPR Class A Common Stock") and PPR
Class B Common Stock in favor of this Agreement and the transactions
contemplated hereby; and
WHEREAS, simultaneously with the consummation of the Exchange, PPR will
acquire 100% of the issued and outstanding membership interests of Dak Bev LLC,
a Delaware limited liability company (the "Dakota Acquisition") and the
consummation of the Dakota Acquisition is a condition precedent to the
consummation of the Exchange; and
WHEREAS, for federal income tax purposes, it is intended that the Exchange
together with the Dakota Acquisition shall qualify as a transfer to a controlled
corporation within the meaning of Section 351(a) of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises, and in reliance on the
representations, warranties and covenants contained herein, the parties agree as
follows:
A-5
<PAGE>
ARTICLE I
THE EXCHANGE
Section 1.1 The Exchange. At the Closing (as defined in Section 1.5):
------------
(a) each share of Delta Stock issued and outstanding immediately prior
to the Closing shall be exchanged for 343.8381 shares of validly issued,
fully paid and nonassessable shares of PPR Class B Common Stock; and
(b) each share of Delta Preferred Stock Series AA issued and
outstanding immediately prior to the Closing ("Delta Preferred") shall
continue as an issued and outstanding share of preferred stock subject to
the terms and conditions of the Delta Certificate of Incorporation and the
provisions of Section 6.17 hereof.
(c) if as a result of the foregoing any of the Delta Stockholders
would receive a fractional share of PPR Class B Common Stock, such
fractional share shall be rounded up to the nearest whole share of PPR
Class B Common Stock.
Section 1.2 Exchange Procedures.
-------------------
(a) PPR shall authorize a commercial bank reasonably acceptable to
Delta to act as exchange agent hereunder (the "Exchange Agent"). At or
prior to the Closing, PPR shall deliver to and deposit with the Exchange
Agent, in trust for the Delta Stockholders, certificates representing the
shares of PPR Class B Common Stock to be issued pursuant to Section 1.1 in
exchange for outstanding certificates representing shares of Delta Stock
(such shares of PPR Class B Common Stock, together with any dividends or
distributions with respect thereto, being hereinafter referred to as the
"Exchange Fund"). At the Closing, PPR shall deliver to Delta a true and
complete copy of the Depository Agreement between PPR and the Exchange
Agent pertaining to the Exchange Fund and an original receipt of the
Exchange Agent acknowledging receipt of the Exchange Fund.
(b) At or prior to the Closing, each of the Delta Stockholders shall
deliver to the Exchange Agent, in trust for PPR, certificates representing
the number of shares of Delta Stock set forth opposite such Delta
Stockholder's name on Schedule 1 hereto (the "Delta Certificates") to be
exchanged for PPR Class B Common Stock, duly endorsed for transfer or with
executed stock powers attached thereto. At the Closing, Delta shall
deliver to PPR an original receipt of the Exchange Agent acknowledging
receipt of Delta Certificates representing all of the issued and
outstanding shares of Delta Stock.
(c) As soon as practicable after the Closing, the Exchange Agent shall
(i) deliver to the Delta Stockholders certificates representing shares of
PPR Class B Common Stock for which their shares of Delta Stock have been
exchanged, and (ii) deliver to PPR all of the Delta Certificates.
Section 1.3 Transfer Taxes. If any certificate representing shares of
--------------
PPR Class B Common Stock is to be paid to or issued in a name other than that in
which the Delta Certificate surrendered in exchange therefor is registered, it
shall be a condition of such exchange that the Delta Certificate so surrendered
shall be properly endorsed and otherwise in proper form for transfer and that
the person requesting such exchange shall pay to the Exchange Agent any transfer
or other Taxes required by reason of the issuance of certificates for such
shares of PPR Class B Common Stock in a name other than that of
A-6
<PAGE>
the registered holder of the Delta Certificate surrendered, or shall establish
to the satisfaction of the Exchange Agent that such Tax has been paid or is not
applicable.
Section 1.4 Lost Certificates. If any Delta Certificate shall have been
-----------------
lost, stolen or destroyed, upon the making of an affidavit of that fact by the
person claiming such Delta Certificate to be lost, stolen or destroyed and, if
required by PPR, the posting by such person of a bond, in such reasonable amount
as PPR may direct (but consistent with the practices PPR applies to its own
stockholders), as indemnity against any claim that may be made against it with
respect to such Delta Certificate, the Exchange Agent shall issue in exchange
for such lost, stolen or destroyed Delta Certificate the shares of PPR Class B
Common Stock.
Section 1.5 Closing. The closing of the transactions contemplated by
-------
this Agreement (the "Closing") and all actions specified in this Agreement to
occur at the Closing shall take place at the offices of Briggs and Morgan,
Professional Association, 2400 IDS Center, 80 South Eighth Street, Minneapolis,
Minnesota, at 10:00 a.m., local time, no later than the third business day
following the day on which the last of the conditions set forth in Article VII
shall have been fulfilled or waived (if permissible) or at such later time and
place as PPR and Delta shall agree in writing. Delta shall notify all of the
Delta Stockholders of the time of the Closing at least three (3) business days
prior to the Closing.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF PPR
PPR represents and warrants to Delta and the Delta Stockholders as follows:
Section 2.1 Organization, Standing and Power. PPR is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite corporate power and authority to own, lease or
operate its properties and to carry on its business as now being conducted. Each
Subsidiary of PPR (the "PPR Subsidiaries") is duly organized, validly existing
and in good standing under the laws of the jurisdiction in which it is organized
and has the requisite corporate (in the case of a Subsidiary that is a
corporation) or other power and authority to own, lease or operate its
properties and to carry on its business as now being conducted. PPR and each of
the PPR Subsidiaries are duly qualified to do business, and are in good
standing, in each jurisdiction where the character of their properties owned or
held under lease or the nature of their activities makes such qualification
necessary, except where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on PPR. For purposes of
this Agreement (a) "Material Adverse Change" or "Material Adverse Effect" means,
when used with respect to PPR or Delta, as the case may be, any change or effect
that is materially adverse to the business, assets, liabilities, results of
operation or condition (financial or otherwise) of PPR and the PPR Subsidiaries,
taken as a whole, or Delta and the Delta Subsidiaries, taken as a whole, as the
case may be, and (b) "Subsidiary" means any corporation, partnership, limited
liability company, joint venture or other legal entity of which PPR or Delta, as
the case may be (either alone or through or together with any other Subsidiary),
owns, directly or indirectly, 50% or more of the stock or other equity interests
the holders of which are generally entitled to vote for the election of the
board of directors or other governing body of such corporation, partnership,
limited liability company, joint venture or other legal entity.
Section 2.2 Capital Structure.
-----------------
(a) Capital Stock of PPR. The authorized capital stock of PPR
--------------------
consists of 40,000,000 shares, of which 5,000,000 shares are designated as
PPR Class A Common Stock and 35,000,000 are designated as PPR Class B
Common Stock. As of the date hereof, PPR has issued and outstanding
5,000,000 shares of PPR Class A Common Stock and 16,690,000 shares of PPR
Class B
A-7
<PAGE>
Common Stock. All outstanding shares of PPR Class A Common Stock
and PPR Class B Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. Except as set forth in PPR's Form
10-K for the period ended December 31, 1998, and except for option grants
under the Pepsi-Cola Puerto Rico Bottling Company Qualified Plan dated
December 30, 1996 and the Pepsi-Cola Puerto Rico Bottling Company Non-
Qualified Plan dated December 30, 1996 (collectively, the "PPR Option
Plans") in the ordinary course of business since December 31, 1998, PPR has
no outstanding securities convertible into or exchangeable for common
stock, no contracts, rights, options, warrants or other agreements or
commitments to purchase or otherwise issue any shares of its capital stock
or securities convertible into or exchangeable therefor, or any shares
reserved for issuance under any stock option, employee benefit or other
plans or otherwise. No holder of any security of PPR is entitled to any
preemptive or similar rights to purchase securities from PPR.
(b) Capital Stock of PPR After Exchange and Dakota Acquisition. On
----------------------------------------------------------
the date of Closing, upon completion of the Exchange and the Dakota
Acquisition, (i) the authorized capital stock of PPR will consist of
150,000,000 shares, of which 5,000,000 shares will be designated as PPR
Class A Common Stock and 145,000,000 will be designated as PPR Class B
Common Stock, and (ii) PPR will have issued and outstanding 5,000,000
shares of PPR Class A Common Stock and 81,760,006 shares of PPR Class B
Common Stock, not including any shares of PPR Class B Common Stock that PPR
is permitted to issue by this Agreement (other than in connection with the
Dakota Acquisition) during the period from the date of this Agreement
through the date of Closing. Assuming that the Closing were to occur on the
date hereof, immediately after such Closing, the issued and outstanding PPR
Class A Common Stock and PPR Class B Common Stock would be owned as set
forth on Schedule 2.2(b).
(c) Capital Stock of PPR Subsidiaries. A listing of each of the PPR
---------------------------------
Subsidiaries and the authorized, issued and outstanding capital stock or
other equity interests of each of the PPR Subsidiaries, whether voting or
nonvoting, and the rights and preferences associated with each class or
series of capital stock or other equity interests, is as set forth on
Schedule 2.2(c). Except as set forth on Schedule 2.2(c), (i) PPR is the
owner of all of the capital stock or other equity interests of the PPR
Subsidiaries, free and clear of all security interests, liens, pledges,
options, rights of first refusal, limitations on voting rights, charges or
other encumbrances of any nature whatsoever (collectively, "Encumbrances")
and (ii) except for the PPR Subsidiaries, PPR does not own, directly or
indirectly, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other legal
entity. All outstanding shares of capital stock of the PPR Subsidiaries
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth on Schedule 2.2(c), none of the PPR
Subsidiaries has any outstanding securities convertible into or
exchangeable for common stock, no contracts, rights, options, warrants or
other agreements or commitments to purchase or otherwise issue any shares
of capital stock or other equity interests of any of the PPR Subsidiaries
or securities convertible into or exchangeable therefor, or any shares
reserved for issuance under stock option, employee benefit or other plans
or otherwise. No holder of any security of any of the PPR Subsidiaries is
entitled to any preemptive or similar rights to purchase securities from
any such Subsidiary.
Section 2.3 Authority. The PPR Special Committee and PPR's Board of
---------
Directors have, on or prior to the date of this Agreement (a) declared that as
of such date the Exchange was advisable and fair to and in the best interests of
PPR and its stockholders, (b) approved this Agreement and resolved to recommend
the approval of this Agreement and the transactions contemplated hereby by PPR's
stockholders, and (c) directed that this Agreement and the transactions
contemplated hereby be submitted to PPR's stockholders for approval. Subject to
the approval by PPR's stockholders of the PPR Charter Amendment
A-8
<PAGE>
(as defined in Section 6.1), PPR has all requisite corporate power and authority
to enter into this Agreement and, subject to approval by PPR's stockholders of
this Agreement and the transactions contemplated hereby including the Exchange,
to issue the PPR Class B Common Stock in connection with the Exchange (the
"Share Issuance") and to consummate the transactions contemplated hereby. The
execution and delivery of this Agreement by PPR and the consummation by PPR of
the transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of PPR, subject to the approval of this Agreement
and the transactions contemplated hereby including the Exchange, by the
stockholders of PPR. This Agreement has been duly executed and delivered by PPR
and (assuming the valid authorization, execution and delivery of this Agreement
by Delta and the Delta Stockholders) this Agreement constitutes the valid and
binding obligation of PPR enforceable against it in accordance with its terms
except to the extent that (i) enforcement may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to or limiting creditors' remedies, and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court or other tribunal before which any proceeding therefor may be brought.
Subject to approval by the stockholders of PPR, the Share Issuance has been duly
authorized by all necessary corporate action on the part of PPR. When issued in
accordance with the terms of this Agreement, the shares of PPR Class B Common
Stock to be issued under this Agreement will be duly authorized, validly issued,
fully paid and nonassessable.
Section 2.4 Consents and Approvals; No Violation. Except as disclosed
------------------------------------
on Schedule 2.4 hereto, and assuming that all consents, approvals,
authorizations and other actions described in the second sentence of this
Section 2.4 have been obtained, the execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give to
others a right of termination, cancellation or acceleration of any obligation or
the loss of any present or future benefit under, or result in the creation of
any Encumbrance upon any of the properties or assets of PPR or any of the PPR
Subsidiaries under, any provision of (i) the Certificate of Incorporation or
Bylaws of PPR, (ii) the comparable charter or organizational documents of any of
the PPR Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, ground lease or other agreement, instrument, permit,
concession, franchise or license applicable to PPR or any of the PPR
Subsidiaries or (iv) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to PPR or any of the PPR Subsidiaries or any of their
respective real or personal properties or assets, other than, in the case of
clauses (ii), (iii) or (iv), any such violations, defaults, rights, or
Encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on PPR, or prevent or materially delay the consummation of any of
the transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and state), foreign
or supranational court, commission, governmental body, regulatory agency,
authority or tribunal (a "Governmental Entity") is required by or with respect
to PPR or any of the PPR Subsidiaries in connection with the execution and
delivery of this Agreement by PPR or is necessary for the consummation of the
transactions contemplated by this Agreement, except for (i) the filing with the
SEC of (A) the proxy statement for the special meeting of PPR's stockholders to
be held for the purpose of obtaining the approvals required for the transactions
contemplated hereby (the "Proxy Statement"); and (B) such reports and
information under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (ii) such as may be required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (iii) applicable requirements, if any, of Blue Sky Laws and the New
York Stock Exchange, Inc. (the "NYSE") and (iv) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on PPR, or prevent or materially delay the consummation of any of
the transactions contemplated hereby.
A-9
<PAGE>
Section 2.5 SEC Documents and Other Reports. PPR has filed all required
-------------------------------
forms, reports, documents, statements (including proxy statements) and exhibits
with the SEC that were required to be filed pursuant to the Exchange Act or
other federal securities laws since July 1, 1996 (the "PPR SEC Documents"). As
of their respective dates, the PPR SEC Documents complied in all material
respects with the then applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were filed,
none of the PPR SEC Documents contained any untrue statement of a material fact
or omitted to state 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. The consolidated financial statements (including, in
each case, any notes thereto) of PPR included in the PPR SEC Documents complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of the unaudited statements,
as permitted by Regulation S-X of the SEC) applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented in all material respects the consolidated
financial position of PPR and its consolidated Subsidiaries as at the respective
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to the absence of footnote disclosure and any other
adjustments described therein and normal year-end audit adjustments). Except as
disclosed in the PPR SEC Documents or as required by GAAP, PPR has not, since
December 31, 1998, made any change in the accounting practices or policies
applied in the preparation of its financial statements.
Section 2.6 Absence of Certain Changes. Except as set forth on Schedule
--------------------------
2.6 hereof, since December 31, 1998, PPR and the PPR Subsidiaries have operated
their businesses only in the ordinary course and consistent with past practices
and there has not been:
(a) any Material Adverse Change in PPR;
(b) any dividend or other distribution on, or any recapitalization,
combination or subdivision with respect to, or any purchase or redemption
by PPR or the PPR Subsidiaries of, any shares of the capital stock of PPR
or any of the PPR Subsidiaries except for distributions in the ordinary
course of business and consistent with past practice on outstanding shares
of non-voting management stock of Beverage Plastics Company, a Delaware
corporation, of which all of its outstanding voting common stock is owned
by PPR;
(c) except for the sale of substantially all of the assets of PPR's
Cristalia premium water division, any sale, transfer, lease, or Encumbrance
of any of PPR's or any of the PPR Subsidiaries' assets or cancellation of
any claims of, or indebtedness or obligations owing to, PPR or any of the
PPR Subsidiaries, except in the ordinary course of business;
(d) any material increase in the salaries or other compensation or
employee benefits with respect to any employees of PPR or the PPR
Subsidiaries except regularly scheduled increases in accordance with prior
practices or existing agreements;
(e) any purchase of or agreement to purchase any additional assets by
PPR or any of the PPR Subsidiaries, except in the ordinary course of
business or for a purchase price of less than $500,000;
(f) any loss, damage, destruction or other casualty to any of the
properties of PPR or the PPR Subsidiaries (whether or not covered by
insurance) (i) in excess of $100,000 per occurrence
A-10
<PAGE>
or $500,000 in the aggregate or (ii) which has resulted in a Material
Adverse Effect on PPR or the PPR Subsidiaries;
(g) any entry into any additional, or modification of any existing,
agreements to borrow money (whether secured or unsecured), or any
refinancing of such agreements except in the ordinary course of business;
(h) any entry into any guarantee by PPR or the PPR Subsidiaries on
behalf of any third party;
(i) any capital expenditures by PPR or the PPR Subsidiaries in excess
of the amount set forth in PPR's 1999 Capital Expenditure Budget, a true
and correct copy of which is appended to Schedule 2.6 hereto, except for
expenditures related to repairs or replacements for which adequate
insurance was or is available;
(j) changes in accounting principles, elections, or procedures, other
than as required by changes in GAAP;
(k) any entry into any employment, consulting, management or severance
agreement by PPR or any of the PPR Subsidiaries other than severance
payments required to be made under Puerto Rican Law 80 except in the
ordinary course of business;
(l) any amendment of the Certificate of Incorporation or Bylaws of PPR
or any comparable charter or organizational documents of the PPR
Subsidiaries;
(m) authorization for issuance, sale, delivery or agreement or
commitment to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of any class of PPR's or any of the PPR
Subsidiaries' capital stock or any securities convertible into or
exchangeable for shares of any class of such capital stock, other than the
grant of options to employees under the PPR Option Plans in the ordinary
course of business;
(n) any amendment or termination of any material agreement to which
PPR or any of the PPR Subsidiaries is a party; or
(o) any action taken by PPR or the PPR Subsidiaries, or their
directors, officers or stockholders to authorize any of the actions
contemplated above.
Section 2.7 Permits; Compliance and Contracts. Except as disclosed on
---------------------------------
Schedule 2.7: (a) each of PPR and the PPR Subsidiaries is in possession of all
franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates (including, without limitation, certificates
of occupancy), approvals, orders of any Governmental Entity and other permits,
including, without limitation, building, environmental, land-use, health,
safety, fire, utility or other rights or permits necessary for PPR or any of the
PPR Subsidiaries to own, lease and operate all of the PPR Real Property (as
defined in Section 2.16) or to carry on its business as it is now being
conducted (collectively, the "PPR Permits"), except where the failure to have
any of the PPR Permits would not, individually or in the aggregate, have a
Material Adverse Effect on PPR, and, (b) as of the date of this Agreement,
neither PPR nor any of the PPR Subsidiaries is in violation of, or has been
charged with, is in receipt of any notice or warning of, or to the Knowledge of
PPR (as hereinafter defined), under investigation with respect to, any failure
or alleged failure to comply with (A) its charter, bylaws or other
organizational documents, (B) any applicable law, ordinance,
A-11
<PAGE>
administrative or governmental rule or regulation (except for Environmental Laws
which are addressed in Section 2.12 hereto) or (C) any order, decree or judgment
of any Governmental Entity having jurisdiction over PPR or any of the PPR
Subsidiaries, except, in the case of clauses (A), (B) and (C), for any
violations that, individually or in the aggregate, would not have a Material
Adverse Effect on PPR. All of the material contracts of PPR and the PPR
Subsidiaries that are required to be described in the PPR SEC Documents or to be
filed as exhibits thereto are described in the PPR SEC Documents or filed as
exhibits thereto. Except as set forth in the PPR SEC Documents filed prior to
the date of this Agreement or as set forth on Schedule 2.7, each material
contract is in full force and effect and no event of default or event that, but
for the giving of notice or the lapse of time or both, would constitute an event
of default exists or, upon the consummation by PPR of the transactions
contemplated by this Agreement, will exist under any indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed money, any
guarantee of any agreement or instrument for borrowed money or any lease,
contractual license or other agreement or instrument to which PPR or any of the
PPR Subsidiaries is a party or by which PPR or any PPR Subsidiary is bound or to
which any of the properties, assets or operations of PPR or any such Subsidiary
is subject, other than any defaults that, individually or in the aggregate,
would not have a Material Adverse Effect on PPR. "Knowledge of PPR" means the
actual knowledge of A. David Velez and Joseph Gonzalez.
Section 2.8 Tax Matters.
-----------
(a) Except as disclosed on Schedule 2.8, PPR and the PPR Subsidiaries
have (i) duly and timely filed (or there has been duly filed on their
behalf) all tax returns required to be filed by or with respect to PPR
and/or the PPR Subsidiaries, including all foreign, federal, Puerto Rican
and local Tax Returns, and all such Tax Returns were true, accurate and
complete in all material respects, (ii) withheld and collected all Taxes
that are required by applicable laws, rules or regulations to be withheld
and collected and (iii) paid in full on a timely basis (or there have been
paid on their behalf) all Taxes shown to be due on such Tax Returns. The
reserve for Taxes on the December 31, 1998 consolidated balance sheet
contained in PPR's Form 10-K for the period ending December 31, 1998 for
the payment of all accrued but unpaid Taxes through the date thereof has
been determined in accordance with GAAP and is adequate in amount for the
payment of all liabilities for Taxes for which PPR and the PPR Subsidiaries
are liable for the periods up to and including December 31, 1998. Neither
PPR nor the PPR Subsidiaries have incurred any Tax liabilities since
December 31, 1998, other than those Tax liabilities arising in the ordinary
course of business and consistent with prior periods.
(b) Except as described on Schedule 2.8, neither PPR nor the PPR
Subsidiaries has received any notice of a deficiency or assessment (and
none has been threatened) with respect to Taxes of PPR or the PPR
Subsidiaries from any foreign, federal, Puerto Rico or local taxing
authority which has not been fully paid or finally settled; there are no
ongoing audits or examination of any Tax Return which includes PPR or the
PPR Subsidiaries and no notice of audit or examination of any such Tax
Return has been received by PPR or any of the PPR Subsidiaries (and none
has been threatened); PPR or the PPR Subsidiaries have not given and there
has not been given on its or their behalf a waiver or extension of any
statute of limitations relating to the payment of Taxes of PPR or the PPR
Subsidiaries; and no issue has been raised in writing on audit or in any
other proceeding with respect to Taxes of PPR or the PPR Subsidiaries by
any foreign, federal, Puerto Rico, or local taxing authority.
(c) For purposes of this Agreement, the terms "Tax" and "Taxes" shall
mean all taxes, charges, fees, levies, penalties or other assessments
imposed by any United States or Puerto Rican, federal, state, local or
foreign taxing authority, including, but not limited to, income, excise,
property, sales, transfer, franchise, payroll, employment, unemployment,
back-up withholding, gains,
A-12
<PAGE>
withholding, ad valorem, social security or other taxes, including any
interest, penalties or additions attributable to taxes, and the term "Tax
Return" shall mean any return, declaration, report, claim for refund, or
information return or statement relating to Taxes, including any schedule
or attachment thereto and any amendments thereof.
Section 2.9 Actions and Proceedings. Except as set forth in the PPR SEC
-----------------------
Documents or on Schedule 2.9:
(a) there are no outstanding orders, judgments, injunctions, awards or
decrees of any Governmental Entity against or involving (i) PPR or any of
the PPR Subsidiaries, (ii) any of the present or former directors,
officers, employees, consultants, agents or stockholders of PPR or any of
the PPR Subsidiaries, as such, (iii) any of PPR's or any PPR Subsidiaries'
properties, assets or business or (iv) any PPR Plan (as hereinafter
defined) that, in the case of clauses (i), (ii), (iii) or (iv) individually
or in the aggregate, would have a Material Adverse Effect on PPR; or
(b) as of the date of this Agreement, there are no actions, suits or
claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the Knowledge of PPR, threatened against or
involving (i) PPR or any of the PPR Subsidiaries, (ii) any of PPR's or any
PPR Subsidiaries' present or former directors, officers, employees,
consultants, agents or stockholders, as such, (iii) any of PPR's or any PPR
Subsidiaries' properties, assets or business or (iv) any PPR Plan that in
the case of clauses (i), (ii), (iii) or (iv), individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect on PPR
or relate to the transactions contemplated by this Agreement.
Section 2.10 Certain Agreements. As of the date of this Agreement,
------------------
neither PPR nor any of the PPR Subsidiaries is a party to any oral or written
agreement or plan, including any stock option plan, stock appreciation rights
plan, restricted stock plan, stock purchase plan, PPR Other Benefit Obligation
or PPR Plan (as both are defined in Section 2.11), any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement.
Section 2.11 Employee Benefit Matters.
------------------------
(a) As used in this Section 2.11, the following terms have the
meanings set forth below:
"PPR Other Benefit Obligation" means all material obligations,
arrangements, or customary practices, whether or not legally
enforceable, to provide benefits, other than salary, as compensation
for services rendered, to present or former directors, employees, or
agents, other than with respect to any PPR Plan. This includes
sabbatical policies, severance payment policies, and material fringe
benefits within the meaning of Code (S) 132.
"PPR Plan" means (i) all employee benefit plans (as defined in
ERISA (S) 3(3)) of which PPR or the PPR Subsidiaries is a Plan Sponsor
(as defined in ERISA (S) 3(16)(B)), or to which PPR or the PPR
Subsidiaries otherwise contributes or in which PPR or the PPR
Subsidiaries otherwise participates, or (ii) all Title IV Plans and
Multi-Employer Plans (as defined in ERISA (S) 3(37)(A)) of which an
ERISA Affiliate is a Plan Sponsor or otherwise contributes or
currently participates.
"PPR VEBA" means a voluntary employees' beneficiary association
under Code (S) 501(c)(9) whose members include employees of PPR or the
PPR Subsidiaries.
A-13
<PAGE>
"ERISA Affiliate" means any other person that, together with PPR
or any of the PPR Subsidiaries, would be treated as a single employer
under Code (S) 414(b), (c) or, solely with respect to matters relating
to Code (S) 412 or ERISA (S)(S) 302 or 4007, (m).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Title IV Plans" means all PPR Plans that are subject to Title IV
of ERISA, 29 U.S.C. (S) 1301 et seq., other than Multi-Employer Plans.
(b) (i) Schedule 2.11(b)(i) attached hereto sets forth a complete
and accurate list of all PPR Plans, PPR Other Benefit Obligations, and
PPR VEBAs, and identifies as such all PPR Plans that: (A) are defined
benefit plans (as defined in ERISA (S) 3(35)); (B) meet or purport to
meet the requirements of Code (S) 401(a); or (C) are Title IV Plans.
(ii) None of the PPR Plans set forth on Schedule 2.11(b)(i) is a
Multi-Employer Plan and none of PPR, any of the PPR Subsidiaries or
any ERISA Affiliate has any assessed or potential liability due to a
complete or partial withdrawal from or a termination or reorganization
of a Multi-Employer Plan. No circumstances exist that could
reasonably be expected to result in any such liability to PPR, any PPR
Subsidiary or any ERISA Affiliate.
(iii) Except as set forth in Schedule 2.11(b)(iii) or as
required by applicable law, no PPR Plans provide retiree health or
life insurance benefits.
(c) PPR has delivered or made available to Delta all documents,
insurance policies and contracts comprising, describing or relating to each
PPR Plan, PPR Other Benefit Obligation, or PPR VEBA and of any related
trust; as well as all required filings for each of the above filed with
government authorities for each of the three most recent plan years.
(d) Except as set forth in Schedule 2.11(d) attached hereto:
(i) PPR or the PPR Subsidiaries have performed in all material
respects all of their respective obligations whether as plan
administrator, fiduciary, plan sponsor or contributing employer under
all PPR Plans, PPR Other Benefit Obligations, and PPR VEBAs in a
timely manner and have made all required entries in their financial
records and statements for all obligations and liabilities that have
accrued but are not due. No written or oral statement has been made by
PPR or the PPR Subsidiaries to any Person with regard to any PPR Plan
or PPR Other Benefit Obligation not in accordance with such plan or
other benefit obligation which could reasonably be expected to have a
Material Adverse Effect on PPR or the PPR Subsidiaries.
(ii) PPR, the PPR Subsidiaries and each PPR Plan, PPR Other
Benefit Obligation, and PPR VEBA is, to the extent applicable, in
material compliance with applicable law, except for any such failure
to comply which would not result in any material liability to PPR or
any of the PPR Subsidiaries. PPR and all PPR Subsidiaries have met
any applicable minimum funding standard, and have made all
contributions required, under ERISA (S) 302. The most recent
actuarial report for each defined benefit plan of PPR, each PPR
Subsidiary and each ERISA Affiliate thereof fairly presents the
financial condition of each such plan, and since the date of such
report there has been no material adverse change in the funded status
of any such plan.
A-14
<PAGE>
(iii) Since December 31, 1998, there has been no establishment,
termination or amendment of any PPR Plan, PPR VEBA, or PPR Other
Benefit Obligation, except to effect the Board's option of an
amendment to PPR's Salaried Employee Retirement Plan to use the GATT
interest rate standard.
(iv) Other than routine claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding
involving or relating to, any PPR Plan, PPR Other Benefit Obligation,
or PPR VEBA is pending or, to PPR's Knowledge, is threatened.
(v) None of PPR, the PPR Subsidiaries or any ERISA Affiliate has
terminated any Title IV Plan or any other defined benefit plan (as
defined in ERISA Section 3(35)), or incurred any outstanding liability
under Section 4062 of ERISA to the PBGC or to a trustee appointed
under Section 4042 of ERISA, and no events have occurred and no
circumstances exist that could reasonably be expected to result in any
such liability to PPR, the PPR Subsidiaries or any ERISA Affiliate.
All premiums due the PBGC with respect to the Title IV Plans have been
paid.
(vi) There has been no "reportable event" within the meaning of
Section 4043 of ERISA with respect to any Title IV Plan which would
require the giving of notice to the PBGC or any other event requiring
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(vii) Neither the execution and delivery of this Agreement nor
the consummation of the transactions contemplated hereby will, either
alone or upon the occurrence of subsequent events, (i) result in any
payment becoming due to any current or former employee, officer or
director of PPR or the PPR Subsidiaries, (ii) increase any benefits
otherwise payable under any PPR Plan or PPR Other Benefit Obligation,
(iii) result in the acceleration of the time of payment or vesting of
any benefits under any PPR Plan or PPR Other Benefit Obligation, (iv)
constitute a "change in control" or similar event under any PPR Plan
or PPR Other Benefit Obligation or (v) fail to be deductible by reason
of Section 280G of the Code.
Section 2.1 Compliance with Environmental Laws.
----------------------------------
(a) Except as set forth on Schedule 2.12, each of PPR and the PPR
Subsidiaries, and, to the Knowledge of PPR, any prior owner or lessee, have
generated, handled, manufactured, treated, stored, used, released,
transported and disposed of all Environmentally Regulated Materials (as
defined below) on, beneath, to or from any of the properties owned or
operated by PPR and the PPR Subsidiaries in the conduct of their businesses
or any other properties formerly owned, leased or operated by PPR or the
PPR Subsidiaries, in compliance with all Environmental Laws (as defined
below).
(b) Except as set forth on Schedule 2.12, PPR and the PPR Subsidiaries
have operated all plants, facilities and business operations in compliance
with all Environmental Laws and all plants, facilities and business
operations are currently in compliance with all Environmental Laws.
(c) Except as set forth on Schedule 2.12, neither PPR nor the PPR
Subsidiaries have disposed of or released any Environmentally Regulated
Material in any location which would
A-15
<PAGE>
reasonably be expected to give rise to a claim of responsibility for
investigation or clean-up costs, personal injury or property damage
liability against PPR or any PPR Subsidiary by any third party.
(d) Except as set forth on Schedule 2.12, neither PPR nor the PPR
Subsidiaries have received any notices or claims of violations or
liabilities relating to an Environmentally Regulated Material or an
Environmental Law which notices or claims of violations or liabilities have
not been resolved.
The term "Environmentally Regulated Materials" means any of the following:
(i) any petroleum or petroleum products, friable asbestos, urea formaldehyde,
and polychlorinated biphenyls; (ii) any radioactive substance; (iii) any toxic,
infectious, reactive, corrosive, ignitible or flammable chemical or chemical
compound; and (iv) any chemicals, materials or substances, whether solid, liquid
or gas defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants," "solid
waste," or words of similar import, under any Environmental Law.
"Environmental Law" means any applicable federal, state or local statute,
law, rule, regulation, permit, ordinance, code, policy, rule of common law or
other requirement in effect and in each case as amended from time-to-time and
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, that (i) regulates or relates
to the protection or clean-up of the environment; the use, treatment, storage,
transportation, handling, disposal or release of Environmentally Regulated
Materials, the preservation or protection of waterways, groundwater, drinking
water, air, wildlife, plants or other natural resources; or the health and
safety of persons or property, including protection of the health and safety of
employees insofar as such health and safety laws may relate to Environmentally
Regulated Materials; or (ii) imposes liability with respect to any of the
foregoing, including the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 USC 9601 et seq., the Resource Conservation and Recovery Act,
42 USC 6901, et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. (S) 2601 et seq.; the Clean Air Act, 42 U.S.C.
(S) 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S) 300f et seq.; the
Oil Pollution Act of 1990, 33 U.S.C. (S) 2701 et seq.; and the Occupational
Safety and Health Act of 1970, as amended, as it applies to Environmentally
Regulated Materials, 29 U.S.C. (S) 651 et seq.; or any other federal, state or
local law of similar effect, each as amended from time to time.
Section 2.13 Labor Matters. Except as set forth on Schedule 2.13 hereto,
-------------
neither PPR nor any of the PPR Subsidiaries is a party to any collective
bargaining agreement or labor contract. To the Knowledge of PPR, as of the date
of this Agreement, there are no present or pending applications for
certification of any union as the exclusive bargaining agent for any employees
of PPR or any PPR Subsidiaries. To the Knowledge of PPR, neither PPR nor any of
the PPR Subsidiaries has engaged in any unfair labor practice with respect to
any persons employed by or otherwise performing services for PPR or any of the
PPR Subsidiaries (the "PPR Business Personnel"), and there is no unfair labor
practice complaint or grievance against PPR or any of the PPR Subsidiaries by
the National Labor Relations Board or any comparable state or Puerto Rican
agency pending or, to the Knowledge of PPR, threatened with respect to the PPR
Business Personnel, except where such unfair labor practice, complaint or
grievance would not have a Material Adverse Effect on PPR. There is no labor
strike, dispute, slowdown or stoppage pending or, to the Knowledge of PPR,
threatened against PPR or any of the PPR Subsidiaries, except where such
dispute, strike or work stoppage would not have a Material Adverse Effect on
PPR.
Section 2.14 Intellectual Property. Schedule 2.14 sets forth a complete
---------------------
list of all patents and applications therefor, trademark registrations and
applications therefor, service mark registrations and applications therefor,
copyright registrations and applications therefor, trade names, computer
programs or
A-16
<PAGE>
software which are material to the operation of PPR's business and interests in
license agreements and all other proprietary rights that are owned, licensed,
sublicensed or used by agreement or permission by PPR or any PPR Subsidiary and
used in the continued operation of PPR's business (collectively, "PPR
Intellectual Property"). Except as otherwise set forth on Schedule 2.14 and
except for the security interest held by Banco Popular, PPR's interest in the
PPR Intellectual Property is free and clear of any Encumbrance, and constitutes
all such property or rights used by or necessary to the operation of PPR's
business. To PPR's Knowledge and except as set forth on Schedule 2.14, the use
of the PPR Intellectual Property does not conflict with, infringe upon, or
misappropriate any rights held or asserted by any person, or require the consent
of any person. Except as set forth on Schedule 2.14, neither PPR nor any PPR
Subsidiary has, in the past two years, received any notice or claim that any
such PPR Intellectual Property is not valid or enforceable, or of any
infringement upon or conflict with any patent, trademark, service mark,
copyright, trade name or trade secret of any third party by PPR or any PPR
Subsidiary or of any claim by any third party alleging any such infringement or
conflict, and, in the past two years, neither PPR nor any PPR Subsidiary has
given any notice of infringement to any third party with respect to any of the
PPR Intellectual Property. PPR has paid all required license fees related to all
software used in the operation of its business.
Section 2.15 Title to Assets; Insurance. Except as disclosed on Schedule
--------------------------
2.15, PPR and the PPR Subsidiaries have good and marketable title to all real
property and good title to all of the personal property and assets which they
purport to own and which are necessary to carry on its business, in each case
free and clear of all Encumbrances except for Permitted Exceptions (as defined
in Section 2.16). PPR and the PPR Subsidiaries have in full force and effect
policies of insurance that are customary for businesses of similar size in
similar industries and consistent with sound business practice.
Section 2.16 Real Property. (a) Schedule 2.16(a) describes all real
-------------
properties owned or leased by PPR and the PPR Subsidiaries (the "PPR Real
Property"), the nature of the interest of PPR or the PPR Subsidiaries and the
entity which holds the interest in those properties and the approximate acreage
of each of those properties. There is no real property (other than the PPR Real
Property) the use or possession of which by PPR and the PPR Subsidiaries is
necessary to carry on its business. Except as described on Schedule 2.16(b),
PPR and each of the PPR Subsidiaries has (i) such title to the PPR Real Property
as is legally sufficient for the current use thereof in its business as
presently conducted, (ii) good and marketable indefeasible title in fee simple
(except for Permitted Exceptions, as hereinafter defined) to all PPR Real
Property shown in Schedule 2.16(a) as owned by it (the "PPR Owned Real
Property") and (iii) valid leaseholds under valid and enforceable leases in all
PPR Real Property shown on Schedule 2.16(a) as leased by it. The PPR Real
Property is owned or leased by PPR and the PPR Subsidiaries free and clear of
all matters except for Permitted Exceptions. Except as set forth in Schedule
2.16(b), none of the PPR Real Property is subject to any lease (other than the
PPR Leases (as hereinafter defined)), sublease, license or other agreement
granting to any person any right to the use, occupancy or enjoyment thereof (or
any portion thereof). None of the Permitted Exceptions materially interferes
with or has interfered with the maintenance, use or operation of the PPR Real
Property. "Permitted Exceptions" means (i) matters listed or described on
Schedule 2.16(b), (ii) easements, covenants, rights-of-way and other
Encumbrances or restrictions which do not, individually or in the aggregate,
materially detract from the value or impair the present and continued use,
operation and maintenance of the property subject thereto, or impair the
operation of PPR or any of the PPR Subsidiaries, (iii) real estate taxes not yet
due or payable, and (iv) Encumbrances existing at the date of this Agreement
which are set forth on Schedule 2.16(a).
(b) None of the leases identified in Schedule 2.16(a) (collectively,
the "PPR Leases") has been modified or amended, and no notice of
termination has been delivered with respect thereto, except as set forth in
Schedule 2.16(b). Except as set forth on Schedule 2.16(b), neither PPR nor
any of the PPR Subsidiaries, nor any other person, is in breach of or
default under any PPR Lease (and
A-17
<PAGE>
no event has occurred which, with due notice or lapse of time or both, may
constitute such a breach or default).
(c) To the Knowledge of PPR the buildings, driveways and all other
structures and improvements upon the PPR Real Property are all within the
boundary lines of the applicable property or have the benefit of valid
easements or other legal rights and there are no encroachments thereon that
would affect the use thereof.
(d) To the Knowledge of PPR all buildings, structures, improvements,
equipment, facilities, plants and fixtures owned or leased by PPR and the
PPR Subsidiaries conform in all material respects to all applicable codes
and rules adopted by national and local associations and boards and
insurance underwriters, and all such buildings, structures, improvements
and fixtures are in good operating condition and repair. There are no
outstanding requirements or recommendations by any insurance company which
has issued a policy covering any such property, or by any board of fire
underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on any such property.
(e) To the Knowledge of PPR all public utilities required for the
operation of such properties either enter such properties through adjoining
public streets or, if they pass through adjoining private land, do so in
accordance with valid public or private easements which will inure to the
benefit of PPR and the PPR Subsidiaries and their respective successors and
assigns. All of the public utilities mentioned above are installed and
operating, and all installation and connection charges are paid in full.
(f) To the Knowledge of PPR, the plumbing, electrical, heating, air
conditioning, elevator, ventilating and all other mechanical or structural
systems and equipment in the buildings or improvements located on the PPR
Real Property and any manufacturing systems and components located thereof
are in good working order and condition, and the roof, basement and
foundation walls of such buildings and improvements for which PPR or the
PPR Subsidiaries is responsible (as owner or as lessee under any PPR Lease)
are in good condition and free of leaks and other defects. All such
mechanical and structural systems and equipment and such manufacturing
systems and components and such roofs, basement and foundation walls for
which a person other than PPR or the PPR Subsidiaries is responsible are in
good working order and condition and free of leaks and other defects.
(g) To the Knowledge of PPR, PPR or the PPR Subsidiaries has the
uninterrupted use of any easements for ingress and egress for all of the
PPR Real Property owned or leased by PPR or the PPR Subsidiaries, as the
case may be. The PPR Real Property has full and uninterrupted access to
and from public roads, and PPR has no Knowledge of any fact or condition
which would result in the termination of such access.
(h) Neither PPR nor the PPR Subsidiaries is the landlord or lessor
under any lease, sublease or other occupancy agreement affecting any of the
PPR Real Property.
Section 2.1 Title Insurance. Schedule 2.17 sets forth a true, correct
---------------
and complete list and a summary description of all of the policies of title
insurance insuring PPR's and the PPR Subsidiaries' interest in the PPR Owned
Real Property (collectively, the "PPR Title Policies"). PPR has furnished a
true, correct and complete copy of all such PPR Title Policies to Delta. All of
the PPR Title Policies are in full force and effect. PPR shall maintain, and
shall use its best efforts to cause the PPR Subsidiaries to maintain the
coverage under the PPR Title Policies in full force and effect through the date
of the Closing. Neither PPR
A-18
<PAGE>
nor the PPR Subsidiaries is in material default under any provisions of the PPR
Title Policies. There is no claim by PPR, the PPR Subsidiaries or any other
person pending under any of the PPR Title Policies as to which coverage has been
questioned, denied or disputed by the underwriters or issuers of such PPR Title
Policies.
Section 2.18 Zoning. To the Knowledge of PPR, all of the PPR Real
------
Property and the buildings, structures, improvements and fixtures located
thereon, and the respective businesses conducted thereat and the manner of such
conduct, conform in all respects to all existing zoning, building and other
applicable laws, rules and regulations and the operation of the PPR Real
Property and the improvements locate thereon is not in violation of any such
laws, rules or regulations. To the Knowledge of PPR, all uses of the PPR Real
Property and the improvements, to the Knowledge of PPR, located thereon are "as-
of-right" and do not require any non-conforming use rights, nor have they been
"grandfathered" under any pre-existing laws, rules or regulations.
Section 2.19 Brokers. No broker, investment banker or other person,
-------
other than Bear Stearns & Co., Inc. the fees and expenses of which will be paid
by PPR, is entitled to any broker's, finder's or other similar fee or commission
in connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of PPR.
Section 2.20 Relationships. Except as otherwise disclosed in PPR's Form
-------------
10-K for the period ended December 31, 1998, PPR's relationships with its
franchisors, agents, brokers, dealers, distributors, representatives, licensees,
customers and suppliers are continuing, and there has been no material change in
the scope of such relationships during the last year with any of such parties or
similar parties with which PPR has done business during the last year. All
sales and performances of services by PPR in connection with its business are in
material compliance with all of PPR's representations, warranties and
agreements, express or implied, with respect to such sales and performances,
except for customary returns and allowances.
Section 2.21 Compliance with Quality Standards. All water used in the
---------------------------------
production process of PPR's business conforms, in all material respects, to (i)
the quality standards required by PPR's or the PPR Subsidiaries' franchisors,
including PepsiCo, Inc. ("PepsiCo"), (ii) internal quality standards required by
PPR, and (iii) any Puerto Rican or local quality standards.
Section 2.22 Year 2000 Compliance. To the extent that any functionality
--------------------
of any computer system used by PPR is dependent upon or interdependent with the
use or specification of any calendar date, PPR has used commercially reasonable
efforts in implementing a plan pursuant to which any such computer system shall
be "Year 2000 Compliant," except where failure to do so will not result in a
Material Adverse Effect on PPR. For purposes of this Agreement, the term Year
2000 Compliant means that neither the performance nor the functionality of such
computer systems shall be materially affected by dates in, into and between the
20th and 21st centuries. To be deemed Year 2000 Compliant, such computer
systems shall conform in all material respects to the following basic
requirements: (i) no value for a current date shall cause any interruption in
PPR's operations in which the computer system is used; and (ii) any date-based
functions shall operate and perform in a consistent manner for dates in, into
and between the 20th and 21st centuries and such computer systems shall
calculate, manipulate and represent properly inputted dates correctly.
Section 2.32 Delaware Business Combination Statute. PPR has obtained or
-------------------------------------
shall obtain prior to the Closing all approvals necessary from its Board of
Directors related to the transactions contemplated by this Agreement so as to
constitute prior approval by the Board of Directors of such transactions within
the meaning of Section 203(a)(1) of the Delaware General Corporation Law.
A-19
<PAGE>
Section 2.24 Disclosure. No representation or warranty of PPR in this
----------
Agreement or in any certificate, schedule, statement or other document furnished
or to be furnished by PPR to Delta or the Delta Stockholders pursuant hereto or
in connection with the transactions contemplated hereby, contains or will
contain any untrue statement of a material fact or omits or will omit to state
any material fact required to be stated herein or therein or necessary to make
the statements herein or therein not misleading.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF DELTA
Delta represents and warrants to PPR as follows:
Section 3.1 Organization, Standing and Power. As of the date of this
--------------------------------
Agreement, Delta is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware and has the requisite corporate
power and authority to own, lease or operate its properties and to carry on its
business as now being conducted. Each Subsidiary of Delta (the "Delta
Subsidiaries") is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized and has the requisite
corporate (in the case of a Subsidiary that is a corporation) or other power and
authority to own, lease or operate its properties and to carry on its business
as now being conducted. Delta and each of the Delta Subsidiaries are duly
qualified to do business, and are in good standing, in each jurisdiction where
the character of their properties owned or held under lease or the nature of
their activities makes such qualification necessary, except where the failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on Delta.
Section 3.2 Capital Structure.
-----------------
(a) Capital Stock of Delta. The authorized capital stock of Delta
----------------------
consists of 125,000 shares, of which 60,000 shares are designated as Common
Stock, par value $.01 per share (the "Delta Common Stock"), 35,000 shares
are designated as Non-Voting Common Stock, par value $.01 per share (the
"Delta Non-Voting Common Stock"), and 30,000 shares are designated as
Preferred Stock Series AA, par value $.01 per share. Delta has issued and
outstanding 20,301.87 shares of Delta Common Stock, 32,949.93 shares of
Delta Non-Voting Common Stock, and 6,155.11 shares of Delta Preferred
Stock. All outstanding shares of Delta Common Stock, Delta Non-Voting
Common Stock and Delta Preferred Stock have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth
on Schedule 3.2(a), Delta has no outstanding securities convertible into or
exchangeable for common stock, no contracts, rights, options, warrants or
other agreements or commitments to purchase or otherwise issue any shares
of its capital stock or securities convertible into or exchangeable
therefor, or any shares reserved for issuance under any stock option,
employee benefit or other plans or otherwise. Except as set forth in
Delta's Certificate of Incorporation, no holder of any security of Delta is
entitled to any preemptive or similar rights to purchase securities from
Delta.
(b) Capital Stock of Delta Subsidiaries. A listing of the Delta
-----------------------------------
Subsidiaries and the authorized, issued and outstanding capital stock or
other equity interests of each of the Delta Subsidiaries, whether voting or
nonvoting, and the rights and preferences associated with each class or
series of capital stock or other equity interests, is as set forth on
Schedule 3.2(b). Except as set forth on Schedule 3.2(b), (i) Delta is the
owner of all of the capital stock or other equity interests of the Delta
Subsidiaries, free and clear of all Encumbrances and (ii) except for the
Delta Subsidiaries, Delta does not own, directly or indirectly, any equity
or similar interest in, any corporation, partnership, limited liability
company, joint venture or other legal entity. All outstanding shares of
A-20
<PAGE>
capital stock of the Delta Subsidiaries have been duly authorized and
validly issued and are fully paid and nonassessable. Except as set forth
on Schedule 3.2(b), none of the Delta Subsidiaries has any outstanding
securities convertible into or exchangeable for common stock, no contracts,
rights, options, warrants or other agreements or commitments to purchase or
otherwise issue any shares of capital stock or other equity interests of
any of the Delta Subsidiaries or securities convertible into or
exchangeable therefor, or any shares reserved for issuance under stock
option, employee benefit or other plans or otherwise. No holder of any
security of any of the Delta Subsidiaries is entitled to any preemptive or
similar rights to purchase securities from any such Subsidiary.
Section 3.3 Authority. Delta's Board of Directors has on or prior to
---------
the date of this Agreement determined that it is in the best interest of Delta
to enter into the Agreement. Delta has all requisite corporate power and
authority to enter into this Agreement and to perform its obligations hereunder.
The execution and delivery of this Agreement by Delta and the performance of its
obligations hereunder have been duly authorized by all necessary corporate
action on the part of Delta. This Agreement has been duly executed and
delivered by Delta and (assuming the valid authorization, execution and delivery
of this Agreement by PPR and the Delta Stockholders) constitutes the valid and
binding obligation of Delta enforceable against Delta in accordance with its
terms except to the extent that (a) enforcement may be limited by or subject to
any bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to or limiting creditors' remedies and (b) the
remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court or other tribunal before which any proceeding therefor may be brought.
Section 3.4 Consents and Approvals; No Violation. Except as disclosed
------------------------------------
on Schedule 3.4 hereto, and assuming that all consents, approvals,
authorizations and other actions described in this Section 3.4 have been
obtained, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of any
present or future benefit under, or result in the creation of any Encumbrance
upon any of the properties or assets of Delta or any of the Delta Subsidiaries
under, any provision of (i) the Certificate of Incorporation or Bylaws of Delta,
(ii) any provision of the comparable charter or organizational documents of any
of the Delta Subsidiaries, (iii) any loan or credit agreement, note, bond,
mortgage, indenture, lease, ground lease or other agreement, instrument, permit,
concession, franchise or license applicable to Delta or any of the Delta
Subsidiaries or (iv) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Delta or any of the Delta Subsidiaries or any of
their respective real or personal properties or assets, except that the
consummation of this transaction will constitute a "change of control" under the
Indenture dated as of December 17, 1996 related to the 9 3/4% Senior Notes due
2003 which will require written notice from Delta to such noteholders and give
such noteholders a right to require Delta to redeem their notes at 101% of par
and other than, in the case of clauses (ii), (iii) or (iv), any such violations,
defaults, rights or Encumbrances that, individually or in the aggregate, would
not have a Material Adverse Effect on Delta, or prevent or materially delay the
consummation of any of the transactions contemplated hereby. No filing or
registration with, or authorization, consent or approval of, any Governmental
Entity is required by or with respect to Delta or any of the Delta Subsidiaries
in connection with the execution and delivery of this Agreement by Delta or is
necessary for the consummation of the transactions contemplated by this
Agreement, except for (A) such reports and information under the Exchange Act as
may be required in connection with this Agreement and the transactions
contemplated hereby, (B) such as may be required under the HSR Act, and (C) such
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on Delta or prevent or materially
delay the consummation of any of the transactions contemplated hereby.
A-21
<PAGE>
Section 3.5 SEC Documents and Other Reports. Delta has filed all
-------------------------------
required forms, reports, documents, statements (including proxy statements) and
schedules with the SEC that were required to be filed pursuant to the Exchange
Act or other federal securities laws since July 1, 1996 (the "Delta SEC
Documents"). As of their respective dates, the Delta SEC Documents complied in
all material respects with the then applicable requirements of the Securities
Act or the Exchange Act, as the case may be, and, at the respective times they
were filed, none of the Delta SEC Documents contained any untrue statement of a
material fact or omitted to state 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. The consolidated financial statements
(including, in each case, any notes thereto) of Delta included in the Delta SEC
Documents complied as to form in all material respects with applicable
accounting requirements and the published rules and regulations of the SEC with
respect thereto as of their respective dates of filing, were prepared in
accordance with GAAP (except, in the case of the unaudited statements, as
permitted by Regulation S-X of the SEC) applied on a consistent basis during the
periods involved (except as may be indicated therein or in the notes thereto)
and fairly presented in all material respects the consolidated financial
position of Delta and its consolidated Subsidiaries as at the respective dates
thereof and the consolidated results of their operations and their consolidated
cash flows for the periods then ended (subject, in the case of unaudited
statements, to the absence of footnote disclosure and any other adjustments
described therein and normal year-end audit adjustments). Except as disclosed
in the Delta SEC Documents or as required by GAAP, Delta has not, since December
31, 1998, made any change in the accounting practices or policies applied in the
preparation of its financial statements.
Section 3.6 Absence of Certain Changes or Events. Except as set forth
------------------------------------
on Schedule 3.6 hereof, since December 31, 1998, Delta and the Delta
Subsidiaries have operated their businesses only in the ordinary course and
consistent with past practices and there has not been:
(a) any Material Adverse Change in Delta;
(b) any dividend or other distribution on (other than regularly
scheduled quarterly dividends on the Delta Preferred), or any
recapitalization, combination or subdivision with respect to, or any
purchase or redemption by Delta or the Delta Subsidiaries of, any shares of
the capital stock of Delta or any of the Delta Subsidiaries;
(c) any sale, transfer, lease, or Encumbrance of any of Delta's or any
of the Delta Subsidiaries' assets or cancellation of any claims of, or
indebtedness or obligations owing to, Delta or any of the Delta
Subsidiaries, except in the ordinary course of business;
(d) any material increase in the salaries or other compensation or
employee benefits with respect to any employees of Delta or the Delta
Subsidiaries except regularly scheduled increases in accordance with prior
practices or existing agreements;
(e) any purchase of or agreement to purchase any additional assets by
Delta or any of the Delta Subsidiaries, except in the ordinary course of
business;
(f) any loss, damage, destruction or other casualty to any of the
properties of Delta or the Delta Subsidiaries (whether or not covered by
insurance) (i) in excess of $100,000 per occurrence or $500,000 in the
aggregate or (ii) which has resulted in a Material Adverse Effect in Delta;
A-22
<PAGE>
(g) any entry into any additional, or modification of any existing,
agreements to borrow money (whether secured or unsecured), or any
refinancing of such agreements except in the ordinary course of business;
(h) any entry into any guarantee by Delta or the Delta Subsidiaries on
behalf of any third party;
(i) any capital expenditures by Delta or the Delta Subsidiaries in
excess of the amount set forth in Delta's 1999 Capital Expenditure Budget,
a true and correct copy of which is appended to Schedule 3.6 hereto;
(j) changes in accounting principles, elections, or procedures, other
than as required by changes in GAAP;
(k) any entry into any employment, consulting, management or severance
agreement by Delta or any of the Delta Subsidiaries except in the ordinary
course of business;
(l) amendment of the Charter or Bylaws of Delta or any of the Delta
Subsidiaries;
(m) authorization for issuance, sale, delivery or agreement or
commitment to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of any class of Delta's or any of the
Delta Subsidiaries' capital stock or any securities convertible into or
exchangeable for shares of any class of such capital stock, other than the
issuance of additional shares of Delta Preferred as payment-in-kind for the
quarterly dividends payable on shares of outstanding Delta Preferred;
(n) any amendment or termination of any material agreement to which
Delta or any of the Delta Subsidiaries is a party; or
(o) any action taken by Delta or the Delta Subsidiaries, or their
directors, officers or stockholders to authorize any of the actions
contemplated above.
Section 3.7 Permits; Compliance and Contracts. Except as disclosed on
---------------------------------
Schedule 3.7: (a) each of Delta and the Delta Subsidiaries is in possession of
all franchises, grants, authorizations, licenses, permits, easements, variances,
exceptions, consents, certificates (including, without limitation, certificates
of occupancy), approvals, orders of any Governmental Entity and other permits,
including, without limitation, building, environmental, land-use, health,
safety, fire, utility or other rights or permits necessary for Delta or any of
the Delta Subsidiaries to own, lease and operate all of the Delta Real Property
(as defined in Section 3.17) or to carry on its business as it is now being
conducted (collectively, the "Delta Permits"), except where the failure to have
any of Delta Permits would not, individually or in the aggregate, have a
Material Adverse Effect on Delta, and, (b) as of the date of this Agreement,
neither Delta nor any of the Delta Subsidiaries is in violation of, or has been
charged with, is in receipt of any notice or warning of, or to the Knowledge of
Delta (as hereinafter defined), under investigation with respect to, any failure
or alleged failure to comply with (A) its charter, bylaws or other
organizational documents, (B) to the Knowledge of Delta any applicable law,
ordinance, administrative or government rule or regulation or (C) any order,
decree or judgment of any Governmental Entity having jurisdiction over Delta or
any of the Delta Subsidiaries, except, in the case of clauses (A), (B) and (C),
for any violations that, individually or in the aggregate, would not have a
Material Adverse Effect on Delta. All of the material contracts of Delta and
the Delta Subsidiaries that are required to be described in the Delta SEC
Documents or to be filed as exhibits thereto are described in the Delta SEC
Documents or filed as exhibits thereto. Except as set forth in the Delta SEC
Documents
A-23
<PAGE>
filed prior to the date of this Agreement or on Schedule 3.7, each material
contract is in full force and effect and no event of default or event that, but
for the giving of notice or the lapse of time or both, would constitute an event
of default exists or, upon the consummation by Delta of the transactions
contemplated by this Agreement, will exist under any indenture, mortgage, loan
agreement, note or other agreement or instrument for borrowed money, any
guarantee of any agreement or instrument for borrowed money or any lease,
contractual license or other agreement or instrument to which Delta or any of
the Delta Subsidiaries is a party or by which Delta or any such Subsidiary is
bound or to which any of the properties, assets or operations of Delta or any
Delta Subsidiary is subject, other than any defaults that, individually or in
the aggregate, would not have a Material Adverse Effect on Delta. "Knowledge of
Delta" means the actual knowledge of Robert C. Pohlad, John F. Bierbaum, Raymond
R. Stitle, Bradley J. Braun, Jay S. Hulbert, Kenneth E. Keiser, Michael Naylor
or Charles Pullius.
Section 3.8 Tax Matters.
-----------
(a) Except as disclosed on Schedule 3.8, Delta and the Delta
Subsidiaries have (i) duly and timely filed (or there has been duly filed
on their behalf) all Tax Returns required to be filed by or with respect to
Delta and/or the Delta Subsidiaries, including all foreign, federal, and
local Tax Returns, and all such Tax Returns were true, accurate and
complete in all material respects, (ii) withheld and collected all Taxes
that are required by applicable laws, rules or regulations to be withheld
and collected and (iii) paid in full on a timely basis (or there have been
paid on their behalf) all Taxes shown to be due on such Tax Returns.
Except as disclosed on Schedule 3.8, (x) all Taxes for which Delta or the
Delta Subsidiaries may be liable under Treasury Regulations (S)1.1502-6 (or
analogous state or foreign provisions) by virtue of having been a member of
any "affiliated group" (or other group filing on a combined or unitary
basis), if required to have been paid, have been paid (except for Taxes
which are being contested in good faith), and (y) neither Delta nor the
Delta Subsidiaries are a party to any tax sharing or allocation agreement.
The reserve for Taxes on the December 31, 1998 consolidated balance sheet
contained in Delta's Form 10-K for the period ended December 31, 1998 for
the payment of all accrued but unpaid Taxes through the date thereof has
been determined in accordance with GAAP and is adequate in amount for the
payment of all liabilities for Taxes for which Delta and the Delta
Subsidiaries are liable for the periods up to and including December 31,
1998. Neither Delta nor the Delta Subsidiaries have incurred any Tax
liabilities since December 31, 1998, other than those Tax liabilities
arising in the ordinary course of business and consistent with prior
periods.
(b) Except as set forth on Schedule 3.8, neither Delta nor the Delta
Subsidiaries has received any notice of a deficiency or assessment (and
none has been threatened) with respect to Taxes of Delta or the Delta
Subsidiaries from any foreign, federal, or local taxing authority which has
not been fully paid or finally settled; there are no ongoing audits or
examination of any Tax Return which includes Delta or the Delta
Subsidiaries and no notice of audit or examination of any such Tax Return
has been received by Delta or any of the Delta Subsidiaries (and none has
been threatened); Delta or the Delta Subsidiaries have not given and there
has not been given on its or their behalf a waiver or extension of any
statute of limitations relating to the payment of Taxes of Delta or the
Delta Subsidiaries; and no issue has been raised in writing on audit or in
any other proceeding with respect to Taxes of Delta or the Delta
Subsidiaries by any foreign, federal, or local taxing authority.
(c) Neither Delta nor the Delta Subsidiaries are or have been a United
States real property holding corporation within the meaning of Section
897(c)(2) of the Internal Revenue Code of 1986, as amended (the "Code")
during the applicable period specified in Section 897(c)(1)(A)(ii) of the
Code.
A-24
<PAGE>
Section 3.9 Actions and Proceedings. Except as set forth in Delta SEC
-----------------------
Documents or on Schedule 3.9: (a) there are no outstanding orders, judgments,
injunctions, awards or decrees of any Governmental Entity against or involving
(i) Delta or any of the Delta Subsidiaries, (ii) any of the present or former
directors, officers, employees, consultants, agents or stockholders of Delta or
any of the Delta Subsidiaries, as such, (iii) any of Delta's or Delta
Subsidiaries' properties, assets or business or (iv) any Delta Plan (as
hereinafter defined) that in the case of clauses (i), (ii), (iii) or (iv),
individually or in the aggregate, would have a Material Adverse Effect on Delta;
or (b) as of the date of this Agreement, there are no actions, suits or claims
or legal, administrative or arbitrative proceedings or investigations pending
or, to the Knowledge of Delta, threatened against or involving (i) Delta or any
of the Delta Subsidiaries, (ii) any of Delta's or Delta Subsidiaries' present or
former directors, officers, employees, consultants, agents or stockholders, as
such, or (iii) any of Delta's or Delta Subsidiaries' properties, assets or
business, or (iv) any Delta Plan that in the case of clauses (i), (ii), (iii) or
(iv), individually or in the aggregate, would have a Material Adverse Effect on
Delta or relate to the transactions contemplated by this Agreement.
Section 3.10 Certain Agreements. As of the date of this Agreement,
------------------
neither Delta nor any of the Delta Subsidiaries is a party to any oral or
written agreement or plan, including any stock option plan, stock appreciation
rights plan, restricted stock plan, stock purchase plan, Delta Other Benefit
Obligation or Delta Plan (as both are defined in Section 3.11), any of the
benefits of which will be increased, or the vesting of the benefits of which
will be accelerated, by the occurrence of any of the transactions contemplated
by this Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions contemplated by this
Agreement. Neither Delta nor any Delta Subsidiary is a party to any termination
benefits agreement or severance agreement or employment agreement one trigger of
which would be the consummation of the transactions contemplated by this
Agreement, except as set forth on Schedule 3.10.
Section 3.11 Employee Benefit Matters.
------------------------
(a) As used in this Section 3.11, the following terms have the
meanings set forth below:
"Delta Other Benefit Obligation" means all material obligations,
arrangements, or customary practices, whether or not legally
enforceable, to provide benefits, other than salary, as compensation
for services rendered, to present or former directors, employees, or
agents, other than with respect to any Delta Plan. This includes
sabbatical policies, severance payment policies, and material fringe
benefits within the meaning of Code (S) 132.
"Delta Plan" means (i) all employee benefit plans (as defined in
ERISA (S) 3(3)) of which Delta or the Delta Subsidiaries is a Plan
Sponsor (as defined in ERISA (S) 3(16)(B)), or to which Delta or the
Delta Subsidiaries otherwise contributes or in which Delta or the
Delta Subsidiaries otherwise participates, or (ii) all Title IV Plans
and Multi-Employer Plans (as defined in ERISA (S) 3(37)(A)) of which
an ERISA Affiliate is a Plan Sponsor or otherwise contributes or
currently participates.
"Delta VEBA" means a voluntary employees' beneficiary association
under Code (S) 501(c)(9) whose members include employees of Delta or
the Delta Subsidiaries.
"ERISA Affiliate" means any other person that, together with
Delta or any of the Delta Subsidiaries, would be treated as a single
employer under Code (S) 414(b), (c) or, solely with respect to matters
relating to Code (S) 412 or ERISA (S)(S) 302 or 4007, (m).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
A-25
<PAGE>
"Title IV Plans" means all Delta Plans that are subject to Title
IV of ERISA, 29 U.S.C. (S) 1301 et seq., other than Multi-Employer
Plans.
(b) (i) Schedule 3.11(b)(i) attached hereto sets forth a complete
and accurate list of all Delta Plans, Delta Other Benefit Obligations,
and Delta VEBAs, and identifies as such all Delta Plans that: (A) are
defined benefit plans (as defined in ERISA (S) 3(35)); (B) meet or
purport to meet the requirements of Code (S) 401(a); or (C) are Title
IV Plans.
(ii) None of the Delta Plans set forth on Schedule 3.11(b)(i) is
a Multi-Employer Plan and none of Delta, any of the Delta Subsidiaries
or any ERISA Affiliate has any assessed or potential liability due to
a complete or partial withdrawal from or a termination or
reorganization of a Multi-Employer Plan. No circumstances exist that
could reasonably be expected to result in any such liability to Delta,
any Delta Subsidiary or any ERISA Affiliate.
(iii) Except as set forth in Schedule 3.11(b)(iii) or as required
by applicable law, no Delta Plans provide retiree health or life
insurance benefits.
(c) Delta has delivered or made available to PPR all documents,
insurance policies and contracts comprising, describing or relating to each
Delta Plan, Delta Other Benefit Obligation, or Delta VEBA and of any
related trust; as well as all required filings for each of the above filed
with government authorities for each of the three most recent plan years.
(d) Except as set forth in Schedule 3.11(d) attached hereto:
(i) Delta or the Delta Subsidiaries have performed in all
material respects all of their respective obligations whether as plan
administrator, fiduciary, plan sponsor or contributing employer under
all Delta Plans, Delta Other Benefit Obligations, and Delta VEBAs in a
timely manner and have made all required entries in their financial
records and statements for all obligations and liabilities that have
accrued but are not due. No written or oral statement has been made by
Delta or the Delta Subsidiaries to any Person with regard to any Delta
Plan or Delta Other Benefit Obligation not in accordance with such
plan or other benefit obligation which could reasonably be expected to
have a Material Adverse Effect on Delta or the Delta Subsidiaries.
(ii) Delta, the Delta Subsidiaries and each Delta Plan, Delta
Other Benefit Obligation, and Delta VEBA is, to the extent applicable,
in material compliance with applicable law, except for any such
failure to comply which would not result in any material liability to
Delta or any of the Delta Subsidiaries. Delta and all Delta
Subsidiaries have met any applicable minimum funding standard, and
have made all contributions required, under ERISA (S) 302. The most
recent actuarial report for each Title IV Plan fairly presents the
financial condition of each such plan, and since the date of such
report there has been no material adverse change in the funded status
of any such plan.
(iii) Since December 31, 1998, there has been no establishment or
amendment of any Delta Plan, Delta VEBA, or Delta Other Benefit
Obligation.
(iv) Other than routine claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding
involving or relating to, any Delta Plan,
A-26
<PAGE>
Delta Other Benefit Obligation, or Delta VEBA is pending or, to
Delta's Knowledge, is threatened.
(v) None of Delta, the Delta Subsidiaries or any ERISA Affiliate
has terminated any Title IV Plan or incurred any outstanding liability
under Section 4062 of ERISA to the PBGC or to a trustee appointed
under Section 4042 of ERISA, and no events have occurred and no
circumstances exist that could reasonably be expected to result in any
such liability to Delta, the Delta Subsidiaries or any ERISA
Affiliate. All premiums due the PBGC with respect to the Title IV
Plans have been paid.
(vi) There has been no "reportable event" within the meaning of
Section 4043 of ERISA with respect to any Title IV Plan which would require
the giving of notice to the PBGC or any other event requiring disclosure
under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(vii) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, either alone or
upon the occurrence of subsequent events, (i) result in any payment
becoming due to any current or former employee, officer or director of
Delta or the Delta Subsidiaries, (ii) increase any benefits otherwise
payable under any Delta Plan or Delta Other Benefit Obligation, (iii)
result in the acceleration of the time of payment or vesting of any
benefits under any Delta Plan or Delta Other Benefit Obligation, (iv)
constitute a "change in control" or similar event under any Delta Plan or
Delta Other Benefit Obligation or (v) fail to be deductible by reason of
Section 280G of the Code.
Section 3.1 Compliance with Environmental Laws.
----------------------------------
(a) Except as set forth on Schedule 3.12, each of Delta and the Delta
Subsidiaries, and, to the Knowledge of Delta, any prior owner or lessee,
have generated, handled, manufactured, treated, stored, used, transported
and disposed of all Environmentally Regulated Materials (as defined below)
on, beneath, to or from any of the properties owned or operated by Delta
and the Delta Subsidiaries in the conduct of their businesses or any other
properties formerly owned, leased or operated by Delta or the Delta
Subsidiaries, in compliance with all Environmental Laws.
(b) Except as set forth on Schedule 3.12, Delta and the Delta
Subsidiaries have operated all plants, facilities and business operations
in compliance with all Environmental Laws, and all plants, facilities and
business operations are currently in compliance with all Environmental
Laws.
(c) Except as set forth on Schedule 3.12, neither Delta nor the Delta
Subsidiaries have disposed of or released any Environmentally Regulated
Material in any location which would reasonably be expected to give rise to
a claim of responsibility for investigation or clean-up costs, personal
injury or property damage liability against Delta or any Delta Subsidiary
by any third party.
(d) Except as set forth on Schedule 3.12, neither Delta nor the Delta
Subsidiaries have received any notices or claims of violations or
liabilities relating to an Environmentally Regulated Material or an
Environmental Law which notices or claims of violations or liabilities have
not been resolved.
Section 3.1 Indebtedness. Schedule 3.13 sets forth a complete listing
------------
of Delta's and the Delta Subsidiaries' indebtedness for borrowed money as of the
date hereof, and includes a description of all
A-27
<PAGE>
documents and agreements which set forth the terms of such indebtedness, the
amount of the balance owing as of the date hereof, the applicable interest rate
in effect as of the date hereof, and a listing of all collateral securing such
indebtedness (if any), and a description of any applicable prepayment penalties
or make-whole amounts that would be payable if such indebtedness were to be paid
in full as of the date hereof.
Section 3.14 Labor Matters. Neither Delta nor any of the Delta
-------------
Subsidiaries is a party to any collective bargaining agreement or labor
contract, except as set forth in Schedule 3.14. To the Knowledge of Delta, as
of the date of this Agreement, there are no present or pending applications for
certification of any union as the exclusive bargaining agent for any employees
of Delta or any Delta Subsidiaries. To the Knowledge of Delta, neither Delta
nor any of the Delta Subsidiaries has engaged in any unfair labor practice with
respect to any persons employed by or otherwise performing services primarily
for Delta or any of the Delta Subsidiaries (the "Delta Business Personnel"), and
there is no unfair labor practice complaint or grievance against Delta or any of
the Delta Subsidiaries by the National Labor Relations Board or any comparable
state agency pending or, to the Knowledge of Delta, threatened with respect to
Delta Business Personnel, except where such unfair labor practice, complaint or
grievance would not have a Material Adverse Effect on Delta. There is no labor
strike, dispute, slowdown or stoppage pending or, to the Knowledge of Delta,
threatened against Delta or any of the Delta Subsidiaries, except where such
dispute, strike or work stoppage would not have a Material Adverse Effect on
Delta.
Section 3.15 Intellectual Property. Schedule 3.15 sets forth a complete
---------------------
list of all patents and applications therefor, trademark registrations and
applications therefor, service mark registrations and applications therefor,
copyright registrations and applications therefor, trade names, computer
programs or software which are material to the operation of Delta's business and
interests in license agreements and all other proprietary rights that are owned,
licensed, sublicensed or used by agreement or permission by Delta or any Delta
Subsidiary and used in the continued operation of Delta's business
(collectively, "Delta Intellectual Property"). Except as otherwise set forth on
Schedule 3.15, Delta's interest in the Delta Intellectual Property is free and
clear of any Encumbrance, and constitutes all such property or rights used by or
necessary to the operation of Delta's business. To Delta's Knowledge and except
as set forth on Schedule 3.15, the use of the Delta Intellectual Property does
not conflict with, infringe upon, or misappropriate any rights held or asserted
by any person, or require the consent of any person. Except as set forth on
Schedule 3.15, neither Delta nor any Delta Subsidiary has, in the past two
years, received any notice or claim that any such Delta Intellectual Property
is not valid or enforceable, or of any infringement upon or conflict with any
patent, trademark, service mark, copyright, trade name or trade secret of any
third party by Delta or any Delta Subsidiary or of any claim by any third party
alleging any such infringement or conflict, and, in the past two years, neither
Delta nor any Delta Subsidiary has given any notice of infringement to any third
party with respect to any of the Delta Intellectual Property. Delta has paid
all required license fees related to all software used in the operation of its
business.
Section 3.16 Title to Assets; Insurance. Except as disclosed on Schedule
--------------------------
3.16, Delta and the Delta Subsidiaries have good and marketable title to all
real property and good title to all of the personal property and assets which
they purport to own and which are necessary to carry on its business, in each
case free and clear of all Encumbrances except for Permitted Exceptions (as
defined in Section 3.17). Delta and the Delta Subsidiaries have in full force
and effect policies of insurance that are customary for businesses of similar
size in similar industries and consistent with sound business practice.
Section 3.17 Real Property. (a) Schedule 3.17(a) describes all real
-------------
properties owned or leased by Delta and the Delta Subsidiaries (the "Delta Real
Property"), the nature of the interest of Delta or the Delta Subsidiaries and
the entity which holds the interest in those properties and the approximate
acreage of each of those properties. There is no real property (other than the
Delta Real Property) the use or possession of which by Delta and the Delta
Subsidiaries is necessary to carry on its business. Except as
A-28
<PAGE>
described on Schedule 3.17(b), Delta and each of the Delta Subsidiaries has (i)
such title to the Delta Real Property as is legally sufficient for the current
use thereof in its business as presently conducted, (ii) good and marketable
indefeasible title in fee simple (except for Permitted Exceptions, as
hereinafter defined) to all Delta Real Property shown in Schedule 3.17(a) as
owned by it (the "Delta Owned Real Property") and (iii) valid leaseholds under
valid and enforceable leases in all Delta Real Property shown on Schedule
3.17(a) as leased by it. The Delta Real Property is owned or leased by Delta and
the Delta Subsidiaries free and clear of all matters except for Permitted
Exceptions. Except as set forth in Schedule 3.17(b), none of the Delta Real
Property is subject to any lease (other than the Delta Leases (as hereinafter
defined)), sublease, license or other agreement granting to any person any right
to the use, occupancy or enjoyment thereof (or any portion thereof). None of the
Permitted Exceptions materially interferes with or has interfered with the
maintenance, use or operation of the Delta Real Property. "Permitted Exceptions"
means (i) matters listed or described on Schedule 3.17(b), (ii) easements,
covenants, rights-of-way and other Encumbrances or restrictions which do not,
individually or in the aggregate, materially detract from the value or impair
the present and continued use, operation and maintenance of the property subject
thereto, or impair the operation of Delta or any of the Delta Subsidiaries,
(iii) real estate taxes not yet due or payable, and (iv) Encumbrances that are
existing at the date of this Agreement which are set forth on Schedule 3.17(a).
(b) None of the leases identified in Schedule 3.17(a) (collectively,
the "Delta Leases") has been modified or amended, and no notice of
termination has been delivered with respect thereto, except as set forth in
Schedule 3.17(b). Except as set forth on Schedule 3.17(b), neither Delta
nor any of the Delta Subsidiaries, nor any other person, is in breach of or
default under any Delta Lease (and no event has occurred which, with due
notice or lapse of time or both, may constitute such a breach or default).
(c) To the Knowledge of Delta the buildings, driveways and all other
structures and improvements upon the Delta Real Property are all within the
boundary lines of the applicable property or have the benefit of valid
easements or other legal rights and there are no encroachments thereon that
would affect the use thereof.
(d) To the Knowledge of Delta all buildings, structures, improvements,
equipment, facilities, plants and fixtures owned or leased by Delta and the
Delta Subsidiaries conform in all material respects to all applicable codes
and rules adopted by national and local associations and boards and
insurance underwriters, and all such buildings, structures, improvements
and fixtures are in good operating condition and repair. There are no
outstanding requirements or recommendations by any insurance company which
has issued a policy covering any such property, or by any board of fire
underwriters or other body exercising similar functions, requiring or
recommending any repairs or work to be done on any such property.
(e) To the Knowledge of Delta all public utilities required for the
operation of such properties either enter such properties through adjoining
public streets or, if they pass through adjoining private land, do so in
accordance with valid public or private easements which will inure to the
benefit of Delta and the Delta Subsidiaries and their respective successors
and assigns. All of the public utilities mentioned above are installed and
operating, and all installation and connection charges are paid in full.
(f) To the Knowledge of Delta, the plumbing, electrical, heating, air
conditioning, elevator, ventilating and all other mechanical or structural
systems and equipment in the buildings or improvements located on the Delta
Real Property and any manufacturing systems and components located thereof
are in good working order and condition, and the roof, basement and
foundation walls of such buildings and improvements for which Delta or the
Delta Subsidiaries is responsible
A-29
<PAGE>
(as owner or as lessee under any Delta Lease) are in good condition and
free of leaks and other defects. All such mechanical and structural systems
and equipment and such manufacturing systems and components and such roofs,
basement and foundation walls for which a person other than Delta or the
Delta Subsidiaries is responsible are in good working order and condition
and free of leaks and other defects.
(g) To the Knowledge of Delta, Delta or the Delta Subsidiaries has the
uninterrupted use of any easements for ingress and egress for all of the
Delta Real Property owned or leased by Delta or the Delta Subsidiaries, as
the case may be. The Delta Real Property has full and uninterrupted access
to and from public roads, and Delta has no Knowledge of any fact or
condition which would result in the termination of such access.
(h) Neither Delta nor the Delta Subsidiaries is the landlord or lessor
under any lease, sublease or other occupancy agreement affecting any of the
Delta Real Property.
Section 3.18 Title Insurance. Schedule 3.18 sets forth a true, correct
---------------
and complete list and a summary description of all of the policies of title
insurance insuring Delta's and the Delta Subsidiaries' interest in the Delta
Owned Real Property (collectively, the "Delta Title Policies"). Delta has
furnished a true, correct and complete copy of all such Delta Title Policies to
Delta. All of the Delta Title Policies are in full force and effect. Delta
shall maintain, and shall use its best efforts to cause the Delta Subsidiaries
to maintain the coverage under the Delta Title Policies in full force and effect
through the date of the Closing. Neither Delta nor the Delta Subsidiaries is in
material default under any provisions of the Delta Title Policies. There is no
claim by Delta, the Delta Subsidiaries or any other person pending under any of
the Delta Title Policies as to which coverage has been questioned, denied or
disputed by the underwriters or issuers of such Delta Title Policies.
Section 3.19 Zoning. To the Knowledge of Delta, all of the Delta Real
------
Property and the buildings, structures, improvements and fixtures located
thereon, and the respective businesses conducted thereat and the manner of such
conduct, conform in all respects to all existing zoning, building and other
applicable laws, rules and regulations and the operation of the Delta Real
Property and the improvements located thereon is not in violation of any such
laws, rules or regulations. To the Knowledge of Delta, all uses of the Delta
Real Property and the improvements, to the Knowledge of Delta, located thereon
are "as-of-right" and do not require any non-conforming use rights, nor have
they been "grandfathered" under any pre-existing laws, rules or regulations.
Section 3.20 Brokers. No broker, investment banker or other person is
-------
entitled to any broker's, finder's or other similar fee or commission in
connection with the transactions contemplated by this Agreement based upon
arrangements made by or on behalf of Delta.
Section 3.21 Relationships. Except as otherwise disclosed in Delta's
-------------
Form 10-K for the period ended December 31, 1998, Delta's relationships with its
franchisors, agents, brokers, dealers, distributors, representatives, licensees,
customers and suppliers are continuing, and there has been no material change in
the scope of such relationships during the last year with any of such parties or
similar parties with which Delta has done business during the last year. All
sales and performances of services by Delta in connection with its business are
in compliance with all of Delta's representations, warranties and agreements,
express or implied, with respect to such sales and performances, except for
customary returns and allowances.
Section 3.22 Compliance with Quality Standards. All water used in the
---------------------------------
production process of Delta's business conforms, in all material respects, to
(i) the quality standards required by Delta's or the Delta
A-30
<PAGE>
Subsidiaries' franchisors, including PepsiCo, (ii) internal quality standards
required by Delta, and (iii) any local quality standards.
Section 3.23 Year 2000 Compliance. To the extent that any functionality
--------------------
of any computer system used by Delta is dependent upon or interdependent with
the use or specification of any calendar date, Delta has used commercially
reasonable efforts in implementing a plan pursuant to which any such computer
system shall be "Year 2000 Compliant," except where failure to do so will not
result in a Material Adverse Effect on Delta. For purposes of this Agreement,
the term Year 2000 Compliant means that neither the performance nor the
functionality of such computer systems shall be materially affected by dates in,
into and between the 20th and 21st centuries. To be deemed Year 2000 Compliant,
such computer systems shall conform in all material respects to the following
basic requirements: (i) no value for a current date shall cause any
interruption in Delta's operations in which the computer system is used; and
(ii) any date-based functions shall operate and perform in a consistent manner
for dates in, into and between the 20th and 21st centuries and such computer
systems shall calculate, manipulate and represent properly inputted dates
correctly.
Section 3.24 Disclosure. No representation or warranty of Delta in this
----------
Agreement or in any certificate, schedule, statement or other document furnished
or to be furnished by Delta to PPR pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact required to
be stated herein or therein or necessary to make the statements herein or
therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE DELTA STOCKHOLDERS
Each of the Delta Stockholders, for itself but not on behalf of any other
Delta Stockholder, represents and warrants to PPR as follows:
Section 4.1 Title; Authority. Such Delta Stockholder is the beneficial
----------------
owner of the class and number of shares of Delta Stock set forth opposite such
stockholder's name on Schedule 1 hereto (it being understood that such
beneficial owner may hold such shares in the name of its nominee as holder of
record, in which case such nominee has been indicated in parenthesis next to
such beneficial owner's name), and owns such shares of Delta Stock free and
clear of all Encumbrances, except for restrictions on transfer imposed by
federal and state securities laws and the Amended and Restated Shareholders
Agreement dated as of September 23, 1993 and except as described on Schedule 1.
Such Delta Stockholder has the authority to execute, deliver and perform its
obligations under this Agreement. This Agreement has been duly executed and
delivered by such Delta Stockholder and (assuming the valid authorization,
execution and delivery of this Agreement by PPR and the other parties hereto)
constitutes a legal, valid and binding obligation of such Delta Stockholder and
is enforceable against such Delta Stockholder in accordance with its terms,
except to the extent that (i) enforcement may be limited by or subject to any
bankruptcy, insolvency, reorganization, moratorium or similar laws now or
hereafter in effect relating to or limiting creditors' remedies and (ii) the
remedy of specific performance and injunctive and other forms of equitable
relief are subject to certain equitable defenses and to the discretion of the
court or other tribunal before which any proceeding therefor may be brought.
Section 4.2 No Breach. The execution and delivery of this Agreement by
---------
such Delta Stockholder and the consummation by such Delta Stockholder of the
Exchange does not and will not contravene, violate, or constitute or result in a
breach or default (with or without notice or lapse of time, or both) under, the
charter or organizational documents of such Delta Stockholder or any contract or
agreement
A-31
<PAGE>
by which such Delta Stockholder is bound (except as would not have a material
adverse effect on such Delta Stockholder's ability to perform its obligations
under this Agreement or as may arise under the Amended and Restated
Shareholder's Agreement dated as of September 23, 1993), or any judgment, order,
decree, statute, law, ordinance, rule or regulation applicable to such Delta
Stockholders or result in the creation or imposition of any Encumbrance (other
than under this Agreement) on the shares of the Delta Stock owned by such Delta
Stockholder.
Section 4.3 No Consents. Except as set forth in Schedule 4.3 hereto or
-----------
as required by the Amended and Restated Shareholder's Agreement dated as of
September 23, 1993, no consent or authorization of, or registration, declaration
or filing with, any person, is required to be made or received by such Delta
Stockholder in connection with the execution and delivery of this Agreement or
the consummation of the Exchange.
Section 4.4 Entire Interest. The Delta Stock listed opposite such Delta
---------------
Stockholder's name on Schedule 1 hereto constitutes such Delta Stockholder's
entire ownership interest in Delta as of the date hereof, and such Delta
Stockholder has no rights to acquire any additional shares of Delta Stock or any
other equity interest in Delta, except with respect to the Delta Preferred and
the preemptive rights contained in Article Fourth of Delta's Amended and
Restated Certificate of Incorporation.
Section 4.5 Accredited Investor Status; PPR Information. Such Delta
- ------- -------------------------------------------
Stockholder is an "accredited investor" as defined in Rule 501(a) of Regulation
D promulgated under the Securities Act and has knowledge and experience in
financial and business matters sufficient to evaluate the merits and risks of
the investment in the shares of PPR Class B Common Stock and is able to bear
such risks. Such Delta Stockholder has been given access to full and complete
information regarding PPR, including the opportunity to meet with PPR officers
and review the PPR SEC Filings.
Section 4.6 Unregistered Securities; Investment Intent. Such Delta
- -------- ------------------------------------------
Stockholder acknowledges that the shares of PPR Class B Common Stock have not
been registered under the Securities Act or relevant state securities laws
pursuant to exemptions from registration under the Securities Act and such laws,
and that PPR's reliance upon such exemptions is predicated in part on such Delta
Stockholder's representations to PPR as contained herein. The shares of PPR
Class B Common Stock are being purchased for the account of such Delta
Stockholder for investment and without the intention of reselling, transferring
or redistributing the same, other than as provided in or contemplated by this
Agreement. Such Delta Stockholder has no agreement for the transfer or
disposition of any of such shares, except as provided in this Agreement.
Section 4.7 Restrictions on Transfer. Such Delta Stockholder
------------------------
acknowledges that PPR will place a restrictive legend on the certificate(s)
representing the shares of PPR Class B Common Stock, containing substantially
the following language:
The securities represented by this certificate were issued without
registration under the Securities Act of 1933, as amended (the "Act"), and
without registration under state securities laws, in reliance upon
exemptions contained in the Act and such laws. No transfer of these
securities or any interest therein may be made except pursuant to effective
registration statements under said laws unless this corporation has
received an opinion of counsel satisfactory to it that such transfer or
disposition does not require registration under said laws and, for any
sales under Rule 144 of the Act, such evidence as it shall reasonably
request for compliance with that rule.
PPR will place a stop transfer order on the certificate(s) representing the
shares to assure compliance with this Agreement and the matters referenced
above.
A-32
<PAGE>
ARTICLE V
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 5.1 Actions by PPR. Except as expressly permitted by clauses
--------------
(a) through (k) of this Section 5.1, or as otherwise required by this Agreement,
during the period from the date of this Agreement through the date of Closing,
PPR shall, and shall cause each of the PPR Subsidiaries to, in all material
respects carry on its business in the ordinary course as currently conducted
and, to the extent consistent therewith, use reasonable best efforts to preserve
intact its current business organizations, keep available the services of its
current officers and employees and preserve its relationships and goodwill with
customers, suppliers and others having business dealings with it. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, PPR shall not, and shall not permit any of the
PPR Subsidiaries to, without the prior written consent of Delta and the Delta
Stockholders holding, in the aggregate, a majority of the Delta Stock:
(a) (x) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions payable in cash, shares,
stock, securities or property in respect of, any of its capital stock, or
otherwise make any payments to its stockholders in their capacity as such
(other than dividends and other distributions by PPR Subsidiaries including
dividends on outstanding shares of non-voting management stock of Beverage
Plastics Company, a Delaware corporation, in the ordinary course of
business and consistent with past practice), (y) other than in the case of
any PPR Subsidiary, subdivide, split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock
or (z) purchase, redeem or otherwise acquire any shares of capital stock of
PPR or any other securities thereof or any rights, warrants or options to
acquire, directly or indirectly, any such shares or other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire any such shares, voting securities, equity equivalent or
convertible securities, or agree to any amendment to the terms of any
option, warrant or convertible security, other than (x) the grant of stock
options to employees of PPR or any of the PPR Subsidiaries under the PPR
Option Plans and the issuance of shares of PPR Stock pursuant to the
exercise thereof in the ordinary course of business consistent with past
practice, (y) the issuance of PPR Stock pursuant to the exercise of
warrants outstanding as of the date hereof that are exercisable or become
exercisable by their terms (as in effect on the date hereof), and (z) the
issuance of PPR Stock as consideration for the acquisitions permitted to be
made by PPR by clause (d) of this Section 5.1;
(c) amend its charter or bylaws; provided, however, that PPR shall
amend its charter to adopt the PPR Charter Amendment;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of or equity in, or by
any other manner, any business or any corporation, partnership, limited
liability company, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets, except for (x)
the Dakota Acquisition on substantially the terms set forth in the Dakota
Exchange Agreement (as hereinafter defined) without giving effect to any
waiver or modification thereof and (y) acquisitions which do not exceed $50
million individually or $100 million in the aggregate;
A-33
<PAGE>
(e) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of any of its assets, other than transactions that are in
the ordinary course of business consistent with past practice and not
material to PPR and the PPR Subsidiaries taken as a whole;
(f) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (x) in the ordinary
course of business consistent with past practice (including refinancings of
existing debt), (y) indebtedness, loans, advances, capital contributions
and investments between PPR and any of the PPR Subsidiaries, and (z)
indebtedness incurred to fund the acquisitions permitted by Section 5.1(d)
above, including any amendments necessary to existing loan documents with
Banco Popular to extend the facility to $40 million and replace Banco
Popular as the primary lender with NationsBanc (or an affiliate of
NationsBanc) and other syndication participants.
(g) enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any PPR Plan, PPR Option
Plan or employment or consulting agreement, other than as required by law
and other than amending existing PPR Option Plans to increase the number of
shares available for issuance thereunder;
(h) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any PPR Subsidiary by any applicable
material federal, state, Puerto Rican, or local law, rule, regulation,
guideline or ordinance;
(i) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken
by GAAP);
(j) except as set forth on PPR's 1999 Capital Expenditure Budget,
enter into any other material transaction or make any other capital
expenditure not in the ordinary course of business consistent with past
practice; or
(k) authorize, recommend or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
Section 5.2 Actions by Delta. Except as expressly permitted by clauses
----------------
(a) through (l) of this Section 5.2, or otherwise required by this Agreement,
during the period from the date of this Agreement through the date of Closing,
Delta shall, and shall cause each of the Delta Subsidiaries to, in all material
respects, carry on its business in the ordinary course as currently conducted
and, to the extent consistent therewith, use reasonable best efforts to preserve
intact its current business organizations, keep available the services of its
current officers and employees and preserve its relationships and goodwill with
customers, suppliers and others having business dealings with it. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, Delta shall not, and shall not permit any of the
Delta Subsidiaries to, without the prior written consent of PPR:
(a) (x) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions payable in cash, shares,
stock, securities or property in respect of, any of its capital stock, or
otherwise make any payments to its stockholders in their capacity as such,
other than regularly scheduled quarterly dividends on Delta Preferred, (y)
other than in the case of any Delta Subsidiary, subdivide, split, combine
or reclassify any of its capital stock or issue or authorize the issuance
of any other securities in respect of, in lieu of or in substitution for
shares of its capital stock or (z) purchase, redeem or otherwise acquire,
directly or indirectly, any shares of capital stock
A-34
<PAGE>
of Delta or any other securities thereof or any rights, warrants or options
to acquire any such shares or other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber any
shares of its capital stock (other than the issuance of additional shares
of Delta Preferred as payment-in-kind for the quarterly dividends payable
on shares of outstanding Delta Preferred, any other voting securities or
equity equivalent or any securities convertible into, or any rights,
warrants or options to acquire any such shares, voting securities, equity
equivalent or convertible securities, or agree to any amendment to the
terms of any option, warrant or convertible security;
(c) amend its charter or bylaws other than as provided in Section
7.2(h) hereof;
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing a portion of the assets of or equity in, or by any other
manner, any business or any corporation, partnership, limited liability
company, association or other business organization or division thereof or
otherwise acquire or agree to acquire any assets other than transactions
that are in the ordinary course of business consistent with past practice
and that are not material;
(e) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than transactions that are
in the ordinary course of business consistent with past practice and not
material to Delta and the Delta Subsidiaries taken as a whole;
(f) incur any indebtedness in excess of that permitted under existing
credit facilities for borrowed money, guarantee any such indebtedness or
make any loans, advances or capital contributions to, or other investments
in, any other person, other than (x) indebtedness for borrowed money
incurred in the ordinary course of business consistent with past practice
(including but not limited to the issuance of additional notes as payment-
in-kind for accrued interest on Delta's 11% subordinated notes due December
23, 2003 as set forth in that certain Note Exchange Agreement dated as of
September 23, 1993 by and among Delta and the Noteholders set forth on
Schedule 1 thereto), and (y) indebtedness, loans, advances, capital
contributions and investments between Delta and any of the Delta
Subsidiaries;
(g) alter (through merger, liquidation, reorganization, restructuring
or in any other fashion) the corporate structure or ownership of Delta;
(h) enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Delta Plan or
employment or consulting agreement, other than as required by law;
(i) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any Delta Subsidiary by any
applicable material federal, state or local law, rule, regulation,
guideline or ordinance;
(j) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken
by GAAP);
(k) except as set forth on Delta's 1999 Capital Expenditure Budget,
enter into any other material transaction or make any other capital
expenditure not in the ordinary course of business consistent with past
practice; or
A-35
<PAGE>
(l) authorize, recommend, propose or announce an intention to do any
of the foregoing, or enter into any contract, agreement, commitment or
arrangement to do any of the foregoing.
ARTICLE VI
ADDITIONAL AGREEMENTS
Section 6.1 PPR Stockholder Meeting. PPR shall call a meeting of its
-----------------------
stockholders (the "PPR Stockholder Meeting") for the purpose of: (a) approving
the transactions contemplated hereby, including, but not limited to, the Share
Issuance and the Exchange; (b) approving an increase in the number of authorized
shares of PPR's Class B Common Stock to 145,000,000 shares (the "PPR Charter
Amendment"); (c) approving the amendments to the PPR Option Plans to increase
the number of shares available for issuance thereunder and (d) approving such
other matters as PPR's Board of Directors shall determine. PPR shall within
thirty (30) days after the execution of this Agreement, prepare and file with
the SEC the Proxy Statement for the purpose of soliciting proxies for the
matters brought before the PPR Stockholder Meeting. PPR will, through the PPR
Board of Directors with the concurrence of the PPR Special Committee, recommend
to its stockholders approval of such matters and shall not withdraw such
recommendation; provided, however, that the PPR Special Committee shall not be
required to make, and shall be entitled to withdraw, such recommendation if and
only if the PPR Special Committee concludes in good faith on the basis of the
advice of Willkie Farr & Gallagher that the making of, or the failure to
withdraw, such recommendation would violate the fiduciary obligations of the PPR
Special Committee under applicable law; provided further, however, that in no
case shall any change in the trading price of PPR Class B Common Stock be used
as a basis for any such conclusion. Notwithstanding any recission of the
recommendation by the PPR Special Committee that is permitted by this Section
6.1, PPR shall remain obligated to call the PPR Stockholder Meeting.
Section 6.2 Preparation of the Registration Statement and the Proxy
-------------------------------------------------------
Statement.
- ---------
(a) Within thirty (30) days after the Closing Date, PPR shall prepare
and file with the SEC a Registration Statement on Form S-3 for the purpose
of registering for resale by the Delta Stockholders or their assigns (the
"Holders") the shares of PPR Class B Common Stock issued in the Exchange
(the "Registration Statement"). PPR shall use its best efforts to have the
Registration Statement declared effective under the Securities Act prior to
the expiration of the lock-up period described in Section 7.1(h). PPR will
advise the Holders in writing, promptly after it receives notice thereof,
of the time when the Registration Statement has become effective or any
supplement or amendment has been filed, of the issuance of any stop order
(or the initiating or threatening of any proceeding for that purpose), of
the suspension of the qualification of the PPR Class B Common Stock
issuable in connection with the Exchange for offering or sale in any
jurisdiction (or the initiating or threatening of any proceeding for that
purpose), or of any request by the SEC for amendment of the Registration
Statement or comments thereon and responses thereto or requests by the SEC
for additional information. The Holders shall receive an opinion from
counsel to PPR, dated as of the effective date of the Registration
Statement, subject to customary qualifications and limitations for such
opinions and in a form reasonably satisfactory to such Holders, to the
effect that PPR is duly organized, validly existing and in good standing in
Delaware, the PPR Class B Common Stock included in the Registration
Statement has been registered under the Securities Act, the conditions to
use by PPR of a registration statement on Form S-3 under the Securities
Act, as set forth in the General Instructions to Form S-3, have been
satisfied with respect to the Registration Statement and that the
Registration Statement has become effective under the Securities Act. PPR
shall prepare and file with the SEC such amendments and supplements to the
Registration Statement as may be necessary to keep the Registration
Statement effective until the later of nine months from
A-36
<PAGE>
the end of the lock-up period or until such time as each of the Holders who
is not deemed to be an "affiliate" of PPR within the meaning of Rule 144
under the Securities Act, may sell all of such Holder's shares of PPR Class
B Common Stock received in the Exchange within a three (3) month period
under Rule 144, without regard to the volume limitations contained in Rule
144(e). PPR agrees that the restrictive legend and the stop transfer order
on the certificates representing the shares of PPR Class B Common Stock
shall be removed at PPR's expense upon the registration of such shares
under the Securities Act or the sale of such shares pursuant to Rule 144.
(b) PPR and Delta each agree, as to itself and its Subsidiaries, that
none of the information supplied or to be supplied by it or its
Subsidiaries for inclusion or incorporation by reference in (i) the
Registration Statement will, at the time the Registration Statement becomes
effective under the Securities Act, contain any untrue statement of a
material fact or omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading, and
(ii) the Proxy Statement and any amendment or supplement thereto will, at
the date of mailing to the PPR stockholders, contain any untrue statement
of a material fact or omit to state any material fact required to be stated
therein or necessary in order to make the statements therein, in light of
the circumstances under which they were made, not misleading.
(c) PPR shall use its reasonable best efforts to cause "comfort
letters" of Arthur Andersen LLP or another nationally recognized certified
public accounting firm to be delivered to the Holders, dated the date on
which the Registration Statement shall become effective and addressed to
the Holders, in form and substance customary for "comfort letters"
delivered by independent public accountants in connection with transactions
such as those contemplated by this Agreement.
(d) PPR shall use its best efforts to register or qualify the shares
covered by the Registration Statement under such securities or blue sky
laws of such United States jurisdictions as any Holder reasonably requests
to enable such Holder to dispose of such shares owned by such Holder,
provided that PPR will not be required to (i) qualify generally to do
business in any jurisdiction where it would not otherwise be required to so
qualify but for the requirements of this paragraph, (ii) subject itself to
taxation in any jurisdiction where it is not otherwise subject to taxation
or (iii) consent to general service of process in any jurisdiction where it
would not otherwise be required to so consent but for the requirements of
this paragraph.
(e) PPR shall furnish to each Holder such number of copies of a
summary prospectus or other prospectus in conformity with the requirements
of the Securities Act, and such other documents as such Holder may
reasonably request in order to facilitate the public sale or other
disposition of such shares.
(f) PPR shall notify on a timely basis each Holder at any time when a
prospectus relating to the PPR Class B Common Stock is required to be
delivered under the Securities Act within the appropriate period mentioned
in paragraph (a) of this Section, of the happening of any event as a result
of which the prospectus included in such Registration Statement, as then in
effect, includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing and, at the request of such Holder, prepare and furnish to such
Holder a reasonable number of copies of a supplement to or an amendment of
such prospectus as may be necessary so that, as thereafter delivered to the
offerees of such shares, such prospectus shall not include an untrue
statement of a material fact or omit to state a material fact required to
be stated therein or necessary to make the statements therein not
misleading in light of the circumstances then existing.
A-37
<PAGE>
(g) PPR shall make available for inspection by any Holder, any
underwriter participating in any disposition pursuant to such Registration
Statement and any attorney, accountant or other agent retained by any such
Holder or underwriter (collectively, the "Inspectors"), all pertinent
financial and other records, pertinent corporate documents and properties
of PPR (collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause PPR's
officers, directors and employees to supply all information (together with
the Records, the "Information") reasonably requested by any such Inspector
in connection with such Registration Statement. Any of the Information,
which PPR determines in good faith to be confidential, and of which
determination the Inspectors are so notified, shall not be disclosed by the
Inspectors unless (i) the disclosure of such Information is necessary to
avoid or correct a misstatement or omission in the Registration Statement,
(ii) the release of such Information is ordered pursuant to a subpoena or
other order from a court of competent jurisdiction or (iii) such
Information has been made generally available to the public. The Holder
agrees that it will, upon learning that disclosure of such Information is
sought in a court of competent jurisdiction, give notice to PPR and allow
PPR, at PPR's expense, to undertake appropriate action to prevent
disclosure of the Information deemed confidential.
(h) PPR shall provide a transfer agent and registrar (which may be the
same entity and which may be PPR) for the PPR Class B Common Stock.
(i) In connection with any registration of the PPR Class B Common
Stock under the Securities Act pursuant to this Agreement, PPR shall
indemnify and hold harmless each Holder, its partners, members, in the case
of a limited liability company, beneficiaries, in the case of a trust,
officers and directors, each underwriter, broker or any other person acting
on behalf of such Holder and each other person, if any, who controls any of
the foregoing persons within the meaning of the Securities Act against any
losses, claims, damages or liabilities, joint or several (or actions in
respect thereof) to which any of the foregoing persons may become subject
under the Securities Act or otherwise, insofar as such losses, claims,
damages or liabilities (or actions in respect thereof) arise out of or are
based upon an untrue statement or alleged untrue statement of a material
fact contained in the Registration Statement under which shares were
registered under the Securities Act, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the SEC, any amendment
or supplement thereto or any document incident to registration or
qualification of the PPR Class B Common Stock or arise out of or are based
upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein
not misleading or, with respect to any prospectus, necessary to make the
statements therein in light of the circumstances under which they were made
not misleading, or any violation by PPR of the Securities Act or state
securities or blue sky laws applicable to PPR and relating to action or
inaction required of PPR in connection with such registration; and shall
reimburse such Holder, such partner, member, officer or director, such
underwriter, such broker or such other person acting on behalf of such
Holder and each such controlling person for any legal or other expenses
reasonably incurred by any of them in connection with investigating or
defending any such loss, claim, damage, liability or action; provided,
--------
however, that PPR shall not be liable in any such case to the extent that
-------
any such loss, claim, damage, liability or action arises out of or is based
upon an untrue statement or alleged untrue statement or omission or alleged
omission made in said Registration Statement, preliminary prospectus, final
prospectus, amendment, supplement or document incident to registration or
qualification of any PPR Class B Common Stock in reliance upon and in
conformity with written information furnished to PPR through an instrument
duly executed by such Holder or underwriter that states that it is
specifically for use in the preparation thereof.
A-38
<PAGE>
(j) In connection with any registration of the PPR Class B Common
Stock under the Securities Act pursuant to this Agreement, each Holder
shall indemnify and hold harmless (in the same manner and to the same
extent as set forth in the preceding paragraph of this Section) PPR, each
director of PPR, each officer of PPR who shall sign such Registration
Statement, each underwriter, broker or other person acting on behalf of
such Holder, such person who controls any of the foregoing persons within
the meaning of the Securities Act and each other Holder under such
Registration Statement with respect to any statement or omission from such
Registration Statement, any preliminary prospectus or final prospectus
contained therein or otherwise filed with the Commission, any amendment or
supplement thereto or any document incident to registration or
qualification of any PPR Class B Common Stock, if such statement or
omission was made in reliance upon and in conformity with written
information furnished to PPR or such underwriter through an instrument duly
executed by such Holder or underwriter that states that it is specifically
for use in connection with the preparation of such Registration Statement,
preliminary prospectus, final prospectus, amendment, supplement or
document; provided, however, that the obligation to indemnify will be
-------- -------
several, not joint and several, among such Holders, and the maximum amount
of liability in respect of such indemnification shall be in proportion to
and limited to, in the case of each Holder, an amount equal to the net
proceeds actually received by such Holder from the sale of PPR Class B
Common Stock effected pursuant to such registration.
(k) The indemnification required by this Section 6.2 will be made by
periodic payments during the course of the investigation or defense, as and
when bills are received or expenses incurred, subject to prompt refund in
the event any such payments are determined not to have been due and owing
hereunder.
(l) Promptly after receipt by an indemnified party of notice of the
commencement of any action involving a claim referred to in the preceding
paragraphs of this Section 6.2, such indemnified party will, if a claim in
respect thereof is made against an indemnifying party, give written notice
to the latter of the commencement of such action. In case any such action
is brought against an indemnified party, the indemnifying party will be
entitled to participate in and to assume the defense thereof, jointly with
any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and
after notice from the indemnifying party to such indemnified party of its
election so to assume the defense thereof, the indemnifying party shall not
be responsible for any legal or other expenses subsequently incurred by the
latter in connection with the defense thereof; provided, however, that if
-------- -------
any indemnified party shall have reasonably concluded that there may be one
or more legal or equitable defenses available to such indemnified party
which are additional to or conflict with those available to the
indemnifying party, or that such claim or litigation involves or could have
an effect upon matters beyond the scope of the indemnity agreement provided
in this Section 6.2, the indemnifying party shall not have the right to
assume the defense of such action on behalf of such indemnified party and
such indemnifying party shall reimburse such indemnified party and any
person controlling such indemnified party for that portion of the fees and
expenses of any counsel retained by the indemnified party which is
reasonably related to the matters covered by the indemnity agreement
provided in this Section 6.2. No indemnifying party shall, without the
written consent of the indemnified party, effect the settlement or
compromise of, or consent to the entry of any judgment with respect to, any
pending or threatened action or claim in respect of which indemnification
or contribution may be sought hereunder (whether or not the indemnified
party is an actual or potential party to such action or claim) unless such
settlement, compromise or judgment (i) includes an unconditional release of
the indemnified party from all liability arising out of such action or
claim and (ii) does not include a statement as to or an admission of fault,
culpability or a failure to act, by or on behalf of any indemnified party.
A-39
<PAGE>
(m) The indemnification provided for under this Agreement will remain
in full force and effect regardless of any investigation made by or on
behalf of the indemnified party or any partner, member, officer, director
or controlling person of such indemnified party and will survive the
transfer of the PPR Class B Common Stock.
(n) If the indemnification provided for in this Section 6.2 is held by
a court of competent jurisdiction to be unavailable to any indemnified
party with respect to any loss, claim, damage, liability or action referred
to herein, then the indemnifying party, in lieu of indemnifying such
indemnified party hereunder, shall contribute to the amounts paid or
payable by such indemnified party as a result of such loss, claim, damage,
liability or action in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the
indemnified party on the other in connection with the statements or
omissions which resulted in such loss, claim, damage or liability as well
as any other relevant equitable considerations. The relative fault of the
indemnifying party and the indemnified party shall be determined by
reference to among other things whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by an indemnifying party or
by the indemnified party and the parties' relative intent, knowledge,
access to information and opportunity to correct or prevent such statement
or omission. PPR and the Holders agree that it would not be just and
equitable if contributions pursuant to this paragraph were determined by
pro rata allocation or by other method of allocation which did not take
--- ----
into account the equitable considerations referred to herein. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities or expenses referred to above shall be deemed to
include any legal or other expenses reasonably incurred in connection with
investigating or defending the same. Notwithstanding the foregoing, in no
event shall the amount contributed by a Holder exceed the aggregate net
offering proceeds received by such Holder from the sale of such Holder's
PPR Class B Common Stock.
Section 6.3 Access to Information and Properties. Subject to currently
------------------------------------
existing contractual and legal restrictions applicable to PPR or to Delta or any
of their Subsidiaries, each of PPR and Delta shall, and shall cause each of the
PPR and Delta Subsidiaries to, afford to the consultants, accountants, counsel,
financial advisors and other representatives of PPR and Delta reasonable access
to, and permit them to make such inspections and investigations (including,
without limitation, environmental audits, assessments and sub-surface
investigations) as they may reasonably require of, at mutually agreed upon times
during normal business hours during the period from the date of this Agreement
through the effective date of the Registration Statement, all their respective
properties, books, contracts, commitments and records (including, without
limitation, the work papers of independent accountants, if available and subject
to the consent of such independent accountants) and, during such period, PPR and
Delta shall, and shall cause each of the PPR and Delta Subsidiaries to, furnish
promptly to the other (i) a copy of each report, schedule, registration
statement and other document filed by it during such period pursuant to the
requirements of federal or state securities laws and (ii) all other information
concerning its business, properties and personnel as the other may reasonably
request.
Section 6.4 New Credit Facility. PPR shall use its reasonable best
-------------------
efforts to obtain a credit facility of up to $160 million on terms reasonably
acceptable to PPR (the "New Credit Facility"). The purposes of the New Credit
Facility shall include payment of certain debt owed by Delta, PPR and Dakota,
along with financing for working capital and acquisitions.
Section 6.5 [This section intentionally left blank]
A-40
<PAGE>
Section 6.6 NYSE Listing. PPR shall use its reasonable best efforts to
------------
cause the shares of PPR Class B Common Stock to be issued in connection with the
Exchange to be approved for listing on the NYSE, subject to official notice of
issuance.
Section 6.7 Fees and Expenses. Whether or not the Exchange is
-----------------
consummated, and except as otherwise provided in Section 8.2, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby including, without limitation, the fees and disbursements of
counsel, financial advisors and accountants, shall be paid by the party
incurring such costs and expenses; provided, however, that PPR shall pay all
-------- -------
expenses incurred by PPR in complying with this Article 6, including, without
limitation, all registration and filing fees (including all expenses incident to
filing with the NYSE), fees and expenses of complying with securities and blue
sky laws, printing expenses, and fees and expenses of PPR's counsel and
accountants; provided, further, that all underwriting discounts, fees and
-------- -------
expenses of counsel for the Holders and selling commissions applicable to the
PPR Class B Common Stock, if any, shall be borne by the Holders in proportion to
the number of shares of PPR Class B Common Stock sold by such Holder.
Section 6.8 Delta Senior Noteholders. Within thirty (30) days after
------------------------
Closing, Delta shall provide written notice of the consummation of the
transaction which is the subject of this Agreement to the holders of the 9 3/4%
Senior Notes due 2003 as required under the Indenture dated as of December 17,
1996 related thereto and advise such holders of their right to require Delta to
redeem their notes at 101% of par.
Section 6.9 Reasonable Best Efforts to Consummate the Exchange. Upon
--------------------------------------------------
the terms and subject to the conditions set forth in this Agreement, PPR and
Delta agree to use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate,
in the most expeditious manner practicable, the Exchange and the other
transactions contemplated by this Agreement, including, but not limited to: (i)
the obtaining of all necessary actions or nonactions, waivers, consents and
approvals from all Governmental Entities and the making of all necessary
registrations and filings (including filings with Governmental Entities) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement. Each Delta Stockholder agrees that, to the extent reasonably
requested by Delta or PPR, such Delta Shareholder shall assist and cooperate
with PPR and/or Delta in taking all such actions which may be reasonable and
necessary to consummate the Exchange, including, without limitation, providing
such information or documentation that PPR shall reasonably require in
connection with the issuance of shares hereunder pursuant to exemptions from
registration under the Securities Act or relevant state securities laws. No
party to this Agreement shall consent to any voluntary delay of the consummation
of the Exchange at the behest of any Governmental Entity without the consent of
the other parties to this Agreement, which consent shall not be unreasonably
withheld.
Section 6.10 Public Announcements. Delta and PPR each shall consult with
--------------------
the other prior to issuing any press releases or otherwise making public
announcements with respect to the Exchange and the other transactions
contemplated by this Agreement and prior to making any filings with any third
party and/or any Governmental Entity with respect thereto, except as may be
required by law or by obligations pursuant to any listing agreement with or
rules of the NYSE.
A-41
<PAGE>
Section 6.11 State Takeover Laws. If any "fair price," "business
-------------------
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby, PPR
and Delta and their respective Board of Directors shall use their reasonable
best efforts to grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to minimize the
effects of any such statute or regulation on the transactions contemplated
hereby.
Section 6.12 Indemnification. From and after the Closing, PPR agrees to,
---------------
and to cause Delta to, indemnify and hold harmless all past and present officers
and directors of Delta and of the Delta Subsidiaries to the maximum extent
permitted by the Delaware General Corporation Law (including advancing expenses
and attorneys' fees incurred prior to final disposition of any proceeding upon
receipt of an undertaking by such director or officer to repay such amount if it
shall be ultimately determined that he or she is not entitled to be indemnified
under the Delaware General Corporation Law), including but not limited to acts
or omissions occurring in connection with the approval of this Agreement, the
filing of the Registration Statement and the consummation of the transactions
contemplated hereby.
Section 6.13 Notification of Certain Matters. PPR shall use its
-------------------------------
reasonable best efforts to give prompt notice to Delta, and Delta shall use its
reasonable best efforts to give prompt notice to PPR, of: (i) the occurrence,
or non-occurrence, of any event the occurrence, or non-occurrence, of which it
is aware and which would be reasonably likely to cause (x) any representation or
warranty contained in this Agreement to be untrue or inaccurate in any material
respect or (y) any covenant, condition or agreement contained in this Agreement
not to be complied with or satisfied in all material respects, (ii) any failure
of PPR or Delta, as the case may be, to comply in a timely manner with or
satisfy any covenant, condition or agreement to be complied with or satisfied by
it hereunder or (iii) any change or event which would be reasonably likely to
have a Material Adverse Effect on PPR or Delta, as the case may be; provided,
however, that the delivery of any notice pursuant to this Section 6.13 shall not
limit or otherwise affect the remedies available hereunder to the party
receiving such notice.
Section 6.14 Transfer Taxes. All transfer, documentary, sales, use,
--------------
registration, value-added and other similar Taxes (including all applicable real
estate transfer Taxes) and related fees (including any penalties, interest an
additions to Tax) (collectively, "Transfer Taxes") incurred by any party hereto
in connection with this Agreement and the transactions contemplated hereby shall
be shared equally by Delta and PPR; provided, however, that each Delta
Stockholder shall pay and hold PPR and Delta harmless from any Transfer Taxes
and related penalties and additions that would not have arisen but for the
negligence of such Delta Stockholder. PPR and the Delta Stockholders shall
cooperate in timely making all filings, returns, reports and forms as may be
required to comply with the provisions of such Transfer Tax laws.
Section 6.15 Treatment of Delta Phantom Stock Plan Participants. The
--------------------------------------------------
existing Delta phantom stock plan will be amended, promptly following the
Closing, to increase the value of the participants' interest to reflect the
value of the transaction contemplated by this Agreement and to convert the
rights of participants under such phantom stock plan to a combination of PPR
Class B Common Stock and/or options to acquire PPR Class B Common Stock.
Section 6.16 Title Commitments. Delta and PPR shall promptly (and in no
-----------------
event more than ten (10) days after the date hereof), order from a title company
reasonably acceptable to the other (the "Title Company") a title insurance
commitment or commitments with respect to all of the Delta Owned Real Property
and the PPR Owned Real Property, as the case may be, other than those properties
for which the owner already has title insurance. Delta and PPR shall use their
respective reasonable efforts to cause the Title Company to issue the title
commitments as promptly as feasible and, immediately upon receipt thereof, shall
deliver such title commitments to the other. To the extent the recipient
reasonably objects to any
A-42
<PAGE>
matter(s) reflected therein other than Permitted Exceptions, or requests
additional information with respect thereto, the party delivering the title
commitments shall use its reasonable efforts to cause the Title Company to
modify and/or supplement the commitments accordingly. Delta shall, and shall
cause the Delta Subsidiaries to, reasonably cooperate with PPR in the event that
PPR undertakes to purchase title insurance and/or order surveys with respect to
any or all of the Delta Real Property.
Section 6.17 Delta Preferred Stock Dividends. PPR agrees from and after
-------------------------------
the Closing, with respect to the stock dividends accruing on the Delta Preferred
from and after October 2, 1999, to either (a) cause Delta to pay the quarterly
dividends, in cash, owed on the Delta Preferred or (b) make a contribution to
the capital of Delta in an amount sufficient to redeem Preferred Stock Series AA
shares issued as a dividend on the Delta Preferred from and after October 2,
1999 and cause Delta to redeem such shares, in cash, promptly after such shares
are issued to the holders of Delta Preferred.
Section 6.18 Independent Directors. From and after the Closing, Pohlad
---------------------
Companies and Pepsi-Cola Metropolitan Bottling Company, Inc. ("Metropolitan")
shall take all action within their respective power, and, for so long as they
are members of Dakota, LLC, shall cause Dakota, LLC to take all action within
its power, including but not limited to the voting of all shares of PPR Class A
Common Stock and PPR Class B Common Stock owned by them, required to cause at
least two of the directors on the Board of Directors of PPR not to be
"affiliates" (as such term is defined in Rule 405 of the Securities Act of 1933,
as amended) (all such directors hereinafter referred to as the "Independent
Directors") of Pohlad Companies or Metropolitan for so long as Dakota, LLC,
Pohlad Companies, Metropolitan or any of their affiliates, collectively or
individually, hold(s) a majority of the voting rights of the outstanding capital
stock of PPR. If Metropolitan transfers its membership interests in Dakota, LLC,
or any of the PPR capital stock which it is acquiring pursuant to this
Agreement, to PepsiCo or an affiliate of PepsiCo, then Metropolitan shall cause
such transferee to assume Metropolitan's obligations under this Section 6.18 and
Section 6.19 as a condition precedent to such transfer. If Pohlad Companies
transfers its membership interests in Dakota, LLC, or any of the PPR capital
stock which it is acquiring pursuant to this Agreement, to an affiliate of
Pohlad Companies, then Pohlad Companies shall cause such transferee to assume
Pohlad Companies' obligations under this Section 6.18 and Section 6.19 as a
condition precedent to such transfer.
Section 6.19 Transactions with Affiliates. Until June 15, 2003, Pohlad
----------------------------
Companies and Metropolitan agree not to cause, directly or indirectly, PPR or
any PPR Subsidiary to make any payment to, or sell, lease, transfer, substitute
or otherwise dispose of any of its properties or assets to, or purchase any
property or assets from, or enter into or make or amend any transaction,
contract, agreement, understanding, loan, advance or guarantee with, or for the
benefit of, directly or indirectly, any "affiliate" (as such term is defined in
Rule 405 of the Securities Act of 1933, as amended), officer, director or
employee (each an "Affiliate") of Pohlad Companies or Metropolitan (each of the
foregoing an "Affiliate Transaction") which Affiliate Transaction, together with
any related Affiliated Transaction(s), involves aggregate consideration in
excess of $500,000, unless such Affiliate Transaction is on terms that are no
less favorable to PPR or the relevant PPR Subsidiary than those that would have
been obtained in a comparable transaction by PPR or such PPR Subsidiary with an
unrelated person and such Affiliate Transaction shall receive the approval of a
majority of the Independent Directors. This Section 6.19 shall not apply to
transactions entered into in the course of business between an Affiliate of
Metropolitan as licensor and PPR or a PPR Subsidiary as licensee.
Section 6.20 Lock-Up Agreement. All Delta Stockholders shall execute a
-----------------
Lock-Up Agreement in the form attached hereto as Exhibit B which shall prohibit
---------
sale of PPR Class B Connon Stock for a period of six (6) months after the
Closing Date.
ARTICLE VII
A-43
<PAGE>
CONDITIONS PRECEDENT TO CLOSING
Section 7.1 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Exchange. The respective obligations of each party to effect the Exchange shall
be subject to the fulfillment at or prior to the Closing of the following
conditions, each of which may be waived only with the consent in writing of each
party not obligated to satisfy the condition.
(a) PPR Stockholder Approval. This Agreement and the transactions
------------------------
contemplated hereby, including the Share Issuance, the Exchange, the PPR
Charter Amendment and the PPR Option Plan Amendments shall have been duly
approved by the requisite vote of stockholders of PPR in accordance with
applicable law and the Certificate of Incorporation and Bylaws of PPR.
(b) Listing on the NYSE. The PPR Class B Common Stock issuable in the
-------------------
Exchange shall have been authorized for listing on the NYSE upon official
notice of issuance.
(c) Governmental Approvals. All authorizations, consents, orders,
----------------------
declarations or approvals of, or filings with, any Governmental Entity,
which the failure to obtain, make or occur would have the effect of making
the Exchange or any of the transactions contemplated hereby illegal or
would have a Material Adverse Effect on either of PPR or Delta (assuming
the Exchange had taken place), shall have been obtained or shall have been
made.
(d) Litigation. There shall not be instituted or pending any suit,
----------
action or proceeding by a Governmental Entity or any other person as a
result of this Agreement or any of the transactions contemplated herein
which would have a Material Adverse Effect on either PPR or Delta (assuming
for purposes of this paragraph (d) that the Exchange shall have occurred).
(e) No Order. No court or other Governmental Entity having
--------
jurisdiction over Delta or PPR, or any of their respective Subsidiaries,
shall have enacted, issued, promulgated, enforced or entered any law, rule,
regulation, executive order, decree, injunction or other order (whether
temporary, preliminary or permanent) which is then in effect and has the
effect of making this Agreement, the Exchange or any of the transactions
contemplated hereby illegal.
(f) Dakota Acquisition. The Dakota Acquisition shall have been
------------------
consummated or shall be completed simultaneously with the completion of the
Exchange, on substantially the terms set forth in the Dakota Exchange
Agreement (as hereinafter defined) without giving effect to any waiver or
modification thereof.
(g) New Credit Facility. The New Credit Facility shall have been
-------------------
obtained.
(h) Lock-Up Agreement. All Delta Stockholders shall have executed a
-----------------
Lock-Up Agreement in the form attached hereto as Exhibit B which shall
---------
prohibit sale of PPR Class B Common Stock for a period of six (6) months
after the Closing Date.
Section 7.2 Conditions to Obligation of the Delta Stockholders to Effect
------------------------------------------------------------
the Exchange. The obligation of the Delta Stockholders to effect the Exchange
- ------------
shall be subject to the fulfillment at or prior to the Closing of the following
additional conditions, each of which may be waived by the Delta Stockholders in
writing:
(a) Performance of Obligations; Representations and Warranties. PPR
----------------------------------------------------------
shall have performed in all material respects each of its agreements
contained in this Agreement required to be
A-44
<PAGE>
performed on or prior to the date of Closing, each of the representations
and warranties of PPR contained in this Agreement that is qualified by
materiality shall be true and correct on and as of the date of Closing as
if made on and as of such date (other than representations and warranties
which address matters only as of a certain date which shall be true and
correct as of such certain date) and each of the representations and
warranties that is not so qualified shall be true and correct in all
material respects on and as of the date of Closing as if made on and as of
such date (other than representations and warranties which address matters
only as of a certain date which shall be true and correct in all material
respects as of such certain date), in each case except as contemplated or
permitted by this Agreement, and the Delta Stockholders shall have received
a certificate signed on behalf of PPR by its Chief Executive Officer and
its Chief Financial Officer to such effect.
(b) Opinion of Counsel. The Delta Stockholders shall have received an
------------------
opinion of Willkie Farr & Gallagher, counsel to the PPR Special Committee,
in form and substance reasonably satisfactory to the Delta Stockholders,
dated the date of Closing, subject to customary qualifications and
limitations for opinions given in transactions of the kind contemplated
hereby, to the effect that PPR is in good standing under the laws of
Delaware and the PPR Class B Common Stock to be issued in the Exchange has
been duly authorized, validly issued, is not subject to further assessment,
and has been issued pursuant to applicable exemptions from registration
under the Securities Act.
(c) Execution of Registration Rights Agreement. The Registration
------------------------------------------
Rights Agreement in the form attached hereto as Exhibit C shall have been
---------
executed and delivered to Pohlad Companies by PPR.
(d) Consents. The consents, waivers, approvals and authorizations set
--------
forth on Schedule 7.2(d) hereto shall have been obtained.
(e) Miller Brewing Company Waiver. Delta shall have obtained a waiver
-----------------------------
of the ownership requirement through December 31, 1999 from Miller Brewing
Company.
(f) Payment of Notes. The Delta Subordinated Notes shall be paid in
----------------
full, in cash, at par, together with all accrued interest thereon through
the date of Closing and such payment shall take place simultaneously with
the Closing.
(g) Tax Opinion. Those holders of Delta Stock who exchanged such
-----------
Delta Stock for PPR Class B Common Stock (the "Exchanging Stockholders")
shall have received an opinion of Arthur Andersen LLP, or another
nationally-recognized independent accountant at PPR's election (the
"Accountant"), in form and substance reasonably satisfactory to the Delta
Stockholders, dated the date of Closing, substantially to the effect that
on the basis of facts, representations and assumptions set forth in such
opinion which are consistent with the state of facts existing as of the
date of Closing, for federal income tax purposes:
(i) The Exchange should qualify as a nontaxable transfer of
property by Exchanging Stockholders in exchange for PPR Class B Common
Stock under Section 351 of the Code.
(ii) No gain or loss should be recognized by the Exchanging
Stockholders upon the exchange of the Delta Stock solely for PPR Class
B Common Stock pursuant to the Exchange.
A-45
<PAGE>
(iii) If a holder of Delta Stock receives only PPR Class B Common
Stock in the Exchange, such holder's basis in the PPR Class B Common
Stock received in the exchange should be the same as the basis of
Delta Stock surrendered in the Exchange assuming there are no
liabilities assumed by PPR in connection therewith.
(iv) The holding period of the PPR Class B Common Stock received
by an Exchanging Stockholder pursuant to the Exchange should include
the period during which Delta Stock surrendered in the Exchange was
held, provided that Delta Stock surrendered was a capital asset on the
date of the Exchange.
In rendering such opinion, the Accountant may receive and rely upon
representations from PPR, Delta, Dakota and the Delta Stockholders.
(h) Amendment to Delta's Certificate of Incorporation. Delta's
-------------------------------------------------
Certificate of Incorporation shall be amended to eliminate (i) the Fourth
Section, paragraphs 3 and 4, (ii) the Fifth Section, (iii) the Sixth
Section, paragraph 3, and (iv) the Seventh Section.
Section 7.3 Conditions to Obligations of PPR to Effect the Exchange.
-------------------------------------------------------
The obligations of PPR to effect the Exchange shall be subject to the
fulfillment at or prior to the date of Closing of the following additional
conditions, each of which may be waived by PPR in writing:
(a) Performance of Obligations; Representations and Warranties. Delta
----------------------------------------------------------
and the Delta Stockholders shall have performed in all material respects
each of their agreements contained in this Agreement required to be
performed by them on or prior to the date of Closing, each of the
representations and warranties of Delta and the Delta Stockholders
contained in this Agreement that is qualified by materiality shall be true
and correct on and as of the date of Closing as if made on and as of such
date (other than representations and warranties which address matters only
as of a certain date which shall be true and correct as of such certain
date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of
the date of Closing as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date), in each case except as contemplated or permitted by this
Agreement, and PPR shall have received a certificate signed on behalf of
Delta by its Chief Executive Officer and its Chief Financial Officer to
such effect.
(b) Consents. The consents, waivers, approvals and authorizations set
--------
forth on Schedule 7.3 (b) hereto shall have been obtained.
(c) Opinion of Counsel. PPR shall have received an opinion of counsel
------------------
to Delta in form and substance reasonably satisfactory to PPR, dated the
Closing Date, subject to customary qualifications, limitations and
qualifications for opinions given in transactions of the kind contemplated
hereby, to the effect that Delta is duly organized, validly existing and in
good standing under the laws of Delaware.
(d) Dakota Representations and Warranties. The representations and
-------------------------------------
warranties of Dakota and Pohlad Companies contained in the Exchange
Agreement by and among PPR, Dakota and Pohlad Companies (the "Dakota
Exchange Agreement") shall be true and correct in all material respects
without respect to any waiver of or modification to such representations
and warranties by the parties to the Dakota Exchange Agreement.
A-46
<PAGE>
ARTICLE VII
TERMINATION, AMENDMENT AND WAIVER
Section 8.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing, whether before or after any approval of the matters
presented in connection with the Exchange by the stockholders of PPR:
(a) by mutual written consent of PPR, Delta and all of the Delta
Stockholders;
(b) by either PPR on the one hand, or Delta or the Delta Stockholders
on the other hand, if the other party shall have failed to comply in any
material respect with any of its covenants or agreements contained in this
Agreement required to be complied with prior to the date of such
termination, which failure to comply has not been cured within five (5)
business days following receipt by such other party of written notice of
such failure to comply; provided, however, that if any such breach is
curable by the breaching party through the exercise of the breaching
party's best efforts and for so long as the breaching party shall be so
using its best efforts to cure such breach, the non-breaching party may not
terminate this Agreement pursuant to this paragraph;
(c) by either PPR on the one hand, or Delta or the Delta Stockholders
on the other hand, if there has been (i) a breach by the other party of any
representation or warranty that is not qualified as to materiality which
has the effect of making such representation or warranty not true and
correct in all material respects or (ii) a breach by the other party of any
representation or warranty that is qualified as to materiality, in each
case which breach has not been cured within five (5) business days
following receipt by the breaching party of written notice of the breach or
except as contemplated or permitted by this Agreement; provided, however,
that if any such breach is curable by the breaching party through the
exercise of the breaching party's best efforts and for so long as the
breaching party shall be so using its best efforts to cure such breach, the
non-breaching party may not terminate this Agreement pursuant to this
paragraph;
(d) by PPR on the one hand, or Delta or the Delta Stockholders
holding, in aggregate, a majority of the Delta Stock on the other hand, if
the Exchange has not been effected on or prior to the close of business on
November 30, 1999 (the "Termination Date"); provided, however, that the
right to terminate this Agreement pursuant to this Section 8.1(d) shall not
be available to any party whose failure to fulfill any of its obligations
contained in this Agreement has been the cause of, or resulted in, the
failure of the Exchange to have occurred on or prior to the aforesaid date;
(e) by PPR on the one hand, or Delta or the Delta Stockholders on the
other hand, if the stockholders of PPR do not approve this Agreement and
the transactions contemplated hereby, including, the Share Issuance, the
Exchange and the PPR Charter Amendment at the PPR Stockholder Meeting or
any adjournment or postponement thereof; or
(f) by PPR on the one hand, or Delta or the Delta Stockholders on the
other hand, if: (i) there shall be a final, non-appealable order of a
federal or state court in effect preventing consummation of the
transactions contemplated hereby; or (ii) there shall be any final action
taken, or any statute, rule, regulation or order enacted, promulgated or
issued or deemed applicable to the transactions contemplated hereby by any
Governmental Entity which would make consummation of the transactions
contemplated hereby illegal.
A-47
<PAGE>
The right of any party hereto to terminate this Agreement pursuant to this
Section 8.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 8.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either PPR, Delta or the Delta Stockholders, as provided in Section
8.1, this Agreement shall forthwith terminate and there shall be no liability
hereunder on the part of the Delta Stockholders, Delta, PPR, or their respective
officers or directors (except for the entirety of Section 6.7, which shall
survive the termination); provided, however, that nothing contained in this
Section 8.2 shall relieve any party hereto from any liability for any breach of
a representation or warranty contained in this Agreement or the breach of any
covenant contained in this Agreement; provided, further, that in addition to any
other remedies available to any party under this Agreement or at law or in
equity, in the event that the Exchange does not occur as a direct result of
breach of this Agreement by a party hereto, the breaching party shall be
responsible for all costs and expenses incurred in connection with the
transactions contemplated hereby by the non-breaching party including, but not
limited to, the fees and disbursements of all legal, accounting, financial and
other advisers.
Section 8.3 Amendment. This Agreement may be amended by the parties
---------
hereto at any time before or after approval of the matters presented in
connection with the Exchange by the stockholders of PPR, but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 8.4 Waiver. At any time prior to the Closing, the parties
------
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE IX
GENERAL PROVISIONS
Section 9.1 Non-Survival of Representations, Warranties and Agreements.
----------------------------------------------------------
The representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall terminate at the Closing
or upon the termination of this Agreement pursuant to Section 8.1, as the case
may be, and no claim for breach of any such representation, warranty or
agreement may be made after Closing or termination of this Agreement, as the
case may be, except that (i) Article I shall survive the Closing; (ii) the
representations and warranties of PPR set forth in Sections 2.1, 2.2, 2.3 and
2.4 and the representations and warranties of the Delta Stockholders set forth
in Sections 4.1, 4.2, 4.3, 4.4,4.5, 4.6 and 4.7 shall survive the Closing
indefinitely; and (iii) the agreements set forth in Sections 6.2, 6.3, 6.6, 6.7,
6.8, 6.9, 6.12, 6.13, 6.14, 6.15, 6.17, 6.18 and 6.19 and this Article IX shall
survive the Closing, and those set forth in Sections 6.7 and 8.2 and this
Article IX shall survive termination.
Section 9.2 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given when delivered personally, one day
after being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
A-48
<PAGE>
(a) if to PPR, to: Pepsi-Cola Puerto Rico Bottling
Company
P.O. Box 191709
Carr. 865 km 0.4
Barrio Candelaria Arenas
Toa Baja, PR 00949
Attn: President
with a copy to: Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
Attn: Christopher E. Manno, Esq.
(b) if to Delta, to Delta Beverage Group, Inc.
3880 Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402
(c) If to the Delta Stockholders, the addresses listed on Exhibit D
to: ---------
(d) And, in all cases, a copy to: Pohlad Companies
3880 Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402
Attn: Robert C. Pohlad
with a further copy to: Briggs and Morgan, P.A.
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attn: Brian D. Wenger, Esq.
Section 9.3 Interpretation. When a reference is made in this Agreement
---------------
to a Section or Article, such reference shall be to a Section or Article of this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 9.4 Counterparts. This Agreement may be executed in
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 9.5 Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder, except as set
forth in Sections 6.2, 6.12 and except that Section 6.17 shall inure to the
benefit of any transferee of the Delta Preferred.
Section 9.6 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS
A-49
<PAGE>
RIGHT TO A TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT
OF OR RELATING TO THIS AGREEMENT IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE
AND ENFORCEMENT THEREOF.
Section 9.7 Assignment. Except for the registration provisions set
----------
forth in Section 6.2, neither this Agreement nor any of the rights, interests or
obligations hereunder shall be assigned by any of the parties hereto (whether by
operation of law or otherwise) without the prior written consent of the other
parties, except that Pohlad Companies and Metropolitan may assign their
interests under this agreement and any related agreement to Dakota, LLC, a
Delaware limited liability company ("Dakota, LLC"), which Pohlad Companies will
cause to be formed pursuant to the terms and conditions of the Dakota Exchange
Agreement. This Agreement shall inure to the benefit of, and shall be binding
upon, the successors and permitted assigns of the parties hereto and Section
6.17 shall inure to the benefit of any transferee of the Delta Preferred.
Section 9.8 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
Section 9.9 Enforcement of this Agreement. The parties hereto agree
-----------------------------
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, such remedy being in addition to
any other remedy to which any party is entitled under this Agreement at law or
in equity. Each party hereto hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the United States District Court located
in the State of Delaware (unless such courts assert no jurisdiction, in which
case each party consents to the exclusive jurisdiction of the courts of the
State of Delaware) for any actions, suits or proceedings arising out of or
relating to this Agreement and the transactions contemplated hereby (and each
party hereto agrees not to commence any action, suit or proceeding relating
thereto except in such courts), and further agrees that service of any process,
summons, notice or document by U.S. registered mail to the addresses set forth
herein shall be effective service of process for any such action, suit or
proceeding brought against the each party in such court. Each party hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby, in the United States District Courts located
in the State of Delaware (unless such courts assert no jurisdiction, in which
case each party consents to the exclusive jurisdiction of the courts of the
State of Delaware). Each party hereby further irrevocably and unconditionally
waives and agrees not to plead or to claim in any such court that any such
action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
Section 9.10 Rule of Construction. The parties acknowledge and agree
--------------------
that each has negotiated and reviewed the terms of this Agreement, assisted by
such counsel as they desired, and has contributed to its revisions. The parties
further agree that the rule of construction that any ambiguities are resolved
against the drafting party will be subordinated to the principle that the terms
and provisions of this Agreement will be construed fairly as to all parties and
not in favor of or against any party.
A-50
<PAGE>
Section 9.11 Effect of Execution. The execution of this Agreement by
-------------------
each of the Delta Stockholders shall be deemed to be: (a) a consent to the
transaction contemplated by this Agreement in their capacities as an owner of
Delta Stock and Delta Preferred and (b) a consent to the transaction
contemplated by this Agreement to the extent required under the Delta
Certificate of Incorporation, the Delta by-laws, any other governing or
organizational document, or any agreement between or among any Delta
Stockholders and/or Delta (including, without limitation, the Amended and
Restated Shareholder's Agreement dated as of September 23, 1993). Additionally,
if requested by Delta or PPR, each of the Delta Stockholders agrees to execute
and deliver, without requirement of additional consideration, such other or
additional documents, instruments, agreements or consents necessary to
effectuate the foregoing transaction.
Section 9.12 Rights Under Amended and Restated Shareholder's Agreement.
---------------------------------------------------------
The Delta Stockholders agree that Pohlad Companies may, at Pohlad Companies'
sole discretion, assign its rights under the Amended and Restated Shareholder's
Agreement dated as of September 23, 1993 to PPR or Delta. The Delta
Stockholders further agree that Sections 2, 3, 7 and 9 of such agreement shall
be of no further force and effect as of the Closing.
Section 9.13 Termination of Amended and Restated Co-Sale Agreement. The
-----------------------------------------------------
Delta Stockholders hereby agree that the Amended and Restated Co-Sale Agreement
entered into by the stockholders of Delta as of September 23, 1993, is
terminated and of no further force and effect as of the Closing.
Section 9.14 Amendment to Delta's Certificate of Incorporation. The
-------------------------------------------------
Delta Stockholders shall cause the amendment to the Delta's Certificate of
Incorporation referenced in Section 7.2(h) to become effective on or prior to
the Closing.
IN WITNESS WHEREOF, the parties hereto have executed or have caused this
Agreement to be executed by their respective duly authorized officers all as of
the date first written above.
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
By: /s/ John F. Bierbaum
---------------------
Name: John F. Bierbaum
Title: Chief Financial Officer, Vice President
Only as to Articles 1, 3, 8 and 9 and Sections 5.2, 6.2(b), 6.3, 6.7, 6.8 -
6.16, 7.1(c), (d) and (e), 7.2(e), (f), (g) and (h) and 7.3(a), (b) and (c)
DELTA BEVERAGE GROUP, INC.
By: /s/ Robert C. Pohlad
---------------------
Name: Robert C. Pohlad
Title: Chief Executive Officer
A-51
<PAGE>
DELTA STOCKHOLDERS
<TABLE>
<CAPTION>
No. of Shares
----------------------------------------------
Common Non-Voting Preferred
Stock Common Stock
------ Stock --
---------- Series AA
---------
Name
----
<S> <C> <C> <C>
Pohlad Companies 12,037.87
By: /s/ Robert C. Pohlad
-----------------------------------------------
Its: President
-----------------------------------------------
/s/ Robert C. Pohlad
- --------------------------------------------------- 100.00
Robert C. Pohlad
- ---------------------------------------------------
/s/ William M. Pohlad
- --------------------------------------------------- 100.00
William M. Pohlad
- ---------------------------------------------------
/s/ James O. Pohlad
- --------------------------------------------------- 100.00
James O. Pohlad
- ---------------------------------------------------
Pepsi-Cola Metropolitan Bottling Company, Inc. 3,221.57
By: /s/ W. Timothy Heaviside
-----------------------------------------------
Its: Vice President
-----------------------------------------------
Arbeit Investment Limited Partnership 4,187.92
By: Adler Management Corporation
Its: General Partner
By: /s/ John H. Agee
------------------------------------------
Its: President
-------------------------------------
/s/ Kenneth E. Keiser
- --------------------------------------------------- 532.51
Kenneth E. Keiser
</TABLE>
A-52
<PAGE>
<TABLE>
<CAPTION>
No. of Shares
----------------------------------------------
Common Non-Voting Preferred
Stock Common Stock
------ Stock --
---------- Series AA
---------
Name
----
<S> <C> <C> <C>
/s/ John F. Bierbaum
- --------------------------------------------------------- 22.00
John F. Bierbaum
U.S. Bancorp (f/k/a First Bank System, Inc.) 469.99
By: /s/ Susan E. Lester
-----------------------------------------------------
Its: Chief Financial Officer
-----------------------------------------------
The Morgan Stanley Leveraged Mezzanine Fund, L.P. 4,236.17 2,102.835
By: /s/ Morgan Stanley Leveraged Capital Fund, Inc.
-----------------------------------------------------
Its General Partner
By: /s/ Kenneth F. Clifford
----------------------------------------------
Its: Vice President, CFO and Treasurer
---------------------------------------
By: /s/ Cigna Leveraged Capital Fund, Inc.
-----------------------------------------------------
Its General Partner
By: /s/ Maurice A. Gordon
---------------------
Its: Vice President
---------------------------------------
Massachusetts Mutual Life Insurance Co. 5,476.63
By: /s/ Robert Joyal
-----------------------------------------------------
Its: Executive Director
-----------------------------------------------
Mass Mutual Corporate Investors 966.43
By: /s/ Robert Joyal
-----------------------------------------------------
Its: Senior Vice President
The Northwestern Mutual Life Insurance Co. 9,357.30 1,874.147
By: /s/ John Schlifske
-----------------------------------------------------
Its: Senior Vice President
-----------------------------------------------
</TABLE>
A-53
<PAGE>
<TABLE>
<CAPTION>
No. of Shares
---------------------------------------------------------
Common Non-Voting Preferred
Stock Common Stock
------ Stock --
---------- Series AA
---------
Name
----
<S> <C> <C> <C>
CIGNA Property & Casualty Ins. Co. 306.20
(CIG & Co.)
By: /s/ James R. Kuzemchak
-----------------------------------------------------
Its: Investment Officer
-----------------------------------------------
Connecticut General Life Insurance Co. 3,283.26 1,420.81
(CIG & Co.)
By: /s/ James R. Kuzemchak
-----------------------------------------------------
Its: Assistant Vice President
-----------------------------------------------
Insurance Company of North America 3,904.00
(CIG & Co.)
By: Cigna Investments, Inc.
By: /s/ Richard B. McGauley
-----------------------------------------------------
Its: Managing Director
-----------------------------------------------
Norwest Venture Capital Management, Inc. 3,865.95
By: /s/ John E. Lindahl
-----------------------------------------------------
Its: Vice President
-----------------------------------------------
First Colony Life Insurance Co. 100.20
By: /s/ Greg M. Card
-----------------------------------------------------
Its: Assistant Vice President & Investment Officer
-----------------------------------------------
The Lincoln National Life Insurance Company 1,290.00 543.44
By: Lincoln Investment Management, Inc.
Its Attorney-in-Fact
By: /s/ Richard L. Cowen
-----------------------------------------------------
Its: Vice President
-----------------------------------------------
</TABLE>
A-54
<PAGE>
EXHIBIT 10.2
DAKOTA EXCHANGE AGREEMENT
June 28, 1999
B-1
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I - PRE-CLOSING TRANSACTIONS..............................................................-2-
Section 1.1 Formation of DakBev and Subsidiaries of DakBev.........................-2-
Section 1.2 Merger of DakBev and Dakota............................................-2-
Section 1.3 Merger of the Wholly Owned Corporations into the DakBev LLCs...........-2-
Section 1.4 Formation of Dakota, LLC...............................................-2-
Section 1.5 Contributions to Dakota, LLC...........................................-3-
ARTICLE II - THE EXCHANGE.........................................................................-3-
Section 2.1 The Exchange...........................................................-3-
Section 2.2 Exchange Procedures....................................................-3-
Section 2.3 Closing................................................................-3-
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF PPR...............................................-4-
Section 3.1 Organization, Standing and Power.......................................-4-
Section 3.2 Capital Structure......................................................-4-
Section 3.3 Authority..............................................................-5-
Section 3.4 Consents and Approvals; No Violation...................................-6-
Section 3.5 SEC Documents and Other Reports........................................-7-
Section 3.6 Absence of Certain Changes.............................................-7-
Section 3.7 Permits; Compliance and Contracts......................................-9-
Section 3.8 Tax Matters...........................................................-10-
Section 3.9 Actions and Proceedings...............................................-11-
Section 3.10 Certain Agreements....................................................-11-
Section 3.11 Employee Benefit Matters..............................................-11-
Section 3.12 Compliance with Environmental Laws....................................-14-
Section 3.13 Labor Matters.........................................................-15-
Section 3.14 Intellectual Property.................................................-15-
Section 3.15 Title to Assets; Insurance............................................-16-
Section 3.16 Real Property.........................................................-16-
Section 3.17 Title Insurance.......................................................-18-
Section 3.18 Zoning................................................................-18-
Section 3.19 Brokers...............................................................-18-
Section 3.20 Relationships.........................................................-18-
Section 3.21 Compliance with Quality Standards.....................................-18-
Section 3.22 Year 2000 Compliance..................................................-18-
Section 3.23 Delaware Business Combination Statute.................................-19-
Section 3.24 Disclosure............................................................-19-
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF DAKOTA............................................-19-
Section 4.1 Organization, Standing and Power......................................-19-
Section 4.2 Capital Structure.....................................................-20-
Section 4.3 Authority.............................................................-21-
Section 4.4 Consents and Approvals; No Violation..................................-21-
Section 4.5 Financial Statements..................................................-22-
</TABLE>
B-2
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
Section 4.6 Absence of Certain Changes or Events..................................-22-
Section 4.7 Permits; Compliance and Contracts.....................................-24-
Section 4.8 Tax Matters...........................................................-25-
Section 4.9 Actions and Proceedings...............................................-26-
Section 4.10 Certain Agreements....................................................-26-
Section 4.11 Employee Benefit Matters..............................................-26-
Section 4.12 Compliance with Environmental Laws....................................-29-
Section 4.13 Indebtedness..........................................................-29-
Section 4.14 Labor Matters.........................................................-29-
Section 4.15 Intellectual Property.................................................-30-
Section 4.16 Title to Assets; Insurance............................................-30-
Section 4.17 Real Property.........................................................-31-
Section 4.18 Title Insurance.......................................................-32-
Section 4.19 Zoning................................................................-33-
Section 4.20 Brokers...............................................................-33-
Section 4.21 Relationships.........................................................-33-
Section 4.22 Compliance with Quality Standards.....................................-33-
Section 4.23 Year 2000 Compliance..................................................-33-
Section 4.24 Disclosure............................................................-33-
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF POHLAD.............................................-34-
Section 5.1 Organization; Title; Authority........................................-34-
Section 5.2 No Breach.............................................................-34-
Section 5.3 No Consents...........................................................-34-
Section 5.4 Entire Interest.......................................................-35-
Section 5.5 Accredited Investor Status; PPR Information...........................-35-
Section 5.6 Unregistered Securities; Investment Intent............................-35-
Section 5.7 Restrictions on Transfer..............................................-35-
ARTICLE VI - COVENANTS RELATING TO CONDUCT OF BUSINESS...........................................-35-
Section 6.1 Actions by PPR........................................................-35-
Section 6.2 Actions by Dakota.....................................................-37-
ARTICLE VII - ADDITIONAL AGREEMENTS..............................................................-39-
Section 7.1 PPR Stockholder Meeting...............................................-39-
Section 7.2 Preparation of the Proxy Statement....................................-40-
Section 7.3 Access to Information and Properties..................................-40-
Section 7.4 New Credit Facility...................................................-40-
Section 7.5 NYSE Listing..........................................................-41-
Section 7.6 Fees and Expenses.....................................................-41-
Section 7.7 Reasonable Best Efforts to Consummate the Exchange....................-41-
Section 7.8 Public Announcements..................................................-41-
Section 7.9 State Takeover Laws...................................................-41-
Section 7.10 Indemnification.......................................................-42-
Section 7.11 Notification of Certain Matters.......................................-42-
Section 7.12 Tax Matters...........................................................-42-
Section 7.13 Treatment of Dakota Phantom Stock Plan Participants...................-44-
Section 7.14 Title Commitments.....................................................-44-
</TABLE>
B-3
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
ARTICLE VIII - CONDITIONS PRECEDENT TO CLOSING...................................................-44-
Section 8.1 Conditions to Each Party's Obligation to Effect the Exchange..........-44-
Section 8.2 Conditions to Obligation of Dakota, LLC to Effect the Exchange........-45-
Section 8.3 Conditions to Obligations of PPR to Effect the Exchange...............-47-
ARTICLE IX - TERMINATION, AMENDMENT AND WAIVER...................................................-48-
Section 9.1 Termination...........................................................-48-
Section 9.2 Effect of Termination.................................................-49-
Section 9.3 Amendment.............................................................-49-
Section 9.4 Waiver................................................................-49-
ARTICLE X - GENERAL PROVISIONS...................................................................-50-
Section 10.1 Non-Survival of Representations, Warranties and Agreements............-50-
Section 10.2 Notices...............................................................-50-
Section 10.3 Interpretation........................................................-51-
Section 10.4 Counterparts..........................................................-51-
Section 10.5 Entire Agreement; No Third-Party Beneficiaries........................-51-
Section 10.6 Governing Law.........................................................-51-
Section 10.7 Assignment............................................................-51-
Section 10.8 Severability..........................................................-51-
Section 10.9 Enforcement of this Agreement.........................................-52-
</TABLE>
B-4
<PAGE>
DAKOTA
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT, dated as of June 28, 1999 (this "Agreement"), among
PEPSI-COLA PUERTO RICO BOTTLING COMPANY, a Delaware corporation ("PPR"), DAKOTA
BEVERAGE COMPANY, INC., a Minnesota corporation ("Dakota"), and POHLAD
COMPANIES, a Minnesota corporation and the sole shareholder of Dakota
("Pohlad").
WITNESSETH:
WHEREAS, the respective Boards of Directors of Dakota and Pohlad have
determined that the transactions described in this Agreement are in their
respective companies' best interests and the best interests of their
shareholders and, accordingly, have authorized their respective companies to
enter into this Agreement; and
WHEREAS, a special committee of the Board of Directors of PPR (the "PPR
Special Committee") and the Board of Directors of PPR have determined that the
transactions described in this Agreement are in PPR's and its stockholders'
respective best interests and, accordingly, have authorized PPR to enter into
this Agreement and agreed to recommend to its stockholders that this Agreement
and the transactions contemplated hereby be approved by PPR's stockholders; and
WHEREAS, this Agreement contemplates that Pohlad will form DakBev, LLC, a
Delaware limited liability company ("DakBev") which will be a wholly owned
subsidiary of Pohlad and that Dakota will merge with and into DakBev and,
furthermore, that each wholly owned corporation of Dakota will merge with and
into newly created wholly owned limited liability companies of DakBev
(collectively these transactions shall be referred to herein as the "DakBev
Merger"); and
WHEREAS, this Agreement further contemplates the formation of Dakota, LLC,
a Delaware limited liability company whose members will be Pohlad and Pepsi-Cola
Metropolitan Bottling Company, Inc., a Delaware corporation ("Metropolitan"),
and that Pohlad will contribute all its membership interests in DakBev (the
"DakBev Membership Units") to Dakota, LLC and that Metropolitan will contribute
shares of the common stock of PepsiCo, Inc., a Delaware corporation ("PepsiCo")
to Dakota, LLC in exchange for a membership interest therein; and
WHEREAS, this Agreement provides for the issuance by PPR of shares of its
Class B common stock, par value $.01 per share (the "PPR Class B Common Stock"),
and for Dakota, LLC to exchange all of the DakBev Membership Units for PPR Class
B Common Stock in the manner set forth herein (the "Exchange"), and that, as a
result, DakBev will become a wholly-owned subsidiary of PPR; and
WHEREAS, the DakBev Merger will occur immediately prior to the contribution
by Pohlad of its DakBev Membership Units to Dakota, LLC, which, in turn, will
occur immediately prior to the Exchange; and
B-5
<PAGE>
WHEREAS, as an inducement to PPR entering into this Agreement and incurring
the obligations set forth herein, concurrently with the execution and delivery
of this Agreement, P-PR Transfer, LLP, a Delaware limited liability partnership
("P-PRT") and PPR are entering into a Voting Agreement in the form of Exhibit A
hereto pursuant to which P-PRT has agreed to vote its shares of PPR Class A
common stock par value $.01 per share (the "PPR Class A Common Stock") and PPR
Class B Common Stock in favor of this Agreement and the transactions
contemplated hereby; and
WHEREAS, simultaneously with, and as a condition to, the consummation of
the Exchange, PPR will acquire all of the issued and outstanding shares of Delta
Beverage Group, Inc., a Delaware corporation (the "Delta Acquisition"); and
WHEREAS, for federal income tax purposes, it is intended that the Exchange
together with the Delta Acquisition shall qualify as a transfer to a controlled
corporation within the meaning of Section 351(a) of the Internal Revenue Code of
1986, as amended (the "Code").
NOW, THEREFORE, in consideration of the premises, and in reliance on the
representations, warranties and covenants contained herein, the parties agree as
follows:
ARTICLE I.
PRE-CLOSING TRANSACTIONS
Section 1.1 Formation of DakBev and Subsidiaries of DakBev. Prior to
----------------------------------------------
the Closing, Pohlad hereby agrees to take all necessary actions to: (a) form
DakBev, including, but not limited to, filing the Certificate of Formation of
DakBev with the Secretary of State of Delaware and (b) form seven (7) wholly
owned limited liability companies of DakBev (the "DakBev LLCs") including, but
not limited to, filing the Certificates of Formation with the Secretary of State
of the State of Delaware for each of the DakBev LLCs.
Section 1.2 Merger of DakBev and Dakota. Prior to the Closing, and
---------------------------
after the formation of DakBev, Pohlad hereby agrees to cause Dakota to merge
with and into DakBev pursuant to Section 18-209 of the Delaware Limited
Liability Company Act. DakBev shall be the surviving limited liability company
as a result of the DakBev Merger.
Section 1.3 Merger of the Wholly Owned Corporations into the DakBev
-------------------------------------------------------
LLCs. Prior to the Closing and after the formation of DakBev and the DakBev
LLCs, Pohlad hereby agrees to cause each of Dakota's seven (7) wholly owned
corporations to merge with and into the DakBev LLCs pursuant to Section 18-209
of the Delaware Limited Liability Company Act. The seven (7) DakBev LLCs, each
a wholly owned subsidiary of DakBev, will be the surviving limited liability
companies as a result of the DakBev Merger.
Section 1.4 Formation of Dakota, LLC. Pohlad hereby agrees to take all
------------------------
necessary actions prior to the Closing to form Dakota, LLC, including, but not
limited to, (a) filing the Certificate of Formation of Dakota, LLC with the
Secretary of State of the State of Delaware and (b) authorizing and signing a
limited liability company agreement of Dakota, LLC. At the Closing, Pohlad will
have all requisite power and authority, including voting control of Dakota, LLC,
necessary to cause Dakota, LLC to exchange the DakBev Membership Units for the
Exchange Consideration (as defined below) in accordance with Article II hereof.
Section 1.5 Contributions to Dakota, LLC.
----------------------------
B-6
<PAGE>
(a) Immediately prior to the Closing, and subsequent to the completion
of the events set forth in Section 1.1, Section 1.2 and Section 1.3 above,
and subject to the contribution by Metropolitan of certain of PepsiCo.'s
shares of issued and outstanding common stock to Dakota, LLC, Pohlad will
contribute all of the DakBev Membership Units to Dakota, LLC, in exchange
for a membership interest in Dakota, LLC (the "Pohlad Contribution").
(b) At the same time, the partners of P-PRT will contribute all of
their partnership interest in P-PRT to Dakota, LLC in exchange for
membership interests in Dakota, LLC (the "P-PRT Contribution").
Immediately after the P-PRT Contribution, P-PRT will be dissolved and its
assets distributed to Dakota, LLC in complete liquidation.
ARTICLE II
THE EXCHANGE
Section 2.1 The Exchange. At the Closing (as defined in Section 2.3)
------------
all of the DakBev Membership Units issued and outstanding immediately prior to
the Closing shall be exchanged for 46,760,000 shares of validly issued, fully
paid and nonassessable shares of PPR Class B Common Stock (the "Exchange
Consideration").
Section 2.2 Exchange Procedures.
-------------------
At the Closing (i) PPR shall deliver to Dakota, LLC certificates
representing the Exchange Consideration and (ii) Pohlad will cause Dakota, LLC
to deliver to PPR all of the issued and outstanding DakBev Membership Units free
and clear of all Encumbrances (as defined in Section 3.2) and a fully executed
Assignment of Membership Interests pursuant to which Dakota, LLC will assign all
of its right, title and interest in and to the DakBev Membership Units to PPR.
Section 2.3 Closing. The closing of the transactions contemplated by
-------
this Agreement (the "Closing") and all actions specified in this Agreement to
occur at the Closing shall take place at the offices of Briggs and Morgan,
Professional Association, 2400 IDS Center, 80 South Eighth Street, Minneapolis,
Minnesota, at 10:00 a.m., local time, no later than the third business day
following the day on which the last of the conditions set forth in Article VIII
shall have been fulfilled or waived (if permissible) or at such later time and
place as PPR and Dakota shall agree in writing.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF PPR
PPR represents and warrants to Pohlad and Dakota as follows:
Section 3.1 Organization, Standing and Power. PPR is a corporation duly
--------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, and has the requisite corporate power and authority to own, lease or
operate its properties, and to carry on its business as now being conducted.
Each Subsidiary of PPR (the "PPR Subsidiaries") is duly organized, validly
existing and in good standing under the laws of the jurisdiction in which it is
organized and has the requisite corporate (in the case of a Subsidiary that is a
corporation) or other power and authority to own, lease or operate its
properties, and to carry on its business as now being conducted. PPR and each
of the PPR Subsidiaries are duly qualified to do business, and are in good
standing, in each jurisdiction where the character of their properties owned or
B-7
<PAGE>
held under lease or the nature of their activities makes such qualification
necessary, except where the failure to be so qualified would not, individually
or in the aggregate, have a Material Adverse Effect on PPR. For purposes of
this Agreement (a) "Material Adverse Change" or "Material Adverse Effect" means,
when used with respect to PPR or Dakota, as the case may be, any change or
effect that is materially adverse to the business, assets, liabilities, results
of operation or condition (financial or otherwise) of PPR and the PPR
Subsidiaries, taken as a whole, or Dakota and the Dakota Subsidiaries, taken as
a whole, as the case may be, and (b) "Subsidiary" means any corporation,
partnership, limited liability company, joint venture or other legal entity of
which PPR or Dakota, as the case may be (either alone or through or together
with any other Subsidiary), owns, directly or indirectly, 50% or more of the
stock or other equity interests the holders of which are generally entitled to
vote for the election of the board of directors or other governing body of such
corporation, partnership, limited liability company, joint venture or other
legal entity. For the purposes of this Agreement, except where specifically
stated otherwise, "Dakota" and "Dakota Subsidiaries" shall mean (x) Dakota and
its subsidiaries, respectively, for the period prior to the DakBev Merger and
(y) DakBev and its subsidiaries, respectively, for the period after the DakBev
Merger.
Section 3.2 Capital Structure.
-----------------
(a) Capital Stock of PPR. The authorized capital stock of PPR
--------------------
consists of 40,000,000 shares, of which 5,000,000 shares are designated as
PPR Class A Common Stock and 35,000,000 are designated as PPR Class B
Common Stock. As of the date hereof, PPR has issued and outstanding
5,000,000 shares of PPR Class A Common Stock and 16,690,000 shares of PPR
Class B Common Stock. All outstanding shares of PPR Class A Common Stock
and PPR Class B Common Stock have been duly authorized and validly issued
and are fully paid and nonassessable. Except as set forth in PPR's Form
10-K for the period ended December 31, 1998, and except for option grants
under the Pepsi-Cola Puerto Rico Bottling Company Qualified Plan dated
December 30, 1996 and the Pepsi-Cola Puerto Rico Bottling Company Non-
Qualified Plan dated December 30, 1996 (collectively, the "PPR Option
Plans") in the ordinary course of business since December 31, 1998, PPR has
no outstanding securities convertible into or exchangeable for common
stock, no contracts, rights, options, warrants or other agreements or
commitments to purchase or otherwise issue any shares of its capital stock
or securities convertible into or exchangeable therefor, or any shares
reserved for issuance under any stock option, employee benefit or other
plans or otherwise. No holder of any security of PPR is entitled to any
preemptive or similar rights to purchase securities from PPR.
(b) Capital Stock of PPR After Exchange and Delta Acquisition. On
---------------------------------------------------------
the date of Closing, upon completion of the Exchange and the Delta
Acquisition, (i) the authorized capital stock of PPR will consist of
150,000,000 shares, of which 5,000,000 shares will be designated as PPR
Class A Common Stock and 145,000,000 will be designated as PPR Class B
Common Stock, and (ii) PPR will have issued and outstanding 5,000,000
shares of PPR Class A Common Stock and 81,760,006 shares of PPR Class B
Common Stock, not including any shares of PPR Class B Common Stock that PPR
is permitted to issue by this Agreement (other than in connection with the
Delta Acquisition) during the period from the date of this Agreement
through the date of Closing. Assuming that the Closing were to occur on the
date hereof, immediately after such Closing, the issued and outstanding PPR
Class A Common Stock and Class B Common Stock would be owned as set forth
on Schedule 3.2(b).
(c) Capital Stock of PPR Subsidiaries. A listing of each of the PPR
---------------------------------
Subsidiaries and the authorized, issued and outstanding capital stock or
other equity interests of each of the PPR Subsidiaries, whether voting or
nonvoting, and the rights and preferences associated with each class
B-8
<PAGE>
or series of capital stock or other equity interests, is as set forth on
Schedule 3.2(c). Except as set forth on Schedule 3.2(c), (i) PPR is the
owner of all of the capital stock or other equity interests of the PPR
Subsidiaries, free and clear of all security interests, liens, pledges,
options, rights of first refusal, limitations on voting rights, charges or
other encumbrances of any nature whatsoever (collectively, "Encumbrances")
and (ii) except for the PPR Subsidiaries, PPR does not own, directly or
indirectly, any equity or similar interest in, any corporation,
partnership, limited liability company, joint venture or other legal
entity. All outstanding shares of capital stock of the PPR Subsidiaries
have been duly authorized and validly issued and are fully paid and
nonassessable. Except as set forth on Schedule 3.2(c), none of the PPR
Subsidiaries has any outstanding securities convertible into or
exchangeable for common stock, no contracts, rights, options, warrants or
other agreements or commitments to purchase or otherwise issue any shares
of capital stock or other equity interests of any of the PPR Subsidiaries
or securities convertible into or exchangeable therefor, or any shares
reserved for issuance under stock option, employee benefit or other plans
or otherwise. No holder of any security of any of the PPR Subsidiaries is
entitled to any preemptive or similar rights to purchase securities \from
any such Subsidiary.
Section 3.3 Authority. The PPR Special Committee and PPR's Board of
---------
Directors have, on or prior to the date of this Agreement (a) declared that as
of such date the Exchange was advisable and fair to and in the best interests of
PPR and its stockholders, (b) approved this Agreement and resolved to recommend
the approval of this Agreement and the transactions contemplated hereby by PPR's
stockholders, and (c) directed that this Agreement and the transactions
contemplated hereby be submitted to PPR's stockholders for approval. Subject to
the approval by PPR's stockholders of the PPR Charter Amendment (as defined in
Section 7.1), PPR has all requisite corporate power and authority to enter into
this Agreement and, subject to approval by PPR's stockholders of this Agreement
and the transactions contemplated hereby, including the Exchange, to issue the
PPR Class B Common Stock in connection with the Exchange (the "Share Issuance")
and to consummate the transactions contemplated hereby. The execution and
delivery of this Agreement by PPR and the consummation by PPR of the
transactions contemplated hereby have been duly authorized by all necessary
corporate action on the part of PPR, subject to the approval of this Agreement
and the transactions contemplated hereby, including the Exchange, by the
stockholders of PPR. This Agreement has been duly executed and delivered by PPR
and (assuming the valid authorization, execution and delivery of this Agreement
by Dakota and Pohlad) this Agreement constitutes the valid and binding
obligation of PPR enforceable against it in accordance with its terms except to
the extent that (i) enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to or limiting creditors' remedies, and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court or
other tribunal before which any proceeding therefor may be brought. Subject to
approval by the stockholders of PPR, the Share Issuance has been duly authorized
by all necessary corporate action on the part of PPR. When issued in accordance
with the terms of this Agreement, the shares of PPR Class B Common Stock to be
issued under this Agreement will be duly authorized, validly issued, fully paid
and nonassessable.
Section 3.4 Consents and Approvals; No Violation. Except as disclosed
------------------------------------
on Schedule 3.4 hereto, and assuming that all consents, approvals,
authorizations and other actions described in the second sentence of this
Section 3.4 have been obtained, the execution and delivery of this Agreement
does not, and the consummation of the transactions contemplated hereby and
compliance with the provisions hereof will not, result in any violation of, or
default (with or without notice or lapse of time, or both) under, or give to
others a right of termination, cancellation or acceleration of any obligation or
the loss of any present or future benefit under, or result in the creation of
any Encumbrance upon any of the properties or assets of PPR or any of the PPR
Subsidiaries under, any provision of (i) the Certificate of Incorporation or
Bylaws of PPR,
B-9
<PAGE>
(ii) the comparable charter or organizational documents of any of
the PPR Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, ground lease or other agreement, instrument, permit,
concession, franchise or license applicable to PPR or any of the PPR
Subsidiaries or (iv) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to PPR or any of the PPR Subsidiaries or any of their
respective real or personal properties or assets, other than, in the case of
clauses (ii), (iii) or (iv), any such violations, defaults, rights, or
Encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on PPR, or prevent or materially delay the consummation of any of
the transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any domestic (federal and state), foreign
or supranational court, commission, governmental body, regulatory agency,
authority or tribunal (a "Governmental Entity") is required by or with respect
to PPR or any of the PPR Subsidiaries in connection with the execution and
delivery of this Agreement by PPR or is necessary for the consummation of the
transactions contemplated by this Agreement, except for (i) the filing with the
SEC of (A) the proxy statement for the special meeting of PPR's stockholders to
be held for the purpose of obtaining the approvals required for the transactions
contemplated hereby (the "Proxy Statement"); and (B) such reports and
information under the Exchange Act as may be required in connection with this
Agreement and the transactions contemplated hereby, (ii) such as may be required
under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended (the
"HSR Act"), (iii) applicable requirements, if any, of Blue Sky Laws and the New
York Stock Exchange, Inc. (the "NYSE"), and (iv) such other consents, orders,
authorizations, registrations, declarations and filings the failure of which to
be obtained or made would not, individually or in the aggregate, have a Material
Adverse Effect on PPR, or prevent or materially delay the consummation of any of
the transactions contemplated hereby.
Section 3.5 SEC Documents and Other Reports. PPR has filed all required
-------------------------------
forms, reports, documents, statements (including proxy statements) and exhibits
with the SEC that were required to be filed pursuant to the Exchange Act or
other federal securities laws since July 1, 1996 (the "PPR SEC Documents"). As
of their respective dates, the PPR SEC Documents complied in all material
respects with the then applicable requirements of the Securities Act or the
Exchange Act, as the case may be, and, at the respective times they were filed,
none of the PPR SEC Documents contained any untrue statement of a material fact
or omitted to state 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. The consolidated financial statements (including, in
each case, any notes thereto) of PPR included in the PPR SEC Documents complied
as to form in all material respects with applicable accounting requirements and
the published rules and regulations of the SEC with respect thereto as of their
respective dates of filing, were prepared in accordance with generally accepted
accounting principles ("GAAP") (except, in the case of the unaudited statements,
as permitted by Regulation S-X of the SEC) applied on a consistent basis during
the periods involved (except as may be indicated therein or in the notes
thereto) and fairly presented in all material respects the consolidated
financial position of PPR and its consolidated Subsidiaries as at the respective
dates thereof and the consolidated results of their operations and their
consolidated cash flows for the periods then ended (subject, in the case of
unaudited statements, to the absence of footnote disclosure and any other
adjustments described therein and normal year-end audit adjustments). Except as
disclosed in the PPR SEC Documents or as required by GAAP, PPR has not, since
December 31, 1998, made any change in the accounting practices or policies
applied in the preparation of its financial statements.
Section 3.6 Absence of Certain Changes. Except as set forth on Schedule
--------------------------
3.6 hereof, since December 31, 1998, PPR and the PPR Subsidiaries have operated
their businesses only in the ordinary course and consistent with past practices
and there has not been:
(a) any Material Adverse Change in PPR;
B-10
<PAGE>
(b) any dividend or other distribution on, or any recapitalization,
combination or subdivision with respect to, or any purchase or redemption
by PPR or the PPR Subsidiaries of, any shares of the capital stock of PPR
or any of the PPR Subsidiaries except for distributions in the ordinary
course of business and consistent with past practice on outstanding shares
of non-voting management stock of Beverage Plastics Company, a Delaware
corporation, of which all of its outstanding voting common stock is owned
by PPR;
(c) except for the sale of substantially all of the assets of PPR's
Cristalia Premium Water division, any sale, transfer, lease, or Encumbrance
of any of PPR's or any of the PPR Subsidiaries' assets or cancellation of
any claims of, or indebtedness or obligations owing to, PPR or any of the
PPR Subsidiaries, except in the ordinary course of business;
(d) any material increase in the salaries or other compensation or
employee benefits with respect to any employees of PPR or the PPR
Subsidiaries except regularly scheduled increases in accordance with prior
practices or existing agreements;
(e) any purchase of or agreement to purchase any additional assets by
PPR or any of the PPR Subsidiaries, except in the ordinary course of
business or for a purchase price of less than $500,000;
(f) any loss, damage, destruction or other casualty to any of the
properties of PPR or the PPR Subsidiaries (whether or not covered by
insurance) (i) in excess of $100,000 per occurrence or $500,000 in the
aggregate or (ii) which has resulted in a Material Adverse Effect on PPR or
the PPR Subsidiaries;
(g) any entry into any additional, or modification of any existing,
agreements to borrow money (whether secured or unsecured), or any
refinancing of such agreements, except in the ordinary course of business;
(h) any entry into any guarantee by PPR or the PPR Subsidiaries on
behalf of any third party;
(i) any capital expenditures by PPR or the PPR Subsidiaries in excess
of the amount set forth in PPR's 1999 Capital Expenditure Budget, a true
and correct copy of which is appended to Schedule 3.6 hereto, except for
expenditures related to repairs or replacements for which adequate
insurance was or is available;
(j) changes in accounting principles, elections, or procedures, other
than as required by changes in GAAP;
(k) any entry into any employment, consulting, management or
severance agreement by PPR or any of the PPR Subsidiaries other than
severance payments required to be made under Puerto Rican Law 80, except in
the ordinary course of business;
(l) any amendment of the Certificate of Incorporation or Bylaws of
PPR or any comparable charter or organizational documents of the PPR
Subsidiaries;
(m) authorization for issuance, sale, delivery or agreement or
commitment to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments,
B-11
<PAGE>
subscriptions, rights to purchase or otherwise) any shares of any class of
PPR's or any of the PPR Subsidiaries' capital stock or any securities
convertible into or exchangeable for shares of any class of such capital
stock, other than the grant of options to employees under the PPR Option
Plans in the ordinary course of business;
(n) any amendment or termination of any material agreement to which
PPR or any of the PPR Subsidiaries is a party; or
(o) any action taken by PPR or the PPR Subsidiaries, or their
directors, officers or stockholders to authorize any of the actions
contemplated above.
Section 3.7 Permits; Compliance and Contracts.
---------------------------------
(a) Except as disclosed in Schedule 3.7, each of PPR and the PPR
Subsidiaries is in possession of all franchises, grants, authorizations,
licenses, permits, easements, variances, exceptions, consents, certificates
(including, without limitation, certificates of occupancy), approvals,
orders of any Governmental Entity and other permits, including, without
limitation, building, environmental, land-use, health, safety, fire,
utility or other rights or permits necessary for PPR or any of the PPR
Subsidiaries to own, lease and operate all of the PPR Real Property (as
defined in Section 3.16) or to carry on its business as it is now being
conducted (collectively, the "PPR Permits"), except where the failure to
have any of the PPR Permits would not, individually or in the aggregate,
have a Material Adverse Effect on PPR, and, as of the date of this
Agreement, (i) all of the PPR Permits are valid and in full force and
effect, (ii) each of PPR and the PPR Subsidiaries is in compliance with its
respective PPR Permits, and (iii) no revocations, suspensions or
cancellations of any of the PPR Permits are pending or threatened.
(b) Except as disclosed in Schedule 3.7, neither PPR nor any of the
PPR Subsidiaries is in violation of , or has been charged with, is in
receipt of any notice or warning of, or to the Knowledge of PPR (as
hereinafter defined), under investigation with respect to, any failure or
alleged failure to comply with (A) its charter, bylaws or other
organizational documents, (B) to the Knowledge of PPR any applicable law,
ordinance, administrative or governmental rule or regulation (except for
Environmental Laws, which are addressed in Section 3.12 hereto) or (C) any
order, decree or judgment of any Governmental Entity having jurisdiction
over PPR or any of the PPR Subsidiaries, except, in the case of clauses
(A), (B) and (C), for any violations that, individually or in the
aggregate, would not have a Material Adverse Effect on PPR.
(c) Except as disclosed in Schedule 3.7, all of the material
contracts of PPR and the PPR Subsidiaries that are required to be described
in the PPR SEC Documents or to be filed as exhibits thereto are described
in the PPR SEC Reports or filed as exhibits thereto. Except as set forth in
the PPR SEC Documents filed prior to the date of this Agreement or as set
forth on Schedule 3.7, each material contract is in full force and effect
and no event of default or event that, but for the giving of notice or the
lapse of time or both, would constitute an event of default exists or, upon
the consummation by PPR of the transactions contemplated by this Agreement,
will exist under any indenture, mortgage, loan agreement, note or other
agreement or instrument for borrowed money, any guarantee of any agreement
or instrument for borrowed money or any lease, contractual license or other
agreement or instrument to which PPR or any of the PPR Subsidiaries is a
party or by which PPR or any PPR Subsidiary is bound or to which any of the
properties, assets or operations of PPR or any such Subsidiary is subject,
other than any defaults that, individually or in the aggregate,
B-12
<PAGE>
would not have a Material Adverse Effect on PPR. "Knowledge of PPR" means
the actual knowledge of A. David Velez and Joe Gonzalez.
Section 3.8 Tax Matters.
-----------
(a) Except as disclosed on Schedule 3.8, PPR and the PPR Subsidiaries
have (i) duly and timely filed (or there has been duly filed on their
behalf) all Tax Returns required to be filed by or with respect to PPR
and/or the PPR Subsidiaries, including all foreign, federal, Puerto Rican
and local Tax Returns, and all such Tax Returns were true, accurate and
complete in all material respects, (ii) withheld and collected all Taxes
that are required by applicable laws, rules or regulations to be withheld
and collected and (iii) paid in full on a timely basis (or there have been
paid on their behalf) all Taxes shown to be due on such Tax Returns. The
reserve for Taxes on the December 31, 1998 consolidated balance sheet
contained in PPR's Form 10-K for the period ending December 31, 1998 for
the payment of all accrued but unpaid Taxes through the date thereof has
been determined in accordance with GAAP and is adequate in amount for the
payment of all liabilities for Taxes for which PPR and the PPR Subsidiaries
are liable for the periods up to and including December 31, 1998. Neither
PPR nor the PPR Subsidiaries have incurred any Tax liabilities since
December 31, 1998, other than those Tax liabilities arising in the ordinary
course of business and consistent with prior periods.
(b) Except as described on Schedule 3.8, neither PPR nor the PPR
Subsidiaries has received any notice of a deficiency or assessment (and
none has been threatened) with respect to Taxes of PPR or the PPR
Subsidiaries from any foreign, federal, Puerto Rico or local taxing
authority which has not been fully paid or finally settled; there are no
ongoing audits or examination of any Tax Return which includes PPR or the
PPR Subsidiaries and no notice of audit or examination of any such Tax
Return has been received by PPR or any of the PPR Subsidiaries (and none
has been threatened); PPR or the PPR Subsidiaries have not given and there
has not been given on its or their behalf a waiver or extension of any
statute of limitations relating to the payment of Taxes of PPR or the PPR
Subsidiaries; and no issue has been raised in writing on audit or in any
other proceeding with respect to Taxes of PPR or the PPR Subsidiaries by
any foreign, federal, Puerto Rico, or local taxing authority.
(c) For purposes of this Agreement, (i) the terms "Tax" and "Taxes"
shall mean all taxes, charges, fees, levies, penalties or other assessments
imposed by any United States or Puerto Rican, federal, state, local or
foreign taxing authority, including, but not limited to, income, excise,
property, sales, transfer, franchise, payroll, employment, unemployment,
back-up withholding, gains, withholding, ad valorem, social security or
other taxes, including any interest, penalties or additions attributable to
taxes, and (ii) the term "Tax Return" shall mean any return, declaration,
report, claim for refund, or information return or statement relating to
Taxes, including any schedule or attachment thereto and any amendments
thereof.
Section 3.9 Actions and Proceedings. Except as set forth in the PPR SEC
-----------------------
Documents or on Schedule 3.9:
(a) There are no outstanding orders, judgments, injunctions, awards or
decrees of any Governmental Entity against or involving (i) PPR or any of
the PPR Subsidiaries, (ii) any of the present or former directors,
officers, employees, consultants, agents or stockholders of PPR or any of
the PPR Subsidiaries, as such, (iii) any of PPR's or any PPR Subsidiaries'
properties, assets or
B-13
<PAGE>
business or (iv) any PPR Plan (as hereinafter defined) that, in the case of
clauses (i), (ii), (iii) or (iv), individually or in the aggregate, would
have a Material Adverse Effect on PPR.
(b) As of the date of this Agreement, there are no actions,
suits or claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the Knowledge of PPR, threatened against or
involving (i) PPR or any of the PPR Subsidiaries, (ii) any of PPR's or any
PPR Subsidiaries' present or former directors, officers, employees,
consultants, agents or stockholders, as such, (iii) any of PPR's or any PPR
Subsidiaries' properties, assets or business or (iv) any PPR Plan that, in
the case of clauses (i), (ii), (iii) or (iv), individually or in the
aggregate, are reasonably likely to have a Material Adverse Effect on PPR
or relate to the transactions contemplated by this Agreement.
Section 3.10 Certain Agreements. As of the date of this Agreement,
------------------
neither PPR nor any of the PPR Subsidiaries is a party to any oral or written
agreement or plan, including any stock option plan, stock appreciation rights
plan, restricted stock plan, stock purchase plan, PPR Other Benefit Obligation
or PPR Plan (as both are defined in Section 3.11), any of the benefits of which
will be increased, or the vesting of the benefits of which will be accelerated,
by the occurrence of any of the transactions contemplated by this Agreement or
the value of any of the benefits of which will be calculated on the basis of any
of the transactions contemplated by this Agreement.
Section 3.11 Employee Benefit Matters.
------------------------
(a) As used in this Section 3.11, the following terms have the
meanings set forth below:
"PPR Other Benefit Obligation" means all material obligations,
arrangements, or customary practices, whether or not legally
enforceable, to provide benefits, other than salary, as compensation
for services rendered, to present or former directors, employees, or
agents, other than with respect to any PPR Plan. This includes
sabbatical policies, severance payment policies, and material fringe
benefits within the meaning of Code (S) 132.
"PPR Plan" means (i) all employee benefit plans (as defined in
ERISA (S) 3(3)) of which PPR or the PPR Subsidiaries is a Plan Sponsor
(as defined in ERISA (S) 3(16)(B)), or to which PPR or the PPR
Subsidiaries otherwise contributes or in which PPR or the PPR
Subsidiaries otherwise participates, or (ii) all Title IV Plans and
Multi-Employer Plans (as defined in ERISA (S) 3(37)(A)) of which an
ERISA Affiliate is a Plan Sponsor or otherwise contributes or
currently participates.
"PPR VEBA" means a voluntary employees' beneficiary association
under Code (S) 501(c)(9) whose members include employees of PPR or the
PPR Subsidiaries.
"ERISA Affiliate" means any other person that, together with PPR
or any of the PPR Subsidiaries, would be treated as a single employer
under Code (S) 414(b), (c) or, solely with respect to matters relating
to Code (S) 412 or ERISA (S)(S) 302 or 4007, (m).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Title IV Plans" means all PPR Plans that are subject to Title IV
of ERISA, 29 U.S.C. (S) 1301 et seq., other than Multi-Employer Plans.
B-14
<PAGE>
(b) (i) Schedule 3.11(b)(i) attached hereto sets forth a complete
and accurate list of all PPR Plans, PPR Other Benefit Obligations, and
PPR VEBAs, and identifies as such all PPR Plans that: (A) are defined
benefit plans (as defined in ERISA (S) 3(35)); (B) meet or purport to
meet the requirements of Code (S) 401(a); or (C) are Title IV Plans.
(ii) None of the PPR Plans set forth on Schedule 3.11(b)(i) is a
Multi-Employer Plan and none of PPR, any of the PPR Subsidiaries or
any ERISA Affiliate has any assessed or potential liability due to a
complete or partial withdrawal from or a termination or reorganization
of a Multi-Employer Plan. No circumstances exist that could
reasonably be expected to result in any such liability to PPR, any PPR
Subsidiary or any ERISA Affiliate.
(iii) Except as set forth in Schedule 3.11(b)(iii) or as required
by applicable law, no PPR Plans provide retiree health or life
insurance benefits.
(c) PPR has delivered or made available to Dakota all documents,
insurance policies and contracts comprising, describing or relating to each
PPR Plan, PPR Other Benefit Obligation, or PPR VEBA and of any related
trust; as well as all required filings for each of the above filed with
government authorities for each of the three most recent plan years.
(d) Except as set forth in Schedule 3.11(d) attached hereto:
(i) PPR or the PPR Subsidiaries have performed in all material
respects all of their respective obligations whether as plan
administrator, fiduciary, plan sponsor or contributing employer under
all PPR Plans, PPR Other Benefit Obligations, and PPR VEBAs in a
timely manner and have made all required entries in their financial
records and statements for all obligations and liabilities that have
accrued but are not due. No written or oral statement has been made by
PPR or the PPR Subsidiaries to any Person with regard to any PPR Plan
or PPR Other Benefit Obligation not in accordance with such plan or
other benefit obligation which could reasonably be expected to have a
Material Adverse Effect on PPR or the PPR Subsidiaries.
(ii) PPR, the PPR Subsidiaries and each PPR Plan, PPR Other
Benefit Obligation, and PPR VEBA is, to the extent applicable, in
material compliance with applicable law, except for any such failure
to comply which would not result in any material liability to PPR or
any of the PPR Subsidiaries. PPR and all PPR Subsidiaries have met
any applicable minimum funding standard, and have made all
contributions required, under ERISA (S) 302. The most recent
actuarial report for each defined benefit plan of PPR, each PPR
Subsidiary and each ERISA Affiliate thereof fairly presents the
financial condition of each such plan, and since the date of such
report there has been no material adverse change in the funded status
of any such plan.
(iii) Since December 31, 1998, there has been no establishment,
termination or amendment of any PPR Plan, PPR VEBA, or PPR Other
Benefit Obligation, except to effect the Board's option of an
amendment to PPR's Salaried Employee Retirement Plan to use the GATT
interest rate standard.
(iv) Other than routine claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding
involving or relating to, any PPR Plan,
B-15
<PAGE>
PPR Other Benefit Obligation, or PPR VEBA is pending or, to PPR's
Knowledge, is threatened.
(v) None of PPR, the PPR Subsidiaries or any ERISA Affiliate has
terminated any Title IV Plan or any other defined benefit plan (as
defined in ERISA Section 3(35)), or incurred any outstanding liability
under Section 4062 of ERISA to the PBGC or to a trustee appointed
under Section 4042 of ERISA, and no events have occurred and no
circumstances exist that could reasonably be expected to result in any
such liability to PPR, the PPR Subsidiaries or any ERISA Affiliate.
All premiums due the PBGC with respect to the Title IV Plans have been
paid.
(vi) There has been no "reportable event" within the meaning of
Section 4043 of ERISA with respect to any Title IV Plan which would
require the giving of notice to the PBGC or any other event requiring
disclosure under Section 4041(c)(3)(C) or 4063 of ERISA.
(vii) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, either
alone or upon the occurrence of subsequent events, (i) result in any
payment becoming due to any current or former employee, officer or
director of PPR or the PPR Subsidiaries, (ii) increase any benefits
otherwise payable under any PPR Plan or PPR Other Benefit Obligation,
(iii) result in the acceleration of the time of payment or vesting of
any benefits under any PPR Plan or PPR Other Benefit Obligation, (iv)
constitute a "change in control" or similar event under any PPR Plan
or PPR Other Benefit Obligation or (v) fail to be deductible by reason
of Section 280G of the Code.
Section 3.12 Compliance with Environmental Laws.
----------------------------------
(a) Except as set forth on Schedule 3.12, each of PPR and the PPR
Subsidiaries, and, to the Knowledge of PPR, any prior owner or lessee, have
generated, handled, manufactured, treated, stored, used, released,
transported and disposed of all Environmentally Regulated Materials (as
defined below) on, beneath, to or from any of the properties owned or
operated by PPR and the PPR Subsidiaries in the conduct of their businesses
or any other properties formerly owned, leased or operated by PPR or the
PPR Subsidiaries, in compliance with all Environmental Laws (as defined
below).
(b) Except as set forth on Schedule 3.12, PPR and the PPR
Subsidiaries have operated all plants, facilities and business operations
in compliance with all Environmental Laws, and all plants, facilities and
business operations are currently in compliance with all Environmental
Laws.
(c) Except as set forth on Schedule 3.12, neither PPR nor the PPR
Subsidiaries have disposed of or released any Environmentally Regulated
Material in any location which would reasonably be expected to give rise to
a claim of responsibility for investigation or clean-up costs, personal
injury or property damage liability against PPR or any PPR Subsidiary by
any third party.
(d) Except as set forth on Schedule 3.12, neither PPR nor the PPR
Subsidiaries have received any notices or claims of violations or
liabilities relating to an Environmentally Regulated Material or an
Environmental Law, which notices or claims of violations or liabilities
have not been resolved.
B-16
<PAGE>
The term "Environmentally Regulated Materials" means any of the following:
(i) any petroleum or petroleum products, friable asbestos, urea formaldehyde,
and polychlorinated biphenyls; (ii) any radioactive substance; (iii) any toxic,
infectious, reactive, corrosive, ignitible or flammable chemical or chemical
compound; and (iv) any chemicals, materials or substances, whether solid, liquid
or gas defined as or included in the definition of "hazardous substances,"
"hazardous wastes," "hazardous materials," "extremely hazardous wastes,"
"restricted hazardous wastes," "toxic substances," "toxic pollutants," "solid
waste," or words of similar import, under any Environmental Law.
"Environmental Law" means any applicable federal, state or local statute,
law, rule, regulation, permit, ordinance, code, policy, rule of common law or
other requirement in effect and in each case as amended from time-to-time and
any judicial or administrative interpretation thereof, including any judicial or
administrative order, consent decree or judgment, that (i) regulates or relates
to the protection or clean-up of the environment; the use, treatment, storage,
transportation, handling, disposal or release of Environmentally Regulated
Materials, the preservation or protection of waterways, groundwater, drinking
water, air, wildlife, plants or other natural resources; or the health and
safety of persons or property, including protection of the health and safety of
employees insofar as such health and safety laws may relate to Environmentally
Regulated Materials, or (ii) imposes liability with respect to any of the
foregoing, including the Comprehensive Environmental Response, Compensation, and
Liability Act, 42 USC 9601 et seq., the Resource Conservation and Recovery Act,
42 USC 6901, et seq., the Clean Water Act, 33 U.S.C. (S) 1251 et seq.; the Toxic
Substances Control Act, 15 U.S.C. (S) 2601 et seq.; the Clean Air Act, 42 U.S.C.
(S) 7401 et seq.; the Safe Drinking Water Act, 42 U.S.C. (S) 300f et seq.; the
Oil Pollution Act of 1990, 33 U.S.C. (S) 2701 et seq.; and the Occupational
Safety and Health Act of 1970, as amended, as it applies to Environmentally
Regulated Materials, 29 U.S.C. (S) 651 et seq.; or any other federal, state or
local law of similar effect, each as amended from time to time.
Section 3.13 Labor Matters. Except as set forth on Schedule 3.13 hereto,
-------------
neither PPR nor any of the PPR Subsidiaries is a party to any collective
bargaining agreement or labor contract. To the Knowledge of PPR, as of the date
of this Agreement, there are no present or pending applications for
certification of any union as the exclusive bargaining agent for any employees
of PPR or any PPR Subsidiaries. To the Knowledge of PPR, neither PPR nor any of
the PPR Subsidiaries has engaged in any unfair labor practice with respect to
any persons employed by or otherwise performing services for PPR or any of the
PPR Subsidiaries (the "PPR Business Personnel"), and there is no unfair labor
practice complaint or grievance against PPR or any of the PPR Subsidiaries by
the National Labor Relations Board or any comparable state or Puerto Rican
agency pending or, to the Knowledge of PPR, threatened with respect to the PPR
Business Personnel, except where such unfair labor practice, complaint or
grievance would not have a Material Adverse Effect on PPR. There is no labor
strike, dispute, slowdown or stoppage pending or, to the Knowledge of PPR,
threatened against PPR or any of the PPR Subsidiaries, except where such
dispute, strike or work stoppage would not have a Material Adverse Effect on
PPR.
Section 3.14 Intellectual Property. Schedule 3.14 sets forth a complete
---------------------
list of all patents and applications therefor, trademark registrations and
applications therefor, service mark registrations and applications therefor,
copyright registrations and applications therefor, trade names, computer
programs or software which are material to the operation of PPR's business and
interests in license agreements and all other proprietary rights that are owned,
licensed, sublicensed or used by agreement or permission by PPR or any PPR
Subsidiary and used in the continued operation of PPR's business (collectively,
"PPR Intellectual Property"). Except as otherwise set forth on Schedule 3.14
and except for the security interest held by Banco Popular, PPR's interest in
the PPR Intellectual Property is free and clear of any Encumbrance, and
constitutes all such property or rights used by or necessary to the operation of
PPR's business. To PPR's Knowledge and except as set forth on Schedule 3.14,
the use of the PPR Intellectual Property does not conflict with,
B-17
<PAGE>
infringe upon, or misappropriate any rights held or asserted by any person, or
require the consent of any person. Except as set forth on Schedule 3.14, neither
PPR nor any PPR Subsidiary has, in the past two years, received any notice or
claim that any such PPR Intellectual Property is not valid or enforceable, or of
any infringement upon or conflict with any patent, trademark, service mark,
copyright, trade name or trade secret of any third party by PPR or any PPR
Subsidiary or of any claim by any third party alleging any such infringement or
conflict, and, in the past two years, neither PPR nor any PPR Subsidiary has
given any notice of infringement to any third party with respect to any of the
PPR Intellectual Property. PPR has paid all required license fees related to all
software used in the operation of its business.
Section 3.15 Title to Assets; Insurance. Except as described on Schedule
--------------------------
3.15, PPR and the PPR Subsidiaries have good and marketable title to all real
property and good title to all of the personal property and assets which they
purport to own and which are necessary to carry on its business, in each case
free and clear of all Encumbrances except for Permitted Exceptions (as defined
in Section 3.16). PPR and the PPR Subsidiaries have in full force and effect
policies of insurance that are customary for businesses of similar size in
similar industries and consistent with sound business practice.
Section 3.16 Real Property.
-------------
(a) Schedule 3.16(a) describes all real properties owned or leased by
PPR and the PPR Subsidiaries (the "PPR Real Property"), the nature of the
interest of PPR or the PPR Subsidiaries and the entity which holds the
interest in those properties and the approximate acreage of each of those
properties. There is no real property (other than the PPR Real Property)
the use or possession of which by PPR and the PPR Subsidiaries is necessary
to carry on its business. Except as described on Schedule 3.16(b), PPR and
each of the PPR Subsidiaries has (i) such title to the PPR Real Property as
is legally sufficient for the current use thereof in its business as
presently conducted, (ii) good and marketable indefeasible title in fee
simple (except for Permitted Exceptions, as hereinafter defined) to all PPR
Real Property shown in Schedule 3.16(a) as owned by it (the "PPR Owned Real
Property") and (iii) valid leaseholds under valid and enforceable leases in
all PPR Real Property shown on Schedule 3.16(a) as leased by it. The PPR
Real Property is owned or leased by PPR and the PPR Subsidiaries free and
clear of all matters except for Permitted Exceptions. Except as set forth
in Schedule 3.16(b), none of the PPR Real Property is subject to any lease
(other than the PPR Leases (as hereinafter defined)), sublease, license or
other agreement granting to any person any right to the use, occupancy or
enjoyment thereof (or any portion thereof). None of the Permitted
Exceptions materially interferes with or has interfered with the
maintenance, use or operation of the PPR Real Property. "Permitted
Exceptions" means (i) matters listed or described on Schedule 3.16(b), (ii)
easements, covenants, rights-of-way and other Encumbrances or restrictions
which do not, individually or in the aggregate, materially detract from the
value or impair the present and continued use, operation and maintenance of
the property subject thereto, or impair the operation of PPR or any of the
PPR Subsidiaries, and (iii) real estate taxes not yet due or payable, and
(iv) encumbrances existing at the date of this Agreement set forth on
Schedule 3.16(a).
(b) None of the leases identified in Schedule 3.16(a) (collectively,
the "PPR Leases") has been modified or amended, and no notice of
termination has been delivered with respect thereto, except as set forth in
Schedule 3.16(b). Except as set forth on Schedule 3.16(b), neither PPR nor
any of the PPR Subsidiaries, nor any other person, is in breach of or
default under any PPR Lease (and no event has occurred which, with due
notice or lapse of time or both, may constitute such a breach or default).
B-18
<PAGE>
(c) To the Knowledge of PPR, the buildings, driveways and all other
structures and improvements upon the PPR Real Property are all within the
boundary lines of the applicable property or have the benefit of valid
easements or other legal rights and there are no encroachments thereon that
would affect the use thereof.
(d) To the Knowledge of PPR, all buildings, structures, improvements,
equipment, facilities, plants and fixtures owned or leased by PPR and the
PPR Subsidiaries conform in all material respects to all applicable codes
and rules adopted by national and local associations and boards and
insurance underwriters, and all such buildings, structures, improvements
and fixtures are in good operating condition and repair. There are no
outstanding requirements or recommendations by any insurance company which
has issued a policy covering any such property, or by any board of fire
underwriters or other body exercising similar functions, requirement or
recommending any repairs or work to be done on any such property.
(e) To the Knowledge of PPR, all public utilities required for the
operation of such properties either enter such properties through adjoining
public streets or, if they pass through adjoining private land, do so in
accordance with valid public or private easements which will inure to the
benefit of PPR and the PPR Subsidiaries and their respective successors and
assigns. All of the public utilities mentioned above are installed and
operating, and all installation and connection charges are paid in full.
(f) To the Knowledge of PPR, the plumbing, electrical, heating, air
conditioning, elevator, ventilating and all other mechanical or structural
systems and equipment in the buildings or improvements located on the PPR
Real Property and any manufacturing systems and components located thereof
are in good working order and condition, and the roof, basement and
foundation walls of such buildings and improvements for which PPR or the
PPR Subsidiaries is responsible (as owner or as lessee under any PPR Lease)
are in good condition and free of leaks and other defects. All such
mechanical and structural systems and equipment and such manufacturing
systems and components and such roofs, basements and foundation walls for
which a person other than PPR or the PPR Subsidiaries is responsible are in
good working order and condition and free of leaks and other defects.
(g) To the Knowledge of PPR, PPR or the PPR Subsidiaries has the
uninterrupted use of any easements for ingress and egress for all of the
PPR Real Property owned or leased by PPR or the PPR Subsidiaries, as the
case may be. The PPR Real Property has full and uninterrupted access to
and from public roads and PPR has no Knowledge of any fact or condition
which would result in the termination of such access.
(h) Neither PPR nor the PPR Subsidiaries is the landlord or lessor
under any lease, sublease or other occupancy agreement affecting any of the
PPR Real Property.
Section 3.17 Title Insurance. Schedule 3.17 sets forth a true, correct
---------------
and complete list and summary description of all of the policies of title
insurance insuring PPR's and the PPR Subsidiaries' interest in the PPR Owned
Real Property (collectively, the "PPR Title Policies"). PPR has furnished a
true, correct and complete copy of all such PPR Title Policies to Dakota. All
of the PPR Title Policies are in full force and effect. PPR shall maintain, and
shall use its best efforts to cause the PPR Subsidiaries to maintain, the
coverage under the PPR Title Policies in full force and effect through the date
of the Closing. Neither PPR nor the PPR Subsidiaries is in material default
under any provisions of the PPR Title Policies. There is no claim by PPR, the
PPR Subsidiaries or any other person pending under any of the PPR Title Policies
as to
B-19
<PAGE>
which coverage has been questioned, denied or disputed by the underwriters or
issuers of such PPR Title Policies.
Section 3.18 Zoning. To the Knowledge of PPR, all of the PPR Real
------
Property and the buildings, structures, improvements and fixtures located
thereon, and the respective businesses conducted thereat and the manner of such
conduct, conform in all respects to all existing zoning, building and other
applicable laws, rules and regulations and the operation of the PPR Real
Property and the improvements located thereon is not in violation of any such
laws, rules or regulations. To the Knowledge of PPR, all uses of the PPR Real
Property and the improvements, to the Knowledge of PPR, located thereon are
"as-of-right" and do not require any non-conforming use rights, nor have they
been "grandfathered" under any pre-existing laws, rules or regulations.
Section 3.19 Brokers. No broker, investment banker or other person,
-------
other than Bear, Stearns & Co., Inc., the fees and expenses of which will be
paid by PPR, is entitled to any broker's, finder's or other similar fee or
commission in connection with the transactions contemplated by this Agreement
based upon arrangements made by or on behalf of PPR.
Section 3.20 Relationships. Except as otherwise disclosed in PPR's Form
-------------
10-K for the period ended December 31, 1998, PPR's relationships with its
franchisors, agents, brokers, dealers, distributors, representatives, licensees,
customers and suppliers are continuing, and there has been no material change in
the scope of such relationships during the last year with any of such parties or
similar parties with which PPR has done business during the last year. All
sales and performances of services by PPR in connection with its business are in
material compliance with all of PPR's representations, warranties and
agreements, express or implied, with respect to such sales and performances,
except for customary returns and allowances.
Section 3.21 Compliance with Quality Standards. All water used in the
---------------------------------
production process of PPR's business conforms, in all material respects, to (i)
the quality standards required by PPR's or the PPR Subsidiaries' franchisors,
including PepsiCo, (ii) internal quality standards required by PPR, and (iii)
any Puerto Rican or local quality standards.
Section 3.22 Year 2000 Compliance. To the extent that any functionality
--------------------
of any computer system used by PPR is dependent upon or interdependent with the
use or specification of any calendar date, PPR has used commercially reasonable
efforts in implementing a plan pursuant to which any such computer system shall
be "Year 2000 Compliant," except where failure to do so will not result in a
Material Adverse Effect on PPR. For purposes of this Agreement, the term Year
2000 Compliant means that neither the performance nor the functionality of such
computer systems shall be materially affected by dates in, into and between the
20th and 21st centuries. To be deemed Year 2000 Compliant, such computer
systems shall conform in all material respects to the following basic
requirements: (i) no value for a current date shall cause any interruption in
PPR's operations in which the computer system is used; and (ii) any date-based
functions shall operate and perform in a consistent manner for dates in, into
and between the 20th and 21st centuries and such computer systems shall
calculate, manipulate and represent properly inputted dates correctly.
Section 3.23 Delaware Business Combination Statute. PPR has obtained or
-------------------------------------
shall obtain prior to the Closing, all approvals necessary from its Board of
Directors related to the transactions contemplated by this Agreement so as to
constitute prior approval by the Board of Directors of such transactions within
the meaning of section 203(a)(1) of the Delaware General Corporation Law.
B-20
<PAGE>
Section 3.24 Disclosure. No representation or warranty of PPR in this
----------
Agreement or in any certificate, schedule, statement or other document furnished
or to be furnished by PPR to Dakota, Pohlad or Dakota, LLC pursuant hereto or in
connection with the transactions contemplated hereby, contains or will contain
any untrue statement of a material fact or omits or will omit to state any
material fact required to be stated herein or therein or necessary to make the
statements herein or therein not misleading.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF DAKOTA
Dakota represents and warrants (each such representation and warranty being
made (i) as to Dakota and the Dakota Subsidiaries prior to the DakBev Merger and
(ii) as to DakBev and each Subsidiary of DakBev after the DakBev Merger) to PPR
as follows:
Section 4.1 Organization, Standing and Power. As of the date of this
--------------------------------
Agreement, Dakota is a corporation duly organized, validly existing and in good
standing under the laws of the State of Minnesota and has the requisite
corporate power and authority to own, lease or operate its properties and to
carry on its business as now being conducted. At the Closing, DakBev will be a
limited liability company duly organized, validly existing and in good standing
under the laws of the State of Delaware and will have the requisite power and
authority to own, lease or operate its properties and to carry on the business
of Dakota as now being conducted. Each Subsidiary of Dakota (the "Dakota
Subsidiaries") is duly organized, validly existing and in good standing under
the laws of the jurisdiction in which it is organized and has the requisite
corporate (in the case of a Subsidiary that is a corporation) or other power and
authority to own, lease or operate its properties, and to carry on its business
as now being conducted. Dakota and each of the Dakota Subsidiaries are duly
qualified to do business, and are in good standing, in each jurisdiction where
the character of their properties owned or held under lease or the nature of
their activities makes such qualification necessary, except where the failure to
be so qualified would not, individually or in the aggregate, have a Material
Adverse Effect on Dakota.
Section 4.2 Capital Structure.
-----------------
(a) Capital Stock of Dakota.
-----------------------
(i) The authorized capital stock of Dakota prior to the DakBev
Merger consists of 1,000 shares of Common Stock, par value $1.00 per
share (the "Dakota Stock"). Dakota has issued and outstanding 1,000
shares of Dakota Stock, all of which are owned by Pohlad (the "Dakota
Stock"). All outstanding shares of Dakota Stock have been duly
authorized and validly issued and are fully paid and nonassessable.
Except as set forth on Schedule 4.2(a), Dakota has no outstanding
securities convertible into or exchangeable for common stock, no
contracts, rights, options, warrants or other agreements or
commitments to purchase or otherwise issue any shares of its capital
stock or securities convertible into or exchangeable therefor, or any
shares reserved for issuance under any stock option, employee benefit
or other plans or otherwise. Except as set forth in Dakota's Articles
of Incorporation, no holder of any security of Dakota is entitled to
any preemptive or similar rights to purchase securities from Dakota.
(ii) At the Closing, all of the authorized, issued and outstanding
DakBev Membership Units will be owned by Dakota, LLC. All of the
DakBev Membership Units at the Closing will have been duly authorized
and validly issued and will be fully paid and nonassessable. DakBev
will have no outstanding interests or securities convertible into or
exchangeable for membership interests, no contracts, rights, options,
warrants or other agreements or commitments to purchase or otherwise
issue any shares of its membership interests or securities convertible
into or exchangeable therefor, or any membership units reserved for
issuance under any employee benefit or other plans or otherwise. No
holder of any security of DakBev will be entitled to any preemptive or
similar rights to purchase
B-21
<PAGE>
securities from DakBev.
(b) Capital Stock of Dakota Subsidiaries.
------------------------------------
(i) A listing of each of the Dakota Subsidiaries and the
authorized, issued and outstanding capital stock or other equity
interests of each of the Dakota Subsidiaries, whether voting or
nonvoting, and the rights and preferences associated with each class
or series of capital stock or other equity interests, is as set forth
on Schedule 4.2(b). Except as set forth on Schedule 4.2(b), (i)
Dakota is the owner of all of the capital stock or other equity
interests of the Dakota Subsidiaries, free and clear of all
Encumbrances and (ii) except for the Dakota Subsidiaries Dakota does
not own, directly or indirectly, any equity or similar interest in,
any corporation, partnership, limited liability company, joint venture
or other legal entity. All outstanding shares of capital stock of the
Dakota Subsidiaries have been duly authorized and validly issued and
are fully paid and nonassessable. Except as set forth on Schedule
4.2(b), none of the Dakota Subsidiaries has any outstanding securities
convertible into or exchangeable for common stock, no contracts,
rights, options, warrants or other agreements or commitments to
purchase or otherwise issue any shares of capital stock or other
equity interests of any of the Dakota Subsidiaries or securities
convertible into or exchangeable therefor, or any shares reserved for
issuance under stock option, employee benefit or other plans or
otherwise. No holder of any security of any of the Dakota
Subsidiaries is entitled to any preemptive or similar rights to
purchase securities from any such Subsidiary.
(ii) At the Closing, all of the authorized, issued and outstanding
membership units of each of the DakBev LLCs will be owned by DakBev.
All such membership units at the Closing will have been duly
authorized and validly issued and will be fully paid and
nonassessable. The DakBev LLCs will have no outstanding interests or
securities convertible into or exchangeable for membership interests,
no contracts, rights, options, warrants or other agreements or
commitments to purchase or otherwise issue any shares of its
membership interests or securities convertible into or exchangeable
therefor, or any membership interests reserved for issuance under any
employee benefit or other plans or otherwise. No holder of any
security of the DakBev LLCs will be entitled to any preemptive or
similar rights to purchase securities of DakBev or the DakBev LLCs.
Section 4.3 Authority. Dakota's Board of Directors has on or prior to
---------
the date of this Agreement: (a) declared that as of such date the Exchange was
advisable and fair to and in the best interest of Dakota and its sole
stockholder Pohlad and (b) approved this Agreement and the transactions
contemplated hereby, including, but not limited to, the DakBev Merger and the
Exchange, and resolved to recommend to Pohlad that it enter into this Agreement.
Dakota has all requisite corporate power and authority to enter into this
Agreement and to perform its obligations hereunder. The execution and delivery
of this Agreement by Dakota and the performance of its obligations hereunder
have been duly authorized by all necessary corporate action on the part of
Dakota. This Agreement has been duly executed and delivered by Dakota and
(assuming the valid authorization, execution and delivery of this Agreement by
PPR and Pohlad) this
B-22
<PAGE>
Agreement constitutes the valid and binding obligation of Dakota enforceable
against Dakota in accordance with its terms except to the extent that (i)
enforcement may be limited by or subject to any bankruptcy, insolvency,
reorganization, moratorium or similar laws now or hereafter in effect relating
to or limiting creditors' remedies and (ii) the remedy of specific performance
and injunctive and other forms of equitable relief are subject to certain
equitable defenses and to the discretion of the court or other tribunal before
which any proceeding therefor may be brought.
Section 4.4 Consents and Approvals; No Violation. Except as disclosed
------------------------------------
on Schedule 4.4 hereto, and assuming that all consents, approvals,
authorizations and other actions described in this Section 4.4 have been
obtained, the execution and delivery of this Agreement does not, and the
consummation of the transactions contemplated hereby and compliance with the
provisions hereof will not, result in any violation of, or default (with or
without notice or lapse of time, or both) under, or give to others a right of
termination, cancellation or acceleration of any obligation or the loss of any
present or future benefit under, or result in the creation of any Encumbrance
upon any of the properties or assets of Dakota or any of the Dakota Subsidiaries
under, any provision of (i) the Articles of Incorporation or Bylaws of Dakota,
(ii) the comparable charter or organizational documents of any of the Dakota
Subsidiaries, (iii) any loan or credit agreement, note, bond, mortgage,
indenture, lease, ground lease or other agreement, instrument, permit,
concession, franchise or license applicable to Dakota or any of the Dakota
Subsidiaries or (iv) any judgment, order, decree, statute, law, ordinance, rule
or regulation applicable to Dakota or any of the Dakota Subsidiaries or any of
their respective real or personal properties or assets, other than in the case
of clauses (ii), (iii) or (iv), any such defaults, rights, violations, or
Encumbrances that, individually or in the aggregate, would not have a Material
Adverse Effect on Dakota, or prevent or materially delay the consummation of any
of the transactions contemplated hereby. No filing or registration with, or
authorization, consent or approval of, any Governmental Entity is required by or
with respect to Dakota or any of the Dakota Subsidiaries in connection with the
execution and delivery of this Agreement by Dakota or is necessary for the
consummation of the transactions contemplated by this Agreement, except for (i)
the filing of Certificates of Formation with the Secretary of State of the State
of Delaware to form DakBev, LLC and Dakota, LLC, (ii) the filing of appropriate
merger documents with the Secretaries of State of Minnesota and Delaware
relating to the DakBev Merger, (iii) the filing with the SEC of (A) the Proxy
Statement and (B) such reports and information under the Exchange Act as may be
required in connection with this Agreement and the transactions contemplated
hereby, (iv) such as may be required under the HSR Act, (v) applicable
requirements, if any, of Blue Sky Laws and the NYSE, and (vi) such other
consents, orders, authorizations, registrations, declarations and filings the
failure of which to be obtained or made would not, individually or in the
aggregate, have a Material Adverse Effect on Dakota, or prevent or materially
delay the consummation of any of the transactions contemplated hereby.
Section 4.5 Financial Statements. Schedule 4.5 hereto consists of (a) a
--------------------
copy of the consolidated balance sheets of Dakota as of December 31, 1998,
December 31, 1997 and December 31, 1996 and the related statements of
operations, stockholders equity and cash flows for the calendar years then ended
(the "Annual Financial Statements") and (b) the unaudited balance sheets of
Dakota as of March 31, 1999 and March 31, 1998 and the related statements of
operations, stockholders equity and cash flows for the periods then ended (the
"Unaudited Financial Statements"). The Annual Financial Statements have been
audited by Arthur Andersen, LLP certified public accountants. The Annual
Financial Statements and the Unaudited Financial Statements have been prepared
in accordance with GAAP except, with respect to the Unaudited Financial
Statements, for the absence of footnote disclosures and normal year-end audit
adjustments, and in each case such principles have been applied in a consistent
manner in each of the periods indicated. The Annual Financial Statement and the
Unaudited Financial Statements are complete, correct and in accordance with the
books of accounts and records of Dakota and present fairly the consolidated
financial position of Dakota and the Dakota Subsidiaries as of December 31,
1998, December 31, 1997 and December 31, 1996,
B-23
<PAGE>
and March 31, 1999 and March 31, 1998, as the case may be, and the results of
operations of Dakota and the Dakota Subsidiaries for the periods then ended.
Section 4.6 Absence of Certain Changes or Events. Except as set forth
------------------------------------
on Schedule 4.6 hereof, since December 31, 1998, Dakota and the Dakota
Subsidiaries have operated their businesses only in the ordinary course and
consistent with past practices and there has not been:
(a) any Material Adverse Change in Dakota;
(b) any dividend or other distribution on, or any recapitalization,
combination or subdivision with respect to, or any purchase or redemption
by Dakota or the Dakota Subsidiaries of, any shares of the capital stock of
Dakota or any of the Dakota Subsidiaries other than in the ordinary course
of business consistent with past practices;
(c) any sale, transfer, lease, or Encumbrance of any of Dakota's or
any of the Dakota Subsidiaries' assets or cancellation of any claims of, or
indebtedness or obligations owing to, Dakota or any of the Dakota
Subsidiaries, except in the ordinary course of business;
(d) any material increase in the salaries or other compensation or
employee benefits with respect to any employees of Dakota or the Dakota
Subsidiaries except regularly scheduled increases in accordance with prior
practices or existing agreements.
(e) any purchase of or agreement to purchase any additional assets by
Dakota or any of the Dakota Subsidiaries, except in the ordinary course of
business or for a purchase price of less than $500,000;
(f) any loss, damage, destruction or other casualty to any of the
properties of Dakota or the Dakota Subsidiaries (whether or not covered by
insurance) (i) in excess of $100,000 per occurrence or $500,000 in the
aggregate or (ii) which has resulted in a Material Adverse Effect on Dakota
or the Dakota Subsidiaries;
(g) any entry into any additional, or modification of any existing,
agreements to borrow money (whether secured or unsecured), or any
refinancing of such agreements, except in the ordinary course of business;
(h) any entry into any guarantee by Dakota or the Dakota Subsidiaries
on behalf of any third party;
(i) any capital expenditures by Dakota or the Dakota Subsidiaries in
excess of the amount set forth in Dakota's 1999 Capital Expenditure
Budget, a true and correct copy of which is appended to Schedule 4.6
hereto;
(j) changes in accounting principles, elections, or procedures other
than as required by changes in GAAP;
(k) any entry into any employment, consulting, management or
severance agreement by Dakota or any of the Dakota Subsidiaries except in
the ordinary course of business;
B-24
<PAGE>
(l) amendment of the Articles of Incorporation or Bylaws of Dakota or
comparable charter or organizational document of the Dakota Subsidiaries;
(m) except for the merger of Dakota into DakBev contemplated in this
Agreement, authorization for issuance, sale, delivery or agreement or
commitment to issue, sell or deliver (whether through the issuance or
granting of options, warrants, commitments, subscriptions, rights to
purchase or otherwise) any shares of any class of Dakota's or any of the
Dakota Subsidiaries' capital stock or any securities convertible into or
exchangeable for shares of any class of such capital stock;
(n) any amendment or termination of any material agreement to which
Dakota or any of the Dakota Subsidiaries is a party; or
(o) any action taken by Dakota or the Dakota Subsidiaries, or their
directors, officers or stockholders to authorize any of the actions
contemplated above.
Section 4.7 Permits; Compliance and Contracts.
---------------------------------
(a) Except as disclosed in Schedule 4.7(a), each of Dakota and the
Dakota Subsidiaries is in possession of all franchises, grants,
authorizations, licenses, permits, easements, variances, exceptions,
consents, certificates, (including, without limitation, certificates of
occupancy), approvals, orders of any Governmental Entity and other permits,
including, without limitation, building, environmental, land-use, health,
safety, fire, utility or other rights or permits necessary for Dakota or
any of the Dakota Subsidiaries to own, lease and operate all of the Dakota
Real Property (as defined in Section 4.17) or to carry on its business as
it is now being conducted (collectively, the "Dakota Permits"), except
where the failure to have any of Dakota Permits would not, individually or
in the aggregate, have a Material Adverse Effect on Dakota, and, as of the
date of this Agreement, (i) all of the Dakota Permits are valid and in full
force and effect, (ii) each of Dakota and the Dakota Subsidiaries is in
compliance with its respective Dakota Permits, and (iii) no revocations,
suspensions or cancellations of any of the Dakota Permits are pending or
threatened.
(b) Neither Dakota nor any of the Dakota Subsidiaries is in violation
of, or has been charged with, is in receipt of any notice or warning of, or
to the Knowledge of Dakota (as hereinafter defined), under investigation
with respect to, any failure or alleged failure to comply with (A) its
articles, bylaws or other organizational documents, (B) to the Knowledge of
Dakota any applicable law, ordinance, administrative or government rule or
regulation (except for Environmental Laws, which are addressed in Section
4.12 hereto) or (C) any order, decree or judgment of any Governmental
Entity having jurisdiction over Dakota or any of the Dakota Subsidiaries,
except, in the case of clauses (A), (B) and (C), for any violations that,
individually or in the aggregate, would not have a Material Adverse Effect
on Dakota.
(c) Except as set forth on Schedule 4.7(c), each material contract is
in full force and effect and no event of default or event that, but for the
giving of notice or the lapse of time or both, would constitute an event of
default exists or, upon the consummation by Dakota of the transactions
contemplated by this Agreement, will exist under any indenture, mortgage,
loan agreement, note or other agreement or instrument for borrowed money,
any guarantee of any agreement or instrument for borrowed money or any
lease, contractual license or other agreement or instrument to which Dakota
or any of the Dakota Subsidiaries is a party or by which Dakota or any
Dakota Subsidiary is bound or to which any of the properties, assets or
operations of Dakota or any Dakota Subsidiary
B-25
<PAGE>
is subject, other than any defaults that, individually or in the aggregate,
would not have a Material Adverse Effect on Dakota. "Knowledge of Dakota"
means the actual knowledge of Robert C. Pohlad, John F. Bierbaum and Brad
Williams.
Section 4.8 Tax Matters.
-----------
(a) Subchapter S Election. Dakota and each Dakota Subsidiary is a
---------------------
"small business corporation" for which a valid qualified subchapter S
subsidiary election under Section 1361(b)(3) of the Internal Revenue Code
1986, as amended (the "Code") and the equivalent provisions of all
applicable state income tax statutes has been in effect since January 1,
1997. As of the date of this Agreement, Dakota has not taken any action
which might have caused the revocation of such Subchapter S status.
(b) All Returns Filed. Pohlad, Dakota and each Dakota Subsidiary has
-----------------
filed all Tax Returns that it was required to file. All such Tax Returns
were correct and complete in all material respects. All Taxes owed by
Pohlad, Dakota and each Dakota Subsidiary (whether or not shown on any Tax
Return) have been paid. Except as disclosed on Schedule 4.8(b), neither
Pohlad, Dakota nor any of the Dakota Subsidiaries is currently the
beneficiary of any extension of time within which to file any Tax Return.
(c) Taxes Paid. Dakota and each Dakota Subsidiary has withheld and
----------
paid all Taxes required under Federal or any state law (or the laws of any
other jurisdiction) to have been withheld and paid in connection with
amounts paid or owing to any employee, independent contractor, creditor,
shareholder or other third party.
(d) Tax Disputes. Except as disclosed on Schedule 4.8(d), there is
------------
no dispute or claim concerning any Tax liability of Dakota or any Dakota
Subsidiary and no deficiencies for any Taxes have been asserted or, to
Dakota's Knowledge, threatened, and no audit of any such Tax Returns is
currently underway or, to Dakota's Knowledge, threatened. There are no
outstanding agreements by Dakota or any Dakota Subsidiary for the extension
of time for the assessment of any Tax with respect to Dakota or any Dakota
Subsidiary and neither Dakota nor any Dakota Subsidiary has waived any
statute of limitations with respect to any Tax.
(e) Elections and Agreements. Neither Dakota nor any Dakota
------------------------
Subsidiary has filed a consent pursuant to Section 341(f) of the Code.
Except as disclosed on Schedule 4.8(e), neither Dakota nor the Dakota
Subsidiaries are a party to any tax sharing or allocation agreement.
Section 4.9 Actions and Proceedings.
-----------------------
(a) Except as set forth on Schedule 4.9, there are no outstanding
orders, judgments, injunctions, awards or decrees of any Governmental
Entity against or involving (i) Dakota or any of the Dakota Subsidiaries,
(ii) any of the present or former directors, officers, employees,
consultants, agents or stockholders of Dakota or any of the Dakota
Subsidiaries, as such, (iii) any of Dakota or Dakota Subsidiaries'
properties, assets or business or (iv) any Dakota Plan (as hereinafter
defined) that, in the case of clauses (i), (ii), (iii) or (iv) individually
or in the aggregate, would have a Material Adverse Effect on Dakota.
(b) As of the date of this Agreement, there are no actions, suits or
claims or legal, administrative or arbitrative proceedings or
investigations pending or, to the Knowledge of Dakota,
B-26
<PAGE>
threatened against or involving (i) Dakota or any of the Dakota
Subsidiaries, (ii) any of Dakota or Dakota Subsidiaries' present or former
directors, officers, employees, consultants, agents or stockholders, as
such, (iii) any of Dakota or Dakota Subsidiaries' properties, assets or
business or (iv) any Dakota Plan that, in the case of clauses (i), (ii),
(iii) or (iv) individually or in the aggregate, would have a Material
Adverse Effect on Dakota or relate to the transactions contemplated by this
Agreement.
Section 4.10 Certain Agreements. As of the date of this Agreement,
------------------
neither Dakota nor any of the Dakota Subsidiaries is a party to any oral or
written agreement or plan, including any stock option plan, stock appreciation
rights plan, restricted stock plan, stock purchase plan, Dakota Other Benefit
Obligation or Dakota Plan (as both are defined in Section 4.11), any of the
benefits of which will be increased (except as provided in Section 7.13 hereof),
or the vesting of the benefits of which will be accelerated, by the occurrence
of any of the transactions contemplated by this Agreement or the value of any of
the benefits of which will be calculated on the basis of any of the transactions
contemplated by this Agreement. Neither Dakota nor any Dakota Subsidiary is a
party to any termination benefits agreement or severance agreement or employment
agreement, one trigger of which would be the consummation of the transactions
contemplated by this Agreement.
Section 4.11 Employee Benefit Matters.
------------------------
(a) As used in this Section 4.11, the following terms have the
meanings set forth below:
"Dakota Other Benefit Obligation" means all material obligations,
arrangements, or customary practices, whether or not legally
enforceable, to provide benefits, other than salary, as compensation
for services rendered, to present or former directors, employees, or
agents, other than with respect to any Dakota Plan. This includes
sabbatical policies, severance payment policies, and material fringe
benefits within the meaning of Code (S) 132.
"Dakota Plan" means (i) all employee benefit plans (as defined
in ERISA (S) 3(3)) of which Dakota or the Dakota Subsidiaries is a
Plan Sponsor (as defined in ERISA (S) 3(16)(B)), or to which Dakota or
the Dakota Subsidiaries otherwise contributes or in which Dakota or
the Dakota Subsidiaries otherwise participates, or (ii) all Title IV
Plans and Multi-Employer Plans (as defined in ERISA (S) 3(37)(A)) of
which an ERISA Affiliate is a Plan Sponsor or otherwise contributes or
currently participates.
"Dakota VEBA" means a voluntary employees' beneficiary
association under Code (S) 501(c)(9) whose members include employees
of Dakota or the Dakota Subsidiaries.
"ERISA Affiliate" means any other person that, together with
Dakota or any of the Dakota Subsidiaries, would be treated as a single
employer under Code (S) 414(b), (c) or, solely with respect to matters
relating to Code (S) 412 or ERISA (S)(S) 302 or 4007, (m).
"PBGC" means the Pension Benefit Guaranty Corporation, or any
successor thereto.
"Title IV Plans" means all Dakota Plans that are subject to Title
IV of ERISA, 29 U.S.C. (S) 1301 et seq., other than Multi-Employer
Plans.
(b) (i) Schedule 4.11(b)(i) attached hereto sets forth a complete
and accurate list of all Dakota Plans, Dakota Other Benefit
Obligations, and Dakota VEBAs, and identifies as such all Dakota Plans
that: (A) are defined benefit plans (as defined in ERISA (S) 3(35));
B-27
<PAGE>
(B) meet or purport to meet the requirements of Code (S) 401(a); or
(C) are Title IV Plans.
(ii) None of the Dakota Plans set forth on Schedule 4.11(b)(i) is
a Multi-Employer Plan and none of Dakota, any of the Dakota
Subsidiaries or any ERISA Affiliate has any assessed or potential
liability due to a complete or partial withdrawal from or a
termination or reorganization of a Multi-Employer Plan. No
circumstances exist that could reasonably be expected to result in any
such liability to Dakota, any Dakota Subsidiary or any ERISA
Affiliate.
(iii) Except as set forth in Schedule 4.11(b)(iii) or as required
by applicable law, no Dakota Plans provide retiree health or life
insurance benefits.
(c) Dakota has delivered or made available to PPR all documents,
insurance policies and contracts comprising, describing or relating to each
Dakota Plan, Dakota Other Benefit Obligation, or Dakota VEBA and of any
related trust; as well as all required filings for each of the above filed
with government authorities for each of the three most recent plan years.
(d) Except as set forth in Schedule 4.11(d) attached hereto:
(i) Dakota or the Dakota Subsidiaries have performed in all
material respects all of their respective obligations whether as plan
administrator, fiduciary, plan sponsor or contributing employer under
all Dakota Plans, Dakota Other Benefit Obligations, and Dakota VEBAs
in a timely manner and have made all required entries in their
financial records and statements for all obligations and liabilities
that have accrued but are not due. No written or oral statement has
been made by Dakota or the Dakota Subsidiaries to any Person with
regard to any Dakota Plan or Dakota Other Benefit Obligation not in
accordance with such plan or other benefit obligation which could
reasonably be expected to have a Material Adverse Effect on Dakota or
the Dakota Subsidiaries.
(ii) Dakota, the Dakota Subsidiaries and each Dakota Plan, Dakota
Other Benefit Obligation, and Dakota VEBA is, to the extent
applicable, in material compliance with applicable law, except for any
such failure to comply which would not result in any material
liability to Dakota or any of the Dakota Subsidiaries. Dakota and all
Dakota Subsidiaries have met any applicable minimum funding standard,
and have made all contributions required, under ERISA (S) 302. The
most recent actuarial report for each Title IV Plan fairly presents
the financial condition of each such plan, and since the date of such
report there has been no material adverse change in the funded status
of any such plan.
(iii) Since December 31, 1998, there has been no establishment,
termination or amendment of any Dakota Plan, Dakota VEBA, or Dakota
Other Benefit Obligation.
(iv) Other than routine claims for benefits submitted by
participants or beneficiaries, no claim against, or legal proceeding
involving or relating to, any Dakota Plan, Dakota Other Benefit
Obligation, or Dakota VEBA is pending or, to Dakota's Knowledge, is
threatened.
(v) None of Dakota, the Dakota Subsidiaries or any ERISA
Affiliate has terminated any Title IV Plan or incurred any outstanding
liability under Section 4062 of
B-28
<PAGE>
ERISA to the PBGC or to a trustee appointed under Section 4042 of
ERISA, and no events have occurred and no circumstances exist that
could reasonably be expected to result in any such liability to
Dakota, the Dakota Subsidiaries or any ERISA Affiliate. All premiums
due the PBGC with respect to the Title IV Plans have been paid.
(vi) There has been no "reportable event" within the meaning of
Section 4043 of ERISA with respect to any Title IV Plan which would
require the giving of notice to the PBGC or any other event requiring
disclosure under Section 4041(c)(3)(C) or 4063(a) of ERISA.
(vii) Neither the execution and delivery of this Agreement nor the
consummation of the transactions contemplated hereby will, either
alone or upon the occurrence of subsequent events, (i) result in any
payment becoming due to any current or former employee, officer or
director of Dakota or the Dakota Subsidiaries, (ii) increase any
benefits otherwise payable under any Dakota Plan or Dakota Other
Benefit Obligation, (iii) result in the acceleration of the time of
payment or vesting of any benefits under any Dakota Plan or Dakota
Other Benefit Obligation, (iv) constitute a "change in control" or
similar event under any Dakota Plan or Dakota Other Benefit Obligation
or (v) fail to be deductible by reason of Section 280G of the Code.
Section 4.12 Compliance with Environmental Laws.
----------------------------------
(a) Except as set forth on Schedule 4.12, each of Dakota and the
Dakota Subsidiaries, and, to the Knowledge of Dakota, any prior owner or
lessee, have generated, handled, manufactured, treated, stored, used,
released, transported and disposed of all Environmentally Regulated
Materials (as defined below) on, beneath, to or from any of the properties
owned or operated by Dakota and the Dakota Subsidiaries in the conduct of
their businesses or any other properties formerly owned, leased or operated
by Dakota or the Dakota Subsidiaries, in compliance with all Environmental
Laws.
(b) Except as set forth on Schedule 4.12, Dakota and the Dakota
Subsidiaries have operated all plants, facilities and business operations
in compliance with all Environmental Laws, and all plants, facilities and
business operations are currently in compliance with all Environmental
Laws.
(c) Except as set forth on Schedule 4.12, neither Dakota nor the
Dakota Subsidiaries have disposed of or released any Environmentally
Regulated Material in any location which would reasonably be expected to
give rise to a claim of responsibility for investigation or clean-up costs,
personal injury or property damage liability against Dakota or any Dakota
Subsidiary by any third party.
(d) Except as set forth on Schedule 4.12, neither Dakota nor the
Dakota Subsidiaries have received any notices or claims of violations or
liabilities relating to an Environmentally Regulated Material or an
Environmental Law, which notices or claims of violations or liabilities
have not been resolved.
Section 4.13 Indebtedness. Schedule 4.13 sets forth a complete listing
------------
of Dakota's and the Dakota Subsidiaries' indebtedness for borrowed money as of
the date hereof, and includes a description of all documents and agreements
which set forth the terms of such indebtedness, the amount of the balance owing
B-29
<PAGE>
as of the date hereof, the applicable interest rate in effect as of the date
hereof, and a listing of all collateral securing such indebtedness (if any), and
a description of any applicable prepayment penalties or make-whole amounts that
would be payable if such indebtedness were to be paid in full as of the date
hereof.
Section 4.14 Labor Matters. Neither Dakota nor any of the Dakota
-------------
Subsidiaries is a party to any collective bargaining agreement or labor
contract, except as set forth in Schedule 4.14. To the Knowledge of Dakota, as
of the date of this Agreement, there are no present or pending applications for
certification of any union as the exclusive bargaining agent for any employees
of Dakota or any Dakota Subsidiaries. To the Knowledge of Dakota, neither
Dakota nor any of the Dakota Subsidiaries has engaged in any unfair labor
practice with respect to any persons employed by or otherwise performing
services primarily for Dakota or any of the Dakota Subsidiaries (the "Dakota
Business Personnel"), and there is no unfair labor practice complaint or
grievance against Dakota or any of the Dakota Subsidiaries by the National Labor
Relations Board or any comparable state agency pending or, to the Knowledge of
Dakota, threatened with respect to Dakota Business Personnel, except where such
unfair labor practice, complaint or grievance would not have a Material Adverse
Effect on Dakota. There is no labor strike, dispute, slowdown or stoppage
pending or, to the Knowledge of Dakota, threatened against Dakota or any of the
Dakota Subsidiaries, except where such dispute, strike or work stoppage would
not have a Material Adverse Effect on Dakota.
Section 4.15 Intellectual Property. Schedule 4.15 sets forth a complete
---------------------
list of all patents and applications therefor, trademark registrations and
applications therefor, service mark registrations and applications therefor,
copyright registrations and applications therefor, trade names, computer
programs or software which are material to the operation of Dakota's business
and interests in license agreements and all other proprietary rights that are
owned, licensed, sublicensed or used by agreement or permission by Dakota or any
Dakota Subsidiary and used in the continued operation of Dakota's business
(collectively, "Dakota Intellectual Property"). Except as otherwise set forth
on Schedule 4.15, Dakota's interest in the Dakota Intellectual Property is free
and clear of any Encumbrance, and constitutes all such property or rights used
by or necessary to the operation of Dakota's business. To Dakota's Knowledge
and except as set forth on Schedule 4.15, the use of the Dakota Intellectual
Property does not conflict with, infringe upon, or misappropriate any rights
held or asserted by any person, or require the consent of any person. Except as
set forth on Schedule 4.15, neither Dakota nor any Dakota Subsidiary has, in the
past two years, received any notice or claim that any such Dakota Intellectual
Property is not valid or enforceable, or of any infringement upon or conflict
with any patent, trademark, service mark, copyright, trade name or trade secret
of any third party by Dakota or any Dakota Subsidiary or of any claim by any
third party alleging any such infringement or conflict, and, in the past two
years, neither Dakota nor any Dakota Subsidiary has given any notice of
infringement to any third party with respect to any of the Dakota Intellectual
Property. Dakota has paid all required license fees related to all software
used in the operation of its business.
Section 4.16 Title to Assets; Insurance. Except as described on Schedule
--------------------------
4.16, Dakota and the Dakota Subsidiaries have good and marketable title to all
real property and good title to all of the personal property and assets which
they purport to own, and which are necessary to carry on its business, in each
case free and clear of all Encumbrances except for Permitted Exceptions (as
defined in Section 4.17). Dakota and the Dakota Subsidiaries have in full force
and effect policies of insurance that are customary for businesses of similar
size in similar industries and consistent with sound business practice.
Section 4.17 Real Property.
-------------
(a) Schedule 4.17(a) describes all real properties owned or leased by
Dakota and the Dakota Subsidiaries (the "Dakota Real Property"), the nature
of the interest of Dakota or the Dakota Subsidiaries and the entity which
holds the interest in those properties and the approximate acreage of each
of those properties. There is no real property (other than the Dakota Real
Property) the use
B-30
<PAGE>
or possession of which by Dakota and the Dakota Subsidiaries is necessary
to carry on its business. Except as described on Schedule 4.17(b), Dakota
and each of the Dakota Subsidiaries has (i) such title to the Dakota Real
Property as is legally sufficient for the current use thereof in its
business as presently conducted, (ii) good and marketable indefeasible
title in fee simple (except for Permitted Exceptions, as hereinafter
defined) to all Dakota Real Property shown in Schedule 4.17(a) as owned by
it (the "Dakota Owned Real Property") and (iii) valid leaseholds under
valid and enforceable leases in all Dakota Real Property shown on Schedule
4.17(a) as leased by it. The Dakota Real Property is owned or leased by
Dakota and the Dakota Subsidiaries free and clear of all matters except for
Permitted Exceptions. Except as set forth in Schedule 4.17(b), none of the
Dakota Real Property is subject to any lease (other than the Dakota Leases
(as hereinafter defined)), sublease, license or other agreement granting to
any person any right to the use, occupancy or enjoyment thereof (or any
portion thereof). None of the Permitted Exceptions materially interferes
with or has interfered with the maintenance, use or operation of the Dakota
Real Property. "Permitted Exceptions" means (i) matters listed or described
on Schedule 4.17(b), (ii) easements, covenants, rights-of-way and other
Encumbrances or restrictions which do not, individually or in the
aggregate, materially detract from the value or impair the present and
continued use, operation and maintenance of the property subject thereto,
or impair the operation of Dakota or any of the Dakota Subsidiaries, (iii)
real estate taxes not yet due or payable and (iv) Encumbrances existing at
the date of this Agreement which are set forth on Schedule 4.17(a).
(b) None of the leases identified in Schedule 4.17(a) (collectively,
the "Dakota Leases") has been modified or amended, and no notice of
termination has been delivered with respect thereto, except as set forth in
Schedule 4.17(b). Except as set forth on Schedule 4.17(c), neither Dakota
nor any of the Dakota Subsidiaries, nor any other person, is in breach of
or default under any Dakota Lease (and no event has occurred which, with
due notice or lapse of time or both, may constitute such a breach or
default).
(c) To the Knowledge of Dakota, the buildings, driveways and all
other structures and improvements upon the Dakota Real Property are all
within the boundary lines of the applicable property or have the benefit of
valid easements or other legal rights and there are no encroachments
thereon that would affect the use thereof.
(d) To the Knowledge of Dakota, all buildings, structures,
improvements, equipment, facilities, plants and fixtures owned or leased by
Dakota and the Dakota Subsidiaries conform in all material respects to all
applicable codes and rules adopted by national and local associations and
boards and insurance underwriters, and all such buildings, structures,
improvements and fixtures are in good operating condition and repair.
There are no outstanding requirements or recommendations by any insurance
company which has issued a policy covering any such property, or by any
board of fire underwriters or other body exercising similar functions,
requirement or recommending any repairs or work to be done on any such
property.
(e) To the Knowledge of Dakota, all public utilities required for the
operation of such properties either enter such properties through adjoining
public streets or, if they pass through adjoining private land, do so in
accordance with valid public or private easements which will inure to the
benefit of Dakota and the Dakota Subsidiaries and their respective
successors and assigns. All of the public utilities mentioned above are
installed and operating, and all installation and connection charges are
paid in full.
B-31
<PAGE>
(f) To the Knowledge of Dakota, the plumbing, electrical, heating,
air conditioning, elevator, ventilating and all other mechanical or
structural systems and equipment in the buildings or improvements located
on the Dakota Real Property and any manufacturing systems and components
located thereof are in good working order and condition, and the roof,
basement and foundation walls of such buildings and improvements for which
Dakota or the Dakota Subsidiaries is responsible (as owner or as lessee
under any Dakota Lease) are in good condition and free of leaks and other
defects. All such mechanical and structural systems and equipment and such
manufacturing systems and components and such roofs, basements and
foundation walls for which a person other than Dakota or the Dakota
Subsidiaries is responsible are in good working order and condition and
free of leaks and other defects.
(g) To the Knowledge of Dakota, Dakota or the Dakota Subsidiaries has
the uninterrupted use of any easements for ingress and egress for all of
the Dakota Real Property owned or leased by Dakota or the Dakota
Subsidiaries, as the case may be. The Dakota Real Property has full and
uninterrupted access to and from public roads and Dakota has no Knowledge
of any fact or condition which would result in the termination of such
access.
(h) Neither Dakota nor the Dakota Subsidiaries is the landlord or
lessor under any lease, sublease or other occupancy agreement affecting any
of the Dakota Real Property.
Section 4.18 Title Insurance. Schedule 4.18 sets forth a true, correct
---------------
and complete list and summary description of all of the policies of title
insurance and legal opinions with respect to title insurance insuring Dakota's
and the Dakota Subsidiaries' interest in the Dakota Owned Real Property
(collectively, the "Dakota Title Policies"). Dakota has furnished a true,
correct and complete copy of all such Dakota Title Policies to PPR. All of the
Dakota Title Policies are in full force and effect. Dakota shall maintain, and
shall use its best efforts to cause the Dakota Subsidiaries to maintain, the
coverage under the Dakota Title Policies in full force and effect through the
date of the Closing. Neither Dakota nor the Dakota Subsidiaries is in material
default under any provisions of the Dakota Title Policies. There is no claim by
Dakota, the Dakota Subsidiaries or any other person pending under any of the
Dakota Title Policies as to which coverage has been questioned, denied or
disputed by the underwriters or issuers of such Dakota Title Policies.
Section 4.19 Zoning. To the Knowledge of Dakota, all of the Dakota Real
------
Property and the buildings, structures, improvements and fixtures located
thereon, and the respective businesses conducted thereat and the manner of such
conduct, conform in all respects to all existing zoning, building and other
applicable laws, rules and regulations and the operation of the Dakota Real
Property and the improvements located thereon is not in violation of any such
laws, rules or regulations. To the Knowledge of Dakota, all uses of the Dakota
Real Property and the improvements located thereon are "as-of-right" and do not
require any non-conforming use rights, nor have they been "grandfathered" under
any pre-existing laws, rules or regulations.
Section 4.20 Brokers. No broker, investment banker or other person,
-------
other than NationsBanc/Montgomery Securities, the fees and expenses of which
will be paid by Dakota is entitled to any broker's, finder's or other similar
fee or commission in connection with the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of Dakota.
B-32
<PAGE>
Section 4.21 Relationships. Except as otherwise disclosed in Schedule
-------------
4.21, Dakota's relationships with its franchisors, agents, brokers, dealers,
distributors, representatives, licensees, customers and suppliers are
continuing, and there has been no material change in the scope of such
relationships during the last year with any of such parties or similar parties
with which Dakota has done business during the last year. All sales and
performances of services by Dakota in connection with its business are in
material compliance with all of Dakota's representations, warranties and
agreements, express or implied, with respect to such sales and performances,
except for customary returns and allowances.
Section 4.22 Compliance with Quality Standards. All water used in the
---------------------------------
production process of Dakota's business conforms, in all material respects, to
(i) the quality standards required by Dakota's or the Dakota Subsidiaries'
franchisors, including PepsiCo, (ii) internal quality standards required by
Dakota, and (iii) any local quality standards.
Section 4.23 Year 2000 Compliance. To the extent that any functionality
--------------------
of any computer system used by Dakota is dependent upon or interdependent with
the use or specification of any calendar date, Dakota has used commercially
reasonable efforts in implementing a plan pursuant to which any such computer
system shall be "Year 2000 Compliant," except where failure to do so will not
result in a Material Adverse Effect on Dakota. For purposes of this Agreement,
the term Year 2000 Compliant means that neither the performance nor the
functionality of such computer systems shall be materially affected by dates in,
into and between the 20th and 21st centuries. To be deemed Year 2000 Compliant,
such computer systems shall conform in all material respects to the following
basic requirements (i) no value for a current date shall cause any interruption
in Dakota's operations in which the computer system is used; and (ii) any date-
based functions shall operate and perform in a consistent manner for dates in,
into and between the 20th and 21st centuries and such computer systems shall
calculate, manipulate and represent properly inputted dates correctly.
Section 4.24 Disclosure. No representation or warranty of Dakota in this
----------
Agreement or in any certificate, schedule, statement or other document furnished
or to be furnished by Dakota to PPR pursuant hereto or in connection with the
transactions contemplated hereby, contains or will contain any untrue statement
of a material fact or omits or will omit to state any material fact required to
be stated herein or therein or necessary to make the statements herein or
therein not misleading.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF POHLAD
Pohlad represents and warrants to PPR as follows:
Section 5.1 Organization; Title; Authority. Pohlad is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Minnesota and has the requisite corporate power and authority to own, lease or
operate its properties and to carry on its business as now being conducted.
Pohlad is the beneficial and record owner of 1,000 number of shares of Dakota
Stock and owns such shares free and clear of all Encumbrances except for
restrictions on transfer imposed by federal securities laws. Pohlad has the
authority to execute, deliver and perform its obligations under this Agreement.
Pohlad's Board of Directors have approved, or will approve prior to the Closing,
as the case may be, this Agreement and the transactions contemplated hereby,
including, but not limited to, the Exchange, the formation of DakBev, the DakBev
Merger, the formation of Dakota, LLC, the Pohlad Contribution and the P-PRT
Contribution. This Agreement has been duly executed and delivered by Pohlad and
(assuming the valid authorization, execution and delivery of this Agreement by
PPR and Dakota) constitutes a legal, valid and binding obligation of Pohlad and
is enforceable against Pohlad in accordance with its terms, except to the
B-33
<PAGE>
extent that (i) enforcement may be limited by or subject to any bankruptcy,
insolvency, reorganization, moratorium or similar laws now or hereafter in
effect relating to or limiting creditors' remedies and (ii) the remedy of
specific performance and injunctive and other forms of equitable relief are
subject to certain equitable defenses and to the discretion of the court or
other tribunal before which any proceeding therefor may be brought.
Section 5.2 No Breach. The execution and delivery of this
---------
Agreement by Pohlad and the consummation by Pohlad of the transactions
contemplated hereby, including, but not limited to, the Exchange, the formation
of DakBev, the DakBev Merger, the formation of Dakota, LLC, the Pohlad
Contribution and the P-PRT Contribution does not and will not contravene,
violate or constitute, or result in a breach or default (with or without notice
or lapse of time, or both) under, the charter or organizational documents of
Pohlad, any judgement, order, decree, statute, law, ordinance, rule or
regulation or any contract or agreement by which Pohlad is bound, or result in
the creation or imposition of any Encumbrance (other than under this Agreement)
on the shares of the Dakota Stock owned by Pohlad.
Section 5.3 No Consents. Except as set forth in Schedule 5.3
-----------
hereto, no consent or authorization of, or registration, declaration or filing
with, any person, is required to be made or received by Pohlad in connection
with the execution and delivery of this Agreement or the consummation of the
transactions contemplated hereby, including, but not limited to, the Exchange,
the formation of DakBev, the DakBev Merger, the formation of Dakota, LLC, the
Pohlad Contribution and the P-PRT Contribution.
Section 5.4 Entire Interest. The 1,000 shares of Dakota Stock owned by
---------------
Pohlad constitutes Pohlad's entire ownership interest in Dakota, and Pohlad has
no rights to acquire any additional shares of Dakota Stock or any other equity
interest in Dakota. At the Closing, Pohlad shall have all requisite power and
authority, including voting control of Dakota, LLC, necessary to cause Dakota,
LLC to exchange the DakBev Membership Units for the Exchange Consideration as
set forth in Article II hereof.
Section 5.5 Accredited Investor Status; PPR Information. Pohlad is an
-------------------------------------------
"accredited investor" as defined in Rule 501(a) of Regulation D promulgated
under the Exchange Act.
Section 5.6 Unregistered Securities; Investment Intent. The shares of
------------------------------------------
PPR Class B Common Stock have not been registered under the Securities Act or
relevant state securities laws pursuant to exemptions from registration under
the Securities Act and such laws. PPR's reliance upon such exemptions is
predicated in part on Pohlad's representations to PPR as contained herein. The
shares of PPR Class B Common Stock are being acquired for the account of Dakota,
LLC and for investment and without the intention of reselling, transferring, or
redistributing the same. At the time Dakota, LLC receives such shares, it will
have no agreement for the transfer or disposition of any of such shares.
Section 5.7 Restrictions on Transfer. Pohlad acknowledges that PPR will
------------------------
place a restrictive legend on the certificate(s) representing the shares of PPR
Class B Common Stock received by Dakota, LLC pursuant to this Agreement,
containing substantially the following language:
The securities represented by this certificate were issued without
registration under the Securities Act of 1933, as amended (the "Act"), and
without registration under state securities laws, in reliance upon
exemptions contained in the Act and such laws. No transfer of these
securities or any interest therein may be made except pursuant to effective
registration statements under said laws unless this corporation has
received an opinion of counsel satisfactory to it that such transfer or
disposition does not require registration under
B-34
<PAGE>
said laws and, for any sales under Rule 144 of the Act, such evidence as it
shall reasonably request for compliance with that rule.
PPR will place a stop transfer order on the certificate(s) representing the
shares to assure compliance with this Agreement and the matters referenced
above.
ARTICLE VI
COVENANTS RELATING TO CONDUCT OF BUSINESS
Section 6.1 Actions by PPR. Except as expressly permitted by clauses
--------------
(a) through (j) of this Section 6.1 or as otherwise required by this Agreement,
during the period from the date of this Agreement through the date of Closing,
PPR shall, and shall cause each of the PPR Subsidiaries to, in all material
respects carry on its business in the ordinary course as currently conducted
and, to the extent consistent therewith, use reasonable best efforts to preserve
intact its current business organizations, keep available the services of its
current officers and employees and preserve its relationships and goodwill with
customers, suppliers and others having business dealings with it. Without
limiting the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, PPR shall not, and shall not permit any of the
PPR Subsidiaries to, without the prior written consent of Dakota:
(a) (x) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions payable in cash, shares,
stock, securities or property in respect of, any of its capital stock, or
otherwise make any payments to its stockholders in their capacity as such
(other than dividends and other distributions by PPR Subsidiaries including
dividends on outstanding shares of non-voting management stock of Beverage
Plastics Company, a Delaware corporation, in the ordinary course of
business and consistent with past practice), (y) other than in the case of
any PPR Subsidiary, subdivide, split, combine or reclassify any of its
capital stock or issue or authorize the issuance of any other securities in
respect of, in lieu of or in substitution for shares of its capital stock
or (z) purchase, redeem or otherwise acquire any shares of capital stock of
PPR or any other securities thereof or any rights, warrants or options to
acquire, directly or indirectly, any such shares or other securities;
(b) issue, deliver, sell, pledge, dispose of or otherwise encumber
any shares of its capital stock, any other voting securities or equity
equivalent or any securities convertible into, or any rights, warrants or
options to acquire any such shares, voting securities, equity equivalent or
convertible securities, or agree to any amendment to the terms of any
option, warrant or convertible security, other than (x) the grant of stock
options to employees of PPR or any of the PPR Subsidiaries under the PPR
Option Plans and the issuance of shares of PPR Stock pursuant to the
exercise thereof in the ordinary course of business consistent with past
practice, (y) the issuance of PPR Stock pursuant to the exercise of
warrants outstanding as of the date hereof that are exercisable or become
exercisable by their terms (as in effect on the date hereof), and (z) the
issuance of PPR Stock as consideration for the acquisitions permitted to be
made by PPR by clause (d) of this Section 6.1;
(c) amend its charter or bylaws; provided, however, that PPR shall
amend its charter to adopt the PPR Charter Amendment;
B-35
<PAGE>
(d) acquire or agree to acquire by merging or consolidating with, or
by purchasing a substantial portion of the assets of or equity in, or by
any other manner, any business or any corporation, partnership, limited
liability company, association or other business organization or division
thereof or otherwise acquire or agree to acquire any assets, except for (x)
the Delta Acquisition, and (y) acquisitions which do not exceed $50 million
individually or $100 million in the aggregate;
(e) sell, lease or otherwise dispose of, or agree to sell, lease or
otherwise dispose of, any of its assets, other than transactions that are
in the ordinary course of business consistent with past practice and not
material to PPR and the PPR Subsidiaries taken as a whole;
(f) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to, or
other investments in, any other person, other than (x) in the ordinary
course of business consistent with past practice (including refinancings of
existing debt), (y) indebtedness, loans, advances, capital contributions
and investments between PPR and any of the PPR Subsidiaries, and (z)
indebtedness incurred to fund the acquisitions permitted by Section 6.1(d)
above, including any amendments necessary to existing loan documents with
Banco Popular to extend the facility to $40 million and replace Banco
Popular as the primary lender with NationsBanc (or an affiliate of
NationsBanc) and other syndication participants.
(g) enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any PPR Plan, PPR Option
Plan or employment or consulting agreement, other than as required by law
and other than amending the existing PPR option plans to increase the
number of shares available for issuance thereunder;
(h) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any PPR Subsidiary by any applicable
material federal, state, Puerto Rican, or local law, rule, regulation,
guideline or ordinance;
(i) take any action, other than reasonable and usual actions in the
ordinary course of business consistent with past practice, with respect to
accounting policies or procedures (other than actions required to be taken
by GAAP);
(j) except as set forth on PPR's 1999 Capital Expenditure Budget,
enter into any other material transaction or make any other capital
expenditure not in the ordinary course of business consistent with past
practice; or
(k) authorize, recommend or announce an intention to do any of the
foregoing, or enter into any contract, agreement, commitment or arrangement
to do any of the foregoing.
Section 6.2 Actions by Dakota.
-----------------
(a) Dakota Reorganization. Dakota and Pohlad hereby agree to take all
---------------------
actions reasonably necessary or appropriate to cause the Dakota
Reorganization to be consummated prior to the Closing in accordance with
Article I hereof. As used herein, "Dakota Reorganization" shall mean,
collectively, (i) the formation of each of DakBev and Dakota, LLC, (ii) the
DakBev Merger, (iii) the Pohlad Contribution and (iv) the P-PRT
Contribution. Upon the completion of the Dakota Reorganization, Pohlad
shall have voting control of Dakota, LLC, and shall have all necessary
power
B-36
<PAGE>
and authority to cause Dakota, LLC to satisfy its obligations under
this Agreement, including consummating the Exchange.
(b) Conduct of Dakota's Business. Except as expressly permitted by
----------------------------
clauses (i) through (xi) of this Section 6.2(b) or as otherwise
contemplated by this Agreement, during the period from the date of this
Agreement through the date of Closing, each of Dakota, DakBev and Dakota,
LLC, as the case may be, shall, and shall cause each of its respective
Subsidiaries to, in all material respects, carry on its business in the
ordinary course as currently conducted and, to the extent consistent
therewith, use reasonable best efforts to preserve intact its current
business organizations, keep available the services of its current officers
and employees and preserve its relationships and goodwill with customers,
suppliers and others having business dealings with it. Without limiting
the generality of the foregoing, and except as otherwise expressly
contemplated by this Agreement, none of Dakota, DakBev and Dakota, LLC, as
the case may be, shall and none shall permit any of its respective
Subsidiaries to, without the prior written consent of PPR:
(i) declare, set aside or pay any dividends on, or make any other
actual, constructive or deemed distributions in respect of, any of its
capital stock, or otherwise make any payments to its stockholders in
their capacity as stockholders, except cash distributions to its
stockholders in their capacity as such and the distribution of a note
receivable in the amount of $33,400,000 from Dakota to Pohlad, (y)
other than in the case of any Dakota Subsidiary, subdivide, split,
combine or reclassify any of its capital stock or issue or authorize
the issuance of any other securities in respect of, in lieu of or in
substitution for shares of its capital stock or (z) purchase, redeem
or otherwise acquire, directly or indirectly, any shares of capital
stock of Dakota or any other securities thereof or any rights,
warrants or options to acquire any such shares or other securities;
(ii) issue, deliver, sell, pledge, dispose of or otherwise
encumber any shares of its capital stock any other voting securities
or equity equivalent or any securities convertible into, or any
rights, warrants or options to acquire any such shares, voting
securities, equity equivalent or convertible securities, or agree to
any amendment to the terms of any option, warrant or convertible
security;
(iii) except for the filing of Articles of Merger relating to the
DakBev Merger, amend its Articles of Incorporation or Bylaws;
(iv) except for the DakBev Merger, acquire or agree to acquire by
merging or consolidating with, or by purchasing a portion of the
assets of or equity in, or by any other manner, any business or any
corporation, partnership, limited liability company, association or
other business organization or division thereof or otherwise acquire
or agree to acquire any assets except for (A) acquisitions which do
not exceed $1 million individually or $5 million in the aggregate and
(B) transactions that are in the ordinary course of business
consistent with past practice and that are not material;
(v) sell, lease or otherwise dispose of, or agree to sell, lease
or otherwise dispose of, any of its assets, other than (x)
transactions that are in the ordinary course of business consistent
with past practice and not material to Dakota and the Dakota
Subsidiaries taken as a whole and the distribution of a note
receivable in the amount of $33,400,000 from Dakota to Pohlad.
B-37
<PAGE>
(vi) incur any indebtedness for borrowed money, guarantee any such
indebtedness or make any loans, advances or capital contributions to,
or other investments in, any other person, other than (x) indebtedness
for borrowed money incurred in the ordinary course of business
consistent with past practice (including refinancings of existing
debt) (y) indebtedness, loans, advances, capital contributions and
investments between Dakota and any of the Dakota Subsidiaries, and (z)
indebtedness necessary to fund the acquisitions permitted by Section
6.2(b)(iv) above.
(vii) except as may be necessary or proper to consummate the DakBev
Merger, enter into or adopt, or amend any existing, severance plan,
agreement or arrangement or enter into or amend any Dakota Plan or
employment or consulting agreement, other than as required by law;
(viii) knowingly violate or knowingly fail to perform any material
obligation or duty imposed upon it or any Dakota Subsidiary by any
applicable material federal, state or local law, rule, regulation,
guideline or ordinance;
(ix) take any action, other than reasonable and usual actions in
the ordinary course of business consistent with past practice, with
respect to accounting policies or procedures (other than actions
required to be taken by GAAP);
(x) authorize, recommend, propose or announce an intention to do
any of the foregoing, or enter into any contract, agreement,
commitment or arrangement to do any of the foregoing; or
(xi) except as set forth on Dakota's 1999 Capital Expenditure
Budget, enter into any other material transaction or make any other
capital expenditure not in the ordinary course of business consistent
with past practice.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 PPR Stockholder Meeting. PPR shall call a meeting of its
-----------------------
stockholders (the "PPR Stockholder Meeting") for the purpose of: (a) approving
the transactions contemplated hereby, including, but not limited to, the Share
Issuance and the Exchange; (b) approving an increase in the number of authorized
shares of PPR's Class B Common Stock to 145,000,000 shares (the "PPR Charter
Amendment"); and (c) approving the amendments to the PPR Option Plans to
increase the number of shares available for issuance thereunder and (d)
approving such other matters as PPR's Board of Directors shall determine. PPR
shall prepare and file with the SEC the Proxy Statement (as hereinafter defined)
for the purpose of soliciting proxies for the matters brought before the PPR
Stockholder Meeting. PPR will, through the PPR Board of Directors with the
concurrence of the PPR Special Committee, recommend to its stockholders approval
of such matters and shall not withdraw such recommendation; provided, however,
that the PPR Special Committee shall not be required to make, and shall be
entitled to withdraw, such recommendation if the PPR Special Committee concludes
in good faith on the basis of the advice of Willkie Farr & Gallagher that the
making of, or the failure to withdraw, such recommendation would violate the
fiduciary obligations of the PPR Special Committee under applicable law;
provided further, however, that in no case shall any change in the trading price
of PPR Class B Common Stock be used as a basis for any such conclusion.
B-38
<PAGE>
Notwithstanding any recission of the recommendation by the PPR Special Committee
that is permitted by this Section 7.1, PPR shall remain obligated to call the
PPR Stockholder Meeting.
Section 7.2 Preparation of the Proxy Statement. PPR and Dakota each
----------------------------------
agree, as to itself and its Subsidiaries, that none of the information supplied
or to be supplied by it or its Subsidiaries for inclusion or incorporation by
reference in the Proxy Statement and any amendment or supplement thereto will,
at the date of mailing to the PPR stockholders and at the time of the PPR
Stockholder Meeting, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. "Proxy Statement" shall mean the proxy statement for the
PPR Stockholder Meeting to be held for the purpose of obtaining the approvals
required for the transactions contemplated hereby.
Section 7.3 Access to Information and Properties. Subject to currently
------------------------------------
existing contractual and legal restrictions applicable to PPR or to Dakota,
DakBev or Dakota, LLC, as the case may be, or any of their Subsidiaries, each of
PPR and Dakota, DakBev or Dakota, LLC, as the case may be, shall, and shall
cause each of the PPR and Dakota, DakBev or Dakota, LLC, as the case may be,
Subsidiaries to, afford to the consultants, accountants, counsel, financial
advisors and other representatives of PPR and Dakota reasonable access to, and
permit them to make such inspections and investigations (including, without
limitation, environmental audits, assessments, and sub-surface investigations)
as they may reasonably require of, at mutually agreed upon times during normal
business hours during the period from the date of this Agreement through the
Closing, all their respective properties, books, contracts, commitments and
records (including, without limitation, the work papers of independent
accountants, if available and subject to the consent of such independent
accountants) and, during such period, PPR and Dakota, DakBev or Dakota, LLC, as
the case may be, shall, and shall cause each of the PPR and Dakota Subsidiaries
to, furnish promptly to the other (i) a copy of each report, schedule,
registration statement and other document filed by it during such period
pursuant to the requirements of federal or state securities laws and (ii) all
other information concerning its business, properties and personnel as the other
may reasonably request.
Section 7.4 New Credit Facility. PPR shall use its reasonable best
-------------------
efforts to obtain a credit facility of up to $160 million on terms reasonably
acceptable to PPR (the "New Credit Facility). The purposes of the New Credit
Facility shall include payment of certain debt owed by Delta Beverage Group,
Inc. ("Delta"), PPR and Dakota, along with financing for working capital and
acquisitions.
Section 7.5 NYSE Listing. PPR shall use its reasonable best efforts to
------------
cause the shares of PPR Class B Common Stock to be issued in connection with the
Exchange to be approved for listing on the NYSE subject to official notice of
issuance.
Section 7.6 Fees and Expenses. Whether or not the Exchange is
-----------------
consummated, and except as otherwise provided in Section 9.2, all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby including, without limitation, the fees and disbursements of
counsel, financial advisors and accountants, shall be paid by the party
incurring such costs and expenses.
Section 7.7 Reasonable Best Efforts to Consummate the Exchange. Upon
--------------------------------------------------
the terms and subject to the conditions set forth in this Agreement, each of the
parties agrees to use reasonable best efforts to take, or cause to be taken, all
actions, and to do, or cause to be done, and to assist and cooperate with the
other parties in doing, all things necessary, proper or advisable to consummate,
in the most expeditious manner practicable, the DakBev Merger, the Pohlad
Contribution, the Exchange and the other transactions contemplated by this
Agreement, including, but not limited to: (i) the obtaining of all necessary
actions or nonactions, waivers, consents and approvals from all Governmental
Entities and the making of all necessary
B-39
<PAGE>
registrations and filings (including filings with Governmental Entities) and the
taking of all reasonable steps as may be necessary to obtain an approval or
waiver from, or to avoid an action or proceeding by, any Governmental Entity,
(ii) the obtaining of all necessary consents, approvals or waivers from third
parties, (iii) the defending of any lawsuits or other legal proceedings, whether
judicial or administrative, challenging this Agreement or the consummation of
the transactions contemplated hereby, including seeking to have any stay or
temporary restraining order entered by any court or other Governmental Entity
vacated or reversed, and (iv) the execution and delivery of any additional
instruments necessary to consummate the transactions contemplated by this
Agreement. No party to this Agreement shall consent to any voluntary delay of
the consummation of the Exchange at the behest of any Governmental Entity
without the consent of the other parties to this Agreement, which consent shall
not be unreasonably withheld.
Section 7.8 Public Announcements. Dakota and PPR each shall consult
--------------------
with the other prior to issuing any press releases or otherwise making public
announcements with respect to the Exchange and the other transactions
contemplated by this Agreement and prior to making any filings with any third
party and/or any Governmental Entity with respect thereto, except as may be
required by law or by obligations pursuant to any listing agreement with or
rules of the NYSE.
Section 7.9 State Takeover Laws. If any "fair price," "business
-------------------
combination" or "control share acquisition" statute or other similar statute or
regulation shall become applicable to the transactions contemplated hereby, PPR
and Dakota and their respective Boards of Directors shall use their reasonable
best efforts to grant such approvals and take such actions as are necessary so
that the transactions contemplated hereby may be consummated as promptly as
practicable on the terms contemplated hereby and otherwise act to minimize the
effects of any such statute or regulation on the transactions contemplated
hereby.
Section 7.10 Indemnification. From and after the Closing, PPR agrees to,
---------------
and to cause DakBev to, indemnify and hold harmless all past and present
officers, directors and managers of Dakota, DakBev, and of the Dakota
Subsidiaries to the maximum extent permitted by the Delaware General Corporation
Law and Delaware Limited Liability Company Act, as applicable (including
advancing expenses and attorneys' fees incurred prior to final disposition of
any proceeding upon receipt of an undertaking by such manager, director or
officer to repay such amount if it shall be ultimately determined that he or she
is not entitled to be indemnified under the Delaware General Corporation Law or
Delaware Limited Liability Company Act), including but not limited to acts or
omissions occurring in connection with the approval of this Agreement, the
filing of the Registration Statement and the consummation of the transactions
contemplated hereby.
Section 7.11 Notification of Certain Matters. PPR shall use its
-------------------------------
reasonable best efforts to give prompt notice to Dakota, and Dakota shall use
its reasonable best efforts to give prompt notice to PPR, of: (i) the
occurrence, or non-occurrence, of any event the occurrence, or non-occurrence,
of which it is aware and which would be reasonably likely to cause (x) any
representation or warranty contained in this Agreement to be untrue or
inaccurate in any material respect or (y) any covenant, condition or agreement
contained in this Agreement not to be complied with or satisfied in all material
respects, (ii) any failure of PPR or Dakota, as the case may be, to comply in a
timely manner with or satisfy any covenant, condition or agreement to be
complied with or satisfied by it hereunder or (iii) any change or event which
would be reasonably likely to have a Material Adverse Effect on PPR or Dakota,
as the case may be; provided, however, that the delivery of any notice pursuant
to this Section 7.11 shall not limit or otherwise affect the remedies available
hereunder to the party receiving such notice.
Section 7.12 Tax Matters. The following provisions shall govern the
-----------
allocation of responsibility as between PPR and Pohlad for certain Tax matters
following the Closing.
B-40
<PAGE>
(a) Tax Periods Ending on or Before the Closing. The parties
-------------------------------------------
acknowledge that the qualified subchapter S subsidiary election currently
in effect for Dakota will be terminated as of the consummation of the
DakBev Merger. The income of Dakota, and the Dakota Subsidiaries, and
DakBev, and the DakBev LLCs, for the period commencing January 1, 1999 and
ending as of the date of the Closing will be included in the Tax Return of
Pohlad (the "Pohlad Return"). The income generated by DakBev following the
date of Closing will be included in the PPR Tax Return.
(b) Cooperation on Tax Matters.
--------------------------
(i) PPR and Pohlad shall cooperate fully, as and to the extent
reasonably requested by the other party, in connection with the filing
of Tax Returns pursuant to this Section and any proceedings. Such
cooperation shall include the retention and (upon the other party's
request) the provision of records and information which are reasonably
relevant to any proceedings and making employees available on a
mutually convenient basis to provide additional information and
explanation of any material provided hereunder. PPR and Pohlad agree
(A) to retain all books and records with respect to Tax matters
pertinent to Dakota, the Dakota Subsidiaries, DakBev, and the DakBev
LLCs relating to any taxable period beginning before the Closing until
the expiration of the statute of limitations (and, to the extent
notified by PPR or Pohlad, any extensions thereof) of the respective
taxable periods, and to abide by all record retention agreements
entered into with any taxing authority, and (B) to give the other
party reasonable written notice prior to the transferring, destroying
or discarding of any such books and records and, if the other party so
requests, PPR or Pohlad, as the case may be, shall allow the other
party to take possession of such books and records.
(ii) PPR and Pohlad further agree, upon request, to use their best
efforts to obtain any certificate or other document from any
Government Entity or any other person as may be necessary to mitigate,
reduce or eliminate any Tax that could be imposed (including, but not
limited to, with respect to the transactions contemplated hereby).
(iii) PPR and Pohlad further agree, upon request, to provide the
other party with all information that either party may be required to
report pursuant to (S)6043 of the Code and all Treasury Regulations
promulgated thereunder.
(c) Tax Distribution. On or prior to the date of Closing, Pohlad
----------------
shall deliver to PPR a statement of the Estimated Tax Liability and Dakota
shall make a distribution to Pohlad in such amount. For purposes of this
Agreement, the term "Estimated Tax Liability" shall mean an amount equal to
45% of the estimated taxable income of Dakota and DakBev for the period
from January 1, 1999 through the date of Closing. In the event the amount
of taxable income: (i) on the Pohlad Return allocable to Dakota and DakBev
or as may be redetermined by the Internal Revenue Service ("IRS") upon
audit, differs from the amount of taxable income on the statement delivered
to PPR pursuant to this Section 7.12(c), Pohlad shall pay (in the event the
taxable income allocable to Dakota and DakBev on the Pohlad Return, or as
redetermined by IRS, is less) to PPR, or PPR shall pay to Pohlad (in the
event the taxable income allocable to Dakota and DakBev in the Pohlad
Return, or as redetermined by IRS, is greater) 45% of the difference in
taxable income allocable to Dakota and DakBev within ten (10) days from the
date the Pohlad Return is filed or the redetermination becomes final and
nonappealable (as the case may be).
(d) Transfer Taxes. All transfer, documentary, sales, use,
--------------
registration, value-added and other similar Taxes (including all applicable
real estate transfer Taxes) and related fees (including
B-41
<PAGE>
any penalties, interest and additions to Tax) (collectively, the "Transfer
Taxes") incurred in connection with this Agreement and the transactions
contemplated hereby shall be shared equally by PPR and Dakota, LLC;
provided, however, that PPR shall pay and hold Dakota, LLC harmless from
any such penalties and additions that would not have arisen but for the
negligence of PPR and Dakota, LLC shall pay and hold PPR harmless from any
such penalties and additions that would not have arisen but for the
negligence of Dakota, LLC. PPR and Dakota, LLC shall cooperate in timely
making all filings, returns, reports and forms as may be required to comply
with the provisions of such Transfer Tax laws.
Section 7.13 Treatment of Dakota Phantom Stock Plan Participants. The
---------------------------------------------------
existing Dakota phantom stock plan will be amended, promptly following the
Closing, to increase the value of the participant's interest to reflect the
value of the transaction contemplated by this Agreement and to convert the
rights of participants under such phantom stock plan to a combination of PPR
Class B Common Stock and/or options to acquire PPR Class B Common Stock.
Section 7.14 Title Commitments. Dakota and PPR shall, promptly (and in
-----------------
no event more than ten (10) days) after the date hereof, order from a title
company reasonably acceptable to the other (the "Title Company") a title
insurance commitment or commitments with respect to all of the Dakota Owned Real
Property and the PPR Owned Real Property, as the case may be, other than those
properties for which the owner already has title insurance. Dakota and PPR
shall use their respective reasonable efforts to cause the Title Company to
issue such title commitments as promptly as feasible and, immediately upon
receipt thereof, shall deliver the title commitments to the other. To the extent
the recipient reasonably objects to any matter(s) reflected therein, other than
Permitted Exceptions, or requests additional information with respect thereto,
the party delivering the title commitments shall use its reasonable efforts to
cause the Title Company to modify and/or supplement the commitments accordingly.
Dakota shall, and shall cause the Dakota Subsidiaries to, reasonably cooperate
with PPR in the event that PPR undertakes to purchase title insurance and/or
order surveys with respect to any or all of the Dakota Real Property.
ARTICLE VIII
CONDITIONS PRECEDENT TO CLOSING
Section 8.1 Conditions to Each Party's Obligation to Effect the
---------------------------------------------------
Exchange. The respective obligations of each party to effect the Exchange shall
be subject to the fulfillment at or prior to the Closing of the following
conditions, each of which may be waived only with the consent in writing of each
party not obligated to satisfy the condition:
(a) PPR Stockholder Approval. This Agreement and the transactions
------------------------
contemplated hereby, including, the Share Issuance, the Exchange, the PPR
Charter Amendment and the PPR Option Plan Amendments shall have been duly
approved by the requisite vote of stockholders of PPR in accordance with
applicable law and the Certificate of Incorporation and Bylaws of PPR.
(b) Listing on the NYSE. The PPR Class B Common Stock issuable in
-------------------
the Exchange shall have been authorized for listing on the NYSE upon
official notice of issuance.
B-42
<PAGE>
(c) Governmental Approvals. All authorizations, consents, orders,
----------------------
declarations or approvals of, or filings with, any Governmental Entity,
which the failure to obtain, make or occur would have the effect of making
the Exchange or any of the transactions contemplated hereby illegal or
would have a Material Adverse Effect on either of PPR or Dakota (assuming
the Exchange had taken place), shall have been obtained or shall have been
made.
(d) Litigation. There shall not be instituted or pending any suit,
----------
action or proceeding by a Governmental Entity or any other person as a
result of this Agreement or any of the transactions contemplated herein
which would have a Material Adverse Effect on either PPR or Dakota
(assuming for purposes of this paragraph (d) that the Exchange shall have
occurred).
(e) No Order. No court or other Governmental Entity having
--------
jurisdiction over Dakota, DakBev, Dakota, LLC, or PPR, or any of their
respective Subsidiaries, shall have enacted, issued, promulgated, enforced
or entered any law, rule, regulation, executive order, decree, injunction
or other order (whether temporary, preliminary or permanent) which is then
in effect and has the effect of making this Agreement, the Exchange or any
of the transactions contemplated hereby illegal.
(f) DakBev Merger. The Dakota Reorganization shall have been
-------------
consummated in accordance with Article I hereof.
(g) Delta Acquisition. The transactions contemplated by the
-----------------
Exchange Agreement dated as of the date hereof among PPR, Delta and the
Delta Stockholders (the "Delta Exchange Agreement"), to occur at or prior
to the Closing shall have been consummated or shall be completed
simultaneously with the completion of the Exchange, on substantially the
terms set forth in the Delta Exchange Agreement without giving effect to
any waiver or modification thereof.
(h) New Credit Facility. The New Credit Facility shall have been
-------------------
obtained.
(i) Metropolitan's Contribution to Dakota, LLC . Metropolitan shall
-------------------------------------------
have made a capital contribution in the form of common stock of PepsiCo to
Dakota, LLC.
Section 8.2 Conditions to Obligation of Dakota, LLC to Effect the
-----------------------------------------------------
Exchange. The obligation of Dakota, LLC to effect the Exchange shall be subject
- --------
to the fulfillment at or prior to the Closing of the following additional
conditions, each of which may be waived by Dakota, LLC in writing:
(a) Performance of Obligations; Representations and Warranties. PPR
----------------------------------------------------------
shall have performed in all material respects each of its agreements
contained in this Agreement required to be performed on or prior to the
date of Closing, each of the representations and warranties of PPR
contained in this Agreement that is qualified by materiality shall be true
and correct on and as of the date of Closing as if made on and as of such
date (other than representations and warranties which address matters only
as of a certain date which shall be true and correct as of such certain
date) and each of the representations and warranties that is not so
qualified shall be true and correct in all material respects on and as of
the date of Closing as if made on and as of such date (other than
representations and warranties which address matters only as of a certain
date which shall be true and correct in all material respects as of such
certain date), in each case except as contemplated or permitted by this
Agreement, and Dakota, LLC and Pohlad shall have received a certificate
signed on behalf of PPR by its Chief Executive Officer and its Chief
Financial Officer to such effect.
(b) Dakota, LLC and Pohlad shall have received an opinion of Willkie
Farr & Gallagher, counsel to the PPR Special Committee, in form and
substance reasonably satisfactory to
B-43
<PAGE>
Dakota, LLC and Pohlad, dated the date of Closing, subject to customary
qualifications and limitations for opinions given in transactions of the
kind contemplated hereby, to the effect that the PPR Class B Common Stock
to be issued in the Exchange has been duly authorized, validly issued, is
not subject to further assessment, and has been issued pursuant to
applicable exemptions from registration under the Securities Act.
(c) The Registration Rights Agreement in the form attached hereto as
Exhibit B shall have been executed and delivered to Pohlad Companies and
Dakota, LLC by PPR.
(d) The consents, waivers, approvals and authorizations set forth on
Schedule 8.2(e) hereto shall have been obtained.
(e) Tax Opinion. Pohlad and Dakota, LLC shall have received an
-----------
opinion of Arthur Andersen LLP or another nationally recognized independent
accountant at PPR's election (the "Accountant") in form and substance
reasonably satisfactory to Pohlad and Dakota, LLC, dated the date of
Closing, substantially to the effect that on the basis of facts,
representations and assumptions set forth in such opinion which are
consistent with the state of facts existing as of the date of Closing, for
federal income tax purposes:
(i) The Exchange should qualify as a nontaxable transfer of
property by Pohlad and Dakota, LLC in exchange for PPR Class B Common
Stock under Section 351 of the Code.
(ii) No gain or loss should be recognized by Pohlad and Dakota,
LLC upon the exchange of the Dakota Stock or the DakBev Membership
Units solely for PPR Class B Common Stock pursuant to the Exchange.
(iii) If Pohlad and/or Dakota receive only PPR Class B Common Stock
in the Exchange, such holder's basis in the PPR Class B Common Stock
received in the Exchange should be the same as the basis of the Dakota
Stock or DakBev Membership Units surrendered in the Exchange reduced
by any liabilities assumed by PPR.
(iv) The holding period of the PPR Class B Common Stock received
by Pohlad and Dakota pursuant to the Exchange should include the
period during which the Dakota Stock and DakBev Membership Units
surrendered in the Exchange were held, provided that Delta Stock or
the DakBev Membership Units surrendered were a capital asset on the
date of the Exchange.
In rendering such opinion, the Accountant may receive and rely upon
representations from PPR, Dakota, Pohlad and Dakota, LLC.
Section 8.3 Conditions to Obligations of PPR to Effect the Exchange.
-------------------------------------------------------
The obligations of PPR to effect the Exchange shall be subject to the
fulfillment at or prior to the date of Closing of the following additional
conditions, each of which may be waived by PPR in writing:
B-44
<PAGE>
(a) Performance of Obligations; Representations and Warranties.
----------------------------------------------------------
Dakota, Dakota, LLC and Pohlad shall have performed in all material
respects each of their agreements contained in this Agreement required to
be performed by them on or prior to the date of Closing, each of the
representations and warranties of Dakota, Dakota, LLC and Pohlad, contained
in this Agreement that is qualified by materiality shall be true and
correct on and as of the date of Closing as if made on and as of such date
(other than representations and warranties which address matters only as of
a certain date which shall be true and correct as of such certain date) and
each of the representations and warranties that is not so qualified shall
be true and correct in all material respects on and as of the date of
Closing as if made on and as of such date (other than representations and
warranties which address matters only as of a certain date which shall be
true and correct in all material respects as of such certain date), in each
case except as contemplated or permitted by this Agreement, and PPR shall
have received certificates signed on behalf of Dakota, Dakota, LLC and
Pohlad, by their respective Chief Executive Officers and Chief Financial
Officers to such effect.
(b) PPR shall have received certificates of good standing from the
Delaware Secretary of State of the State of Delaware for DakBev and Dakota,
LLC, each dated within five days of the Closing.
(c) PPR shall have received certified copies of the Certificates of
Formation of DakBev and the DakBev LLCs.
(d) The consents, waivers, approvals and authorizations set forth on
Schedule 8.3(d) hereto shall have been obtained.
(e) PPR shall have received an opinion of counsel to Dakota, LLC, in
form and substance reasonably satisfactory to PPR, dated the Closing Date,
subject to customary qualifications, limitations and qualifications for
opinions given in transactions of the kind contemplated hereby, to the
effect that (i) DakBev is duly organized, validly existing and in good
standing under the laws of Delaware, (ii) to the knowledge of counsel,
immediately prior to the Closing, Dakota, LLC owned all of the DakBev
Membership Units free and clear of any Encumbrances, (iii) the DakBev
Merger was effected in accordance with applicable law and (iv) all of the
DakBev Membership Units were duly authorized, validly issued and fully paid
and non-assessable.
(f) Each of the representations and warranties of Delta contained in
the Delta Exchange Agreement shall be true and correct in all material
respects on and as of the date of Closing as if made on and as of such date
(other than representations and warranties which address matters only as of
a certain date which shall be true and correct as of such certain date)
without respect to any waiver of or modification to such representations or
warranties by the parties to the Delta Exchange Agreement.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time
-----------
prior to the Closing, whether before or after any approval of the matters
presented in connection with the Exchange by the stockholders of PPR:
(a) by mutual written consent of PPR, Pohlad and Dakota.
B-45
<PAGE>
(b) by PPR on the one hand, or Dakota or Pohlad on the other hand, if
the other party shall have failed to comply in any material respect with
any of its covenants or agreements contained in this Agreement required to
be complied with prior to the date of such termination, which failure to
comply has not been cured within five (5) business days following receipt
by such breaching party of written notice of such failure to comply;
provided, however, that if any such breach is curable by the breaching
party through the exercise of the breaching party's best efforts and for so
long as the breaching party shall be so using its best efforts to cure such
breach, the non-breaching parties may not terminate this Agreement pursuant
to this paragraph;
(c) by either PPR on the one hand, or Dakota or Pohlad on the other
hand, if there has been (i) a breach by the other party of any
representation or warranty that is not qualified as to materiality which
has the effect of making such representation or warranty not true and
correct in all material respects or (ii) a breach by the other party of any
representation or warranty that is qualified as to materiality, in each
case which breach has not been cured within five (5) business days
following receipt by the breaching party of written notice of the breach or
except as contemplated or permitted by this Agreement; provided, however,
that if any such breach is curable by the breaching party through the
exercise of the breaching party's best efforts and for so long as the
breaching party shall be so using its best efforts to cure such breach, the
non-breaching party may not terminate this Agreement pursuant to this
paragraph;
(d) by PPR on the one hand, or Dakota or Pohlad on the other hand, if
the Exchange has not been effected on or prior to the close of business on
November 30, 1999 (the "Termination Date"); provided, however, that the
right to terminate this Agreement pursuant to this Section 9.1(d) shall not
be available to any party whose failure to fulfill any of its obligations
contained in this Agreement has been the cause of, or resulted in, the
failure of the Exchange to have occurred on or prior to the aforesaid date;
(e) by PPR on the one hand, or Dakota or Pohlad on the other hand, if
the stockholders of PPR do not approve this Agreement and the transactions
contemplated hereby, including the Share Issuance, the Exchange and the PPR
Charter Amendment at the PPR Stockholder Meeting or any adjournment or
postponement thereof; or
(f) by PPR on the one hand, or Dakota or Pohlad on the other hand,
if: (i) there shall be a final, non-appealable order of a federal or state
court in effect preventing consummation of the transactions contemplated
hereby; or (ii) there shall be any final action taken, or any statute,
rule, regulation or order enacted, promulgated or issued or deemed
applicable to the transactions contemplated hereby by any Governmental
Entity which would make consummation of the transactions contemplated
hereby illegal.
The right of any party hereto to terminate this Agreement pursuant to this
Section 9.1 shall remain operative and in full force and effect regardless of
any investigation made by or on behalf of any party hereto, any person
controlling any such party or any of their respective officers or directors,
whether prior to or after the execution of this Agreement.
Section 9.2 Effect of Termination. In the event of termination of this
---------------------
Agreement by either PPR, Dakota or Pohlad as provided in Section 9.1, this
Agreement shall forthwith terminate and there shall be no liability hereunder on
the part of Dakota, Pohlad, DakBev, Dakota, LLC, PPR, or their respective
officers, managers or directors (except for the entirety of Section 7.6, which
shall survive the termination); provided, however, that nothing contained in
this Section 9.2 shall relieve any party hereto from any liability for any
willful breach of a representation or warranty contained in this Agreement or
the breach of any covenant
B-46
<PAGE>
contained in this Agreement; provided, further, that in addition to any other
remedies available to any party under this Agreement or at law or in equity, in
the event that the Exchange does not occur as a direct result of breach of this
Agreement by a party hereto, the breaching party shall be responsible for all
costs and expenses incurred in connection with the transactions contemplated
hereby by the non-breaching party, including, but not limited to, the fees and
disbursements of all legal, accounting, financial and other advisers.
Section 9.3 Amendment. This Agreement may be amended by the parties
---------
hereto at any time before or after approval of the matters presented in
connection with the Exchange by the stockholders of PPR, but, after any such
approval, no amendment shall be made which by law requires further approval by
such stockholders without such further approval. This Agreement may not be
amended except by an instrument in writing signed on behalf of each of the
parties hereto.
Section 9.4 Waiver. At any time prior to the Closing, the parties
------
hereto may (i) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (ii) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (iii) waive compliance with any of the agreements or
conditions contained herein which may legally be waived. Any agreement on the
part of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Non-Survival of Representations, Warranties and Agreements.
----------------------------------------------------------
The representations, warranties and agreements in this Agreement or in any
instrument delivered pursuant to this Agreement shall terminate at the Closing
or upon the termination of this Agreement pursuant to Section 8.1, as the case
may be, and no claim for breach of any such representation, warranty or
agreement may be made after Closing or termination of this Agreement, as the
case may be, except that (i) Article II shall survive the Closing; (ii) the
representations and warranties of PPR set forth in Sections 3.1, 3.2, 3.3 and
3.4, and the representations and warranties of Pohlad set forth in Sections 5.1
- - 5.7 shall survive the Closing indefinitely; and (iii) the agreements set forth
in Sections 7.3, 7.5, 7.6, 7.8, 7.10, 7.12 and 7.13 and this Article IX shall
survive the Closing, and those set forth in Sections 7.8 and 9.2 and this
Article IX shall survive termination.
Section 10.2 Notices. All notices and other communications hereunder
-------
shall be in writing and shall be deemed given when delivered personally, one day
after being delivered to an overnight courier or when telecopied (with a
confirmatory copy sent by overnight courier) to the parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) if to PPR, to: Pepsi-Cola Puerto Rico Bottling Company
P.O. Box 191709
Carr. 865 km 0.4
Barrio Candelaria Arenas
Toa Baja, PR 00949
Attn: President
with a copy to: Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019-6099
Attn: Christopher E. Manno, Esq.
B-47
<PAGE>
(b) if to Dakota, to Dakota Beverage Company, Inc.
3800 Dain Rauscher Plaza
Minneapolis, MN 55402
Attn: President
with a copy to: Briggs and Morgan, P.A.
2400 IDS Center
80 South Eight Street
Minneapolis, MN 55402
Attn: Brian D. Wenger, Esq.
(c) If to Pohlad, to: Pohlad Companies
3880 Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402
Attn: Robert C. Pohlad
(d) And, in all cases,
a copy to: Briggs and Morgan, P.A.
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attn: Brian D. Wenger, Esq.
Section 10.3 Interpretation. When a reference is made in this Agreement
--------------
to a Section or Article, such reference shall be to a Section or Article of this
Agreement unless otherwise indicated. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement. Whenever the words "include," "includes" or
"including" are used in this Agreement, they shall be deemed to be followed by
the words "without limitation."
Section 10.4 Counterparts. This Agreement may be executed in
------------
counterparts, all of which shall be considered one and the same agreement, and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other parties.
Section 10.5 Entire Agreement; No Third-Party Beneficiaries. This
----------------------------------------------
Agreement constitutes the entire agreement and supersedes all prior agreements
and understandings, both written and oral, among the parties with respect to the
subject matter hereof. This Agreement is not intended to confer upon any person
other than the parties hereto any rights or remedies hereunder, except as set
forth in Section 7.10.
Section 10.6 Governing Law. This Agreement shall be governed by, and
-------------
construed in accordance with, the laws of the State of Delaware, regardless of
the laws that might otherwise govern under applicable principles of conflicts of
laws thereof. EACH OF THE PARTIES HERETO IRREVOCABLY WAIVES ITS RIGHT TO A
TRIAL BY JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM ARISING OUT OF OR
RELATING TO THIS AGREEMENT IN THE NEGOTIATION, ADMINISTRATION, PERFORMANCE AND
ENFORCEMENT THEREOF.
Section 10.7 Assignment. Neither this Agreement nor any of the rights,
----------
interests or obligations hereunder shall be assigned by any of the parties
hereto (whether by operation of law or otherwise) without the prior written
consent of the other parties. This Agreement shall inure to the benefit of, and
shall be binding upon, the successors and permitted assigns of the parties
hereto.
B-48
<PAGE>
Section 10.8 Severability. If any term or other provision of this
------------
Agreement is invalid, illegal or incapable of being enforced by any rule of law,
or public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic and legal
substance of the transactions contemplated hereby are not affected in any manner
materially adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties shall
negotiate in good faith to modify this Agreement so as to effect the original
intent of the parties as closely as possible in a mutually acceptable manner in
order that the transactions contemplated by this Agreement may be consummated as
originally contemplated to the fullest extent possible.
Section 10.9 Enforcement of this Agreement. The parties hereto agree
-----------------------------
that irreparable damage would occur in the event that any of the provisions of
this Agreement were not performed in accordance with their specific terms or
were otherwise breached. It is accordingly agreed that the parties shall be
entitled to an injunction or injunctions to prevent breaches of this Agreement
and to enforce specifically the terms and provisions hereof in any court of the
United States or any state having jurisdiction, such remedy being in addition to
any other remedy to which any party is entitled under this Agreement at law or
in equity. Each party hereto hereby irrevocably and unconditionally consents to
submit to the exclusive jurisdiction of the United States District Court located
in the State of Delaware (unless such courts assert no jurisdiction, in which
case each party consents to the exclusive jurisdiction of the courts of the
State of Delaware) for any actions, suits or proceedings arising out of or
relating to this Agreement and the transactions contemplated hereby (and each
party hereto agrees not to commence any action, suit or proceeding relating
thereto except in such courts), and further agrees that service of any process,
summons, notice or document by U.S. registered mail to the addresses set forth
herein shall be effective service of process for any such action, suit or
proceeding brought against the each party in such court. Each party hereto
hereby irrevocably and unconditionally waives any objection to the laying of
venue of any action, suit or proceeding arising out of this Agreement or the
transactions contemplated hereby, in the United States District Courts located
in the State of Delaware (unless such courts assert no jurisdiction, in which
case each party consents to the exclusive jurisdiction of the courts of the
State of Delaware). Each party hereby further irrevocably and unconditionally
waives and agrees not to plead or to claim in any such court that any such
action, suit or proceeding brought in any such court has been brought in an
inconvenient forum.
Section 10.10 Rule of Construction. The parties acknowledge and agree
--------------------
that each has negotiated and reviewed the terms of this Agreement, assisted by
such counsel as they desired, and has contributed to its revisions. The parties
further agree that the rule of construction that any ambiguities are resolved
against the drafting party will be subordinated to the principle that the terms
and provisions of this Agreement will be construed fairly as to all parties and
not in favor of or against any party.
Section 10.11 Cooperation. Each of the parties to this Agreement agrees
-----------
to execute and deliver, without requirement of additional consideration, such
other or additional documents, instruments, agreements or consents necessary to
effectuate the foregoing transaction.
[THIS SPACE INTENTIONALLY LEFT BLANK]
B-49
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed or have caused this
Agreement to be executed by their respective duly authorized officers all as of
the date first written above.
PEPSI-COLA PUERTO RICO BOTTLING
COMPANY
By: /s/ John F. Bierbaum
----------------------------------
Name: John F. Bierbaum
Title: Vice President and Chief
Financial Officer
DAKOTA BEVERAGE COMPANY, INC.
By: /s/ Robert C. Pohlad
----------------------------------
Name: Robert C. Pohlad
Title: Executive Vice President
and Chief Executive Officer
POHLAD COMPANIES
By: /s/ Robert C. Pohlad
----------------------------------
Name: Robert C. Pohlad
Title: President
B-50
<PAGE>
EXHIBIT 10.3
VOTING AGREEMENT
VOTING AGREEMENT (this "Agreement"), dated as of June 28, 1999, by and
---------
among Pepsi-Cola Puerto Rico Bottling Company, a Delaware corporation ("PPR")
---
and P-PR Transfer, LLP, a Delaware limited liability partnership ("P-PRT").
-----
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, concurrently with the execution and delivery of this Agreement,
PPR, Delta Beverage Group, Inc., a Delaware corporation ("Delta") and the
-----
stockholders of Delta named therein have entered into an Exchange Agreement,
dated as of June 28, 1999 (as such agreement may hereafter be amended from time
to time, the "Delta Exchange Agreement"), pursuant to which, among other things,
------------------------
PPR will issue shares of Class B Common Stock, par value $.01 per share, of PPR
("PPR Class B Common Stock") in exchange for shares of Delta common stock held
------------------------
by the Delta stockholders;
WHEREAS, concurrently with the execution and delivery of this Agreement and
the Delta Exchange Agreement, PPR, Dakota Beverage Company, Inc. and Pohlad
Companies have entered into an Exchange Agreement, dated as of June 28, 1999 (as
such agreement may hereafter be amended from time to time, the "Dakota Exchange
---------------
Agreement", and together with the Delta Exchange Agreement, the "Exchange
- --------- --------
Agreements"), pursuant to which, among other things, PPR will issue shares of
- ----------
PPR Class B Common Stock in exchange for membership interests in DakBev, LLC, a
Delaware limited liability company;
WHEREAS, P-PRT is the owner, beneficially and of record, and has the sole
right to vote and dispose of 4,000,000 shares of PPR Class A Common Stock ("PPR
---
Class A Common Stock") and 6,329,000 shares of PPR Class B Common Stock (and
- --------------------
together with the PPR Class A Common Stock, "PPR Stock") (all PPR Stock owned by
---------
P-PRT, the "Owned Shares"); and
------------
WHEREAS, as an inducement and a condition to its entering into the Exchange
Agreements and incurring the obligations set forth therein, PPR has required
that P-PRT enter into this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual promises,
representations, warranties, covenants and agreements contained herein and in
the Exchange Agreements, the parties hereto, intending to be legally bound
hereby, agree as follows:
1. Certain Definitions. Capitalized terms not defined herein have the
-------------------
respective meanings ascribed to them in the Exchange Agreements. In addition,
for purposes of this Agreement:
"Affiliate" means, with respect to any specified Person, any Person that
directly, or indirectly through one or more intermediaries, controls, or is
controlled by, or is under common control with, the Person specified.
"Beneficially Own" or "Beneficial Ownership" with respect to any securities
means having "beneficial ownership" of such securities (as determined pursuant
to Rule 13d-3 under the Exchange Act), including pursuant to any agreement,
arrangement or understanding, whether or not in writing. Without duplicative
counting of the same securities by the same holder, securities Beneficially
Owned by a Person shall include securities Beneficially Owned by all Affiliates
of such Person and all other Persons with whom such Person would constitute a
"group" within the meaning of Section 13(d) of the Exchange Act and the rules
promulgated thereunder.
C-1
<PAGE>
"Person" means an individual, corporation, partnership, limited liability
company, joint venture, association, trust, unincorporated organization or other
entity.
"Representative" means, with respect to any Person, such Person's officers,
directors, employees, agents and representatives (including any investment
banker, financial advisor, agent, representative or expert retained by or acting
on behalf of such Person or its subsidiaries).
"Transfer" means, with respect to a security, the sale, transfer, pledge,
hypothecation, encumbrance, assignment or disposition of such security or the
Beneficial Ownership thereof, the offer to make such a sale, transfer or other
disposition, and each option, agreement, arrangement or understanding, whether
or not in writing, to effect any of the foregoing. As a verb, "Transfer" shall
have a correlative meaning.
2. Voting of Owned Shares; Proxy. (a) During the period commencing on the
-----------------------------
date hereof and continuing until the earlier of (x) the Closing and (y) the
termination of the Exchange Agreements in accordance with their terms (such
period being referred to as the "Voting Period"), at any meeting (whether annual
-------------
or special, and whether or not an adjourned or postponed meeting) of PPR's
stockholders, however called, or in connection with any written consent of PPR's
stockholders, subject to the absence of a preliminary or permanent injunction or
other final order by any United States federal, state or foreign court barring
such action, P-PRT shall vote (or cause to be voted) all of its Owned Shares:
(a) in favor of the issuance of PPR Class B Common Stock pursuant to the
Exchange Agreements;
(b) in favor of each of the other actions contemplated by the Exchange
Agreements and this Agreement and any actions required in furtherance
thereof and hereof;
(c) in favor of the amendment to the Certificate of Incorporation of PPR to
increase the authorized shares of capital stock of PPR required to
effect the issuances pursuant to the Exchange Agreements;
(d) in favor of the amendment to the Certificate of Incorporation of PPR to
change the name of PPR; and
(e) against any action or agreement that would (A) result in a breach of
any covenant, representation or warranty or any other obligation or
agreement under the Exchange Agreements or of P-PRT under this
Agreement or (B) impede, interfere with, delay, postpone, or adversely
affect the Exchange or the transactions contemplated by the Exchange
Agreements or hereby.
(b) IRREVOCABLE PROXY. P-PRT HEREBY GRANTS TO, AND APPOINTS ROBERT
-----------------
POHLAD AND JOHN BIERBAUM IN THEIR RESPECTIVE CAPACITIES AS OFFICERS OF PPR, AND
ANY INDIVIDUAL WHO SHALL HEREAFTER SUCCEED TO ANY SUCH OFFICE OF PPR, AND ANY
OTHER DESIGNEE OF PPR, EACH OF THEM INDIVIDUALLY, P-PRT's IRREVOCABLE (UNTIL THE
END OF THE VOTING PERIOD) PROXY AND ATTORNEY-IN-FACT (WITH FULL POWER OF
SUBSTITUTION) TO VOTE THE OWNED SHARES OF P-PRT AS INDICATED IN SECTION 2(a)
ABOVE. P-PRT INTENDS THIS PROXY TO BE IRREVOCABLE (UNTIL THE END OF THE VOTING
PERIOD) COUPLED WITH AN INTEREST AND SHALL TAKE SUCH FURTHER ACTIONS AND EXECUTE
SUCH OTHER INSTRUMENTS AS MAY BE NECESSARY TO EFFECTUATE THE INTENT OF THIS
PROXY AND HEREBY REVOKES ANY PROXY PREVIOUSLY GRANTED BY P-PRT WITH RESPECT TO
THE OWNED SHARES.
C-2
<PAGE>
3. Restrictions on Transfer, Other Proxies. P-PRT shall not, until the
---------------------------------------
expiration of the Voting Period, directly or indirectly: (i) Transfer to any
Person any or all of its Owned Shares other than to Dakota LLC immediately prior
to the Closing; (ii) except as provided in Section 2(b), grant any proxies or
powers of attorney, deposit any Owned Shares into a voting trust or enter into a
voting agreement, understanding or arrangement with respect to such Owned
Shares; or (iii) take any action that would make any representation or warranty
of P-PRT contained herein untrue or incorrect or would result in a breach by P-
PRT of its obligations under this Agreement or a breach by PPR of its
obligations under the Exchange Agreements.
4. Certain Events. In the event of any stock split, stock dividend,
merger, reorganization, recapitalization or other change in the capital
structure of PPR affecting the PPR Stock, or the acquisition of additional
shares of PPR Stock or other securities or rights of PPR by P-PRT, the number of
Owned Shares shall be adjusted appropriately, and this Agreement and the
obligations hereunder shall attach to any additional PPR Stock or other
securities or rights of PPR issued to or acquired by P-PRT.
5. Representations and Warranties of P-PRT. P-PRT hereby represents,
---------------------------------------
warrants and covenants as follows:
(1) Due Authorization, Etc. P-PRT has all necessary power and
----------------------
authority to enter into and perform this Agreement and perform its obligations
hereunder, and no other proceedings or actions on the part of P-PRT is necessary
to authorize the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby. P-PRT currently has good,
valid and marketable title to the Owned Shares, free and clear of all security
interests, liens, claims, charges, encumbrances, equities and options of any
nature whatsoever, and with no restriction on the voting rights pertaining
thereto. P-PRT further warrants that there are no outstanding options, warrants
or rights to purchase or acquire, or agreements relating to, any of the Owned
Shares.
(2) Enforceability. This Agreement constitutes a valid and binding
agreement of P-PRT, enforceable against P-PRT in accordance with its terms.
Neither the execution and delivery of this Agreement by P-PRT nor the
consummation by P-PRT of the transactions contemplated hereby shall conflict
with or constitute a violation of or default under any contract, commitment,
agreement, arrangement or restriction of any kind to which P-PRT is a party or
by which P-PRT is bound.
(3) Voting Rights. Except as provided in Section 2(b) hereof, P-PRT
has sole power to vote and to dispose of the Owned Shares, and sole power to
issue instructions with respect to the Owned Shares to the extent appropriate in
respect of the matters set forth in this Agreement, sole power to demand
appraisal rights and sole power to agree to all of the matters set forth in this
Agreement, in each case with respect to all of the Owned Shares, with no
limitations, qualifications, or restrictions on such rights, subject to
applicable securities laws and the terms of this Agreement.
(4) No Filings. No filing with, and no permit, authorization, consent
----------
or approval of, any state or federal governmental body or authority is necessary
for the execution of this Agreement by P-PRT and the consummation by P-PRT of
the transactions contemplated hereby, and none of the execution and delivery of
this Agreement by P-PRT, the consummation by P-PRT of the transactions
contemplated hereby or compliance by P-PRT with any of the provisions hereof
shall (A) conflict with or result in any breach of the organizational documents
of P-PRT, (B) result in a violation or breach of, or constitute (with or without
notice or lapse of time or both) a default (or give rise to any third party
right of termination, cancellation, material modification or acceleration) under
any of the terms, conditions or provisions of any note, loan agreement, bond,
mortgage, indenture, license, contract, commitment, arrangement, understanding,
agreement or other instrument or obligation of any kind to which P-PRT is a
party or by which P-PRT or any
C-3
<PAGE>
of its properties or assets (including the Owned Shares) may be bound, or (C)
violate any order, writ, injunction, decree, judgment, statute, rule or
regulation applicable to P-PRT or any of its properties or assets.
(5) Reliance. P-PRT understands and acknowledges that PPR is entering
--------
into the Exchange Agreements, and is incurring the obligations set forth
therein, in reliance upon P-PRT's execution and delivery of this Agreement.
6. Representations and Warranties of PPR. PPR hereby represents,
-------------------------------------
warrants and covenants to P-PRT as follows:
(1) Due Authorization, Etc. PPR has all necessary power and authority
----------------------
to enter into and perform this Agreement and perform its obligations hereunder,
and no other proceedings or actions on the part of PPR is necessary to authorize
the execution, delivery or performance of this Agreement or the consummation of
the transactions contemplated hereby.
(2) Enforceability. This Agreement constitutes a valid and binding
--------------
agreement of PPR, enforceable against PPR in accordance with its terms. Neither
the execution and delivery of this Agreement by PPR nor the consummation by PPR
of the transactions contemplated hereby shall conflict with or constitute a
violation of or default under any contract, commitment, agreement, arrangement
or restriction of any kind to which PPR is a party or by which PPR is bound.
(3) No Filings. Except for filings, authorizations, consents and
----------
approvals as may be required under the Exchange Agreements, (i) no filing with,
and no permit, authorization, consent or approval of, any state or federal
public body or authority is necessary for the execution of this Agreement by PPR
and the consummation by PPR of the transactions contemplated hereby and (ii)
none of the execution and delivery of this Agreement by PPR, the consummation by
PPR of the transactions contemplated hereby or compliance by PPR with any of the
provisions hereof shall (A) conflict with or result in any breach of the
Certificate of Incorporation or By-laws of PPR, or (B) result in a violation or
breach of, or constitute (with or without notice or lapse of time or both) a
default (or give rise to any third party right of termination, cancellation,
material modification or acceleration) under any of the terms, conditions or
provisions of any note, loan agreement, bond, mortgage, indenture, license,
contract, commitment, arrangement, understanding, agreement or other instrument
or obligation of any kind to which PPR is a party or by which PPR or any of its
properties or assets may be bound, or violate any order, writ, injunction,
decree, judgment, statute, rule or regulation applicable to PPR or any of its
respective properties or assets.
7. Certain Covenants.
-----------------
(1) No Sale. P-PRT shall not sell, transfer, assign, pledge,
-------
hypothecate or otherwise dispose of or limit its right to vote in any manner any
of the Owned Shares which are the subject matter of this Agreement except
pursuant to the terms hereof.
(2) Further Assurances. From time to time, at the other party's
------------------
request and without further consideration, each party hereto shall execute and
deliver such additional documents and take all such further lawful action as may
be necessary or desirable to consummate and make effective, in the most
expeditious manner practicable, the transactions contemplated by this Agreement.
8. Enforcement. The parties agree that irreparable damage would occur in
-----------
the event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties shall be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce specifically
the terms and provisions of this Agreement
C-4
<PAGE>
in any court of the United States located in the State of Delaware or in any
Delaware State court, this being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (a)
consents to submit itself (without making such submission exclusive) to the
personal jurisdiction of any federal court located in the State of Delaware or
any Delaware State court in the event any dispute arises out of this Agreement
or any of the transactions contemplated by this Agreement and (b) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or other
request for leave from any such court.
9. Miscellaneous.
-------------
(1) Assignment. Neither this Agreement nor any of the rights,
interests or obligations under this Agreement shall be assigned or delegated, in
whole or in part, by operation of law or otherwise, by any of the parties hereto
without the prior written consent of the other parties, except that PPR may
assign its rights and obligations, in whole or in part, to any of its
Affiliates, but no such assignment shall relieve PPR of its obligations
hereunder if such assignee does not perform such obligations. Subject to the
preceding sentence, this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
(2) Amendments. This Agreement may be amended, modified, or
supplemented only by a written agreement among each of the parties hereto.
(3) Notices. All notices and other communications hereunder shall be
in writing and shall be deemed to have been duly given when delivered in person,
by facsimile, receipt confirmed, or on the next business day when sent by
overnight courier or on the second succeeding business day when sent by
registered or certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for a
party as shall be specified by like notice):
if to PPR, to
Pepsi-Cola Puerto Rico Bottling Company
P.O. Box 191709
Carr. 865 km 0.4
Barrio Candelaria Arenas
Toa Baja, PR 00949
Attn: President
with a copy to:
Willkie Farr & Gallagher
787 Seventh Avenue
New York, NY 10019
Attn: Christopher E. Manno, Esq.
Fax: (212) 728-8111
C-5
<PAGE>
and
(ii) if to P-PRT, to
Pohlad Companies
3880 Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402
Attn: Robert C. Pohlad
with a copy to:
Briggs and Morgan, P.A.
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Attn: Brian D. Wenger, Esq.
(4) GOVERNING LAW. THIS AGREEMENT SHALL BE DEEMED TO BE MADE IN, AND
-------------
IN ALL RESPECTS SHALL BE INTERPRETED, CONSTRUED AND GOVERNED BY AND IN
ACCORDANCE WITH THE INTERNAL LAWS OF, THE STATE OF DELAWARE.
(5) Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
(6) Interpretation. When a reference is made in this Agreement to a
--------------
Section, such reference shall be to a Section of this Agreement unless otherwise
indicated. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement. Whenever the words "include", "includes" or "including" are used in
this Agreement, they shall be deemed to be followed by the words "without
limitation."
(7) Entire Agreement; No Third-Party Beneficiaries. This Agreement and
----------------------------------------------
the Exchange Agreements (together with the other documents and instruments
referred to in the Exchange Agreements, and the exhibits and disclosure
schedules thereto) (a) constitute the entire agreement and supersedes all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement and, (b) are not intended to
confer upon any person other than the parties hereto any rights or remedies.
(8) Severability. In case any provision in this Agreement shall be
------------
held invalid, illegal or unenforceable in a jurisdiction, such provision shall
be modified or deleted, as to the jurisdiction involved, only to the extent
necessary to render the same valid, legal and enforceable, and the validity,
legality and enforceability of the remaining provisions hereof shall not in any
way be affected or impaired thereby nor shall the validity, legality or
enforceability of such provision be affected thereby in any other jurisdiction.
C-6
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the parties hereto on the date first above written.
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
By: /s/ John F. Bierbaum
---------------------
Its: Vice President and Chief Financial
-----------------------------------
Officer
-------
P-PR TRANSFER, LLP
By: /s/ Robert C. Pohlad
---------------------
Its: President
---------
C-7
