<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
--------------------
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED JUNE 30, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
COMMISSION FILE NUMBER 1-13914
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE ###-##-####
(State or Other Jurisdiction (I.R.S. Employer Identification No.)
of Incorporation or Organization)
CARRETERA #865, 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)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes [X] No [ ]
As of August 16, 1999, there were 21,690,000 shares of Common Stock
issued and outstanding. This amount includes 5,000,000 shares of Class A Common
Stock and 16,690,000 shares of Class B Common Stock.
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<PAGE>
TABLE OF CONTENTS
PAGE NO.
--------
PART I
ITEM 1. FINANCIAL STATEMENTS ........................................ 2
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS ......................... 10
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK .. 15
PART II.
ITEM 1. LEGAL PROCEEDINGS ........................................... 16
ITEM 5. OTHER INFORMATION............................................ 16
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K ............................ 17
<PAGE>
CAUTIONARY STATEMENT UNDER THE SAFE HARBOR PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
Management's Discussion and Analysis of Financial Condition and Results of
Operations contained in this Report include forward looking statements regarding
possible future events, including, the Company's proposed acquisition of Delta
Beverage Group, Inc. ("Delta") and Dakota Beverage Company, Inc. ("Dakota")
estimated capital expenditures, seasonality of the Company's business and the
Company's intentions with respect to dividend payments. Such forward looking
statements may involve factors that could cause the actual results of the
Company to differ materially from historical results or from any results implied
by such forward looking statements. The Company cautions the public not to place
undue reliance on forward looking statements, which may be based on assumptions
and anticipated events that do not materialize. Factors which could cause the
Company's actual results to differ from forward looking statements include
material changes in the relationship between the Company and PepsiCo, Inc.; any
material change to the proposed acquisition of Delta and Dakota; inability to
achieve additional cost savings and continued competitive pressures with respect
to pricing and volume in the Puerto Rico market, which could result in continued
erosion of market share; unexpected developments which prevent improved results
from the Company's marketing activities; and other factors, including economic,
climatic and political conditions in Puerto Rico, and the impact of such
conditions on consumer spending.
<PAGE>
PART I
ITEM 1. FINANCIAL STATEMENTS
PEPSI-COLA PUERTO RICO BOTTLING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(U. S. Dollars in thousands)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
ASSETS (unaudited)
-------- --------
<S> <C> <C>
CURRENT ASSETS:
Cash and cash equivalents $ 7,801 $ 19,418
Receivables, net of allowance for doubtful
accounts of $1,577 and $2,402
Trade 13,351 13,043
Due from PepsiCo, Inc. and affiliated companies 2,376 2,008
Other 2,412 2,248
Inventories 3,308 2,505
Bottles, cases and shells 820 1,409
Deferred income taxes 32 49
Prepaid expenses and other current assets 4,820 4,422
-------- --------
Total current assets 34,920 45,102
-------- --------
PROPERTY AND EQUIPMENT:
Land and improvements 6,893 6,893
Buildings and improvements 14,557 14,779
Machinery, equipment and vehicles 52,558 47,881
Furniture and fixtures 1,739 1,809
Construction in process -- 1,250
-------- --------
75,747 72,612
Less accumulated depreciation (29,634) (30,150)
-------- --------
46,113 42,462
-------- --------
OTHER ASSETS:
Deferred income taxes 1,221 1,221
Long-lived assets for sale, principally land and building 2,615 2,615
Intangible assets, net of accumulated amortization 1,112 1,259
Note receivable 379 --
Other assets 572 192
-------- --------
5,899 5,287
-------- --------
Total assets $ 86,932 $ 92,851
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
2
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Continued)
(U. S. Dollars in thousands, except per share data)
<TABLE>
<CAPTION>
June 30, December 31,
1999 1998
LIABILITIES AND SHAREHOLDERS' EQUITY (unaudited)
--------- ---------
<S> <C> <C>
CURRENT LIABILITIES:
Current installments of long-term debt $ 1,070 $ 1,007
Current installments of capital lease obligations 17 41
Accounts payable 6,411 3,842
Accrued expenses 7,571 9,455
--------- ---------
Total current liabilities 15,069 14,345
--------- ---------
LONG-TERM DEBT, excluding current installments 20,823 22,073
CAPITAL LEASE OBLIGATIONS, excluding current installments -- 7
ACCRUED PENSION COST 1,558 1,805
SHAREHOLDERS' EQUITY:
Class A common shares, $0.01 par value;
authorized, issued and outstanding 5,000,000 shares 50 50
Class B common shares, $0.01 par value;
authorized 35,000,000 shares, issued and
outstanding 16,690,000 shares 167 167
Additional paid-in capital 127,516 127,516
Accumulated deficit (75,955) (70,765)
Deferred compensation (406) (457)
Accumulated other comprehensive income (loss) (1,890) (1,890)
--------- ---------
Total shareholders' equity 49,482 54,621
--------- ---------
Total liabilities and shareholders' equity $ 86,932 $ 92,851
========= =========
</TABLE>
The accompanying notes are an integral part of these financial statements.
3
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE SIX MONTHS ENDED JUNE 30
Unaudited
(U.S. Dollars in thousands, except share data)
1999 1998
-------- --------
OPERATIONS:
Net sales $ 50,075 $ 48,785
Cost of sales 37,936 36,193
-------- --------
Gross profit 12,139 12,592
Selling, general and administrative expenses 15,760 16,982
Fees related to combination of interests 692 --
Losses on asset impairments 267 --
-------- --------
Loss from operations (4,580) (4,390)
-------- --------
OTHER INCOME (EXPENSE):
Interest expense (860) (1,239)
Interest income 217 332
Other, net 102 166
-------- --------
(541) (741)
-------- --------
LOSS BEFORE INCOME TAXES (5,121) (5,131)
INCOME TAX BENEFIT (EXPENSE) (69) 922
-------- --------
NET LOSS $ (5,190) $ (4,209)
======== ========
COMPREHENSIVE INCOME (LOSS) $ (5,190) $ (4,209)
======== ========
NET LOSS PER COMMON SHARE $ (0.24) $ (0.20)
======== ========
NET LOSS PER COMMON SHARE-ASSUMING DILUTION $ (0.24) $ (0.20)
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (IN THOUSANDS) 21,690 21,500
======== ========
The accompanying notes are an integral part of these financial statements.
4
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME (LOSS)
FOR THE THREE MONTHS ENDED JUNE 30
Unaudited
(U.S. Dollars in thousands, except share data)
1999 1998
-------- --------
OPERATIONS:
Net sales $ 26,808 $ 25,842
Cost of sales 19,939 19,261
-------- --------
Gross profit 6,869 6,581
Selling, general and administrative expenses 8,057 8,950
Fees related to combination of interests 692 --
Losses on asset impairments -- --
-------- --------
Loss from operations (1,880) (2,369)
-------- --------
OTHER INCOME (EXPENSE):
Interest expense (418) (610)
Interest income 54 176
Other, net -- (116)
-------- --------
(364) (550)
-------- --------
LOSS BEFORE INCOME TAXES (2,244) (2,919)
INCOME TAX BENEFIT (EXPENSE) (52) (139)
-------- --------
NET LOSS $ (2,296) $ (3,058)
======== ========
COMPREHENSIVE INCOME (LOSS) $ (2,296) $ (3,058)
======== ========
NET LOSS PER COMMON SHARE $ (0.11) $ (0.14)
======== ========
NET LOSS PER COMMON SHARE-ASSUMING DILUTION $ (0.11) $ (0.14)
======== ========
WEIGHTED AVERAGE NUMBER OF COMMON SHARES
OUTSTANDING (IN THOUSANDS) 21,690 21,500
======== ========
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30
Unaudited
(U.S. Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (5,190) $ (4,209)
Adjustments to reconcile net loss to net cash
used in operating activities-
Losses on asset impairments 267 --
Depreciation and amortization 2,474 2,646
Deferred income taxes 17 --
Amortization of deferred compensation 51 --
Fees related to combination of interests, net of payments 600 --
Changes in current assets and liabilities:
Receivables (1,665) (971)
Inventories (818) (843)
Bottles, cases and shells (63) --
Prepaid expenses and other current assets (325) (1,358)
Accounts payable 2,690 2,910
Accrued expenses (2,202) 595
Other, net (178) (273)
-------- --------
Net cash used in operating activities (4,342) (1,503)
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Capital expenditures (6,793) (1,053)
Proceeds from sales of property and equipment -- 316
Proceeds from sale of business 700 --
-------- --------
Net cash used in investing activities (6,093) (737)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Repayments of short-term debt -- (266)
Borrowings (repayments) of long-term debt (1,159) 282
Repayment of capital lease obligations (23) (632)
-------- --------
Net cash used in financing activities (1,182) (616)
-------- --------
NET CHANGE IN CASH AND CASH EQUIVALENTS (11,617) (2,856)
CASH AND CASH EQUIVALENTS, beginning of period 19,418 13,814
-------- --------
CASH AND CASH EQUIVALENTS, end of period $ 7,801 $ 10,958
======== ========
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
PEPSI-COLA PUERTO RICO BOTTLING COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(U.S. Dollars in thousands)
Unaudited
1. BASIS OF PRESENTATION:
The accompanying unaudited consolidated financial statements of Pepsi-Cola
Puerto Rico Bottling Company and Subsidiaries (the "Company") have been prepared
in accordance with generally accepted accounting principles for interim
financial information and, in the opinion of management, include all adjustments
(consisting of normal and recurring adjustments) which are considered necessary
for a fair presentation of financial position, results of operations and cash
flows as of June 30, 1999, and for all interim periods presented. These
condensed interim financial statements do not include all of the financial
information and disclosures required by generally accepted accounting principles
for complete financial statements, and should be read in conjunction with the
Company's audited consolidated financial statements and related notes thereto
for the three months ended December 31, 1998. Also, the results of operations
for the interim periods presented may not be indicative of the results for the
entire year.
2. RECLASSIFICATIONS:
Certain prior year balances have been reclassified to conform to the current
year presentation.
3. COMBINATION OF INTERESTS:
On June 28, 1999, the Company entered into share exchange agreements with the
shareholders of two related party entities, Delta Beverage Group, Inc. ("Delta")
and Dakota Beverage Company, Inc. ("Dakota"). The Company, Delta and Dakota
share common ownership and are under the common control of Pohlad Companies, the
principal partner in P-PR Transfer, LLP. Accordingly, the combination will be
accounted for as a merger of entities under common control. The combination is
subject to the approval of the Company's shareholders.
During the three months ended June 30, 1999, the Company incurred approximately
$1,120 in professional fees and other related costs related to the combination
of interests. Costs of approximately $692 attributable to combining the common
equity interests of the Company, Delta and Dakota have been expensed, while
remaining costs of approximately $428 attributable to the acquisition of Delta's
minority interests under the "purchase" method of accounting have been
capitalized as other long-term assets in the accompanying consolidated balance
sheet.
4. SALE OF BUSINESS:
During the three months ended December 31, 1998, the Company agreed to sell
substantially all net assets relating to the bottling, sale and distribution of
potable water under the "Cristalia" tradename to Cristalia Acquisition Corp.
(the "purchaser"), and recorded a $250 non-cash charge for the estimated
impairment of the net assets. The noncash charge was reflected as a writedown of
Cristalia's long-lived assets in the December 31, 1998 consolidated balance
sheet.
The sale was finalized in April 1999 and resulted in an additional impairment
charge of $267. This charge was recorded during the three months ended March 31,
1999. The sales price of $1,200 consisted of $700 cash and a $500 note
receivable due in four annual installments beginning March 31, 2000. The note
receivable bears interest at the Treasury Rate, as defined (approximately 6% as
of June 30, 1999) and is unsecured. Current installments on the note receivable
of approximately $121 are included in prepaid expenses and other current assets
in the accompanying consolidated balance sheet.
7
<PAGE>
5. LONG TERM DEBT:
The Company maintains a credit agreement with Banco Popular which provides for a
term loan of $25,000, payable with 120 principal payments and a balloon payment
at maturity on April 1, 2007 of $11,800. The credit agreement also includes a
$5,000 revolving credit facility. There were no borrowings outstanding under the
revolving credit facility, as of June 30, 1999 or December 31, 1998. In
connection with the sale of the business described in Note 4, the Company made
an additional $650 principal payment on outstanding long-term debt.
6. RESTRUCTURING CHARGE:
In July 1998, a restructuring charge of $1,728 was established under a plan to
improve the Company's performance. The charge included approximately $679 of
severance and related charges, $224 of accruals for future payments to exit
activities, including canceling lease agreements, and $825 of asset writedowns
related to the elimination of certain product lines and exiting certain other
business strategies. During 1998, severance payments and payments relating to
other exit activities approximated $456 and $224, respectively. Severance
payments during the six month period ended June 30, 1999 approximated $171.
7. INVENTORIES:
Inventories include the following:
June 30, December 31,
1999 1998
------ ------
Raw materials $1,540 $1,074
Finished goods 1,768 1,431
------ ------
$3,308 $2,505
====== ======
8. INSURANCE PROCEEDS FROM BUSINESS INTERRUPTION LOSSES:
In 1998, the Company incurred business interruption and other losses resulting
from Hurricane Georges. As the collection of a claim filed under the Company's
business interruption insurance policy was probable, the Company recorded $1,655
in anticipated recoveries attributable to business interruption and other
losses. During the six months ended June 30, 1999, the Company collected the
anticipated amount of insurance recoveries.
9. STOCK OPTION PLANS:
The Company maintains two stock option plans pursuant to which the Company's
Board of Directors may grant stock options to certain employees and directors of
the Company and its affiliates. One of these stock option plans is not a
qualified plan. Stock options under this plan may have an exercise price below
the stock's fair market value at the date of grant ("below market options"). In
accordance with the APB Opinion No. 25, deferred compensation is recorded to
reflect any difference between the exercise price and market value of shares
granted under the plan for below market options, and is expensed over the
vesting period of the options. In 1998, the Company granted below market options
to acquire 452,500 shares of the Company's Class B stock, which vest over five
years. During the six months ended June 30, 1999, deferred compensation expense
of $51 was recorded related to this grant.
10. EARNINGS PER SHARE:
The Company presents basic and diluted earnings per share in accordance with the
provisions of Statement of Financial Accounting Standards No. 128, "Earnings Per
Share." Accordingly, the Company's net loss per common share is computed by
dividing the net loss by the weighted average number of common shares
outstanding. Net loss per common share-assuming dilution does not include the
Company's potentially dilutive securities because to do so would be
antidilutive.
8
<PAGE>
11. SUBSEQUENT EVENT:
On July 30, 1999, the Company entered into a contract rights release agreement
with Seven-UP/RC Bottling Company of Puerto Rico, Inc. ("Seven-UP") pursuant to
which Seven-UP released its exclusive rights for the production and distribution
of the "Seven-UP," "Sunkist," "Welch's" and "Schweppes" brands in Puerto Rico.
The purchase price consisted of $12,000 cash. The Company obtained such releases
as a precondition to its entry into franchise agreements with each respective
franchisor. On July 30, 1999 the Company amended their note with Banco Popular
De Puerto Rico to $40,000. The additional increase was used to fund the Seven-UP
acquisition.
9
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
GENERAL OVERVIEW.
The following discussion of the financial condition and results of operations of
the Company should be read in conjunction with this overview and the unaudited
Condensed Consolidated Financial Statements of the Company, and the Notes
thereto, as of June 30, 1999 and December 31, 1998, and for the six month
periods ended June 30, 1999 and June 30, 1998 and for the three month periods
ended June 30, 1999 and June 30, 1998. Certain prior year balances have been
reclassified to conform to the current year presentation.
CHANGE IN FISCAL YEAR.
During 1998, the Company changed its fiscal year end from September 30 to
December 31. A transition report on Form 10-K was filed for the period from
October 1, 1998 through December 31, 1998. This report on Form 10-Q includes
information for the six month and three month periods ended June 30, 1999 and
June 30, 1998.
CHANGE IN CONTROL.
On July 17, 1998, P-PR Transfer, LLP, a Delaware registered limited liability
partnership (the "Partnership") and V. Suarez & Co., Inc., a Puerto Rico
corporation ("Suarez"), purchased an aggregate of 5,000,000 shares of the Class
A common stock, par value $.01 per share (the "Class A Shares"), and 6,210,429
shares of the Class B common stock, par value $.01 per share (the "Class B
Shares"), of the Company. The Partnership is a joint venture between Pohlad
Companies, a holding company including independent Pepsi-Cola bottlers, and
PepsiCo, Inc. The Company in a current report on Form 8-K previously disclosed
the transactions filed with the Securities and Exchange Commission on July 31,
1998
In connection with the change in control, the Company issued warrants to the
Partnership and Suarez dated July 17, 1998 for the purchase of 1,360,000 Class B
Shares and 340,000 Class B Shares, respectively, exercisable at $6.875 per share
at any time during a period of seven years and six months after the date of the
warrants. The warrants may be transferred and give the holders one demand and
unlimited piggyback registration rights.
Also, in connection with the change in control, six of the Company's seven
directors resigned on July 17, 1998. Effective July 18, 1998, the size of the
Board of Directors was increased to eight members and seven new directors were
appointed, each of whom were designated by the Partnership. Also effective July
18, 1998, certain of the Company's officers resigned.
RESTRUCTURING CHARGE.
During the fiscal year ended September 30, 1998, a restructuring charge of $1.7
million was established under a plan to improve the Company's performance. The
charge includes approximately $0.7 million of severance and related charges for
the elimination of 17 administrative personnel, $0.2 million of accruals for
future payments to exit activities, including canceling lease agreements, and
$0.8 million of asset writedowns related to the elimination of certain product
lines and exiting certain other business strategies. Management anticipates the
restructuring plan will provide savings beginning in 1999. Severance payments in
the six month period ended June 30, 1999 totaled approximately $0.2 million.
SEASONALITY.
The historical results of operations of the Company have not been significantly
seasonal. However the Company anticipates that its results of operations in the
future may become more seasonal, with higher demand in the summer and holiday
seasons.
PENDING ACQUISITION OF DELTA AND DAKOTA.
During the second quarter of 1999, the Company announced an agreement in
principle to combine with two related Pepsi-Cola bottlers, Delta Beverage Group,
Inc. and Dakota Beverage Company, Inc. The three companies generated
10
<PAGE>
combined revenues in 1998 of approximately $530 million. PepsiCo, Inc. (NYSE:
PEP) will hold a 24% equity interest in the combined company, which will be
PepsiCo's third largest anchor bottler. The Company filed copies of the exchange
agreements, pursuant to which it will acquire Delta and Dakota, as exhibits to
its report on Form 8-K filed on July 15, 1999. All three companies have been
under common management since Pohlad Companies of Minneapolis, Minnesota,
purchased a controlling interest in the Company in July 1998, through a joint
venture with PepsiCo. Pohlad Companies also holds a controlling interest in
Delta and Dakota. Completion of the transaction is subject to a number of
conditions, including the approval of the Company's shareholders and franchisor
consents.
THE COMPANY
GENERAL.
The following table sets forth certain financial information as a percentage of
net sales for the Company for the periods indicated.
Six Months Ended Three Months Ended
June 30, June 30
--------------- ------------------
1999 1998 1999 1998
----- ----- ----- -----
Net Sales 100.0% 100.0% 100.0% 100.0%
Cost of Sales 75.8 74.2 74.4 74.5
Gross Profit 24.2 25.8 25.6 25.5
Selling, General and
Administrative Expenses 31.5 34.8 30.1 34.6
Special Charges 1.9 -- 2.6 --
Income (Loss) from Operations (9.1) (9.0) (7.0) (9.2)
===== ===== ===== =====
QUARTER ENDED JUNE 30, 1999 COMPARED TO QUARTER ENDED JUNE 30, 1998.
NET SALES. For the quarter ended June 30, 1999, net sales for the Company
increased $1.0 million to $26.8 million, a 3.7% increase over the quarter ended
June 30, 1998. The sales increase for the quarter was driven by a 7.0% increase
in case volume sales. Case volume gains reflected higher sales through
supermarkets of packages with lower unit selling prices, but more favorable
margins, during the quarter.
COST OF SALES. Cost of sales for the Company increased $0.7 million, or 3.5%, to
$19.9 million for the quarter ended June 30, 1999, in comparison to the quarter
ended June 30, 1998. This increase was due primarily to the increased sales
volume. The effect of those increases in costs were reduced by the effect of a
modest shift in product mix towards cans which have a lower cost than plastic
bottles.
GROSS PROFIT. As a result of the above factors, gross profit for the Company
increased $0.3 million, or 4.4%, to $6.9 million for the quarter ended June 30,
1999, as compared to the same period in 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Company has a number of
marketing arrangements with PepsiCo pursuant to which the Company is required to
make certain investments in marketing, new products, packaging introductions and
certain capital goods. The Company receives reimbursements from PepsiCo for a
portion of such expenditures, which it is able to use to offset traditional
marketing expenses or to acquire fixed assets. The Company's selling and
marketing expenses are shown net of all such reimbursements from PepsiCo.
Selling, general and administrative expenses for the Company decreased by $0.9
million, or 10.0%, to $8.1 million for the quarter ended June 30, 1999, as
compared to the quarter ended June 30, 1998. The Company's provision for bad
debt allowance was decreased by $1.0 million in the quarter ended June 30, 1999.
INCOME (LOSS) FROM OPERATIONS. As a result of the above factors, income (loss)
from operations for the Company decreased to $(1.9) million in the quarter ended
June 30, 1999, from $(2.4) million in the quarter ended June 30, 1998.
SPECIAL CHARGES. During the quarter ended June 30, 1999, the Company incurred
approximately $1.1 million in professional fees and other related costs related
to the combination of interests. Costs of approximately $0.7 million
attributable to combining the common equity interests of the Company, Delta and
Dakota have been expensed, while remaining costs of approximately $0.4 million
attributable to the acquisition of Delta's minority interests under the
"purchase" method of accounting have been capitalized as other long-term assets
in the accompanying consolidated balance sheet.
NET INCOME (LOSS). Net income (loss) decreased to $(2.3) million in the quarter
ended June 30, 1999, from $(3.1) million during the quarter ended June 30, 1998.
This decrease is the result of higher operating income and an decreased interest
and income tax expense.
11
<PAGE>
SIX MONTHS ENDED JUNE 30, 1999 COMPARED TO SIX MONTHS ENDED JUNE 30, 1998.
NET SALES. Net sales for the Company increased $1.3 million, or 2.6%, to $50.1
million for the six months ended June 30, 1999, as compared to the six months
ended June 30, 1998. Case volume sales increased 7.9% during the six months
ended June 30, 1999, as compared to the same six months in 1998. However, the
effect of this increase was reduced by reductions in revenue from the sale of
fountain products and home delivered bulk water. Net sales in the six months
ended June 30, 1998 included $1.5 million received in settlement of franchise
company marketing support claims from prior periods.
COST OF SALES. Cost of sales for the Company increased $1.7 million, or 4.8%,
for the six months ended June 30, 1999, as compared to the six months ended June
30, 1998. This increase was due primarily to the increased sales volume but also
reflected expenses for repair and maintenance of production lines that were $0.5
million higher than the six months ended June 30, 1998. The effect of those
increases in costs were reduced by the effect of a modest shift in product mix
towards cans which have a lower cost than plastic bottles.
GROSS PROFIT. As a result of the above factors, gross profit for the Company
decreased $0.5 million, or 3.6%, to $12.1 million for the six months ended June
30, 1999, as compared to the same period in 1998.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES. The Company has a number of
marketing arrangements with PepsiCo pursuant to which the Company is required to
make certain investments in marketing, new products, packaging introductions and
certain capital goods. The Company receives reimbursements from PepsiCo for a
portion of such expenditures, which it is able to use to offset traditional
marketing expenses or to acquire fixed assets. The Company's selling and
marketing expenses are shown net of all such reimbursements from PepsiCo.
Selling, general and administrative expenses for the Company decreased by $1.2
million, or 7.2%, to $15.8 million for the six months ended June 30, 1999, as
compared to the six months ended June 30, 1998. The decrease reflects a $0.3
million reduction in fleet costs achieved through buy-out of a full-service
lease for certain delivery vehicles. In addition, marketing and other operating
costs were reduced. There continues to be a reduction in administrative staffing
and expenditures for outside professional services during the six months ended
June 30, 1999, as compared to the same period in 1998.
SPECIAL CHARGES. During the six months ended June 30, 1999, the Company incurred
approximately $1.1 million in professional fees and other related costs related
to the combination of interests. Costs of approximately $0.7 million
attributable to combining the common equity interests of the Company, Delta and
Dakota have been expensed, while remaining costs of approximately $0.4 million
attributable to the acquisition of Delta's minority interests under the
"purchase" method of accounting have been capitalized as other long-term assets
in the accompanying consolidated balance sheet. In the six months ended June 30,
1999, the Company reduced the carrying value of assets related to its Cristalia
water division by $0.3 million. This adjustment reflects the effect of the sale
of this division for $1.2 million in April 1999.
INCOME (LOSS) FROM OPERATIONS. As a result of the above factors, the Company had
a loss from operations for the six months ended June 30, 1999 of $(4.6) million,
compared to a loss of $(4.4) million for the same period in 1998.
INTEREST EXPENSE. Interest expense for the six months ended June 30, 1999 was
$0.9 million, compared to $1.2 million for the same period in 1998. This is a
result of reductions of long-term debt.
NET INCOME (LOSS). Net income (loss) increased to $(5.2) million in the six
months ended June 30, 1999, from $(4.2) million during the six months ended June
30, 1998. This increase is the result of lower operating income and an increased
income tax expense. In the six months ended June 30, 1998, the Company
recognized the effect of a carryback to prior income tax periods of expenses
incurred in settlement of litigation.
LIQUIDITY AND CAPITAL RESOURCES. At June 30, 1999, the Company had $7.8 million
of cash and cash equivalents. Indebtedness for borrowed money, including
short-term and long-term borrowings and capital lease obligations at June 30,
1999 totaled $21.9 million, which included $1.1 million of current and
short-term obligations.
Net cash used in operating activities for the Company was $4.3 million for the
six months ended June 30, 1999, as compared with $1.5 million for the same
period in 1998.
12
<PAGE>
Net cash used in investing activities for the Company was $6.1 million for the
six months ended June 30, 1999, as compared with $0.7 million for the same
period in 1998. The increase in cash used in investing activities reflects
purchases of equipment to buy-out a full service lease for delivery vehicles, to
acquire additional vehicles to expand the direct servicing of accounts
previously serviced by wholesalers and to place additional marketing equipment.
Cash flows used in financing activities for the Company were $1.1 million for
the six months ended June 30, 1999, as compared with $0.6 for the same period in
1998. During the six months ended June 30, 1998, the Company borrowed an
additional $0.8 million on a long term basis. Additional loans were not incurred
in the six months ended June 30, 1999.
In April 1999, the Company completed the sale of the Cristalia water business.
The sales price of $1.2 million was comprised of $0.7 million cash and $0.5
million note receivable. The majority of the cash proceeds were used to prepay
amounts due on long-term debt.
The Company's long-term debt is due in the twelve months following June 30,
1999, under the terms of the Third Restated Credit Agreement. The Company may
prepay certain of the loans subject to the terms and conditions of the Third
Restated Credit Agreement with Banco Popular de Puerto Rico.
Under the terms of the Third Restated Credit Agreement, the Company must
maintain a minimum tangible net worth (as defined in the Third Restated Credit
Agreement) of $26.0 million on September 30, 1999, $24.5 million, at December
31, 1999, and $23.5 million through April 25, 2000. In addition, under certain
circumstances, the Company may be required to prepay a portion of the debt.
Specifically, net proceeds of capital asset dispositions over $0.25 million per
year, insurance recoveries other than for business interruption not promptly
applied toward repair or replacement, and a portion of excess cash flow (as
defined in the Third Restated Credit Agreement), must be applied toward early
repayment of the amounts outstanding under this agreement. The entire principal
amount of loans outstanding under the Third Restated Credit Agreement becomes
immediately due and payable if the Company violates any of these financial
restrictions. Furthermore, the Company may not pay dividends without the consent
of Banco Popular under the Third Restated Credit Agreement.
The Company believes that as of August 16, 1999 it is in full compliance with
the terms of the Third Restated Credit Agreement.
Pursuant to the Third Restated Credit Agreement, the Company has granted Banco
Popular a security interest in all its machinery and equipment, receivables,
inventory and the real property on which the Toa Baja Plant and the Rio Piedras
Plant are located.
13
<PAGE>
YEAR 2000 COMPLIANCE
The Year 2000 problem concerns the ability of information systems and equipment
controlled by computer chips and systems to properly recognize and process
date-sensitive information on and beyond January 1, 2000. The risks from this
date change are both internal and external and can potentially affect the
Company's production, distribution and administrative systems and the Company's
customers, suppliers of raw materials, utilities and distribution services. Year
2000 related problems could prevent customers from accepting deliveries from the
Company or processing payments for amounts due to the Company. Suppliers may be
prevented from producing and supplying goods or services essential to the
Company's business.
Delta Beverage Group, Inc. ("Delta"), a company affiliated with P-PR Transfer,
LLP, provides information services to the Company, including the use of
information systems and technology, under an accounting services agreement
executed in fiscal year 1998. The Company completed its transition to Delta's
systems, hardware and software during the first quarter of 1999. Below is a
discussion of the Company's Year 2000 readiness and planning status, which has
been developed based upon Year 2000 planning.
The Company's production facility uses equipment that operates using computer
control systems based upon programmed logic controllers. The Company completed a
Year 2000 compliance evaluation of these systems. The Company also uses computer
systems to forecast demand, order raw materials, monitor inventory levels, ship
product and record shipments. The software that runs these processes is a
combination of commercially available software and internally developed
applications. The Company's initial assessment indicated that these applications
were Year 2000 compliant, and the Company, through Delta, completed the testing
of these applications. The Company relies on a supply chain to produce and
distribute its products from manufacturing facilities to distribution warehouses
and finally to customers. The Company's distribution centers use a common supply
chain management application that is Year 2000 compliant.
In order to assess the external risks to the Company, Delta distributed Year
2000 readiness surveys to the Company's suppliers and key customers. The Company
is waiting for the responses from suppliers and customers to complete the
assessment.
The Company has not incurred material incremental costs associated with its Year
2000 plan. This is due in part to the recent conversion to systems provided by
Delta. Within the last 18 months, Delta has replaced most software applications
in use before 1993 with systems that are Year 2000 compliant. The Company
believes that the remaining costs associated with addressing Year 2000
compliance issues will not be material.
The Company's most likely potential risk with regard to Year 2000 issues is the
temporary inability of suppliers to provide supplies of raw materials to the
Company. The inability of the Company's suppliers to be Year 2000 ready could
result in delays in product manufacturing and delivery, thereby adversely
affecting the business or operations of the Company. The Company believes,
however, that in a worst case scenario any disruption in supply materials can be
minimized by relying on inventories or shifting production to unaffected plants
with some increase in distribution costs.
The Company recognizes the need for Year 2000 contingency plans in the event
that remediation is not fully successful or that the remediation efforts of its
vendors and suppliers are not timely completed. The Company plans to address
contingency planning during calendar 1999. Such plans will include building
inventories of raw materials and finished goods in advance of January 1, 2000 to
protect against supply and production disruptions. To the extent that the
Company's vendors and suppliers are unable to provide sufficient evidence of
Year 2000 readiness by September 30, 1999, the Company will seek to arrange for
their replacement. Additionally, the Company is developing manual processes to
replace electronic applications in the event of their failure.
14
<PAGE>
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The Company uses financial instruments, primarily variable rate debt, to finance
operations, for capital expenditures and for general corporate purposes. The
Company's exposure to market risk for changes in interest rates relates
primarily to investments, and short- and long-term debt obligations. The Company
places its investments in high-quality securities with major financial
institutions while limiting exposure to any one issuer. The Company does not use
derivative financial instruments or engage in trading activities. There have
been no significant changes in the Company's exposure to market risk for changes
in interest rates during the six months ended June 30, 1999.
15
<PAGE>
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is involved in various claims and legal actions arising in the
ordinary course of business. In the opinion of management, the ultimate
disposition of these matters will not have a material effect on the Company's
consolidated financial position, results of operation or liquidity.
ITEM 5. OTHER INFORMATION
On July 30, 1999, the Company entered into a contract rights agreement with
Seven-Up/RC Bottling Company of Puerto Rico, Inc ("Seven-UP") pursuant to which
Seven-UP released its exclusive rights for the production and distribution of
the "Seven-UP," "Sunkist," "Welch's" and "Schweppes" brands in Puerto Rico. In
exchange for these releases, the Company used working capital to pay Seven-UP
$12.0 million in cash. The purchase price was based on negotiations between the
Company and Seven-UP. The Company obtained such releases as a precondition to
its expected entry into franchise agreements with each respective franchisor.
With the addition of these brands, the Company expects to increase its case
volume production by approximately 20%.
On August 3, 1999, the Company entered into an asset purchase agreement with
Seven-UP pursuant to which the Company acquired from Seven-UP certain customer
information, owned vehicles, equipment and leased vehicle contracts. In exchange
for these assets, the Company used working capital to pay Seven-UP $30,300 in
cash and to pay unrelated third party lessors $468,597 in cash. Seven-UP used
the assets in connection with its production and distribution of the "Seven-UP,"
"Sunkist," "Welch's" and "Schweppes" brands in Puerto Rico. If the Company
enters franchise agreements with each respective franchisor, the Company expects
to use the assets for the same purpose.
The Company has filed the contract rights release agreement and the asset
purchase agreement as exhibits to this report.
16
<PAGE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibit 10.1 - Contract Rights Release Agreement, dated July 30,
1999, between Seven-UP/RC Bottling Company of
Puerto Rico, Inc. and Pepsi-Cola Puerto Rico
Bottling Company.
Exhibit 10.2 - Asset Purchase Agreement, dated August 3, 1999,
between Seven-UP/RC Bottling Company of Puerto
Rico, Inc. and Pepsi-Cola Puerto Rico Bottling
Company.
Exhibit 27.1 - Financial Data Schedule.
(b) The Company filed the following report on Form 8-K with the SEC
during the quarter for which this report is filed:
1. The Company's Current Report on Form 8-K, filed on June
28, 1999, relating to the agreements in principle to
acquire Delta Beverage Group, Inc. and Dakota Beverage
Company, Inc.
17
<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 thereunto duly authorized.
Date: August 16, 1999
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
/s/ Robert C. Pohlad
-----------------------------------
By: Name: Robert C. Pohlad
Title: Chief Executive Officer
Signature Title Date
- ---------------------- ---------------------------------------- ----------------
Chief Financial Officer and Vice
/s/ John F. Bierbaum President (Principal Financial Officer) August 16, 1999
- ----------------------
John F. Bierbaum
18
<PAGE>
EXHIBIT INDEX
Exhibit 10.1 Contract Rights Release Agreement, dated July 30, 1999, between
Seven-UP/RC Bottling Company of Puerto Rico, Inc. and Pepsi-Cola
Puerto Rico Bottling Company.
Exhibit 10.2 Asset Purchase Agreement, dated August 3, 1999, between
Seven-UP/RC Bottling Company of Puerto Rico, Inc. and Pepsi-Cola
Puerto Rico Bottling Company.
Exhibit 27.1 Financial Data Schedule
<PAGE>
EXHIBIT 10.1
CONTRACT RIGHTS RELEASE AGREEMENT
This CONTRACT RIGHTS RELEASE AGREEMENT, dated as of July 30, 1999, is made
and entered into between Seven-UP/RC Bottling Company of Puerto Rico, Inc., a
Puerto Rico corporation ("Seven-UP"), and Pepsi-Cola Puerto Rico Bottling
--------
Company, a Delaware corporation ("PPR"). Capitalized terms not otherwise defined
---
herein have the meanings set forth in Section 1.01.
WHEREAS, Seven-UP is the franchisee of those certain franchise rights for
the bottling, distribution and/or sale of soft drink products bearing the
"Seven-UP," "Schweppes," "Sunkist" and "Welch's" brand names (collectively, the
"Brands") in the territories specified in each of the Franchise Contracts (as
------
hereinafter defined);
WHEREAS, PPR desires to become a franchisee of the Franchisor (as
hereinafter defined);
WHEREAS, as a precondition to PPR entering into a franchise agreement with
each respective Franchisor, it is required that Seven-UP release its rights
under the applicable Franchise Contracts and PPR must pay to Seven-Up the
Release Payment for Seven-UP's release of its rights under the Franchise
Contracts;
WHEREAS, Seven-UP desires to release all its right, title and interest in,
to and under each Franchise Contracts, and PPR desires to pay Seven-UP the
amount set forth below in consideration of such release of rights by Seven-UP,
all on the terms set forth herein; and
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
---------
DEFINITIONS
1.01 Definitions. (a) As used in this Agreement, the following defined
-----------
terms shall have the meanings indicated below:
"Act 75" means Section 278 through 278d of Title 10 of the Laws of Puerto
------
Rico, as amended from time to time.
"Actions or Proceedings" means any action, suit, adverse claim proceeding,
----------------------
mediation, arbitration or Governmental or Regulatory Authority investigation or
audit.
"Affiliate" means any Person that directly, or indirectly through one of
---------
more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, directly or indirectly, to direct or cause the
<PAGE>
direction of the management and policies of such Person whether by contract or
otherwise and, in any event and without limitation of the previous sentence, any
Person owning ten percent (10%) or more of the voting securities of a second
Person shall be deemed to control that second Person.
"Agreement" means this Contract Rights Release Agreement, the Release and
---------
the Disclosure Schedule hereto, as the same may be amended, modified,
supplemented or restated from time to time in accordance with the terms hereof.
"Assets and Properties" of any Person at any time of determination means,
---------------------
collectively, all assets, properties and rights of every kind, nature, character
and description (whether real, personal or mixed, whether tangible or
intangible, whether absolute, accrued, contingent, fixed or otherwise and
wherever situated), including the goodwill related thereto, operated, owned or
leased by such Person, at such time, including without limitation cash, cash
equivalents, investments, accounts and notes receivable, chattel paper,
documents, instruments, general intangibles, real estate, equipment, inventory,
goods and Intellectual Property.
"Brands" has the meaning ascribed to it in the recitals hereto.
------
"Closing" has the meaning ascribed to it in Section 3.01.
-------
"Closing Date" means the date on which the Closing actually occurs, which
------------
shall be either
(a) as soon as practicable after satisfaction of the conditions to closing set
forth in Article Six or (b) such other date as Seven-UP and PPR may mutually
agree, but in no event later than July 30, 1999.
"Confidentiality Agreement" has the meaning ascribed to it in Section 7.02.
-------------------------
"Disclosure Schedule" means the schedules dated as of the date hereof,
-------------------
containing all lists, descriptions, exceptions and other information and
materials as are required to be included therein pursuant to this Agreement.
"Franchise Contracts" means each of the franchise, bottling and/or
-------------------
distribution agreements set forth on Section 2.01 of the Disclosure Schedule and
---------------------------------------
all rights of Seven-UP under Act 75 and common law with respect to such
Franchise Contracts and the Brands.
"Franchisor" means a party (other than Seven-UP) to any of the Franchise
----------
Contracts.
"Governmental or Regulatory Authority" means any court, tribunal,
------------------------------------
arbitrator, authority, agency, commission, official, commonwealth or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"Laws" means all laws, statutes, rules, regulations, ordinances and other
----
pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, commonwealth, county, city or other
political subdivision or of any Governmental or Regulatory Authority.
2
<PAGE>
"Licenses" means all licenses, permits, certificates of authority,
--------
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest, lease,
-----
lien, advers claim, levy, charge or other encumbrance of any kind, or any
conditional sale contract, title retention contract or other Contract to give
any of the foregoing.
"Operative Agreements" means, collectively, the Release and all other
--------------------
documents or instruments executed in connection with this Agreement.
"Order" means any writ, judgment, decree, injunction or similar order of
-----
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"Permitted Liens" has the meaning ascribed to it in Section 4.05.
---------------
"Person" means any natural person, corporation, general partnership,
------
limited partnership, limited liability company, limited liability partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Release Payment" has the meaning ascribed to it in Section 3.03.
---------------
"PPR" has the meaning ascribed to it in the introductory paragraph of this
---
Agreement.
"Release" means the Release to be executed and delivered on the Closing
-------
Date by Seven-UP, substantially in the form of Exhibit A.
"Representatives" has the meaning ascribed to it in Section 7.02.
---------------
"Seven-UP" has the meaning ascribed to it in the introductory paragraph of
--------
this Agreement.
(b) Unless the context of this Agreement otherwise requires: (i) words of
any gender include each other gender; (ii) words using the singular or plural
number also include the plural or singular number, respectively; (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement; (iv) the terms "Article" or "Section" refer to the specified
Article or Section of this Agreement; and (v) the words "include," "includes"
and "including" are deemed to be followed by the phrase "without limitation."
References herein to the terms "Agreement" and "Operative Agreements" shall mean
this Agreement and the Operative Agreements as each may be amended, supplemented
or modified from time to time.
3
<PAGE>
ARTICLE II
----------
RELEASE OF CONTRACT RIGHTS
2.01 Release of Contract Rights. Subject to and upon the terms and
--------------------------
conditions set forth in this Agreement, at the Closing, Seven-UP will release
and discharge all of its rights, title and interest in, to and under the
Franchise Contracts by executing a Release with respect to each such Franchise
Contract.
2.02 Assumption of Liabilities. PPR shall not assume any liability or
-------------------------
obligation of Seven- UP under or in connection with the Franchise Contracts.
2.03 No Liability. PPR agrees not to assert any claims with respect to the
------------
Franchise Contracts after the Closing Date.
ARTICLE III
-----------
THE CLOSING AND RELEASE PAYMENT
3.01 Date and Place. Subject to the terms and conditions set forth in this
--------------
Agreement, the closing for the transactions contemplated by this Agreement (the
"Closing") shall be held at the offices of Morgan, Lewis & Bockius LLP, 101 Park
-------
Avenue, New York, New York, or at such other place as PPR and Seven-UP mutually
agree, at 3:00 p.m. local time, on the Closing Date.
3.02 Release. Subject to the terms and conditions hereof, at the Closing,
-------
Seven-UP will release all its rights, title and interest in, to and under the
Franchise Contracts by executing and delivering a Release with respect to each
of the Franchise Contracts.
3.03 Release Payment. In payment for entering into the Releases, PPR shall
---------------
pay to Seven- UP at the Closing US$12,000,000 (the "Release Payment") by wire
---------------
transfer of immediately available funds to the account of Seven-UP which account
will be designated by Seller prior to the Closing.
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF SEVEN-UP
PPR hereby acknowledges that it has conducted its own investigation and due
diligence with respect to the Franchise Contracts and its request of Seven-UP to
release its rights in respect thereof and has relied exclusively thereon as
concerns its decision to enter into this Agreement and the Operative Agreements
to which it is a party. The provisions of this paragraph shall survive the
closing of the transactions contemplated by this Agreement and the execution and
delivery of this Agreement and the Operative Agreements.
Notwithstanding the foregoing, Seven-UP hereby represents and warrants to
PPR as follows:
4
<PAGE>
4.01 Organization. Seven-UP is a corporation duly organized and validly
------------
existing under the Laws of the Commonwealth of Puerto Rico.
4.02 Authority. Seven-UP has all necessary corporate power and authority
---------
to execute and deliver this Agreement and the Operative Agreements to which it
is a party, to perform its obligations hereunder and thereunder and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery by Seven-UP of this Agreement and the Operative Agreements to which it
is a party, and the performance by Seven-UP of its obligations hereunder and
thereunder, have been duly and validly authorized by all necessary board of
directors approval and other corporate action of Seven-UP. This Agreement has
been duly and validly executed and delivered by Seven-UP and constitutes, and
upon the execution and delivery by Seven-UP of the Operative Agreements to which
it is a party, such Operative Agreements will constitute, legal, valid and
binding obligations of Seven-UP enforceable against Seven-UP in accordance with
their terms.
4.03 No Conflicts. The execution and delivery by Seven-UP of this
------------
Agreement does not, and the execution and delivery by Seven-UP of the Operative
Agreements to which it is a party, the performance by Seven-UP of its
obligations under this Agreement and such Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws (or
other comparable corporate charter documents) of Seven-UP; or
(b) materially conflict with or result in a material violation or
material breach of any term or provision of any Law or Order applicable to
Seven-UP or its Assets and Properties.
4.04 Governmental Approvals and Filings. No consent, approval or action
----------------------------------
of, filing with or notice to any Governmental or Regulatory Authority on the
part of Seven-UP is required in connection with the execution, delivery and
performance of this Agreement or any of the Operative Agreements to which it is
a party or the consummation of the transactions contemplated hereby or thereby.
4.05 Liens. Seven-UP owns the contract rights in the Franchise Contracts
-----
exclusively, and in each case as of the Closing Date will own the contract
rights in the Franchise Contracts free and clear of any Liens, except as set
forth in Section 4.05 of the Disclosure Schedule (collectively, "Permitted
--------------------------------------- ---------
Liens").
- -----
4.06 Brokers. With the exception of Glover Capital, Inc. (whose fee will
-------
be paid by Seven-UP), no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seven-UP.
4.07 Legal Proceedings. (a) Except as disclosed in Section 4.07(a) of the
----------------- ----------------------
Disclosure Schedule, there are no Actions or Proceedings currently on-going,
- -------------------
pending or, to the knowledge of Seven-UP, threatened against, relating to or
affecting Seven-UP or any of its Assets and Properties which could reasonably be
expected to result in the issuance of an Order restraining, enjoining or
5
<PAGE>
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the Operative Agreements
or otherwise result in a material diminution of the benefits contemplated by
this Agreement or any of the Operative Agreements to PPR.
(b) Except as disclosed in Section 4.07(b) of the Disclosure Schedule,
------------------------------------------
there are no facts or circumstances to the knowledge of Seven-UP that could
reasonably be expected to give rise to any Action or Proceeding that would be
required to be disclosed pursuant to Section 4.07(a).
4.08 Seven-UP's Knowledge. If the phrase "Seven-UP's knowledge" or
--------------------
"knowledge of Seven-UP" is used in connection with any representation and
warranty made by Seven-UP hereunder, the representation and warranty so
qualified shall be deemed to be made by Seven-UP solely on the basis of the
actual knowledge, after due inquiry, of the following members of Seven- UP's
senior management: Mr. Victor Collazo and Mr. Orlando Gonzalez. It is expressly
agreed and acknowledged by PPR that PPR shall have no claim or remedy against
Seven-UP for any breach or untruth of any representation or warranty that is
qualified by the phrase "Seven-UP's knowledge" or the phrase "knowledge of
Seven-UP," except upon a showing by PPR that such breach or untruth was known,
after due inquiry, to any of the following members of Seven-UP's senior
management: Mr. Victor Collazo and Mr. Orlando Gonzalez.
The representations and warranties set forth in Section 4.03, Section 4.04,
Section 4.06 and Section 4.07 hereof shall expire on the one year anniversary of
the Closing Date. All other representations and warranties set forth in this
Article IV shall survive indefinitely.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES OF PPR
PPR hereby represents and warrants to Seven-UP as follows:
5.01 Organization. PPR is a corporation duly organized, validly existing
------------
and in good standing under the Laws of the state of Delaware. PPR has all
necessary corporate power and authority to execute and deliver this Agreement
and the Operative Agreements to which it is a party, to perform its obligations
hereunder and thereunder and to consummate the transactions contemplated hereby
and thereby. PPR is duly qualified, licensed or admitted to do business and is
in good standing in all jurisdictions in which the ownership, use or leasing of
its Assets and Properties, or the conduct or nature of its business, makes such
qualification, licensing or admission necessary and in which the failure to be
so qualified, licensed or admitted and in good standing could reasonably be
expected to have an adverse effect on the validity or enforceability of this
Agreement or any of the Operative Agreements to which it is a party or on the
ability of PPR to perform its obligations hereunder and thereunder.
5.02 Authority. The execution and delivery by PPR of this Agreement and
---------
the Operative Agreements to which it is a party, and the performance by PPR of
its obligations hereunder and thereunder, have been duly and validly authorized
by all necessary board of directors approval and other corporate action of PPR.
This Agreement has been duly and validly executed and delivered
6
<PAGE>
by PPR and constitutes, and upon the execution and delivery by PPR of the
Operative Agreements to which it is a party, such Operative Agreements will
constitute, legal, valid and binding obligations of PPR enforceable against PPR
in accordance with their terms.
5.03 No Conflicts. The execution and delivery by PPR of this Agreement do
------------
not, and the execution and delivery by PPR of the Operative Agreements to which
it is a party, the performance by PPR of its obligations under this Agreement
and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws (or
other comparable corporate charter documents) of PPR;
(b) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to PPR or any of its Assets and
Properties; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under or
(iii) require PPR to obtain any consent, approval or action of, make any filing
with, or give any notice to any Person as a result or under the terms of any
contract or License to which PPR is a party or by which any of its Assets and
Properties is bound.
5.04 Governmental Approvals and Filings. No consent, approval or action
----------------------------------
of, filing with or notice to any Governmental or Regulatory Authority on the
part of PPR is required in connection with the execution, delivery and
performance of this Agreement or the Operative Agreements to which it is a party
or the consummation of the transactions contemplated hereby or thereby.
5.05 Legal Proceedings. (a) Except as disclosed in Section 5.05(a) of the
----------------- ----------------------
Disclosure Schedule, there are no Actions or Proceedings currently on-going,
- -------------------
pending or, to the knowledge of PPR, threatened against, relating to or
affecting PPR or any of its Assets and Properties (including, without
limitation, any antitrust claims) which could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or otherwise result in a diminution
of the benefits contemplated by this Agreement or any of the Operative
Agreements to Seven-UP.
(b) Except as disclosed in Section 5.05(b) of the Disclosure Schedule,
------------------------------------------
there are no facts or circumstances known to PPR that could reasonably be
expected to give rise to any Action or Proceeding that would be required to be
disclosed pursuant to Section 5.05(a).
5.06 Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried out by PPR with Seven-UP
through Seven-UP's broker, Glover Capital, Inc., without the intervention of any
Person on behalf of PPR in such manner as to give rise to any valid claim by any
Person against Seven-UP for a finder's fee, brokerage commission or similar
payment.
7
<PAGE>
5.07 Financial Ability. PPR has the financial ability to consummate the
-----------------
transactions contemplated by this Agreement.
5.08 No Consents. All consents and approvals necessary to consummate the
-----------
transactions contemplated by this Agreement shall be obtained prior to or at the
Closing, except as otherwise provided herein. No other consent or approval of,
or declaration, filing or registration with any non-governmental third-party is
required to be obtained by PPR, in connection with the execution, delivery and
performance of this Agreement or the Operative Agreements to which it is a party
or the consummation of the transactions contemplated hereby or thereby.
The representations and warranties set forth in Section 5.03, Section 5.04,
Section 5.05, Section 5.06, Section 5.07 and Section 5.08 hereof shall expire on
the one year anniversary of the Closing Date. All other representations and
warranties set forth in this Article V shall survive indefinitely.
ARTICLE VI
----------
CONDITIONS TO CLOSING
6.01 Conditions to Obligations of Seven-UP. The obligations of Seven-UP
-------------------------------------
hereunder are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in part
by Seven-UP in its sole discretion):
(a) Intentionally Omitted.
---------------------
(b) Deliveries at Closing. At the Closing, Seven-UP shall have received
---------------------
from PPR the Release Payment in immediately available funds as provided for in
Section 3.03.
(c) Representations and Warranties. Each of the representations and
------------------------------
warranties made by PPR in this Agreement (other than those made as of a
specified date earlier than the Closing Date) shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty were made on and as of the Closing Date, shall have been true and
correct in all material respects on and as of such earlier date.
(d) Orders and Laws. There shall not be in effect on the Closing Date any
---------------
Order or Law restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement or
any of the Operative Agreements.
6.02 Conditions to Obligations of PPR. The obligations of PPR hereunder
--------------------------------
are subject to the fulfillment, at or before the Closing, of each of the
following conditions (all or any of which may be waived in whole or in part by
PPR in its sole discretion):
(a) Releases. At the Closing, Seven-UP shall have executed and delivered
--------
to PPR a Release with respect to each Franchise Contract and any other of the
Operative Agreements to which it is a party.
8
<PAGE>
(b) Representations and Warranties. Each of the representations and
------------------------------
warranties made by Seven-UP in this Agreement (other than those made as of a
specified date earlier than the Closing Date) shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty were made on and as of the Closing Date, and any representation or
warranty made as of a specified date earlier than the Closing Date shall have
been true and correct in all material respects on and as of such earlier date.
(c) Orders and Laws. There shall not be in effect on the Closing Date any
---------------
Order or Law restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement or
any of the Operative Agreements.
(d) Franchise Contracts. At the Closing, Seven-UP shall have delivered
-------------------
the original executed Franchise Contracts or, to the extent originals are not
available, Seven-UP shall have delivered a certificate by the President of
Seven-UP that such copy of the Franchise Contract is true and correct.
(e) Lien Release. At the Closing, Seven-UP shall deliver to PPR evidence
------------
or duly executed documents in proper form to effectuate the cancellation of all
Liens (other than the Permitted Liens) encumbering the Franchise Contracts.
ARTICLE VII
-----------
MISCELLANEOUS
7.01 Notices. All notices, requests and other communications hereunder
-------
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to PPR, to:
Pepsi-Cola Puerto Rico Bottling Company
3880 Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402
Facsimile No. 612-661-3825
with a copy to:
Briggs and Morgan
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Facsimile No. 612-334-8650
Attn: Brian D. Wenger, Esq.
9
<PAGE>
If to Seven-UP, to:
Seven-Up/RC Bottling Company of Puerto Rico, Inc.
Can, 177 KM 8.3, Los Filtros
Urb Industriol Minnillas
Bayam(cent)n, Puerto Rico 00960
Attn: President
with copies to:
O'Neill & Borges
American International Plaza, 8th Floor
250 Mu*oz Rivera Avenue (Hato Rey)
San Juan, Puerto Rico 00918-1808
Facsimile No.: 787-753-8944
Attn: Juan A. Rivero, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: (212) 309-6273
Attn: Margot B. Schonholtz, Esq.
7.02 Confidentiality. For a period of five years from the date of this
---------------
Agreement, each party hereto will hold, and will use its best efforts to cause
its Affiliates and its officers, directors, employees, agents, counsel,
accountants, financial advisors, consultants and other representatives
(collectively, "Representatives") to hold, in strict confidence from any Person
---------------
(other than any such Affiliate or Representative), unless (a) compelled to
disclose by judicial or administrative process (including without limitation in
connection with obtaining any necessary approvals of this Agreement and the
transactions contemplated hereby of Governmental or Regulatory Authorities) or
by other requirements of Law or Governmental or Regulatory Authorities, (b)
disclosed in an Action or Proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder or (c) Seven-UP grants prior
written consent to make such disclosure, all data and information disclosed by
Seven-UP and its Representatives to PPR or its Representatives, as well as any
and all reports, analyses, compilations or studies generated, whether or not
jointly by the parties or by any party alone, relating to the transactions
contemplated hereby, and all data and information relating to the businesses,
operation, contractual relationships and financial affairs of Seven-UP,
excluding data and information (i) that was at the time of receipt in the public
domain or which subsequently became part of the public domain other than by
breach by PPR of this Agreement or that certain Confidentiality Agreement
between Seven-UP and PPR, dated October 28, 1998 ("Confidentiality Agreement"),
-------------------------
(ii) that was lawfully in the possession of PPR prior to the date on which PPR
received such information from Seven-UP or its Representatives or (iii) that was
lawfully acquired from a third party that was under no obligation to keep such
data and information confidential. PPR will, and will cause those Persons to
whom it has disclosed any documents or information furnished to PPR in
connection with this Agreement or the transactions contemplated hereby to,
deliver to Seven-UP all documents and other material and all copies thereof in
its or their
10
<PAGE>
possession, custody or control that contain or incorporate any documents or
information furnished to PPR in connection with this Agreement or the
transactions contemplated hereby, promptly upon Seven-UP's request. In the event
that PPR becomes legally compelled to disclose any information or material
subject to this Section 7.02 (collectively, "Confidential Information"), PPR
------------------------
shall provide Seven-UP with prompt notice thereof, specifying in reasonable
detail the nature of such disclosure, so that Seven-UP may seek a protective
order or other appropriate remedy and/or waive compliance with the provisions of
this Section 7.02. PPR shall use, at the request of Seven-UP, all reasonable
efforts to cooperate with Seven-UP in seeking a protective order or other
appropriate remedy in respect thereof. In the event that such protective order
or other remedy is not obtained, or Seven-UP waives compliance with the
provisions of this Section 7.02, PPR shall furnish only that part of the
Confidential Information which it is advised by written opinion of counsel is
legally required and will exercise its best efforts to ensure that confidential
treatment will be accorded such Confidential Information. In addition, PPR will
provide Seven-UP with written notice of any Confidential Information to be so
disclosed as far in advance of its disclosure as is practicable.
7.03 Entire Agreement. This Agreement and the Operative Agreements
----------------
supersede all prior discussions and agreements, including, but not limited to,
the Confidentiality Agreement, between the parties with respect to the subject
matter hereof and thereof. This Agreement and the Operative Agreements contain
the sole and entire agreement between the parties hereto with respect to the
subject matter hereof and thereof.
7.04 Expenses. All costs and expenses, including, without limitation, fees
--------
and disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
7.05 Public Announcements. Any announcement or press releases by either
--------------------
party relating to this Agreement and the Operative Agreements and the
transactions contemplated hereby and thereby shall be approved in advance by the
other party.
7.06 Waiver. Any term or condition of this Agreement may be waived at any
------
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
7.07 Amendment. This Agreement may be amended, supplemented or modified
---------
only by a written instrument duly executed by or on behalf of each party hereto.
7.08 No Third Party Beneficiary. The terms and provisions of this
--------------------------
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any Person.
11
<PAGE>
7.09 No Assignment; Binding Effect. Neither this Agreement nor any right,
-----------------------------
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other parties hereto and any attempt to do so will
be void. This Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
7.10 Disclosure. Neither Seven-UP nor PPR shall be deemed to have made, to
----------
any other party hereto or to any Operative Agreement, any representation or
warranty with respect to the transactions contemplated hereby other than such
representations and warranties as are expressly made by it in this Agreement or
in any Operative Agreement to which it is a party.
7.11 Headings. The headings used in this Agreement have been inserted for
--------
convenience of reference only and do not define or limit the provisions hereof.
7.12 Consent to Jurisdiction and Service of Process. PPR hereby
----------------------------------------------
irrevocably appoints Brian Wenger, Esq. at his offices at Briggs and Morgan,
2400 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 and Seven-UP
hereby irrevocably appoints Juan A. Rivero, Esq., at his office at O'Neill &
Borges, American International Plaza, 8th Floor, 250 Mu*oz Rivera Avenue (Hato
Rey), San Juan, Puerto Rico, its lawful agent and attorney to accept and
acknowledge service of any and all process against it in any Action or
Proceeding arising in connection with this Agreement or any of the Operative
Agreements and upon whom such process may be served, with the same effect as if
such party were a resident of the State of New York and had been lawfully served
with such process in such jurisdiction, and waives all claims of error by reason
of such service, provided that in the case of any service upon such agent and
--------
attorney, the party effecting such service shall also deliver a copy thereof to
the other parties at the addresses and in the manner specified in Section 7.01.
The parties hereto will enter into such agreements with such agents as may be
necessary to constitute and continue the appointment of such agents hereunder.
In the event that such agent and attorney resigns or otherwise becomes incapable
of acting as such, such party will appoint a successor agent and attorney in New
York, New York, reasonably satisfactory to the other party, with like powers.
Each party hereby irrevocably submits to the nonexclusive jurisdiction of the
United States District Court for the Southern District of New York or any court
of the State of New York located in the City of New York in any such Action or
Proceeding, and agrees that any such Action or Proceeding shall be brought only
in such court (and waives any objection based on forum non conveniens or any
--------------------
other objection to venue therein); provided, however, that such consent to
-----------------
jurisdiction is solely for the purpose referred to in this Section 7.12 and
shall not be deemed to be a general submission to the jurisdiction of said
courts or in the State of New York other than for such purpose.
7.13 Invalid Provisions. If any provision of this Agreement is held to be
------------------
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid
12
<PAGE>
and enforceable provision as similar in terms to such illegal, invalid or
unenforceable provision as may be possible.
7.14 Governing Law; Waiver of Jury Trial. This Agreement shall be governed
-----------------------------------
by and construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Each party hereby irrevocably waives to the extent permitted by Law its
right to a jury trial in any Action or Proceeding arising as a result of or
relating to the transactions contemplated by this Agreement or the Operative
Agreements.
7.15 Time of the Essence. Time is of the essence for all deadlines set
-------------------
forth in this Agreement.
7.16 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
[Signature Page to Follow]
13
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each party as of the date first above written.
Affidavit Number 40 SEVEN-UP/RC BOTTLING COMPANY OF
-- PUERTO RICO, INC.
Subscribed and acknowledged to before me by
Victor M. Callazo, of legal age, married, By: /s/ Victor M. Callazo
- ----------------- ----------------------------
business executive and resident of Guaynabo, Name: Victor M. Callazo
-------- ----------------------
Puerto Rico, in his capacity as President, Title: President
--------- ----------------------
whom I have identified by means of their
respective Puerto Rico driver's license in
accordance with Article 17(c) of the Notarial
Act, this 30th day of July, 1999, in San Juan,
---- ----
Puerto Rico.
/s/ Ivelisse Callazo Rivera
- ---------------------------
Notary Public
Affidavit Number 1093 PEPSI-COLA PUERTO RICO BOTTLING
---- COMPANY
Subscribed and acknowledged to before me by
A. David Velez, of legal age, married, By: /s/ A. David Velez
- -------------- ------------------------------
business executive and resident of San Juan, Name: A. David Velez
-------- ------------------------
Puerto Rico, in his capacity as President, Title: President
--------- ------------------------
whom I have identified by means of their
respective Puerto Rico driver's license in
accordance with Article 17(c) of the Notarial
Act, this 30th day of July, 1999, in San Juan,
---- ----
Puerto Rico.
/s/ Juan C. Salichs Pou
- -----------------------
Notary Public
14
<PAGE>
EXHIBIT A
RELEASE
THIS RELEASE is executed this ___ day of July, 1999 by Seven-UP/RC Bottling
Company of Puerto Rico, Inc., a Puerto Rico corporation (hereinafter referred to
as "Seven-UP").
--------
WHEREAS, Pepsi-Cola Puerto Rico Bottling Company ("PPR"), a Delaware
corporation, and Seven-UP have entered into an Contract Rights Release
Agreement, dated as of July 30, 1999 (the "Contract Rights Release Agreement";
capitalized terms not defined herein shall have the meanings ascribed to them in
the Contract Rights Release Agreement), pursuant to which Seven-UP has agreed to
release all of its rights, title and interest in, to and under the Franchise
Contracts; and
WHEREAS, pursuant to Section 3.02 of the Contract Rights Release Agreement,
Seven-UP is required to execute and deliver to PPR this Release on the date
hereof;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and in the Contract Rights Release Agreement and other good and valuable
consideration the receipt and sufficiency of which are hereby acknowledged,
Seven-UP, for itself, and its beneficiaries, agents, representatives, successors
and assigns, hereby irrevocably, completely and unconditionally releases any and
all future rights, title and interest in, to and under the ____________ between
Seven-UP and ____________________________ dated _____________, 19___ (the
"Franchise Agreement"), effective as of the Closing Date. Seven-UP agrees not to
institute any lawsuit or administrative action arising under the Franchise
Agreement for the period on or after the Closing Date; provided, however, that
Seven-UP expressly reserves all rights for claims against the Franchisor arising
under the Franchise Agreement, if any, for the period prior to the Closing Date.
IN WITNESS WHEREOF, the undersigned has caused its duly authorized officers
to execute this Release on the day and year first above written.
SEVEN-UP/RC BOTTLING COMPANY
OF PUERTO RICO, INC.
By:________________________________________
Name:
Title:
15
<PAGE>
Affidavit Number _____________
Subscribed and acknowledged to before me by ______________, of legal age,
married/single, business executive and resident of ____________, Puerto Rico, in
his/her capacity as ____________, whom I have identified by means of their
respective Puerto Rico driver's license in accordance with Article 17(c) of the
Notarial Act, this ____ day of __________, 1999, in San Juan, Puerto Rico.
______________________________________
Notary Public
ACKNOWLEDGED AND AGREED
this ____ day of July, 1999
PEPSI-COLA PUERTO RICO BOTTLING COMPANY
By: ___________________________________________
Title:
By its execution hereof, ________________, as the Franchisor under the Franchise
Agreement, hereby acknowledges and consents to the release and termination by
Seven-UP of its rights under the Franchise Agreement as set forth above and
agrees that the effect of such release is a complete termination as of the
Closing Date.
CADBURY/DR PEPPER/SEVEN UP, INC.
By:______________________________
Title:
16
<PAGE>
Pepsi-Cola Puerto Rico Bottling Company, Inc. Acquisition
GENERAL INFORMATION
REGARDING DISCLOSURE SCHEDULE
This page and all of the sections of this Disclosure Schedule, along with
all attachments referred to herein, all of which are hereby incorporated herein
by reference, comprise the Disclosure Schedule referred to in the Contract
Rights Release Agreement, dated as of July 30, 1999 (which, together with all
Exhibits thereto and this Disclosure Schedule, may be sometimes hereinafter
collectively referred to as the "Agreement"), by and between Seven-Up/RC
---------
Bottling Company of Puerto Rico, Inc., a Puerto Rico corporation ("Seller"), and
------
Pepsi-Cola Puerto Rico Bottling Company, Inc., a Delaware corporation
("Purchaser"). To the extent that an item is disclosed or set forth in one
---------
section of this Disclosure Schedule or an attachment thereto and is specifically
referenced to in a paragraph or section number of the Agreement and that same
item also may be applicable to (or properly serve as an amendment to or
disclosure regarding) another paragraph or section of the Agreement (other than
items regarding compliance with laws and litigation), its inclusion anywhere in
this Disclosure Schedule or the attachments thereto shall be deemed to be an
automatic cross-reference to, and inclusion in, this Disclosure Schedule or the
attachments thereto as may be appropriate throughout the Agreement and any and
all applicable sections or paragraphs thereof, whether or not a specific
cross-reference is noted. In addition, any and all attachments, statements or
other documents attached to any section of this Disclosure Schedule are
incorporated by reference to the section of this Disclosure Schedule to which
they are either attached or referenced and to any other section of this
Disclosure Schedule which may be appropriate. The disclosure in this Disclosure
Schedule of any matter not specifically required to be disclosed herein under
the terms of one or more sections of the Agreement shall not in any way be
deemed to affect the interpretation of the express terms of the Agreement or to
establish in any manner a level of materiality for purposes of interpreting the
Agreement. Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in the Agreement.
17
<PAGE>
Reference to Sections
of Agreement Subject Matter of Section
- ------------ -------------------------
2.01 Franchise Contracts
4.05 Seller Liens
4.07(a) Seller Legal Proceedings
4.07(b) Seller Legal Proceedings
5.05(a) Purchaser Legal Proceedings
5.05(b) Purchaser Legal Proceedings
18
<PAGE>
SECTION 2.01
Franchise Contracts
-------------------
1. Bottling Appointment, dated December 19, 1974, by and between Schweppes
U.S.A. Limited and Seven-Up Bottling Company of Puerto Rico, Inc.
2. Sunkist Soft Drink Trademark License and Bottling Agreement, dated as of
December 30, 1980, among Sunkist Soft Drinks, Inc., Sunkist Growers, Inc.
and Seven-Up Bottling Company, Inc.
3. Sunkist Soft Drink Trademark License for Fountain Syrup and Post-Mix, dated
as of December 30, 1980, among Sunkist Soft Drinks, Inc., Seven-Up Bottling
Co., Inc. and Sunkist Growers, Inc.
4. 7-Up Franchise Agreement, dated September 12, 1990, between The Seven-Up
Company and Seven-Up/RC Bottling Company of Puerto Rico, Inc., d/b/a
Seven-Up Bottling Company, Bayamon, Puerto Rico, as amended by that certain
Amendment to 7-up Franchise Agreement, dated September 12, 1990, between
The Seven-Up Company and Seven-Up/RC Bottling Company of Puerto Rico, Inc.,
d/b/a Seven-Up Bottling Company, Bayamon, Puerto Rico.
5. Foodservice National Account Program Fountain Syrup Agreement, dated
September 12, 1990, between The Seven-Up Company and Seven-Up/RC Bottling
Company of Puerto Rico, Inc., d/b/a Seven-Up Bottling Company, Bayamon,
Puerto Rico.
6. Sublicense Agreement No. 258-A, dated June 30, 1994, between Premier
Beverages, Inc. and Seven-Up/RC Bottling Company of Puerto Rico, Inc.
19
<PAGE>
SECTION 4.05
Seller Liens
------------
Chattel Mortgage in favor if BT Commercial Corporation executed September 11,
1990 before Salvador Casellas Toro, Aff. 62, guaranteeing the amount of
$17,825.00.
20
<PAGE>
SECTION 4.07(a)
Seller Legal Proceedings
------------------------
Allegation set forth in the letter dated July 23, 1999 from Ramon L. Walker
Merino, Esq., counsel to B. Fernandez & Hnos., Inc. and Orange Crush of Puerto
Rico, Inc.
21
<PAGE>
SECTION 4.07(b)
Seller Legal Proceedings
------------------------
Allegation set forth in the letter dated July 23, 1999 from Ramon L. Walker
Merino, Esq., counsel to B. Fernandez & Hnos., Inc. and Orange Crush of Puerto
Rico, Inc.
22
<PAGE>
SECTION 5.05(a)
Purchaser Legal Proceedings
---------------------------
None.
23
<PAGE>
SECTION 5.05(b)
Purchaser Legal Proceedings
---------------------------
None.
24
<PAGE>
EXHIBIT 10.2
ASSET PURCHASE AGREEMENT
This ASSET PURCHASE AGREEMENT, dated as of August 3, 1999, is made and
entered into by and among Seven-UP/RC Bottling Company of Puerto Rico, Inc., a
Puerto Rico corporation ("Seller"), and Pepsi-Cola Puerto Rico Bottling Company,
------
a Delaware corporation ("Purchaser"). Capitalized terms not otherwise defined
---------
herein have the meanings set forth in Section 1.01.
WHEREAS, Seller desires to sell, transfer and assign to Purchaser, and
Purchaser desires to purchase and acquire from Seller, all of Seller's right,
title and interest in and to certain customer information, equipment and
vehicles, all on the terms set forth herein;
NOW, THEREFORE, in consideration of the mutual covenants and agreements set
forth in this Agreement, and for other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties hereto
agree as follows:
ARTICLE I
---------
DEFINITIONS
1.01 Definitions. (a) As used in this Agreement, the following defined
-----------
terms shall have the meanings indicated below:
"Acquired Assets" has the meaning ascribed to it in Section 2.01(a).
---------------
"Actions or Proceedings" means any action, suit, adverse claim proceeding,
----------------------
mediation, arbitration or Governmental or Regulatory Authority investigation or
audit.
"Affiliate" means any Person that directly, or indirectly through one of
---------
more intermediaries, controls or is controlled by or is under common control
with the Person specified. For purposes of this definition, control of a Person
means the power, directly or indirectly, to direct or cause the direction of the
management and policies of such Person whether by contract or otherwise and, in
any event and without limitation of the previous sentence, any Person owning ten
percent (10%) or more of the voting securities of a second Person shall be
deemed to control that second Person.
"Agreement" means this Asset Purchase Agreement, the Assignment Agreement
---------
and the Disclosure Schedule hereto, as the same may be amended, modified,
supplemented or restated from time to time in accordance with the terms hereof.
"Assets and Properties" of any Person at any time of determination means,
---------------------
collectively, all assets, properties and rights of every kind, nature, character
and description (whether real, personal or mixed, whether tangible or
intangible, whether absolute, accrued, contingent, fixed or otherwise and
wherever situated), including the goodwill related thereto, operated, owned or
leased by such
<PAGE>
Person, at such time, including without limitation cash, cash equivalents,
investments, accounts and notes receivable, chattel paper, documents,
instruments, general intangibles, real estate, equipment, inventory, goods and
Intellectual Property.
"Asset Purchase Price" means US$30,300.00.
--------------------
"Assignment Agreement" means the General Assignment and Bill of Sale to be
--------------------
executed and delivered on the Closing Date by Purchaser and Seller,
substantially in the form of Exhibit A, as the same may be amended, supplemented
or otherwise modified from time to time in accordance with the terms hereof and
thereof.
"Assumption Agreement" means the Assumption Agreement to be executed and
--------------------
delivered on the Closing Date by Purchaser and Seller, substantially in the form
of Exhibit B, as the same may be amended, supplemented or otherwise modified
from time to time in accordance with the terms hereof and thereof.
"Closing" has the meaning ascribed to it in Section 3.01.
-------
"Closing Date" means the date on which the Closing actually occurs, which
------------
shall be either (a) as soon as practicable after satisfaction of the conditions
to closing set forth in Article Seven or (b) such other date as Seller and
Purchaser may mutually agree, but in no event later than August 3, 1999.
"Confidentiality Agreement" has the meaning ascribed to it in Section 8.02.
-------------------------
"Contract Rights Release Agreement" means that Contract Rights Release
---------------------------------
Agreement, dated as of July 30, 1999, between Seller and Purchaser.
"Disclosure Schedule" means the schedules dated as of the date hereof,
-------------------
containing all lists, descriptions, exceptions and other information and
materials as are required to be included therein pursuant to this Agreement.
"Excluded Assets" has the meaning ascribed to it in Section 2.01(b).
---------------
"Governmental or Regulatory Authority" means any court, tribunal,
------------------------------------
arbitrator, authority, agency, commission, official, commonwealth or other
instrumentality of the United States, any foreign country or any domestic or
foreign state, county, city or other political subdivision.
"Laws" means all laws, statutes, rules, regulations, ordinances and other
----
pronouncements having the effect of law of the United States, any foreign
country or any domestic or foreign state, commonwealth, county, city or other
political subdivision or of any Governmental or Regulatory Authority.
"Leased Vehicle Contracts" shall have the meaning ascribed to it in Section
------------------------
2.01(a)(iv).
2
<PAGE>
"Liabilities" means all Indebtedness, obligations and other liabilities of
-----------
a Person (whether absolute, accrued, contingent, known or unknown fixed or
otherwise, or whether due or to become due).
"Licenses" means all licenses, permits, certificates of authority,
--------
authorizations, approvals, registrations, franchises and similar consents
granted or issued by any Governmental or Regulatory Authority.
"Liens" means any mortgage, pledge, assessment, security interest, lease,
-----
lien, adverse claim, levy, charge or other encumbrance of any kind, or any
conditional sale contract, title retention contract or other contract to give
any of the foregoing.
"Operative Agreements" means, collectively, the Assignment Agreement, the
--------------------
Assumption Agreement and all other documents or instruments executed pursuant to
this Agreement.
"Order" means any writ, judgment, decree, injunction or similar order of
-----
any Governmental or Regulatory Authority (in each such case whether preliminary
or final).
"Owned Vehicles" shall have the meaning ascribed to it in Section
--------------
2.01(a)(ii).
"Payoff Amount" means the amounts necessary to be paid to each of the
-------------
lessors under the Leased Vehicle Contracts in order to satisfy in full all
amounts owed to the Vehicle Lessors, which amounts are set forth in Section
2.01(a)(iv) of the Disclosure Schedule.
"Permitted Liens" has the meaning ascribed to it in Section 4.05.
---------------
"Person" means any natural person, corporation, general partnership,
------
limited partnership, limited liability company, limited liability partnership,
proprietorship, other business organization, trust, union, association or
Governmental or Regulatory Authority.
"Purchase Price" has the meaning ascribed to it in Section 3.03(a).
--------------
"Purchaser" has the meaning ascribed to it in the introductory paragraph of
---------
this Agreement.
"Representatives" has the meaning ascribed to it in Section 8.02.
---------------
"Seller" has the meaning ascribed to it in the introductory paragraph of
------
this Agreement.
"Seller Parties" has the meaning ascribed to it in Article IV.
--------------
"Vehicle Lessors" has the meaning ascribed to it in Section 3.04(b).
---------------
(b) Unless the context of this Agreement otherwise requires: (i) words of
any gender include each other gender; (ii) words using the singular or plural
number also include the plural or singular number, respectively; (iii) the terms
"hereof," "herein," "hereby" and derivative or similar words refer to this
entire Agreement; (iv) the terms "Article" or "Section" refer to the specified
3
<PAGE>
Article or Section of this Agreement; and (v) the words "include," "includes"
and "including" are deemed to be followed by the phrase "without limitation."
References herein to the terms "Agreement" and "Operative Agreements" shall mean
this Agreement and the Operative Agreements as each may be amended, supplemented
or modified from time to time.
ARTICLE II
----------
SALE, TRANSFER AND CONVEYANCE OF
CUSTOMER INFORMATION, EQUIPMENT AND VEHICLES
2.01 Assets. (a) Acquired Assets. Subject to and upon the terms and
------ ---------------
conditions set forth in this Agreement, at the Closing, Seller will sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser will purchase
or acquire from Seller, on an "as-is, where-is" basis except as provided in
Article IV, all right, title and interest of Seller in, to and under the
following assets of Seller, as the same shall exist on the Closing Date
(collectively, the "Acquired Assets"), and no others:
---------------
(i) Customer List and Records. All customer lists regarding
-------------------------
customers (the "Customer Information") of Seller related solely to soft
drink products bearing the "Seven- Up," "Schweppes," "Sunkist" and
"Welch's" brand names.
(ii) Owned Vehicles. Those vehicles identified on Section
-------------- -------
2.01(a)(ii) of the Disclosure Schedule (the "Owned Vehicles");
--------------------------------------- --------------
(iii) Equipment. The equipment set forth on Section 2.01(a)(iii)
--------- --------------------
of the Disclosure Schedule (the "Equipment"); and
--------------------------- ---------
(iv) Leased Vehicle Contracts. To the extent their transfer is
------------------------
permitted under the terms thereof and under applicable Law, the leases of
the vehicles described in Section 2.01(a)(iv) of the Disclosure Schedule as
----------------------------------------------
to which Seller is the lessee or sublessee, together with any options to
purchase the underlying vehicles (the "Leased Vehicle Contracts").
------------------------
(b) Excluded Assets. Notwithstanding anything in this Agreement to the
---------------
contrary, all Assets and Properties of Seller other than the Acquired Assets
identified in Section 2.01(a) (the "Excluded Assets") shall be excluded from and
---------------
shall not constitute Acquired Assets.
2.02 Assumption of Liabilities. In connection with the sale, transfer,
-------------------------
conveyance and delivery of the Acquired Assets pursuant to this Agreement on the
terms and subject to the conditions set forth in this Agreement, at the Closing,
Purchaser will assume and agree to pay, perform and discharge when due all
obligations of Seller under the Leased Vehicle Contracts arising or to be
performed on or after the Closing Date and excluding any such obligations
arising or to be performed prior to the Closing Date (the "Assumed
-------
Liabilities"). It is understood that Seller shall be responsible for all
- -----------
obligations in respect of the Acquired Assets prior to the Closing Date and that
Purchaser shall be responsible for all obligations in respect of the Acquired
Assets on and after the Closing Date.
4
<PAGE>
ARTICLE III
-----------
THE CLOSING AND PURCHASE PRICE
3.01 Date and Place. Subject to the terms and conditions set forth in this
--------------
Agreement, the closing for the transactions contemplated by this Agreement (the
"Closing") shall be held at the offices of Morgan, Lewis & Bockius LLP, 101 Park
-------
Avenue, New York, New York, or at such other place as Purchaser and Seller
mutually agree, at 2:00 p.m. local time, on the Closing Date.
3.02 Transfer, Assumption and Purchase. Subject to the terms and
---------------------------------
conditions hereof:
(a) At the Closing, Seller will convey, transfer, assign and deliver to
Purchaser all right, title and interest of Seller in, to and under the Acquired
Assets by executing and delivering to Purchaser an Assignment Agreement; and
(b) At the Closing, Purchaser will assume the Assumed Liabilities by
executing and delivering to Seller an Assumption Agreement.
3.03 Purchase Price; Allocation. (a) Purchase Price. The purchase price
-------------------------- --------------
for the sale and transfer of the Acquired Assets is the sum of (i) the Asset
Purchase Price plus (ii) the Payoff Amount (collectively, the "Purchase Price"),
payable in accordance with Section 3.04.
(b) Allocation of Purchase Price. The parties hereto acknowledge and
----------------------------
agree that the purchase and sale of the Acquired Assets is an "applicable asset
acquisition" within the meaning of Section 1060(c) of the Code. The aggregate
purchase price for the Acquired Assets (including for this purpose the Assumed
Liabilities) shall be allocated among the Acquired Assets as set forth in
Section 3.03(b) of the Disclosure Schedule and the parties agree to be bound by,
- ------------------------------------------
and shall file Tax Returns consistent with, such allocations.
3.04 Payment of Purchase Price for the Acquired Assets. Purchaser shall,
-------------------------------------------------
subject to the terms and conditions of this Agreement, (a) as payment for the
Customer Information, the Equipment and the Owned Vehicles, pay to Seller at the
Closing the Asset Purchase Price by wire transfer of immediately available funds
to the account of Seller, which account will be designated by Seller prior to
the Closing; and (b) as payment for the Leased Vehicle Contracts, pay to the
lessors under the Leased Vehicle Contracts (the "Vehicle Lessors") at the
---------------
Closing the Payoff Amount by wire transfer of immediately available funds to the
accounts of the Vehicle Lessors, which accounts will be designated by the
Vehicle Lessors prior to the Closing.
3.05 Deliveries by Seller at Closing. Seller shall, subject to the terms
-------------------------------
and conditions of this Agreement, deliver to Purchaser at Closing evidence of or
duly executed documents in proper form to effectuate the cancellation of all
Liens (other than Permitted Liens) encumbering the Acquired Assets.
5
<PAGE>
ARTICLE IV
----------
REPRESENTATIONS AND WARRANTIES OF SELLER
Purchaser hereby specifically acknowledges and agrees that Purchaser is
purchasing the Acquired Assets on an "as-is, where-is" basis, without any
representations or warranties of any nature whatsoever, whether express or
implied, at law or in equity by Seller, or any of Seller's officers, directors,
employees, shareholders, attorneys, agents or representatives (collectively, the
"Seller Parties"), except as expressly set forth below. In no event shall Seller
--------------
or the Seller Parties have, incur or become subject to, any liability with
respect to the Acquired Assets after the Closing Date, and Purchaser hereby
agrees not to assert any claims with respect thereto. Purchaser hereby
acknowledges that it has conducted its own investigation and due diligence with
respect to the Acquired Assets and has relied exclusively thereon as concerns
its decision to enter into this Agreement and the Operative Agreements to which
it is a party. SELLER HAS NOT MADE AND DOES NOT MAKE ANY WARRANTY OR
REPRESENTATION WHATSOEVER, EITHER EXPRESS OR IMPLIED, AS TO THE MERCHANTABILITY,
FITNESS, CONDITION, DESIGN OR OPERATION OF THE ACQUIRED ASSETS, THEIR FITNESS
FOR ANY PARTICULAR PURPOSE, THE QUALITY OR CAPACITY OF THE MATERIALS OR
WORKMANSHIP IN THE ACQUIRED ASSETS, AND ANY REPRESENTATIONS OR WARRANTIES OTHER
THAN THOSE EXPRESSLY SET FORTH IN THIS ARTICLE IV ARE HEREBY EXPRESSLY
DISCLAIMED. The provisions of this paragraph shall survive the closing of the
transactions contemplated by this Agreement and the execution and delivery of
the Operative Agreements.
Notwithstanding the foregoing, Seller hereby represents and warrants to
Purchaser as follows:
4.01 Organization. Seller is a corporation duly organized and validly
------------
existing under the Laws of the Commonwealth of Puerto Rico.
4.02 Authority. Seller has all necessary corporate power and authority to
---------
execute and deliver this Agreement and the Operative Agreements to which it is a
party, to perform its obligations hereunder and thereunder and to consummate the
transactions contemplated hereby and thereby. The execution and delivery by
Seller of this Agreement and the Operative Agreements to which it is a party,
and the performance by Seller of its obligations hereunder and thereunder, have
been duly and validly authorized by all necessary board of directors approval
and other corporate action of Seller. This Agreement has been duly and validly
executed and delivered by Seller and constitutes, and upon the execution and
delivery by Seller of the Operative Agreements to which it is a party, such
Operative Agreements will constitute, legal, valid and binding obligations of
Seller enforceable against Seller in accordance with their terms.
4.03 No Conflicts. The execution and delivery by Seller of this Agreement
------------
do not, and the execution and delivery by Seller of the Operative Agreements to
which it is a party, the performance by Seller of its obligations under this
Agreement and such Operative Agreements and the consummation of the transactions
contemplated hereby and thereby will not:
6
<PAGE>
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificates of incorporation or by-laws (or
other comparable corporate charter documents) of Seller; or
(b) materially conflict with or result in a material violation or
material breach of any term or provision of any Law or Order applicable to
Seller or its Assets and Properties.
4.04 Governmental Approvals and Filings. No consent, approval or action
----------------------------------
of, filing with or notice to any Governmental or Regulatory Authority on the
part of Seller is required in connection with the execution, delivery and
performance of this Agreement or any of the Operative Agreements to which it is
a party or the consummation of the transactions contemplated hereby or thereby.
4.05 Liens. Seller owns and has good title to the Acquired Assets, and, in
-----
each case as of the Closing, Seller will own the Acquired Assets free and clear
of all Liens, except as set forth in Section 4.05 of the Disclosure Schedule
---------------------------------------
(collectively, "Permitted Liens").
---------------
4.06 Brokers. With the exception of Glover Capital, Inc. (whose fee will
-------
be paid by Seller), no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of Seller.
4.07 Legal Proceedings. (a) Except as disclosed in Section 4.07(a) of the
----------------- ----------------------
Disclosure Schedule, there are no Actions or Proceedings currently on-going,
- -------------------
pending or, to the knowledge of Seller, threatened against, relating to or
affecting Seller or any of its Assets and Properties which could reasonably be
expected to result in the issuance of an Order restraining, enjoining or
otherwise prohibiting or making illegal the consummation of any of the
transactions contemplated by this Agreement or any of the Operative Agreements
or otherwise result in a material diminution of the benefits contemplated by
this Agreement or any of the Operative Agreements to Purchaser.
(b) Except as disclosed in Section 4.07(b) of the Disclosure Schedule,
------------------------------------------
there are no facts or circumstances to the knowledge of Seller that could
reasonably be expected to give rise to any Action or Proceeding that would be
required to be disclosed pursuant to Section 4.07(a).
4.08 Seller's Knowledge. If the phrase "Seller's knowledge" or "knowledge
------------------
of Seller" is used in connection with any representation and warranty made by
Seller hereunder, the representation and warranty so qualified shall be deemed
to be made by Seller solely on the basis of the actual knowledge, after due
inquiry, of the following members of Seller's senior management: Mr. Victor
Collazo and Mr. Orlando Gonzalez. It is expressly agreed and acknowledged by
Purchaser that Purchaser shall have no claim or remedy against Seller for any
breach or untruth of any representation or warranty that is qualified by the
phrase "Seller's knowledge" or the phrase "knowledge of Seller," except upon a
showing by Purchaser that such breach or untruth was known, after due inquiry,
to any of the following members of Seller's senior management: Mr. Victor
Collazo and Mr. Orlando Gonzalez.
7
<PAGE>
The representations and warranties set forth in Section 4.03, Section 4.04,
Section 4.06 and Section 4.07 hereof shall expire on the one year anniversary of
the Closing Date. All other representations and warranties set forth in this
Article IV shall survive indefinitely.
ARTICLE V
---------
REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser hereby represents and warrants to Seller as follows:
5.01 Organization. Purchaser is a corporation duly organized, validly
------------
existing and in good standing under the Laws of the State of Delaware. Purchaser
has all necessary corporate power and authority to execute and deliver this
Agreement and Operative Agreements to which it is a party, to perform its
obligations hereunder and thereunder and to consummate the transactions
contemplated hereby and thereby. Purchaser is duly qualified, licensed or
admitted to do business and is in good standing in all jurisdictions in which
the ownership, use or leasing of its Assets and Properties, or the conduct or
nature of its business, makes such qualification, licensing or admission
necessary and in which the failure to be so qualified, licensed or admitted and
in good standing could reasonably be expected to have an adverse effect on the
validity or enforceability of this Agreement or any of the Operative Agreements
to which it is a party or on the ability of Purchaser to perform its obligations
hereunder and thereunder.
5.02 Authority. The execution and delivery by Purchaser of this Agreement
---------
and the Operative Agreements to which it is a party, and the performance by
Purchaser of its obligations hereunder and thereunder, have been duly and
validly authorized by all necessary board of directors approval and other
corporate action of Purchaser. This Agreement has been duly and validly executed
and delivered by Purchaser and constitutes, and upon the execution and delivery
by Purchaser of the Operative Agreements to which it is a party, such Operative
Agreements will constitute, legal, valid and binding obligations of Purchaser
enforceable against Purchaser in accordance with their terms.
5.03 No Conflicts. The execution and delivery by Purchaser of this
------------
Agreement do not, and the execution and delivery by Purchaser of the Operative
Agreements to which it is a party, the performance by Purchaser of its
obligations under this Agreement and such Operative Agreements and the
consummation of the transactions contemplated hereby and thereby will not:
(a) conflict with or result in a violation or breach of any of the terms,
conditions or provisions of the certificate of incorporation or by-laws (or
other comparable corporate charter documents) of Purchaser;
(b) conflict with or result in a violation or breach of any term or
provision of any Law or Order applicable to Purchaser or any of its Assets and
Properties; or
(c) (i) conflict with or result in a violation or breach of, (ii)
constitute (with or without notice or lapse of time or both) a default under or
(iii) require Purchaser to obtain any consent, approval or action of, make any
filing with, or give any notice to any Person as a result or under the
8
<PAGE>
terms of any contract or License to which Purchaser is a party or by which any
of its Assets and Properties is bound.
5.04 Governmental Approvals and Filings. No consent, approval or action
----------------------------------
of, filing with or notice to any Governmental or Regulatory Authority on the
part of Purchaser is required in connection with the execution, delivery and
performance of this Agreement or the Operative Agreements to which it is a party
or the consummation of the transactions contemplated hereby or thereby.
5.05 Legal Proceedings. (a) Except as disclosed in Section 5.05(a) of the
----------------- ----------------------
Disclosure Schedule, there are no Actions or Proceedings currently on-going,
- -------------------
pending or, to the knowledge of Purchaser, threatened against, relating to or
affecting Purchaser or any of its Assets and Properties (including, without
limitation, any antitrust claims) which could reasonably be expected to result
in the issuance of an Order restraining, enjoining or otherwise prohibiting or
making illegal the consummation of any of the transactions contemplated by this
Agreement or any of the Operative Agreements or otherwise result in a diminution
of the benefits contemplated by this Agreement or any of the Operative
Agreements to Seller.
(b) Except as disclosed in Section 5.05(b) of the Disclosure Schedule,
------------------------------------------
there are no facts or circumstances known to Purchaser that could reasonably be
expected to give rise to any Action or Proceeding that would be required to be
disclosed pursuant to Section 5.05(a).
5.06 Brokers. All negotiations relative to this Agreement and the
-------
transactions contemplated hereby have been carried out by Purchaser with Seller
through Seller's broker, Glover Capital, Inc., without the intervention of any
Person on behalf of Purchaser in such manner as to give rise to any valid claim
by any Person against Seller for a finder's fee, brokerage commission or similar
payment.
5.07 Financial Ability. Purchaser has the financial ability to consummate
-----------------
the transactions contemplated by this Agreement.
The representations and warranties set forth in Section 5.03, Section 5.04,
Section 5.05 and Section 5.07 hereof shall expire on the one-year anniversary of
the Closing Date. All other representations and warranties set forth in this
Article V shall survive indefinitely.
ARTICLE VI
----------
EMPLOYEE MATTERS
6.01 Employees of Seller. Seller shall remain responsible for payment of
-------------------
severance, termination and change in control payments and other similar
compensation or benefits with respect to its employees required by Law or
contract, if any, which are or may become payable in connection with the
consummation of the transactions contemplated by this Agreement and the
Operative Agreements, or otherwise.
9
<PAGE>
ARTICLE VII
-----------
CONDITIONS TO CLOSING
7.01 Conditions to Obligations of Seller. The obligations of Seller
-----------------------------------
hereunder are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in part
by Seller in its sole discretion):
(a) Deliveries at Closing. At the Closing, Seller shall have received
---------------------
from Purchaser the Asset Purchase Price in immediately available funds as
provided for in Section 3.04.
(b) Payment of Payoff Amount. At the Closing, the Vehicle Lessors shall
------------------------
have received from Purchaser the Payoff Amount in immediately available funds as
provided for in Section 3.04.
(c) Assumption Agreement. At the Closing, Purchaser shall have executed
--------------------
and delivered to Seller the Assumption Agreement and any other of the Operative
agreements to which it is a party.
(d) Vehicle Lessor. At the Closing, Seller shall have received from each
--------------
of the Vehicle Lessors a release, in form and substance satisfactory to Seller,
of all of the obligations of Seller under the Leased Vehicle Contracts.
(e) Contract Rights Release Agreement. On or prior to the Closing Date,
---------------------------------
the Contract Rights Release Agreement shall have been executed and delivered and
the transaction contemplated thereby shall have been consummated.
(f) Representations and Warranties. Each of the representations and
------------------------------
warranties made by Purchaser in this Agreement shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty were made on and as of the Closing Date.
(g) Orders and Laws. There shall not be in effect on the Closing Date any
---------------
Order or Law restraining, enjoining or otherwise prohibiting or making illegal
the consummation of any of the transactions contemplated by this Agreement or
any of the Operative Agreements.
7.02 Conditions to Obligations of Purchaser. The obligations of Purchaser
--------------------------------------
hereunder are subject to the fulfillment, at or before the Closing, of each of
the following conditions (all or any of which may be waived in whole or in part
by Purchaser in its sole discretion):
(a) Assignment Agreement. At the Closing, Seller shall have executed and
--------------------
delivered to Purchaser the Assignment Agreement, and any other of the Operative
Agreements to which it is a party.
(b) Owned Vehicle Titles. At the Closing, Seller shall deliver a duly
--------------------
endorsed and notarized vehicle license and a duly endorsed and notarized
certificate of title for each of the Owned Vehicles.
10
<PAGE>
(c) Representations and Warranties. Each of the representations and
------------------------------
warranties made by Seller in this Agreement (other than those made as of a
specified date earlier than the Closing Date) shall be true and correct in all
material respects on and as of the Closing Date as though such representation or
warranty were made on and as of the Closing Date, and any representation or
warranty made as of a specified date earlier than the Closing Date shall have
been true and correct in all material respects on and as of such earlier date.
(d) Lien Releases. Seller shall deliver to Purchaser at Closing evidence
-------------
or duly executed documents in proper form to effectuate the cancellation of all
Liens (other than Permitted Liens) encumbering the Acquired Assets.
ARTICLE VIII
------------
MISCELLANEOUS
8.01 Notices. All notices, requests and other communications hereunder
-------
must be in writing and will be deemed to have been duly given only if delivered
personally or by facsimile transmission or mailed (first class postage prepaid)
to the parties at the following addresses or facsimile numbers:
If to Purchaser, to:
Pepsi-Cola Puerto Rico Bottling Company
3880 Dain Rauscher Plaza
60 South Sixth Street
Minneapolis, MN 55402
Facsimile No. 612-661-3825
with a copy to:
Briggs and Morgan
2400 IDS Center
80 South Eighth Street
Minneapolis, MN 55402
Facsimile No. 612-334-8650
Attn: Brian D. Wenger, Esq.
If to Seller, to:
Seven-Up/RC Bottling Company of Puerto Rico, Inc.
Can, 177 KM 8.3, Los Filtros
Urb Industriol Minnillas
Bayam(cent)n, Puerto Rico 00960
Attn: President
11
<PAGE>
with copies to:
O'Neill & Borges
American International Plaza, 8th Floor
250 Mu*oz Rivera Avenue (Hato Rey)
San Juan, Puerto Rico 00918-1808
Facsimile No.: 787-753-8944
Attn: Juan A. Rivero, Esq.
Morgan, Lewis & Bockius LLP
101 Park Avenue
New York, New York 10178
Facsimile No.: (212) 309-6273
Attn: Margot B. Schonholtz, Esq.
8.02 Confidentiality. For a period of five years from the date of this
---------------
Agreement, each party hereto will hold, and will use its best efforts to cause
its Affiliates and its officers, directors, employees, agents, counsel,
accountants, financial advisors, consultants and other representatives
(collectively, "Representatives") to hold, in strict confidence from any Person
---------------
(other than any such Affiliate or Representative), unless (a) compelled to
disclose by judicial or administrative process (including without limitation in
connection with obtaining any necessary approvals of this Agreement and the
transactions contemplated hereby of Governmental or Regulatory Authorities) or
by other requirements of Law or Governmental or Regulatory Authorities, (b)
disclosed in an Action or Proceeding brought by a party hereto in pursuit of its
rights or in the exercise of its remedies hereunder or (c) Seller grants prior
written consent to make such disclosure, all data and information disclosed by
Seller and its Representatives to Purchaser or its Representatives, as well as
any and all reports, analyses, compilations or studies generated, whether or not
jointly by the parties or by any party alone, relating to the transactions
contemplated hereby, and all data and information relating to the businesses,
operation, contractual relationships and financial affairs of Seller, excluding
data and information (i) that was at the time of receipt in the public domain or
which subsequently became part of the public domain other than by breach by
Purchaser of this Agreement or that certain Confidentiality Agreement between
Seller and Purchaser, dated October 28, 1998 ("Confidentiality Agreement"), (ii)
-------------------------
that was lawfully in the possession of Purchaser prior to the date on which
Purchaser received such information from Seller or its Representatives or (iii)
that was lawfully acquired from a third party that was under no obligation to
keep such data and information confidential. Purchaser will, and will cause
those Persons to whom it has disclosed any documents or information furnished to
Purchaser in connection with this Agreement or the transactions contemplated
hereby to, deliver to Seller all documents and other material and all copies
thereof in its or their possession, custody or control that contain or
incorporate any documents or information furnished to Purchaser in connection
with this Agreement or the transactions contemplated hereby, promptly upon
Seller's request. In the event that Purchaser becomes legally compelled to
disclose any information or material subject to this Section 8.02 (collectively,
"Confidential Information"), Purchaser shall provide Seller with prompt notice
------------------------
thereof, specifying in reasonable detail the nature of such disclosure, so that
Seller may seek a protective order or other appropriate remedy and/or waive
compliance with the provisions of this Section 8.02. Purchaser shall use, at the
request of Seller, all reasonable efforts to cooperate with Seller in seeking
12
<PAGE>
a protective order or other appropriate remedy in respect thereof. In the event
that such protective order or other remedy is not obtained, or Seller waives
compliance with the provisions of this Section 8.02, Purchaser shall furnish
only that part of the Confidential Information which it is advised by written
opinion of counsel is legally required and will exercise its best efforts to
ensure that confidential treatment will be accorded such Confidential
Information. In addition, Purchaser will provide Seller with written notice of
any Confidential Information to be so disclosed as far in advance of its
disclosure as is practicable.
8.03 Entire Agreement. This Agreement and the Operative Agreements
----------------
supersede all prior discussions and agreements, including, but not limited to
the Confidentiality Agreement, between the parties with respect to the subject
matter hereof and thereof. This Agreement and the Operative Agreements contain
the sole and entire agreement between the parties hereto with respect to the
subject matter hereof and thereof.
8.04 Expenses. All costs and expenses, including, without limitation, fees
--------
and disbursements of counsel, financial advisors and accountants, incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such costs and expenses, whether or not the Closing
shall have occurred.
8.05 Public Announcements. Any announcement or press releases by either
--------------------
party relating to this Agreement and the Operative Agreements and the
transactions contemplated hereby and thereby shall be approved in advance by the
other party.
8.06 Waiver. Any term or condition of this Agreement may be waived at any
------
time by the party that is entitled to the benefit thereof, but no such waiver
shall be effective unless set forth in a written instrument duly executed by or
on behalf of the party waiving such term or condition. No waiver by any party of
any term or condition of this Agreement, in any one or more instances, shall be
deemed to be or construed as a waiver of the same or any other term or condition
of this Agreement on any future occasion. All remedies, either under this
Agreement or by Law or otherwise afforded, will be cumulative and not
alternative.
8.07 Amendment. This Agreement may be amended, supplemented or modified
---------
only by a written instrument duly executed by or on behalf of each party hereto.
8.08 No Third Party Beneficiary. The terms and provisions of this
--------------------------
Agreement are intended solely for the benefit of each party hereto and their
respective successors or permitted assigns, and it is not the intention of the
parties to confer third-party beneficiary rights upon any Person.
8.09 No Assignment; Binding Effect. Neither this Agreement nor any right,
-----------------------------
interest or obligation hereunder may be assigned by any party hereto without the
prior written consent of the other parties hereto and any attempt to do so will
be void. This Agreement is binding upon, inures to the benefit of and is
enforceable by the parties hereto and their respective successors and assigns.
8.10 Disclosure. Neither Seller nor Purchaser shall be deemed to have
----------
made, to any other party hereto or to any Operative Agreement, any
representation or warranty with respect to the
13
<PAGE>
transactions contemplated hereby other than such representations and warranties
as are expressly made by it in this Agreement or in any Operative Agreement to
which it is a party.
8.11 Headings. The headings used in this Agreement have been inserted for
--------
convenience of reference only and do not define or limit the provisions hereof.
8.12 Consent to Jurisdiction and Service of Process. Purchaser hereby
----------------------------------------------
irrevocably appoints Brian Wenger, Esq. at his offices at Briggs and Morgan,
2400 IDS Center, 80 South Eighth Street, Minneapolis, MN 55402 and Seller hereby
irrevocably appoints Juan A. Rivero, Esq., at his office at O'Neill & Borges,
American International Plaza, 8th Floor, 250 Munoz Rivera Avenue (Hato Rey), San
Juan, Puerto Rico, its lawful agent and attorney to accept and acknowledge
service of any and all process against it in any Action or Proceeding arising in
connection with this Agreement or any of the Operative Agreements and upon whom
such process may be served, with the same effect as if such party were a
resident of the State of New York and had been lawfully served with such process
in such jurisdiction, and waives all claims of error by reason of such service,
provided that in the case of any service upon such agent and attorney, the party
effecting such service shall also deliver a copy thereof to the other parties at
the addresses and in the manner specified in Section 8.01. The parties hereto
will enter into such agreements with such agents as may be necessary to
constitute and continue the appointment of such agents hereunder. In the event
that such agent and attorney resigns or otherwise becomes incapable of acting as
such, such party will appoint a successor agent and attorney in New York, New
York, reasonably satisfactory to the other party, with like powers. Each party
hereby irrevocably submits to the nonexclusive jurisdiction of the United States
District Court for the Southern District of New York or any court of the State
of New York located in the City of New York in any such Action or Proceeding,
and agrees that any such Action or Proceeding shall be brought only in such
court (and waives any objection based on forum non conveniens or any other
--------------------
objection to venue therein); provided, however, that such consent to
-----------------
jurisdiction is solely for the purpose referred to in this Section 8.12 and
shall not be deemed to be a general submission to the jurisdiction of said
courts or in the State of New York other than for such purpose.
8.13 Invalid Provisions. If any provision of this Agreement is held to be
------------------
illegal, invalid or unenforceable under any present or future Law, and if the
rights or obligations of any party hereto under this Agreement will not be
materially and adversely affected thereby, (a) such provision will be fully
severable, (b) this Agreement will be construed and enforced as if such illegal,
invalid or unenforceable provision had never comprised a part hereof, (c) the
remaining provisions of this Agreement will remain in full force and effect and
will not be affected by the illegal, invalid or unenforceable provision or by
its severance herefrom and (d) in lieu of such illegal, invalid or unenforceable
provision, there will be added automatically as a part of this Agreement a
legal, valid and enforceable provision as similar in terms to such illegal,
invalid or unenforceable provision as may be possible.
8.14 Governing Law; Waiver of Jury Trial. This Agreement shall be governed
-----------------------------------
by and construed in accordance with the domestic laws of the State of New York,
without giving effect to any choice of law or conflict of law provision or rule
(whether of the State of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the State of New
York. Each party hereby irrevocably waives to the extent
14
<PAGE>
permitted by Law its right to a jury trial in any Action or Proceeding arising
as a result of or relating to the transactions contemplated by this Agreement or
the Operative Agreements.
8.15 Time of the Essence. Time is of the essence for all deadlines set
-------------------
forth in this Agreement.
8.16 Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. Delivery of an executed
counterpart of a signature page of this Agreement by telecopy shall be effective
as delivery of a manually executed counterpart of this Agreement.
[Signature Page to Follow]
15
<PAGE>
IN WITNESS WHEREOF, this Agreement has been duly executed and delivered by
the duly authorized officer of each party as of the date first above written.
Affidavit Number 1132 SEVEN-UP/RC BOTTLING COMPANY
---- OF PUERTO RICO, INC.
Subscribed and acknowledged to before me by
Victor Manuel Callazo, of legal age, married,
- ---------------------
business executive and resident of Guaynabo, By: /s/ Victor M. Callazo
-------- ----------------------------
Puerto Rico, in his capacity as President, Name: Victor M. Callazo
--------- ----------------------
whom I have identified by means of their Title: President
---------------------
respective Puerto Rico driver's license in
accordance with Article 17(c) of the Notarial
Act, this 3rd day of August , 1999, in San
--- ------
Juan, Puerto Rico.
/s/ Juan C. Salichs Pou
- -----------------------
Notary Public
Affidavit Number 1133 PEPSI-COLA PUERTO RICO BOTTLING
---- COMPANY
Subscribed and acknowledged to before me by
A. David Velez, of legal age, married, By:/s/ A. David Velez
- -------------- -----------------------------
business executive and resident of San Juan, Name: A. David Velez
-------- -----------------------
Puerto Rico, in his capacity as President, Title: President
--------- ----------------------
whom I have identified by means of their
respective Puerto Rico driver's license in
accordance with Article 17(c) of the Notarial
Act, this 3rd day of August , 1999, in San
--- ------
Juan, Puerto Rico.
/s/ Juan C. Salichs Pou
- -----------------------
Notary Public
16
<PAGE>
EXHIBIT A
GENERAL ASSIGNMENT AND BILL OF SALE
-----------------------------------
THIS ASSIGNMENT AND BILL OF SALE is entered into this __ day of August,
1999 by and among Seven-UP/RC Bottling Company of Puerto Rico, Inc., a Puerto
Rico corporation (hereinafter referred to as "Seller"), and Pepsi-Cola Puerto
------
Rico Bottling Company, a Delaware corporation, ("hereinafter referred to as
"Purchaser").
---------
WHEREAS, Purchaser and Seller have entered into an Asset Purchase
Agreement, dated as of August 3, 1999 (the "Asset Purchase Agreement";
------------------------
capitalized terms not defined herein shall have the meanings ascribed to them in
the Asset Purchase Agreement), pursuant to which Seller has agreed to sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser has agreed to
purchase or acquire from Seller, all of Seller's right, title and interest in
and to the Customer Information, Equipment, and Vehicles;
WHEREAS, Seller desires to sell, transfer, convey, assign and deliver to
Purchaser the assets described below pursuant to Section 3.02 of the Asset
Purchase Agreement and Purchaser desires to accept the sale, transfer,
conveyance, assignment and delivery thereof;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, Seller hereby irrevocably sells, transfers,
conveys, assigns and delivers to Purchaser, to the extent their transfer is
permitted under the terms thereof and under applicable Law and on an "as-is,
where- is basis," all of Seller's right, title and interest in, to and under the
following assets of Seller, as the same shall exist on the date hereof, and no
others: (i) the Customer Information, (ii) the Leased Vehicle Contracts, (iii)
the Owned Vehicles and (iv) the Equipment (collectively, the "Assigned Assets"),
---------------
TO HAVE AND TO HOLD the same unto Purchaser, its successors and assigns,
forever.
Purchaser hereby accepts the sale, transfer, conveyance, assignment and
delivery of the Assigned Assets, on an "as-is, where-is basis" and on the terms
set forth in the Asset Purchase Agreement.
Seller represents, warrants, covenants and agrees that it: (a) has good
title to the Assigned Assets, free and clear of all Liens other than Permitted
Liens; and (b) will warrant and defend the sale of the Assigned Assets against
all and every Person or Persons whomsoever claiming against any or all of the
same, subject to the terms and provisions of the Asset Purchase Agreement. The
representations and covenants contained in this paragraph shall expire on the
one year anniversary of the Closing Date.
At any time or from time to time after the date hereof, at Purchaser's
request and without further consideration, Seller shall execute and deliver to
Purchaser such other instruments of sale, transfer, conveyance, assignment and
confirmation, provide such materials and information and take such other actions
as Purchaser may reasonably deem necessary or desirable in order more
17
<PAGE>
effectively to transfer, convey and assign to Purchaser, and to confirm
Purchaser's title to, all of the Assigned Assets, and, to the full extent
permitted by Law, to put Purchaser in actual possession and operating control of
the Assigned Assets and to assist Purchaser in exercising all rights with
respect thereto.
Seller hereby constitutes and appoints Purchaser the true and lawful
attorney of Seller, with full power of substitution, in the name of Seller or
Purchaser, but on behalf of and for the benefit of Purchaser: (a) to demand and
receive from time to time any and all of the Assigned Assets and to make
endorsements and give receipts and releases for and in respect of the same and
any part thereof; (b) to institute, prosecute, compromise and settle any and all
Actions or Proceedings that Purchaser may deem proper in order to collect,
assert or enforce any claim, right or title of any kind in or to the Assigned
Assets; (c) to defend or compromise any or all Actions or Proceedings in respect
of any of the Assigned Assets; and (d) to do all such acts and things in
relation to the matters set forth in the preceding clauses (a) through (c) as
Purchaser shall reasonably deem desirable. Seller hereby acknowledges that the
appointment hereby made and the powers hereby granted are coupled with an
interest and are not and shall not be revocable by it in any manner or for any
reason. Purchaser shall indemnify and hold harmless the Seller Parties from any
and all Losses caused by or arising out of any breach of Law by Purchaser in its
exercise of the aforesaid powers.
This General Assignment and Bill of Sale may be executed in any number of
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument. This General Assignment
and Bill of Sale shall become effective upon the execution of a counterpart
hereof by each of the parties hereto and delivery by each of the parties hereto
of executed counterparts hereof to each of the other parties to this General
Assignment and Bill of Sale. Delivery of an executed counterpart of a signature
page of this General Assignment and Bill of Sale by telecopy shall be effective
as delivery of a manually executed counterpart of this General Assignment and
Bill of Sale.
This General Assignment and Bill of Sale shall be governed by and construed
in accordance with the laws of the State of New York applicable to a contract
executed and performed in such State without giving effect to the conflicts of
laws principles thereof, except that if it is necessary in any other
jurisdiction to have the law of such other jurisdiction govern this General
Assignment and Bill of Sale in order for this General Assignment and Bill of
Sale to be effective in any respect, then the laws of such other jurisdiction
shall govern this General Assignment and Bill of Sale to such extent.
[Signature Page to Follow]
18
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused their duly authorized
officers to execute this General Assignment and Bill of Sale on the day and year
first above written.
Affidavit Number __________ SEVEN-UP/RC BOTTLING COMPANY
OF PUERTO RICO, INC.
Subscribed and acknowledged to before me by
_______________, of legal age,
married/single, business executive and By:_____________________________
resident of ______________, Puerto Rico,in Name:
his/her capacity as ______________, whom I Title:
have identified by means of their respective
Puerto Rico driver's license in accordance
with Article 17(c) of the Notarial Act, this
___ day of __________, 1999, in San Juan,
Puerto Rico.
______________________________________
Notary Public
Affidavit Number __________ PEPSI-COLA PUERTO RICO BOTTLING
COMPANY
Subscribed and acknowledged to
before me by ______ of legal age,
married/single, business executive By:_____________________________
and resident of ______________, Name:
Puerto Rico, in his/her capacity as Title:
______________, whom I have
identified by means of their
respective Puerto Rico driver's
license in accordance with Article
17(c) of the Notarial Act, this ___
day of __________, 1999, in San
Juan, Puerto Rico.
______________________________________
Notary Public
19
<PAGE>
EXHIBIT B
ASSUMPTION AGREEMENT
--------------------
THIS ASSUMPTION AGREEMENT is entered into this __ day of August, 1999 by
and between Seven-UP/RC Bottling Company of Puerto Rico, Inc., a Puerto Rico
corporation ("Seller"), and Pepsi-Cola Puerto Rico Bottling Company, a Delaware
------
corporation ("Purchaser").
---------
WHEREAS, Purchaser and Seller have entered into an Asset Purchase
Agreement, dated as of August 3, 1999 (the "Asset Purchase Agreement";
------------------------
capitalized terms not defined herein shall have the meanings ascribed to them in
the Asset Purchase Agreement), pursuant to which Seller has agreed to sell,
transfer, convey, assign and deliver to Purchaser, and Purchaser has agreed to
purchase or acquire from Seller, to the extent their transfer is permitted under
the terms thereof and under applicable Law and on an "as-is, where-is" basis,
all of Seller's right, title and interest in, to and under the (i) Customer
Information, (ii) the Owned Vehicles, (iii) the Leased Vehicle Contracts and
(iv) the Equipment, and Purchaser has agreed, in partial consideration therefor,
to assume certain contractual obligations in connection therewith by executing
an Assumption Agreement of even date herewith;
WHEREAS, pursuant to Section 3.02(b) of the Asset Purchase Agreement,
Purchaser is required to execute and deliver to Seller this Assumption Agreement
whereby Purchaser assumes such obligations;
NOW, THEREFORE, for and in consideration of the mutual covenants contained
herein and other good and valuable consideration the receipt and sufficiency of
which are hereby acknowledged, Purchaser hereby undertakes and agrees from and
after the date hereof, subject to the limitations contained herein, to assume
and to pay, perform and discharge when due the Assumed Liabilities.
Nothing contained herein shall require Purchaser to pay or discharge any
debts or obligations expressly assumed hereby so long as Purchaser shall in good
faith contest or cause to be contested the amount or validity thereof.
Other than as specifically stated above or in the Asset Purchase Agreement,
Purchaser assumes no debt, liability or obligation of Seller by this Assumption
Agreement, and it is expressly understood and agreed that all debts, liabilities
and obligations of Seller not assumed hereby by Purchaser shall remain the sole
obligation of Seller, its successors and assigns.
No Person other than Seller, its successors and assigns shall have any
rights under this Assumption Agreement or the provisions contained herein.
This Assumption Agreement may be executed in any number of counterparts,
each of which will be deemed an original, but all of which together will
constitute one and the same instrument. This Assumption Agreement shall become
effective upon the execution of a counterpart hereof by
20
<PAGE>
each of the parties hereto and delivery by each of the parties hereto of
executed counterparts hereof to each of the other parties to this Assumption
Agreement. Delivery of an executed counterpart of a signature page of this
Assumption Agreement by telecopy shall be effective as delivery of a manually
executed counterpart of this Assumption Agreement.
This Assumption Agreement shall be governed by and construed in accordance
with the laws of the State of New York applicable to a contract executed and
performed in such State without giving effect to the conflicts of laws
principles thereof, except that if it is necessary in any other jurisdiction to
have the law of such other jurisdiction govern this Assumption Agreement in
order for this Assumption Agreement to be effective in any respect, then the
laws of such other jurisdiction shall govern this Assumption Agreement to such
extent.
[Signature Page to Follow]
21
<PAGE>
IN WITNESS WHEREOF, the undersigned have caused their duly authorized
officers to execute this Assumption Agreement on the day and year first above
written.
SEVEN-UP/RC BOTTLING COMPANY
OF PUERTO RICO, INC.
By:__________________
Name:
Title:
PEPSI-COLA PUERTO RICO
BOTTLING COMPANY
By:___________________
Name:
Title:
22
<PAGE>
GENERAL INFORMATION
REGARDING DISCLOSURE SCHEDULE
This page and all of the sections of this Disclosure Schedule, along with
all attachments referred to herein, all of which are hereby incorporated herein
by reference, comprise the Disclosure Schedule referred to in the Asset Purchase
Agreement, dated as of August 3, 1999 (which, together with all Exhibits thereto
and this Disclosure Schedule, may be sometimes hereinafter collectively referred
to as the "Agreement"), by and between Seven-Up/RC Bottling Company of Puerto
---------
Rico, Inc., a Puerto Rico corporation ("Seller"), and Pepsi-Cola Puerto Rico
------
Bottling Company, Inc., a Delaware corporation ("Purchaser"). To the extent that
---------
an item is disclosed or set forth in one section of this Disclosure Schedule or
an attachment thereto and is specifically referenced to in a paragraph or
section number of the Agreement and that same item also may be applicable to (or
properly serve as an amendment to or disclosure regarding) another paragraph or
section of the Agreement (other than items regarding compliance with laws and
litigation), its inclusion anywhere in this Disclosure Schedule or the
attachments thereto shall be deemed to be an automatic cross-reference to, and
inclusion in, this Disclosure Schedule or the attachments thereto as may be
appropriate throughout the Agreement and any and all applicable sections or
paragraphs thereof, whether or not a specific cross-reference is noted. In
addition, any and all attachments, statements or other documents attached to any
section of this Disclosure Schedule are incorporated by reference to the section
of this Disclosure Schedule to which they are either attached or referenced and
to any other section of this Disclosure Schedule which may be appropriate. The
disclosure in this Disclosure Schedule of any matter not specifically required
to be disclosed herein under the terms of one or more sections of the Agreement
shall not in any way be deemed to affect the interpretation of the express terms
of the Agreement or to establish in any manner a level of materiality for
purposes of interpreting the Agreement. Capitalized terms not otherwise defined
herein shall have the meanings ascribed to such terms in the Agreement.
23
<PAGE>
Reference to Sections
of Agreement Subject Matter of Section
- ------------ -------------------------
2.01(a)(ii) Owned Vehicles
Equipment
2.01(a)(iii) Leased Vehicles
2.01(a)(iv) Allocation of Purchase Price
3.03(b) Seller Liens
4.05 Seller Legal Proceedings
4.07(a) Seller Legal Proceedings
4.07(b)
24
<PAGE>
SECTION 2.01(a)(ii)
Owned Vehicles
--------------
I. Trailers
Asset Number\1\ Description VIN Identification
- ------------ ----------- ------------------
88811 45' Fruehauf w/liftgate trailer IH2V03526JH033001
94812 34' Wabash w/liftgate trailer IJJV282STRL224818
94813 34' Wabash w/liftgate trailer IJJV282S9RL2248129
Total Trailers $24,500
Value
__________________
\1\ Asset numbers are the numbers assigned by Seven-Up/RC Bottling Company of
Puerto Rico, Inc.
25
<PAGE>
SECTION 2.01(a)(iii)
Equipment
- ---------
Asset Number/1/ Description
- ------------ -----------
94963 1994 Hyster Forklift
94964 1994 Hyster Forklift
98975 1998 Hyster Forklift
98976 1998 Hyster Forklift
Total Equipment Value $5,800
__________________
\1\ Asset numbers are the numbers assigned by Seven-Up/RC Bottling Company of
Puerto Rico, Inc.
26
<PAGE>
SECTION 2.01(a)(iv)
Leased Vehicles
---------------
Citibank Leased
Ford Trucks
Asset Number Description VIN Number
- ------------ ----------- ----------
97576 Ford J/A 22' box w/liftgate 1FDYW86E7VVA40391
97577 Ford J/A 22' box w/liftgate 1FDYW86E9VVA40389
97578 Ford J/A 22' box w/liftgate 1FDYW86EOVVA40393
97579 Ford J/A 22' box w/liftgate 1FDYW86EXVVA38022
97580 Ford J/A 22' box w/liftgate 1FDYW86E7VVA40388
97581 Ford J/A 22' box w/liftgate 1FDYW86E5VVA40390
97582 Ford J/A 22' box w/liftgate 1FDYW86E9VVA40392
Total Citibank
Lease Truck Value $377,118.85
GE Capital Lease
Asset Number Description VIN Number
- ------------ ----------- ----------
95567 1995 Ford Cargo 8000 1FDYH85E9SVA17119
95568 1995 Ford Cargo 8000 1FDYH85E7SVA17118
95569 1995 Ford Cargo 8000 1FDYH85E3SVA17469
95566 1995 Ford Cargo 8000 1FDYH85E5SVA17120
95570 1995 Ford Cargo 8000 1FDYH81E9SVA18258
95571 1995 Ford Cargo 8000 1FDYH81E1SVA18254
95572 1995 Ford Cargo 8000 1FDYH81E3SVA18255
95573 1995 Ford Cargo 8000 1FDYH81E9SVA18728
95574 1995 Ford Cargo 8000 1FDYH81E7SVA18257
95575 1995 Ford Cargo 8000 1FDYH81E5SVA18256
94234 1994 Ford 1 Ton Pick-Up 1FDLF47F1REA28818
Total GE Capital
Lease Value $91,478.30
27
<PAGE>
SECTION 3.03(b)
Allocation of Purchase Price
----------------------------
Asset Purchase Price: $ 30,300.00
Payoff Amount: 468,597.15
----------
Total: $ 498,897.15
28
<PAGE>
SECTION 4.05
Seller Liens
------------
Chattel Mortgage in favor if BT Commercial Corporation executed September 11,
1990 before Salvador Casellas Toro, Aff. 62, guaranteeing the amount of
$17,825.00.
29
<PAGE>
SECTION 4.07(a)
Seller Legal Proceedings
------------------------
Allegation set forth in the letter dated July 23, 1999 from Ramon L. Walker
Merino, Esq., counsel to B. Fernandez & Hnos., Inc. and Orange Crush of Puerto
Rico, Inc.
30
<PAGE>
SECTION 4.07(b)
Seller Legal Proceedings
------------------------
Allegation set forth in the letter dated July 23, 1999 from Ramon L. Walker
Merino, Esq., counsel to B. Fernandez & Hnos., Inc. and Orange Crush of Puerto
Rico, Inc.
31
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> JUN-30-1999
<CASH> 7,801
<SECURITIES> 0
<RECEIVABLES> 14,928
<ALLOWANCES> 1,577
<INVENTORY> 3,308
<CURRENT-ASSETS> 34,920
<PP&E> 75,747
<DEPRECIATION> 29,634
<TOTAL-ASSETS> 86,932
<CURRENT-LIABILITIES> 15,069
<BONDS> 20,823
0
0
<COMMON> 217
<OTHER-SE> 49,265
<TOTAL-LIABILITY-AND-EQUITY> 89,932
<SALES> 50,075
<TOTAL-REVENUES> 50,075
<CGS> 37,936
<TOTAL-COSTS> 54,655
<OTHER-EXPENSES> 541
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 860
<INCOME-PRETAX> (5,121)
<INCOME-TAX> 69
<INCOME-CONTINUING> (5,190)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (5,190)
<EPS-BASIC> (0.24)
<EPS-DILUTED> (0.24)
</TABLE>
