<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT (DATE OF EARLIEST EVENT REPORTED):
JULY 19, 1999 (JULY 2, 1999)
[SUIZA LOGO]
SUIZA FOODS CORPORATION
(Exact name of registrant as specified in its charter)
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DELAWARE 340-28130 75-2559681
(State or other Jurisdiction of (Commission File Number) (IRS Employer Identification No.)
Incorporation)
</TABLE>
2515 MCKINNEY AVENUE, SUITE 1200
DALLAS, TEXAS 75201
(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code:
(214) 303-3400
<PAGE> 2
ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
(a) On July 2, 1999, Suiza Foods Corporation (the "Registrant")
completed the transactions in which it sold its U.S. plastic packaging
operations to Consolidated Container Company LLC, a newly formed company
("Consolidated Container") controlled by affiliates of Vestar Capital Partners
III, L.P., a private equity firm. The Registrant effected the sale pursuant to a
Contribution and Merger Agreement dated April 29, 1999, by and among the
Registrant and certain of its subsidiaries, Vestar Packaging LLC, a Delaware
limited liability company ("Vestar Packaging") and Reid Plastics Holdings, Inc.,
a Delaware corporation ("Reid Holdings") and its subsidiaries (the "Agreement").
Pursuant to that agreement, the Registrant merged the subsidiaries of Franklin
Plastics, Inc., a Delaware corporation and an indirect, wholly-owned subsidiary
of the Registrant ("Franklin"), with and into Consolidated Container, (2)
transferred the assets and liabilities of Franklin related to the U.S. plastic
packaging business to Consolidated Container, and (3) contributed the equity
interest of the successor to Plastic Containers, Inc., a Delaware corporation
and indirect, wholly-owned subsidiary of the Registrant to Consolidated
Container (the mergers, assignments and contribution of the Registrant's U.S.
plastic packaging operations to Consolidated Container are, collectively, the
"Suiza Contributions").
In exchange for the Suiza Contributions and pursuant to the terms of
the Agreement, the Registrant and certain minority stockholders of Franklin
received a 43% and 6% equity interest, respectively, in Consolidated Container
Holdings LLC, a Delaware limited liability company and the parent of
Consolidated Container ("Holdings"); Vestar Packaging and Reid Holdings,
collectively, hold the remaining 51% of the equity interests in Holdings.
Additionally, the Registrant received a cash payment in the amount of
approximately $372 million in repayment of intercompany debt and redemption of
intercompany preferred stock and accrued but unpaid dividends and interest. The
consideration received by the Registrant for the Suiza Contributions was
determined by arm's-length negotiations between representatives of the
Registrant, Reid Holdings and Vestar Packaging based on a number of factors.
Certain former officers of the Registrant and/or its subsidiaries,
including Franklin and Plastic Containers, are officers and/or managers of
Consolidated Container.
<PAGE> 3
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
(b) Pro Forma Financial Information
On July 2, 1999, the Registrant sold its U.S. plastic packaging
operations to Consolidated Container, in exchange for cash proceeds for the
repayment of intercompany debt and the redemption of intercompany preferred
stock, along with a 43% equity interest in Holdings, which, as of the effective
date included the operations of Reid Plastics, an unaffiliated plastic packaging
business.
The following unaudited pro forma financial information gives effect to
these transactions and the application of the net proceeds received from the
repayment of the intercompany debt and the redemption of intercompany preferred
stock held by the Registrant as if they had occurred on or at the beginning of
the periods presented. The unaudited pro forma balance sheet at March 31, 1999
has been prepared as if the transactions had occurred on March 31, 1999, whereas
the unaudited pro forma statements of operations for the year ended December 31,
1998 and the quarter ended March 31, 1999 give effect to the transactions as if
they had occurred on January 1, 1998. No pro forma adjustment has been reflected
in the unaudited pro forma statements of operations for the decrease in the
Registrants' ownership interest in its U.S. plastic packaging operations because
management believes that the pro forma effect of the Registrant's 43% equity
interest in Holdings will approximate the reported historical operating results
for its U.S. plastic packaging operations.
The pro forma financial information is based on available information
and certain assumptions that management of the Registrant deems appropriate but
which may be revised as additional information becomes available. The pro forma
financial information does not purport to represent what the financial position
or results of operations of the Registrant would actually have been if the
transactions had, in fact, occurred on the dates assumed and is not necessarily
representative of the Registrant's financial position or results of operations
for any future period.
<PAGE> 4
SUIZA FOODS CORPORATION
UNAUDITED PRO FORMA BALANCE SHEET
At March 31, 1999
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CONVERSION
HISTORICAL TO EQUITY NET
SUIZA FOODS METHOD(a) PROCEEDS(b) PRO FORMA
ASSETS (IN THOUSANDS)
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Current assets:
Cash and cash equivalents $ 67,901 $ (2,706) $ - $ 65,195
Temporary Investments 8,111 (8,111) 0
Receivables, net of allowance for doubtful accounts 447,749 (47,661) 400,088
Inventories 229,062 (24,306) 204,756
Prepaid expenses and other current assets 23,988 (768) 23,220
Deferred income taxes 22,565 (2,395) 20,170
---------- ----------
Total current assets 799,376 713,429
Property, plant and equipment 893,845 (222,425) 671,420
Investment in Suiza Packaging 0 374,508 (362,943) 11,565
Deferred income taxes 2,434 2,434
Intangible and other assets 1,385,545 (265,483) 1,120,062
---------- ----------
Total $3,081,200 $2,518,910
========== ==========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Accounts payable and accrued expenses $ 504,296 $ (55,882) $ - $ 448,414
Income taxes payable 9,629 9,629
Current portion of long-term debt 55,292 (1,012) 54,280
---------- ----------
Total current liabilities 569,217 512,323
Long-term debt 923,730 (132,902) (362,943) 427,885
Other long term liabilities 61,313 (22,598) 38,715
Deferred income taxes 34,703 15,190 49,893
Mandatorily redeemable trust issued preferred securities 683,068 683,068
Minority interest in subsidiaries 131,629 (2,143) 129,486
Stockholders' equity:
Common stock 337 337
Additional paid in capital 450,406 450,406
Retained earnings 225,732 225,732
Accumulated other comprehensive income 1,065 1,065
---------- ----------
Total stockholders' equity 677,540 677,540
---------- ----------
Total $3,081,200 $2,518,910
========== ==========
</TABLE>
(a) Pro forma adjustment to deconsolidate the U.S. plastic packaging operations
and report the Registrant's net investment under the equity method of
accounting.
(b) Pro forma adjustments to reflect the pro forma net cash proceeds to the
Registrant of $362.9 million ($372 million as of the transaction date less
the amount of additional accrued interest on the intercompany debt between
March 31, 1999 and the transaction date, which was repaid on July 2, 1999)
from the repayment of intercompany debt and the redemption of intercompany
preferred stock by Consolidated Container and the use of such net proceeds
to repay amounts outstanding under the Registrant's senior credit facility.
<PAGE> 5
SUIZA FOODS CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE YEAR ENDED DECEMBER 31, 1998
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CONVERSION OTHER
HISTORICAL TO EQUITY ADJUSTMENTS
SUIZA FOODS METHOD(a) (b) PRO FORMA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Net sales $ 3,320,940 (326,511) $ 2,994,429
Cost of sales 2,557,908 (241,729) 2,316,179
----------- -----------
Gross profit 763,032 678,250
Operating costs and expenses:
Selling and distribution 376,928 (16,400) 360,528
General and administrative 112,169 (16,795) 95,374
Amortization of intangibles 31,479 (4,921) 26,558
----------- -----------
Total operating costs and expenses 520,576 482,460
=========== ===========
Operating income 242,456 195,790
Other (income) expense:
Interest expense, net 52,082 (26,841) 2,760 28,001
Financing charges on trust issued
preferred securities 30,213 30,213
Equity in earnings of unconsolidated
subsidiary (10,043) (10,043)
Other expense (income) (4,290) 68 (4,222)
----------- -----------
Total other expense 78,005 43,949
=========== ===========
Income from continuing operations
before income taxes 164,451 151,841
Income taxes 59,823 (9,486) 966 51,303
Minority interest in earnings 1,559 (364) 1,195
----------- -----------
Income from continuing operations $ 103,069 $ 99,343
=========== ===========
Income per common share
Basic $ 3.12 $ 3.01
=========== ===========
Diluted $ 2.90 $ 2.81
=========== ===========
</TABLE>
(a) Pro forma adjustment to deconsolidate the U.S. plastic packaging operations
and report the Registrant's equity in the earnings of this unconsolidated
subsidiary under the equity method of accounting.
(b) Pro forma adjustments to interest expense and income tax expense to reflect
the elimination of intercompany interest income received from the U.S.
plastic packaging operations, offset by the reduction in interest expense
attributable to the use of the net proceeds to repay the amounts outstanding
under the Registrant's senior credit facility, as follows:
Elimination of intercompany interest income $ 20,632
Reduction of senior credit facility interest expense
at an assumed effective interest rate of 7% (17,872)
--------
Net effect on interest expense $ 2,760
========
Income taxes at a 35% effective tax rate $ 966
========
<PAGE> 6
SUIZA FOODS CORPORATION
UNAUDITED PRO FORMA STATEMENT OF OPERATIONS
FOR THE QUARTER ENDED MARCH 31, 1999
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CONVERSION OTHER
HISTORICAL TO EQUITY ADJUSTMENTS
SUIZA FOODS METHOD(a) (b) PRO FORMA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
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Net sales $ 1,153,186 $(120,176) $ - $ 1,033,010
Cost of sales 920,627 (88,856) 831,771
----------- --------- -----------
Gross profit 232,559 201,239
Operating costs and expenses:
Selling and distribution 121,855 (5,285) 116,570
General and administrative 39,104 (7,650) 31,454
Amortization of intangibles 9,924 (1,671) 8,253
----------- -----------
Total operating costs and expenses 170,883 156,277
=========== ===========
Operating income 61,676 44,962
Other (income) expense:
Interest expense, net 15,943 (9,363) 486 7,066
Financing charges on trust issued
preferred securities 9,647 9,647
Equity in earnings of unconsolidated
subsidiary (3,642) (3,642)
Other expense (income) (507) 118 (389)
----------- -----------
Total other expense 25,083 12,682
=========== ===========
Income from continuing operations
before income taxes 36,593 32,280
Income taxes 14,012 (3,567) 170 10,615
Minority interest in earnings 1,708 (260) 1,448
----------- -----------
Income from continuing operations $ 20,873 $ 20,217
=========== ===========
Income per common share:
Basic $ 0.62 $ 0.60
=========== ===========
Diluted $ 0.60 $ 0.58
=========== ===========
</TABLE>
(c) Pro forma adjustment to deconsolidate the U.S. plastic packaging operations
and report the Registrant's equity in the earnings of this unconsolidated
subsidiary under the equity method of accounting.
(d) Pro forma adjustments to interest expense and income tax expense to reflect
the elimination of intercompany interest income received from the U.S.
plastic packaging operations, offset by the reduction in interest expense
attributable to the use of the net proceeds to repay the amounts outstanding
under the Registrant's senior credit facility, as follows:
Elimination of intercompany interest income $ 6,448
Reduction of senior credit facility interest expense
at an assumed effective interest rate of 7% (5,962)
--------
Net effect on interest expense $ 486
========
Income taxes at a 35% effective tax rate $ 170
========
<PAGE> 7
(c) Exhibits
2.1 Contribution and Merger Agreement by and among Suiza Foods
Corporation, Franklin Plastics, Inc. and affiliates, Vestar
Packaging LLC, Reid Plastics Holdings, Inc. and affiliates,
Consolidated Container Holdings LLC, Consolidated Container
Company LLC and Reid Plastics Group LLC dated as of April
29, 1999, as amended.
2.2 Amendment No. 1 to Contribution and Merger Agreement dated
June 28, 1999.
99.1 Amended and Restated Limited Liability Company Agreement of
Consolidated Container Holdings, LLC.
<PAGE> 8
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.
Dated: July 19, 1999 SUIZA FOODS CORPORATION
By: /s/ LISA N. TYSON
----------------------------------
Lisa N. Tyson
Vice President
and Assistant General Counsel
<PAGE> 9
INDEX TO EXHIBITS
Exhibit
Number Description
------- ------------
2.1 Contribution and Merger Agreement by and among Suiza Foods
Corporation, Franklin Plastics, Inc. and affiliates, Vestar
Packaging LLC, Reid Plastics Holdings, Inc. and affiliates,
Consolidated Container Holdings LLC, Consolidated Container
Company LLC and Reid Plastics Group LLC dated as of April 29,
1999, as amended.
2.2 Amendment No. 1 to Contribution and Merger Agreement dated June
28, 1999.
99.1 Amended and Restated Limited Liability Company Agreement of
Consolidated Container Holdings LLC.
<PAGE> 1
EXHIBIT 2.1
CONTRIBUTION AND MERGER AGREEMENT
AMONG
SUIZA FOODS CORPORATION,
FRANKLIN PLASTICS, INC.,
THE SUIZA COMPANIES IDENTIFIED HEREIN,
VESTAR PACKAGING LLC,
REID PLASTICS HOLDINGS, INC.,
THE REID COMPANIES IDENTIFIED HEREIN,
REID PLASTICS GROUP LLC,
CONSOLIDATED CONTAINER HOLDINGS LLC
AND
CONSOLIDATED CONTAINER COMPANY LLC
DATED AS OF
APRIL 29, 1999
<PAGE> 2
CONTRIBUTION AND MERGER AGREEMENT
TABLE OF CONTENTS
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Page
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SECTION 1 DEFINITIONS.....................................................................................2
SECTION 2 MERGERS AND CONTRIBUTION; CLOSING..............................................................13
2.1 Mergers and Contribution.......................................................................13
2.2 Consideration..................................................................................13
2.3 Resulting Ownership of the Company.............................................................14
2.4 Closing........................................................................................14
2.5 Closing Obligations............................................................................15
2.6 Post-Closing Adjustment........................................................................15
SECTION 3 REPRESENTATIONS AND WARRANTIES OF THE REID PARTIES.............................................16
3.1 Organization and Good Standing.................................................................16
3.2 Authority; No Conflict; Consents...............................................................17
3.3 Capitalization.................................................................................18
3.4 Financial Statements...........................................................................18
3.5 Books and Records..............................................................................18
3.6 Title to Properties; Encumbrances..............................................................19
3.7 No Undisclosed Liabilities.....................................................................19
3.8 Taxes..........................................................................................20
3.9 No Material Adverse Change.....................................................................20
3.10 Employee Benefits..............................................................................21
3.11 Compliance with Legal Requirements; Governmental Authorizations................................22
3.12 Legal Proceedings; Orders......................................................................23
3.13 Absence of Certain Changes and Events..........................................................24
3.14 Contracts; No Defaults.........................................................................25
3.15 Insurance......................................................................................27
3.16 Environmental Matters..........................................................................27
3.17 Labor Relations; Compliance....................................................................28
3.18 Intellectual Property..........................................................................28
3.19 Brokers or Finders.............................................................................29
3.20 Competing Interests............................................................................29
3.21 Investment Intent..............................................................................29
3.22 Product Warranty and Product Liability.........................................................29
3.23 Year 2000 Compliance...........................................................................29
3.24 No Misrepresentations..........................................................................30
SECTION 4 REPRESENTATIONS AND WARRANTIES OF SUIZA PARTIES................................................30
4.1 Organization and Good Standing.................................................................30
4.2 Authority; No Conflict; Consents...............................................................30
4.3 Capitalization.................................................................................31
</TABLE>
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<TABLE>
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4.4 Financial Statements...........................................................................32
4.5 Books and Records..............................................................................32
4.6 Title to Properties; Encumbrances..............................................................32
4.7 No Undisclosed Liabilities.....................................................................33
4.8 Taxes..........................................................................................33
4.9 No Material Adverse Change.....................................................................34
4.10 Employee Benefits..............................................................................34
4.11 Compliance with Legal Requirements; Governmental Authorizations................................36
4.12 Legal Proceedings; Orders......................................................................37
4.13 Absence of Certain Changes and Events..........................................................37
4.13A Absence of Certain Changes and Events -- Franklin..............................................39
4.14 Contracts; No Defaults.........................................................................39
4.15 Insurance......................................................................................40
4.16 Environmental Matters..........................................................................41
4.17 Labor Relations; Compliance....................................................................42
4.18 Intellectual Property..........................................................................42
4.19 Brokers or Finders.............................................................................43
4.20 Competing Interests............................................................................43
4.21 Investment Intent..............................................................................43
4.22 Product Warranty and Product Liability.........................................................43
4.23 Holdings and the Company.......................................................................43
4.24 Year 2000 Compliance...........................................................................43
4.25 No Misrepresentations..........................................................................43
SECTION 5 REPRESENTATIONS AND WARRANTIES OF VESTAR.......................................................44
5.1 Organization and Good Standing.................................................................44
5.2 Authority; No Conflict; Consents...............................................................44
SECTION 6 REPRESENTATIONS AND WARRANTIES OF SUIZA FOODS..................................................45
6.1 Organization and Good Standing.................................................................45
6.2 Authority; No Conflict; Consents...............................................................45
SECTION 7 COVENANTS OF REID PARTIES PRIOR TO CLOSING DATE................................................45
7.1 Access and Investigation.......................................................................45
7.2 Operation of the Business of the Reid Companies................................................46
7.3 Negative Covenant..............................................................................46
7.4 Notification...................................................................................46
7.5 Distributions and Certain Other Restricted Payments............................................47
7.6 No Negotiation.................................................................................47
7.7 Commercially Reasonable Efforts................................................................48
7.8 Assistance with Permits and Filings............................................................48
7.9 Confidentiality................................................................................48
7.10 Assignment of Indemnification Rights...........................................................48
7.11 Appraisal......................................................................................48
SECTION 8 COVENANTS OF SUIZA PARTIES PRIOR TO CLOSING DATE...............................................48
8.1 Access and Investigation.......................................................................48
</TABLE>
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<TABLE>
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8.2 Operation of the Business of the Suiza Companies...............................................49
8.2A Operation of the Business of Franklin..........................................................49
8.3 Negative Covenant..............................................................................49
8.4 Notification...................................................................................49
8.5 Distributions and Certain Other Restricted Payments............................................50
8.6 No Negotiation.................................................................................50
8.7 Commercially Reasonable Efforts................................................................51
8.8 Assistance with Permits and Filings............................................................51
8.9 Confidentiality................................................................................51
8.10 Tender Offer...................................................................................51
8.11 Assignment of Indemnification Rights...........................................................52
8.12 Contribution by Suiza Parent...................................................................52
8.13 Appraisal......................................................................................52
SECTION 9 CONDITIONS PRECEDENT TO THE SUIZA PARTIES' OBLIGATION TO CLOSE.................................52
9.1 Accuracy of Representations....................................................................52
9.2 Reid's Performance.............................................................................52
9.3 Absence of Material Adverse Effects............................................................53
9.4 Consents.......................................................................................53
9.5 No Proceedings.................................................................................53
9.6 No Prohibition.................................................................................53
9.7 Legal Opinion..................................................................................53
9.8 Capital Contribution...........................................................................53
9.9 Cash Payment...................................................................................53
9.10 Financing......................................................................................53
9.12 FIRPTA Certificate.............................................................................54
9.13 Discharge of Indebtedness......................................................................54
9.14 Suiza Bank Consent.............................................................................54
SECTION 10 CONDITIONS PRECEDENT TO THE REID PARTIES' OBLIGATION TO CLOSE..................................54
10.1 Accuracy of Representations....................................................................54
10.2 Suiza's Performance............................................................................54
10.3 Absence of Material Adverse Effects............................................................55
10.4 Consents.......................................................................................55
10.5 No Proceedings.................................................................................55
10.6 No Prohibition.................................................................................55
10.7 Legal Opinion..................................................................................55
10.8 Financing......................................................................................55
10.10 FIRPTA Certificate.............................................................................55
10.11 Discharge of Indebtedness......................................................................56
10.12 Suiza Bank Consent.............................................................................56
SECTION 11 TERMINATION....................................................................................56
11.1 Termination Events.............................................................................56
11.2 Effect of Termination..........................................................................56
</TABLE>
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<TABLE>
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SECTION 12 INDEMNIFICATION; REMEDIES......................................................................57
12.1 Representations; Survival......................................................................57
12.2 Indemnification and Payment of Damages With Respect to Breaches by Reid Parties................57
12.3 Indemnification and Payment of Damages With Respect to Breaches by Suiza Parties...............58
12.4 Indemnification and Payment of Damages by the Company..........................................59
12.5 Certain Other Indemnifiable Matters............................................................59
12.6 Limitations on Amount..........................................................................60
12.7 Procedure for Indemnification - Third Party Claims.............................................60
12.8 Procedure for Indemnification - Other Claims...................................................61
12.9 Mitigation.....................................................................................61
12.10 Exclusive Remedy...............................................................................61
12.11 Payments in Preferred Units....................................................................62
SECTION 13 POST CLOSING COVENANTS................................................................................63
13.1 Nondisclosure..................................................................................63
13.2 Records Retention..............................................................................64
13.3 Allocation of Purchase Price...................................................................64
13.4 Release of Encumbrances........................................................................64
13.5 Payment of Taxes...............................................................................64
13.6 Employee Benefits..............................................................................65
SECTION 14 GENERAL PROVISIONS.............................................................................65
14.1 Expenses.......................................................................................65
14.2 Public Announcements...........................................................................66
14.3 Notices........................................................................................66
14.4 Attorney's Fees and Costs......................................................................67
14.5 Further Assurances.............................................................................67
14.6 Waiver.........................................................................................67
14.7 Entire Agreement and Modification..............................................................68
14.8 Assignments, Successors and No Third Party Rights..............................................68
14.9 Severability...................................................................................68
14.10 Section Headings, Construction.................................................................68
14.11 Time of Essence................................................................................68
14.12 Governing Law..................................................................................68
14.13 Counterparts...................................................................................68
</TABLE>
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EXHIBITS
- --------
Exhibit A Holdings LLC Agreement
Exhibit B Unit Option Plan, Unit Option Agreement and
Redemption Agreement
Exhibit C Trademark License Agreement
Exhibit D Legal Opinion of Reid's Counsel
Exhibit E Legal Opinion of Suiza's Counsel
Exhibit F Franklin Bill of Sale, Assignment and Assumption
Agreement
Exhibit G Assumption Agreement
v
<PAGE> 7
CONTRIBUTION AND MERGER AGREEMENT
This Contribution and Merger Agreement ("AGREEMENT") is made as of
April 29, 1999, by and among Suiza Foods Corporation, a Delaware corporation
("SUIZA FOODS"), Franklin Plastics, Inc., a Delaware corporation ("FRANKLIN" or
the "SUIZA PARENT"), the Suiza Companies identified below, Vestar Packaging LLC,
a Delaware limited liability company ("VESTAR"), Reid Plastics Holdings, Inc., a
Delaware corporation (the "REID PARENT"), the Reid Companies identified below,
Reid Plastics Group LLC, a Delaware limited liability company ("REID PLASTICS
LLC"), Consolidated Container Holdings LLC, a Delaware limited liability company
("HOLDINGS"), and Consolidated Container Company LLC, a Delaware limited
liability company (the "COMPANY").
RECITALS
The Suiza Parent owns, directly or indirectly, all of the outstanding
equity interests in each of the Suiza Companies, including the Franklin
Companies (identified below) and the PCI Companies (also identified below).
Franklin owns all of the outstanding equity interests in Holdings, Holdings owns
all of the outstanding equity interests in the Company, and the Company owns all
of the outstanding equity interests in Reid Plastics LLC. The Reid Parent owns,
directly or indirectly, all of the outstanding equity interests in the Reid
Companies (other than Reid Mexico S.A. de C.V.). Pursuant to this Agreement,
certain of the Suiza Companies will be merged with and into the Company; and the
Reid Companies (other than those incorporated outside the United States, which
shall continue as subsidiaries of Reid Plastics LLC after the Merger) will be
merged with and into Reid Plastics LLC. Also pursuant to this Agreement, certain
of the Suiza Companies, or their operations, will be contributed to the Company.
As a result of these mergers and contributions, and the other transactions
contemplated by this Agreement, as of the Closing Date, the Reid Parent and
Vestar collectively will own 51% of the outstanding equity interests in
Holdings, and the Suiza Parent will own the remaining 49% of the outstanding
equity interests in Holdings.
Suiza Foods will, prior to the Closing, cause all of the operating
assets (and the associated liabilities, excluding liabilities to Suiza Foods and
its subsidiaries) used or held for use in Suiza Foods' plastics packaging
business and held by Franklin to be transferred to a Franklin Company, and may
cause one or more of the Franklin Companies to be consolidated with one or more
of the remaining Franklin Companies. In the event of such consolidation, the
term Franklin Companies as used herein shall refer to such entities remaining as
the direct or indirect subsidiaries of Franklin, except for the PCI Companies.
The Suiza Parent will also, prior to the Closing, cause the Suiza Packaging
Restructuring (as defined herein) to occur.
The Reid Parent may cause one or more of the Reid Companies to be
consolidated with one or more of the remaining Reid Companies. In the event of
such consolidation, the Reid Companies as used herein shall refer to such
entities remaining as the direct or indirect subsidiaries of the Reid Parent.
The parties, intending to be legally bound, agree as follows:
1
<PAGE> 8
SECTION 1
DEFINITIONS
For purposes of this Agreement, the following terms have the meanings
specified or referred to in this Section 1:
"AFFILIATE" - with respect to a particular Person, any other Person
directly or indirectly Controlling, Controlled by, or under common Control with
such Person.
"CCC" - Continental Can Company, Inc., a Delaware corporation.
"CCCI" - Continental Caribbean Containers, Inc., a Delaware corporation
and wholly-owned subsidiary of PCI.
"CPCI" - Continental Plastic Containers, Inc., a Delaware corporation
and wholly-owned subsidiary of PCI, and/or Continental Plastic Containers LLC, a
Delaware limited liability company and wholly-owned subsidiary of PCI, after the
conversion of the corporation in the Suiza Packaging Restructuring.
"CLOSING" - as defined in Section 2.4.
"CLOSING DATE" - the date and time as of which the Closing actually
takes place.
"COMPANY" - Consolidated Container Company LLC, a Delaware limited
liability company and wholly-owned subsidiary of Holdings.
"COMPANY LLC AGREEMENT" - the Limited Liability Company Agreement of
the Company.
"COMPANY UNITS" - the issued and outstanding limited liability company
units in the Company, the terms and conditions of which are contained in the
Company LLC Agreement.
"CONSENT" - any approval, consent, ratification, waiver, or other
authorization (including any Governmental Authorization).
"CONTROL" - with respect to a particular Person, (a) the ownership,
directly or indirectly, of more than 50% of the equity or voting interests in
such Person, or (b) the right to elect or appoint, together with others who are
required to act in concert with such Person, more than 50% of the directors or
members of another governing body that directs the management and policies of
such Person.
"CONTEMPLATED TRANSACTIONS" - all of the transactions contemplated by
this Agreement, including the Mergers and the PCI Contribution.
2
<PAGE> 9
"CONTRACT" - any agreement, contract, obligation, promise, or
undertaking that is legally binding.
"DAMAGES" - as defined in Section 12.2.
"DEFINED BENEFIT PLAN" - with the meaning of ERISA Section 3(35).
"DISCLOSURE LETTER" - the disclosure letter executed by the Reid
Parties and the Suiza Parties concurrently with the execution and delivery of
this Agreement.
"DOJ" - the United States Department of Justice.
"DOL" - the United States Department of Labor.
"EFFECTIVE TIME" - the date and time at which the last of the following
events occurs (i) the PCI Contribution is effective and (ii) certificates of
merger with respect to the Mergers are filed with the Secretary of State of
Delaware and other required states, pursuant to Section 2.4, or, if different,
the effective time for the Mergers set forth in the respective certificates of
merger.
"EMPLOYEE BENEFIT PLAN" - as defined in ERISA.
"ENCUMBRANCE" - any lien, mortgage, easement, servitude, right of way,
charge, pledge, security interest, or other encumbrance.
"ENVIRONMENT" - soil, land surface or subsurface strata, surface waters
(including navigable waters, ocean waters, streams, ponds, drainage basins, and
wetlands), groundwaters, drinking water supply, stream sediments, ambient air,
plant and animal life, and any other environmental medium.
"ENVIRONMENTAL LAW" - any Legal Requirement that relates to the
Environment or the protection of human health as it relates to the Environment
or the work place.
"ERISA" - the Employee Retirement Income Security Act of 1974 or any
successor law, and regulations and rules issued pursuant to that Act or any
successor law.
"ERISA AFFILIATE" - each corporation, partnership or other trade or
business, whether or not incorporated, which is or has been treated as a single
employer or a controlled group member with a Person pursuant to IRC Section 414
or Section 4001 of ERISA.
"EXPIRATION DATE" - as defined in Section 8.10.
"FRANKLIN" - Franklin Plastics, Inc., a Delaware corporation and
wholly-owned direct subsidiary of Suiza Foods; Franklin will become an indirect
subsidiary of Suiza Foods as a result of the Suiza Packaging Restructuring.
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"FRANKLIN COMPANIES" - Allentown Plastics, Inc., a Pennsylvania
corporation, Atlanta Container, Inc., a Georgia corporation, Chester County
Container Corp., a Pennsylvania corporation, First Capital Plastics, Inc., a
Pennsylvania corporation, Florida Plastics, Inc., a Florida corporation,
Franklin Plastics, Inc., a Massachusetts corporation, Illinois Plastics, Inc.,
an Illinois corporation, Kentwood Plastics, Inc., a Louisiana corporation,
Liquitane Acquisition Corporation, a Delaware corporation, Maine Plastics, Inc.,
a Maine corporation, Marlborough Plastics, Inc., a Massachusetts corporation,
Middlesex Plastics, Inc., a Connecticut corporation, New Jersey Plastics, Inc.,
a New Jersey corporation, North Carolina Plastics, Inc., a North Carolina
corporation, Ohio State Plastics, Inc., an Ohio corporation, Richmond Container,
Inc., a Virginia corporation, Rostan Acquisition Corporation, a Delaware
corporation, Sherman Plastics, Inc., a Texas corporation, Vanguard
Manufacturing, Inc., a New Jersey corporation and Consolidated Plastechs, Inc.,
a New Hampshire corporation.
"FRANKLIN REPLACEMENT OPTION" - as defined in Section 2.3(b).
"FRANKLIN OPTION PLAN" - the Franklin Plastics, Inc. 1998 Stock Option
Plan adopted by Franklin on February 25, 1998.
"FRANKLIN OPTIONS" - options to purchase shares of Franklin Stock,
issued pursuant to the Franklin Option Plan, whether vested or unvested.
"FRANKLIN STOCK" - common stock, par value $.001 per share, of
Franklin.
"FTC" - United States Federal Trade Commission.
"GOVERNMENTAL AUTHORIZATION" - any approval, consent, license, permit,
waiver, or other authorization issued, granted, given, or otherwise made
available by or under the authority of any Governmental Body or pursuant to any
Legal Requirement.
"GOVERNMENTAL BODY" - any:
(a) nation, state, county, city, town, village, district, or
other jurisdiction of any nature;
(b) federal, state, local, municipal, foreign, or other
government;
(c) governmental or quasi-governmental authority of any
nature; or
(d) other body exercising any administrative, executive,
judicial, legislative, police, regulatory, or taxing authority or
power.
"HAZARDOUS ACTIVITY" - the distribution, generation, handling,
importing, management, manufacturing, processing, production, refinement,
release, storage, transfer, transportation, treatment, or use of Hazardous
Materials from the Reid Facilities or the Suiza Facilities, as the case may be,
into the Environment that is not in compliance with Environmental Law.
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"HAZARDOUS MATERIALS" - any waste or other substance that is listed,
defined, designated, or classified as, or otherwise determined to be, hazardous,
radioactive, or toxic or a pollutant or a contaminant under or pursuant to any
Environmental Law or any other material that could result in liability under or
pursuant to any Environmental Law, including without limitation, petroleum and
petroleum products, polychlorinated biphenyls, and asbestos-containing
materials.
"HOLDINGS" - Consolidated Container Holdings LLC, a Delaware limited
liability company, and wholly-owned subsidiary of Franklin prior to the Closing.
"HOLDINGS LLC AGREEMENT" - the Limited Liability Company Agreement of
Holdings to be executed at the Closing pursuant to Section 2.5(a), substantially
in the form of Exhibit A hereto.
"HSR ACT" - Title II of the Hart-Scott-Rodino Antitrust Improvements
Act of 1976, as amended, and the rules and regulation promulgated thereunder.
"INFRINGE" - as defined in Section 3.18(b).
"INITIAL EXPIRATION DATE" - as defined in Section 8.10.
"INTELLECTUAL PROPERTY" - all U.S. and foreign intellectual property,
including without limitation: (i)(a) patents, inventions, discoveries,
processes, designs, techniques, developments, technology, and related
improvements, know-how and show-how, whether or not patented or patentable; (b)
copyrights and works of authorship in any media, including computer hardware,
software, systems, databases, documentation and Internet site content; (c)
trademarks, service marks, trade names, brand names, corporate names, domain
names, logos and trade dress; (d) trade secrets, drawings, blueprints and all
confidential or proprietary information; and (ii) all registrations,
applications and recordings related thereto.
"INTERIM REID BALANCE SHEETS" - the most recent balance sheet for each
Reid Company included within the Reid Financial Statements.
"INTERIM SUIZA BALANCE SHEETS" - the most recent balance sheet for each
Suiza Company included within the Suiza Financial Statements.
"IRC" - the Internal Revenue Code of 1986 or any successor law, and
regulations issued by the IRS pursuant to the Internal Revenue Code or any
successor law.
"IRS" - the United States Internal Revenue Service or any successor
agency, and, to the extent relevant, the United States Department of the
Treasury.
"LEGAL REQUIREMENT" - any administrative order, constitution, law,
ordinance, principle of common law, regulation, rule or statute of any
Governmental Body, including without limitation all federal, foreign, state and
local laws related to Taxes, ERISA, Hazardous Materials
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and the Environment, zoning and land use, occupational safety and health,
product quality and safety, employment and labor matters.
"MATERIAL CONSENTS" - the consents disclosed on Schedule 3.2(d) and
Schedule 4.2(d) to the Disclosure Letter.
"MEMBER UNITS" - the limited liability company units representing
equity interests in Holdings, initially to be issued to the Reid Parent, Vestar
and the Suiza Parent at the Closing, pursuant to the Holdings LLC Agreement.
"MERGERS" - the merger of each Franklin Company with and into the
Company at the Effective Time pursuant to Section 2.1 and the other provisions
of this Agreement, and the mergers of each Reid Company (other than those
incorporated outside the United States, which shall continue as subsidiaries of
Reid Plastics LLC after the Mergers) with and into Reid Plastics LLC at the
Effective Time pursuant to Section 2.1 and the other provisions of this
Agreement.
"OPTION AGREEMENT" - option agreement substantially in the form of
Exhibit C hereto.
"ORDER" - any award, decision, injunction, judgment, order, ruling,
subpoena, or verdict entered, issued, made, or rendered by any court,
administrative agency, or other Governmental Body or by any arbitrator.
"ORDINARY COURSE OF BUSINESS" - an action taken by a Person will be
deemed to have been taken in the "Ordinary Course of Business" only if:
(a) such action is consistent with the past practices of such
Person and is taken in the ordinary course of the normal day-to-day
operations of such Person; and
(b) such action is not required to be authorized by the board
of directors of such Person (or by any Person or group of Persons
exercising similar authority).
"ORGANIZATIONAL DOCUMENTS" - the constituent and organizational
documents of a Person, as amended to date, and any organizational minutes or
resolutions, including (a) with respect to a limited liability company, its
certificate of formation and operating agreement, (b) with respect to a
corporation, its articles or certificate of incorporation and its bylaws and (c)
with respect to a limited partnership, its certificate of limited partnership
and agreement of limited partnership.
"PCI" - Plastic Containers, Inc., a Delaware corporation and
wholly-owned subsidiary of CCC or, after the Suiza Packaging Restructuring, a
wholly-owned subsidiary of Franklin, and/or Plastic Containers LLC, a Delaware
limited liability company and wholly-owned subsidiary of Franklin.
"PCI COMPANIES" - PCI, CCCI, and CPCI.
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"PCI CONTRIBUTION" - the contribution by Franklin of 100% of the equity
interest in PCI to the Company at the Effective Time pursuant to Section 2.1(b).
"PCI NOTES" - 10% Senior Secured Notes Due 2006, Series B, in the
currently outstanding aggregate principal amount of $121.25 million.
"PENSION PLAN" - any pension plan within the meaning of ERISA Section
3(2).
"PERMITTED ENCUMBRANCES" - (a) liens for Taxes that are not yet due and
payable, that may thereafter be paid without penalty or that are being contested
in good faith by appropriate proceedings and as to which adequate reserves have
been established in accordance with GAAP, consistently applied, (b) mechanics',
carriers', workers', repairmen's and similar Encumbrances imposed by Legal
Requirements that have been incurred in the Ordinary Course of Business, (c)
Encumbrances and other title defects, easements, encroachments and encumbrances
that do not materially impair the value, or occupancy, or continued use as
currently conducted of the asset to which they relate, (d) retention of title
agreements with suppliers entered into in the Ordinary Course of Business, (e)
the rights of others to customer deposits, (f) Encumbrances incurred in the
Ordinary Course of Business under leases or securing purchase money indebtedness
and (g) zoning, entitlement, building and other land use Legal Requirements
imposed by Governmental Bodies having jurisdiction over real property that are
not violated in any material respect by the current use and operation of such
real property.
"PERSON" - any individual, corporation (including any non-profit
corporation), general or limited partnership, limited liability company,
cooperative marketing association, joint venture, estate, trust, association or
other entity.
"PREFERRED UNITS" - the limited liability company units representing
preferred liquidation preference equity interests in Holdings, to be issued to
certain members of Holdings pursuant to Section 12.11 of this Agreement. The
Preferred Units shall accrue dividends at an annual rate of 12.5%.
"PROCEEDING" - any action, arbitration, audit, hearing, investigation,
litigation, or suit (whether civil, criminal, administrative, investigative, or
informal) commenced, brought, conducted, or heard by or before, any Governmental
Body or arbitrator.
"REGISTRATION RIGHTS AGREEMENT" - a registration rights agreement to be
executed and delivered by the parties named therein.
"REID BALANCE SHEET" - as defined in Section 3.4.
"REID BONUS PLAN" - any plan, scheme or arrangement, written or
otherwise, pursuant to which any Reid Company may be required to make a payment
or other transfer to any of its Affiliates, employees, or independent
contractors of cash or property the amount or value of which is in any way
contingent on the objectively or subjectively determined attainment of any
individual or group performance goals.
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"REID CONFIDENTIAL INFORMATION" - as defined in Section 13.1.
"REID COMPANIES" - Reid Plastics, Inc., a Delaware corporation, Reid
Canada, Inc., an Ontario corporation, Reid Intermediate, Inc., a California
corporation, Plastic Containers, Inc., an Alabama corporation, S-W Realty Co., a
California corporation, Reid Mexico S.A. de C.V., Mexico D.F., Reid Plastics
West, Inc., a California corporation, Stewart/Walker Plastics, Ltd., a British
Columbia, Canada corporation, Propak Industrial, Inc., a California corporation,
Juice Tree Inc., a California corporation and Master Plastics, Inc., an Alberta,
Canada corporation.
"REID CONTROLLED GROUP PLANS" - as defined in Section 3.10(b)(v).
"REID ERISA PLAN" - any Reid Pension Plan or Reid Welfare Plan.
"REID FACILITIES" - any real property, leaseholds, or other interests
in real property owned or operated by any Reid Company and any buildings,
plants, structures, or fixtures owned or operated by any Reid Company.
"REID FINANCIAL STATEMENTS" - as defined in Section 3.4.
"REID FRINGE BENEFIT PLAN" - any plan, scheme, or arrangement currently
maintained by any Reid Company for the provision of "fringe benefits" to current
or former employees within the meaning of IRC Sections 61(a) or 132(a).
"REID HOLDINGS" - Reid Plastics Holdings, Inc., a Delaware corporation.
"REID HOLDINGS STOCK" - common stock, $0.1 par value per share, of Reid
Holdings.
"REID INDEBTEDNESS" - indebtedness of the Reid Companies listed in
Section 10.11(a) of the Disclosure Letter which will be fully discharged
concurrently with the Closing.
"REID IP" - as defined in Section 3.18(a).
"REID MATERIAL ADVERSE EFFECT" - any material adverse effect on the
business, properties, assets, financial condition, liabilities or results of
operations of the Reid Companies, taken as a whole, other than any effects
arising out of or resulting from changes affecting the economy generally or the
plastic containers industry generally.
"REID MATERIAL CUSTOMERS" - as defined in Section 3.14(c).
"REID OPTION PLAN" - the 1997 Reid Plastics Holdings, Inc. Stock Option
Plan adopted by Reid Holdings on January 22, 1998.
"REID OPTIONS" - options to purchase shares of Reid Holdings Stock,
issued pursuant to the Reid Option Plan, whether vested or unvested.
"REID PARENT" - Reid Holdings.
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"REID PARTIES" - Vestar, the Reid Parent and the Reid Companies.
"REID PAYROLL POLICY" - any policy of making payments or other awards
to employees of any Reid Company other than a Reid Bonus Plan, a Reid Fringe
Benefit Plan, a Reid Pension Plan, a Reid Stock Plan, or a Reid Welfare Plan.
Reid Payroll Policies include, but are not limited to, paid sick days, vacation
days, and personal time off.
"REID PENSION PLAN" - any Pension Plan maintained by any Reid Company
or to which any Reid Company is required to contribute for any current or former
employee.
"REID PLAN" - each Reid Bonus Plan, Reid ERISA Plan, Reid Fringe
Benefit Plan, Reid Payroll Policy and Reid Stock Plan.
"REID PLASTICS" - Reid Plastics, Inc., a Delaware corporation and
wholly-owned subsidiary of Reid Holdings.
"REID PLASTICS LLC" - Reid Plastics Group LLC, a Delaware limited
liability company and wholly-owned subsidiary of the Company.
"REID STOCK PLAN" - any compensatory interest option, restricted
interest, interest appreciation right, phantom interest, or similar plan,
program, or arrangement maintained by any Reid Company for the current,
deferred, or contingent compensation of any of its employees, Affiliates or
independent contractors with an interest in or other equity security of any Reid
Company, a discount on the purchase price of any interest in or other equity
security of any Reid Company, or a payment or other transfer of cash or property
the amount or value of which is in any way contingent on any change in value of
any interest in or other equity security of any Reid Company.
"REID TRANSACTION PROPOSALS" - as defined in Section 7.6.
"REID WELFARE PLAN" - any Welfare Plan (as defined in Section 3(1) of
ERISA) maintained by any Reid Company or to which any Reid Company is required
to contribute for any current or former employees.
"REID'S ADVISORS" - as defined in Section 8.1.
"REID'S INDEMNIFIED PERSONS" - as defined in Section 12.3.
"REID'S KNOWLEDGE" - the Reid Parties will be deemed to have
"Knowledge" of a particular fact or other matter if any individual who is
serving as an executive officer of any Reid Parent or Reid Company (or in any
similar capacity) has actual knowledge of such fact or other matter.
"RELEASE" - any spilling, leaking, emitting, discharging, depositing,
escaping, leaching, dumping, or other releasing into the Environment.
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"REPORTABLE EVENT" - as defined in Section 4043 of ERISA.
"REPRESENTATIVE" - with respect to a particular Person, any director,
officer, employee, agent, consultant, advisor, or other representative of such
Person, including legal counsel, accountants, and financial advisors.
"SECURITIES ACT" - the Securities Act of 1933 or any successor law, and
regulations and rules issued pursuant to that Act or any successor law.
"SUIZA BALANCE SHEET" - as defined in Section 4.4.
"SUIZA BONUS PLAN" - any plan, scheme or arrangement, written or
otherwise, pursuant to which any Suiza Company may be required to make a payment
or other transfer to any of its Affiliates, employees, or independent
contractors of cash or property the amount or value of which is in any way
contingent on the objectively or subjectively determined attainment of any
individual or group performance goals.
"SUIZA COMPANIES" - the Franklin Companies and the PCI Companies.
"SUIZA CONFIDENTIAL INFORMATION" - as defined in Section 13.1.
"SUIZA CONTROLLED GROUP PLANS" - as defined in Section 4.10(b)(v).
"SUIZA ERISA PLAN" - any Suiza Pension Plan or Suiza Welfare Plan.
"SUIZA FACILITIES" - any real property, leaseholds, or other interests
in real property owned or operated by any Suiza Company and any buildings,
plants, structures, or fixtures owned or operated by any Suiza Company.
"SUIZA FINANCIAL STATEMENTS" - as defined in Section 4.4.
"SUIZA FOODS" - Suiza Foods Corporation, a Delaware corporation.
"SUIZA FRINGE BENEFIT PLAN" - any plan, scheme, or arrangement
currently maintained by any Suiza Company for the provision of "fringe benefits"
to current or former employees within the meaning of IRC Sections 61(a) or
132(a).
"SUIZA INDEBTEDNESS" - indebtedness of the Suiza Companies listed in
Section 10.11(b) of the Disclosure Letter which will be fully discharged
concurrently with the Closing.
"SUIZA IP" - as defined in Section 4.18(a).
"SUIZA MATERIAL ADVERSE EFFECT" - any material adverse effect on the
business, properties, assets, financial condition, liabilities or results of
operations of the Suiza Companies,
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taken as a whole, other than any effects arising out of or resulting from
changes affecting the economy generally or the plastic containers industry
generally.
"SUIZA MATERIAL CUSTOMERS" - as defined in Section 4.14(c).
"SUIZA PACKAGING RESTRUCTURING" - the corporate restructuring of the
packaging subsidiaries of Suiza Foods, in which (i) Suiza Foods will contribute
the stock of Franklin to CCC, and (ii) CCC will contribute the stock of PCI to
Franklin, with the result that PCI becomes the wholly-owned direct subsidiary of
Franklin.
"SUIZA PARENT" - Franklin.
"SUIZA PARTIES" - Suiza Foods, the Suiza Parent and the Suiza
Companies.
"SUIZA PAYROLL POLICY" - any policy of making payments or other awards
to employees of any Suiza Company other than a Suiza Bonus Plan, a Suiza Fringe
Benefit Plan, a Suiza Pension Plan, a Suiza Stock Plan, or a Suiza Welfare Plan.
Suiza Payroll Policies include, but are not limited to, paid sick days, vacation
days, and personal time off.
"SUIZA PENSION PLAN" - any Pension Plan maintained by any Suiza Company
or to which any Suiza Company is required to contribute for any current or
former employee.
"SUIZA PLAN" - each Suiza Bonus Plan, Suiza ERISA Plan, Suiza Fringe
Benefit Plan, Suiza Payroll Policy, Suiza Pension Plan, Suiza Stock Plan and
Suiza Welfare Plan.
"SUIZA STOCK PLAN" - any compensatory interest option, restricted
interest, interest appreciation right, phantom interest, or similar plan,
program, or arrangement maintained by any Suiza Company for the current,
deferred, or contingent compensation of any of its employees, Affiliates or
independent contractors with an interest in or other equity security of any
Suiza Company, a discount on the purchase price of any interest in or other
equity security of any Suiza Company, or a payment or other transfer of cash or
property the amount or value of which is in any way contingent on any change in
value of any interest in or other equity security of any Suiza Company.
"SUIZA TRANSACTION PROPOSALS" - as defined in Section 8.6.
"SUIZA WELFARE PLAN" - any Welfare Plan (as defined in Section 3(1) of
ERISA) maintained by any Suiza Company or to which any Suiza Company is required
to contribute for any current or former employees.
"SUIZA'S ADVISORS" - as defined in Section 7.1.
"SUIZA'S INDEMNIFIED PERSONS" - as defined in Section 12.2.
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"SUIZA'S KNOWLEDGE" - Suiza will be deemed to have "Knowledge" of a
particular fact or other matter if any individual who is serving as an executive
officer of the Suiza Parent or any Suiza Company (or in any similar capacity)
has actual knowledge of such fact or other matter.
"TAXES" - all federal, state, local or foreign taxes, charges, fees,
duties, levies or other assessments, including, without limitation, income,
gross receipts, net proceeds, ad valorem, real and personal property (tangible
and intangible), sales, use, franchise, user, transfer, fuel, excess profits,
occupational, employees' income withholding, unemployment and Social Security,
alternative or add-on minimum, environmental and franchise taxes, including
interest, penalties or additions to tax attributable to or imposed on or with
respect to such taxes, which are imposed by any Governmental Body whether
disputed or not.
"TAX RETURN" - any return (including any information return), report,
statement, schedule, notice, form, or other document or information, including
any amendment thereof, filed with or submitted to, or required to be filed with
or submitted to, any Governmental Body in connection with the determination,
assessment, collection, or payment of any Tax.
"TENDER OFFER" - as defined in Section 8.10.
"TRANSFERRED EMPLOYEES" - as defined in Section 13.6.
"VCP" - Vestar Capital Partners, a New York general partnership.
"VCP MANAGEMENT AGREEMENT" - agreement dated the date hereof among VCP,
Holdings and the Company providing for VCP to provide certain services to
Holdings, the Company and the Company's subsidiaries.
"VESTAR" - Vestar Packaging LLC, a Delaware limited liability company.
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SECTION 2
MERGERS AND CONTRIBUTION; CLOSING
2.1 MERGERS AND CONTRIBUTION.
(a) On the terms and subject to the conditions set forth in
this Agreement, and in accordance with applicable Legal Requirements,
at the Effective Time (i) each Franklin Company shall be merged with
and into the Company, and (ii) each Reid Company (other than those
incorporated outside the United States, which shall become subsidiaries
of Reid Plastics LLC after the Mergers) will be merged with and into
Reid Plastics LLC. As a result of the Mergers, the separate corporate
or limited liability company existence of each Reid Company (other than
those incorporated outside the United States) and each Franklin Company
shall cease, and the Company and Reid Plastics LLC shall continue as
the surviving entities of the Mergers, governed by their respective
certificates of formation and limited liability company agreements. At
the Effective Time, the effect of the Mergers shall be as provided by
applicable Legal Requirements. Without limiting the generality of the
foregoing, and subject thereto, at the Effective Time, (i) all the
properties, rights, privileges and powers of each Franklin Company will
vest in the Company, and all debts, liabilities and duties of each
Franklin Company will become the debts, liabilities and duties of the
Company, including, without limitation, any liability to pay the bond
tender premium in connection with the possible tender for the PCI Notes
in accordance with Section 8.10 of this Agreement, which possible
liability the Company hereby expressly agrees to assume (within the
meaning of Treasury Regulation Section 1.461-4(d)(5)(i)), and (ii) all
the properties, rights, privileges and powers of each Reid Company
(other than those incorporated outside the United States and Reid
Plastics) will vest in Reid Plastics LLC, and all the debts,
liabilities and duties of each Reid Company (other than those
incorporated outside the United States and Reid Plastics) will become
the debts, liabilities and duties of Reid Plastics LLC. In effecting
the Mergers, no Reid Company or Franklin Company which is a parent of
another Reid Company or Franklin Company that is to be a constituent to
any merger shall be merged prior to the time when such subsidiary is
merged.
(b) On the terms and subject to the conditions set forth in
this Agreement, and in accordance with applicable Legal Requirements,
at the Effective Time Suiza Foods shall cause the PCI Contribution to
occur. As a result of the PCI Contribution, PCI shall become a
wholly-owned direct subsidiary of the Company, and each of CPCI and
CCCI shall survive as wholly-owned direct subsidiaries of PCI.
2.2 CONSIDERATION.
(a) At the Effective Time, by virtue of the Mergers, without
any action on the part of any party to this Agreement or any other
Person, all of the outstanding equity interests of the Reid Companies
and the Franklin Companies which are constituent companies in the
Mergers shall be cancelled. In consideration for the Mergers and the
PCI Contribution, Member Units shall be issued to the Reid Parent and
the Suiza Parent
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in accordance with Section 2.3 hereof and the provisions of the
Holdings LLC Agreement.
(b) At the Closing, Vestar shall contribute $60.8 million in
cash to Holdings as set forth in the Holdings LLC Agreement, payable in
immediately available funds, as part of its consideration for the
portion of the Member Units issued to Vestar.
(c) At the Closing, Holdings or the Company shall distribute
to Suiza Parent cash in the amount of (i) $366.7 million, plus (ii)
accrued and unpaid interest from December 31, 1998 to the Effective
Time on intercompany debt balances owed by Franklin to Suiza Foods at
the interest rates listed in Schedule 2.2(c), plus (iii) any increase
in the Other Intercompany Debt referred to in Schedule 2.2(c) from
December 31, 1998 to the Effective Time over $26,400,464, minus (iv)
any decrease in Other Intercompany Debt from December 31, 1998 to the
Effective Time below $26,400,464. The difference in the amount of cash
distributed to the Suiza Parent and $366,700,000 is referred to in this
Agreement as the "Adjustment Amount".
2.3 RESULTING OWNERSHIP OF THE COMPANY.
(a) At and immediately after the Effective Time, as a result
of the Contemplated Transactions, the Suiza Parent shall hold 49% of
the Member Units, or 4,900,000 Member Units on a primary basis, and the
Reid Parent and Vestar shall hold 30.5% and 20.5%, respectively, and
collectively, 51% of the Member Units on a primary basis, or 3,050,000
Member Units and 2,050,000 Member Units, respectively, and collectively
5,100,000 Member Units.
(b) At the Effective Time, each Franklin Option outstanding
immediately prior to the Effective Time shall be replaced by an option
to purchase Member Units (a "FRANKLIN REPLACEMENT OPTION") equal in
economic value to the Franklin Option being replaced, on terms and
conditions substantially identical to those contained in the original
Franklin Option including, without limitation, the provisions therein
with respect to vesting, forfeiture and liquidity rights. Upon exercise
of any Franklin Replacement Option, Franklin shall transfer to Holdings
for cancellation, without payment therefor by Holdings, a number of
Member Units equal to the number of Member Units issued upon exercise
of the Franklin Replacement Option. The Reid Options outstanding
immediately prior to the Effective Time shall remain outstanding as
options to purchase shares of Reid Holdings Stock.
2.4 CLOSING. The closing of the Merger (the "CLOSING") will take place
at the offices of Simpson Thacher & Bartlett, 425 Lexington Avenue, New York,
New York 10017 at 10:00 a.m. (local time) on the third business day following
the satisfaction or waiver of all conditions precedent set forth in Sections 9
and 10, or at such other time and place as the Suiza Parent, Reid Parent and
Vestar agree. Subject to the provisions of Section 11, failure to consummate the
purchase and sale provided for in this Agreement on the date and time and at the
place determined pursuant to this Section 2.4 will not result in the termination
of this Agreement and will not relieve any party of any obligation under this
Agreement. As promptly as practicable on
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the Closing Date, the parties hereto shall cause the Mergers and the PCI
Contribution to be consummated by filing the certificates of merger referenced
in Section 2.5(e) with the Secretary of State of the State of Delaware and with
the Secretary of State of each other state of formation of any Reid Company or
Franklin Company.
2.5 CLOSING OBLIGATIONS. At the Closing:
(a) The Reid Parent, Vestar and the Suiza Parent will execute
and deliver the Holdings LLC Agreement, substantially in the form of
Exhibit A hereto, which will provide (among other things) for the
issuance of Member Units to the Reid Parent, Vestar and the Suiza
Parent.
(b) Unit Option Agreements, substantially in the form of
Exhibit B hereto, will be executed and delivered to the Persons who the
Suiza Parent, the Reid Parent and Vestar mutually agree upon.
(c) CCC, Holdings and the Company will execute and deliver the
Trademark License Agreement, substantially in the form of Exhibit C
hereto.
(d) The Reid Parent and the Suiza Parent will surrender for
cancellation any stock certificates or other certificates evidencing
their equity ownership interests in any Reid Company or Suiza Company,
duly endorsed by the record holder thereof, and such certificates will
be marked "cancelled."
(e) The Reid Companies and the Franklin Companies will execute
certificates of merger in the form required by the relevant provisions
of the applicable Legal Requirements of Delaware and each other state
in which any Reid Company or Franklin Company is incorporated.
(f) The Supply Agreement by and among Suiza Foods, Holdings
and the Company will become effective in accordance with its terms.
(g) Franklin and a Franklin Company will execute and deliver
the Bill of Sale, Assignment and Assumption Agreement, substantially in
the form of Exhibit F hereto.
(h) Holdings, the Company and the Reid Parent will execute and
deliver the Assumption Agreement, substantially in the form of Exhibit
G hereto.
2.6 POST-CLOSING ADJUSTMENT.
(a) At least two business days prior to the Closing, the Suiza
Parent will deliver to the Reid Parent and Vestar a preliminary
calculation (with reasonable detail relating thereto) of the Adjustment
Amount (the "ESTIMATED ADJUSTMENT AMOUNT"). The Suiza Parent will
consult in good faith with the Reid Parent and Vestar with respect to
the Estimated Adjustment Amount. The Estimated Adjustment Amount
delivered by
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the Suiza Parent shall be the basis of calculating the payment to be
made at Closing under Section 2.2(c).
(b) Within 30 days of the Closing, the Suiza Parent will
prepare and deliver to the Reid Parent and Vestar a final calculation
of the Adjustment Amount. If within 30 days of its receipt of the
calculation, the Reid Parent or Vestar dispute the calculation of the
Adjustment Amount and the parties are unable to resolve any
disagreement with respect thereto by the 45th day following receipt of
such calculation, the Suiza Parent, the Reid Parent and Vestar shall
submit the dispute to Deloitte & Touche LLP or such other nationally
recognized independent accounting firm as the parties shall agree upon
(the "INDEPENDENT AUDITOR") for resolution. Holdings will pay the fees
and expenses of the Independent Auditor.
(c) As soon as practicable, but in any event within 30 days
after submission of the dispute to the Independent Auditor, the
Independent Auditor will examine the dispute, make any adjustments it
considers appropriate and deliver the revised calculation of the
Adjustment Amount to the Suiza Parent, the Reid Parent and Vestar. The
decision of the Independent Auditor with respect to the calculation
will be final and binding on the parties.
(d) If the Adjustment Amount (as finally determined pursuant
to this Section 2.6) is greater or less than the Estimated Adjustment
Amount, the Company agrees to pay the amount of any such excess to the
Suiza Parent, and the Suiza Parent agrees to pay to the Company the
amount of any such shortfall, in cash. All such payments shall be made
in immediately available funds in accordance with payment instructions
from the party to whom the payment is due within three business days
after the Adjustment Amount is finally determined pursuant to this
Section 2.6.
SECTION 3
REPRESENTATIONS AND WARRANTIES OF THE REID PARTIES
The Reid Parent represents and warrants to the Suiza Parent as follows
(provided, however, that the Disclosure Letter sets forth certain exceptions to
such representations and warranties or discloses certain matters in response to
such representations and warranties, in each case identified by the applicable
Section numbers below):
3.1 ORGANIZATION AND GOOD STANDING.
(a) Each Reid Company and the Reid Parent is a corporation,
limited partnership or limited liability company duly organized,
validly existing, and in good standing under the laws of its state of
formation, with full corporate, partnership or limited liability
company power and authority to conduct its business as it is now being
conducted. Each Reid Company is duly qualified to do business as a
foreign corporation, limited partnership or foreign limited liability
company and is in good standing under the laws of each state or other
jurisdiction in which the nature of the activities conducted by it or
the ownership or leasing of its properties requires such qualification,
except where
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such failure to so qualify or to be in good standing does not have a
Reid Material Adverse Effect.
(b) The Reid Parent has made available to the Suiza Parents
complete and correct copies of the Organizational Documents of each
Reid Company, as currently in effect.
(c) Except as listed on Section 3.1(c) of the Disclosure
Letter, no Reid Company owns any direct or indirect equity or debt
interest in any other Person (except other Reid Companies), and no Reid
Company is obligated or committed to acquire any such interest.
3.2 AUTHORITY; NO CONFLICT; CONSENTS.
(a) This Agreement constitutes the legal, valid and binding
obligation of each Reid Company and the Reid Parent, enforceable
against such entities in accordance with its terms except to the extent
that its enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, fraudulent transfer, moratorium
or other laws relating to or affecting creditors' rights generally and
by general equity principles.
(b) Each Reid Company and the Reid Parent has the requisite
corporate, limited partnership or limited liability company right,
power, authority and capacity to execute and deliver this Agreement and
to perform its obligations under this Agreement. The execution,
delivery and performance of this Agreement by each Reid Company and the
Reid Parent have been duly authorized by all necessary corporate,
limited partnership or limited liability company action, as the case
may be, on the part of such entity and its owners.
(c) Except as disclosed in Section 3.2(c) of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions
will, directly or indirectly:
(i) conflict with any provision of the Organizational
Documents of any Reid Company or the Reid Parent;
(ii) result in a violation of, or give any
Governmental Body or other Person the right to exercise any
remedy or obtain any relief under, any Legal Requirement or
any Order to which any Reid Company or the Reid Parent is
subject;
(iii) result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any Reid Company or
the Reid Parent;
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(iv) result in a violation or breach of any provision
of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Contract of any Reid Company described in Section 3.14(a); or
(v) result in the imposition or creation of any
Encumbrance upon any of the assets owned or used by any Reid
Company.
(d) Neither any Reid Company nor the Reid Parent is or will be
required to obtain any material Consent from any Person or Governmental
Body in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated
Transactions, except the Material Consents disclosed in Section 3.2(d)
of the Disclosure Letter.
3.3 CAPITALIZATION. The authorized and outstanding equity interests of
each Reid Company are listed in Section 3.3 of the Disclosure Letter. The Reid
Parent or one of the other Reid Companies are and will be on the Closing Date
the record and beneficial owners and holders of all such equity interests, free
and clear of all Encumbrances. All of such equity interests have been duly
authorized and validly issued and are fully paid and nonassessable. There are no
Contracts relating to the issuance, sale, or transfer of any equity interests in
any Reid Company. None of the outstanding equity interests in any Reid Company
was issued in violation of the Securities Act.
3.4 FINANCIAL STATEMENTS. Included within Section 3.4 of the Disclosure
Letter are the unaudited consolidated balance sheets and statements of
operations, shareholder's equity and cash flows of the Reid Parent and its
subsidiaries for the year ended and as at December 31, 1998 and the notes
thereto (the "REID FINANCIAL STATEMENTS"). The Reid Financial Statements fairly
present in all material respects the consolidated financial condition, results
of operations, changes in stockholders' equity and cash flow of the Reid Parent
on a consolidated basis, as at and for the year ended December 31, 1998. The
Reid Financial Statements have been prepared in accordance with generally
accepted accounting principles, consistently applied. The Reid Financial
Statements have been prepared from the books and records of the Reid Parent and
its subsidiaries, which accurately and fairly reflect in all material respects
the transactions of, acquisitions and dispositions of assets by, and incurrence
of liabilities by, the Reid Parent and its subsidiaries. All inventories and raw
materials reflected in the balance sheet included in the Reid Financial
Statements (the "REID BALANCE SHEET") or acquired since the date thereof are, in
all material respects, of good and merchantable quality, salable in the Ordinary
Course of Business (in the case of inventory held for sale), currently usable
(in the case of other inventory and raw materials), or adequate reserves have
been established with respect thereto. All accounts receivable, net of
applicable reserves, reflected in the Reid Balance Sheet or acquired since the
date thereof arose in the Ordinary Course of Business and are not subject to
material set-off, counterclaim or other reduction.
3.5 BOOKS AND RECORDS. The books of account and minute books of each
Reid Company, all of which have been made available to the Suiza Parent, are
complete and correct in
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all material respects. At the Closing, all of those books and records will be in
the possession of the applicable Reid Company.
3.6 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) Section 3.6(a) of the Disclosure Letter includes a
complete list (including the street address, where applicable) of each
Reid Facility and one or more recent asset registers listing tangible
personal property owned by the Reid Companies as of the date indicated.
The tangible personal property of the Reid Companies is in good repair
and operating condition, normal wear and tear excepted.
(b) Except as described in Section 3.6(a) of the Disclosure
Letter, each Reid Company owns all the properties and assets (whether
real, personal, or mixed and whether tangible or intangible) that it
purports to own located in the Reid Facilities owned or operated by the
Reid Companies or reflected as owned in the books and records of the
Reid Companies, including all of the properties and assets reflected in
the Interim Reid Balance Sheet (except for personal property sold since
the date of the Reid Balance Sheet in the Ordinary Course of Business
of the Reid Companies), and all of the properties and assets purchased
or otherwise acquired by the Reid Companies since the date of the Reid
Balance Sheet (except for personal property acquired and sold since the
date of the Reid Balance Sheet in the Ordinary Course of Business of
the Reid Companies). Except as described in Section 3.6(b) of the
Disclosure Letter, all material properties and assets reflected in the
Reid Balance Sheet are free and clear of all Encumbrances, except for
Permitted Encumbrances.
(c) To Reid's Knowledge, there are no proceedings pending or
threatened that would alter the current zoning classification of the
Reid Facilities or alter any applicable laws, statutes, regulations,
codes, conditions or restrictions related to zoning or land use that
would adversely affect the existing use of the Reid Facilities in the
business of the Reid Companies. Except as described in Section 3.6(c)
of the Disclosure Letter, no Reid Company has received any written
notice from any insurance company of any defects or inadequacies in the
Reid Facilities that would, if not corrected, result in the termination
of existing insurance coverage or a material increase in the present
cost thereof. No Reid Company has received any written notice providing
for or threatening the discontinuation of necessary utilities to the
Reid Facilities. The Reid Parent is not a "foreign person" as that term
is defined in Section 1445 of the IRC.
(d) The assets, properties and rights of the Reid Companies as
of the Closing Date constitute all assets, properties and rights
necessary for the conduct of the business of the Reid Companies as
currently conducted. Except as disclosed in Section 3.6(d) of the
Disclosure Letter, the Reid Companies consist of all of the plastic
packaging operations or assets of the Reid Parent and its direct and
indirect subsidiaries.
3.7 NO UNDISCLOSED LIABILITIES. The Reid Companies have no liabilities
or obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise) except for (a) liabilities or obligations
reflected or reserved against in the Reid
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Balance Sheet, (b) current liabilities incurred by the Reid Companies in the
Ordinary Course of Business since the date of the Reid Balance Sheet, (c)
performance obligations under Contracts disclosed or not required to be
disclosed pursuant to Section 3.14, and (d) matters disclosed in Section 3.7 of
the Disclosure Letter.
3.8 TAXES. Except as set forth in Section 3.8 of the Disclosure
Letter:
(a) Each Reid Company has filed or caused to be filed on a
timely basis all Tax Returns that are or were required to be filed by
it pursuant to applicable Legal Requirements. Each Reid Company has
paid, or made provision for the payment of, all Taxes that have become
due and payable as Taxes imposed on such Reid Company pursuant to those
Tax Returns or otherwise, or pursuant to any assessment received by
such Reid Company, except such Taxes, if any, as are being contested in
good faith and as to which adequate reserves (other than deferred Taxes
reflecting differences between the book and tax basis in assets and
liabilities) have been provided in the applicable Interim Reid Balance
Sheet.
(b) No Reid Company has been granted an extension of time for
filing any Tax Return that has not yet been filed.
(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of each Reid Company are adequate in all
material respects. There exists no proposed tax assessment against any
Reid Company except as disclosed in the Reid Balance Sheet. All Taxes
that any Reid Company is or was required by Legal Requirements to
withhold or collect have been duly withheld or collected and, to the
extent required, have been paid timely to the proper Governmental Body,
including without limitation all estimated payments of Taxes for the
taxable period beginning January 1, 1999 in amounts that the Reid
Parent and each Reid Company believe are appropriate under all Legal
Requirements.
(d) All Tax Returns filed by any Reid Company are true,
correct, and complete in all material respects, with respect to Taxes
imposed on such Reid Company.
(e) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to
any claim for, or the period for the collection or assessment of, Taxes
due from or with respect to any Reid Company for any taxable period.
(f) No Proceeding is pending or, to Reid's Knowledge,
threatened in regard to any Taxes due from or with respect to any Reid
Company or any Tax Return filed by or with respect to any Reid Company.
3.9 NO MATERIAL ADVERSE CHANGE. Since the date of the Reid Balance
Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or financial condition of the Reid
Companies, taken as a whole, except as set forth on Section 3.9 of the
Disclosure Letter.
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3.10 EMPLOYEE BENEFITS.
(a) Section 3.10(a) of the Disclosure Letter lists each Reid
Plan.
(b) Except as set forth in Section 3.10(b) of the Disclosure
Letter:
(i) The terms and operations of each Reid Plan,
including the filing of reports and returns, have at all times
been in accordance with ERISA, the IRC and each other
applicable Legal Requirement, except for any failure to comply
that could not reasonably be expected to have a Reid Material
Adverse Effect.
(ii) No Reid Company has a contribution obligation to
a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA.
(iii) Other than routine claims for benefits, there
are no audits by the IRS or the DOL or actions, suits, claims
or investigations pending or, to Reid's Knowledge, threatened
against or with respect to any of the Reid Plans or their
assets, except for any audits, actions, suits, claims or
investigations that could not reasonably be expected to have a
Reid Material Adverse Effect.
(iv) With respect to any Employee Benefit Plan of any
Reid Company that is a "Defined Benefit Plan" with the meaning
of ERISA Section 3(35), (A) such Reid Company has not incurred
and is not reasonably likely to incur any liability under
Title IV of ERISA (other than for the payment of premiums and
contributions, all of which have been paid when due) and which
have remained unsatisfied, (B) such Reid Company has not
incurred any accumulated funding deficiency within the meaning
of IRC Section 412 which remain outstanding and has not
applied for or obtained a waiver of any minimum funding
standard or an extension of any amortization period under IRC
Section 412, and (C) no "Reportable Event" as defined in
Section 4043 of ERISA) has occurred or is expected to occur
which, in the case of any of clause (A), (B) or (C), could
reasonably be expected to have a Reid Material Adverse Effect.
(v) With respect to each Employee Benefit Plan
currently maintained or contributed to by any Reid Company or
any ERISA Affiliate of a Reid Company, or with respect to
which any Reid Company or ERISA Affiliate of a Reid Company
has liability (the "REID CONTROLLED GROUP PLANS"), each such
Reid Control Group Plan has been operated in compliance with
ERISA, applicable tax qualification requirements and all other
applicable Legal Requirements, except where noncompliance
could not reasonably be expected to have a Reid Material
Adverse Effect.
(vi) None of the Reid Companies, the Reid Parent, any
ERISA Affiliate of a Reid Company nor any plan fiduciary of
any Reid Company Plan has engaged in any material transaction
in violation of Section 406(a) of ERISA or
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any "prohibited transaction" (as defined in IRC Section
4975(c)(1) that would subject any Reid Company, the Company,
Suiza Parent or any ERISA Affiliate of the foregoing to any
material taxes, penalties or other material liabilities
resulting from such transaction.
(c) Except as set forth in Section 3.10(c) of the Disclosure
Letter, no Reid Company is a party to or subject to any collective
bargaining agreement, contract, commitment or arrangement, nor does any
other written agreement determine the terms and conditions of
employment of any employee of any Reid Company, nor will this Agreement
or the transactions contemplated hereby cause a termination or
renegotiation of, or trigger any rights or result in a default under,
any such agreement. To Reid's Knowledge, no attempts are presently
being made to organize or represent any employees or group of employees
of any Reid Company.
(d) No officer, director or employee of any of the Reid
Companies will be entitled to any additional benefits or payments or
any acceleration of the time of vesting of any payment or benefit under
any Reid Plan as a result of the transactions contemplated by this
Agreement either alone or in combination with any other event or
occurrence (whether or not such benefit or payment would be subject to
any excise tax or penalty under Section 280G or Section 4999 of the
Code).
3.11 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
Except as set forth in Section 3.11 of the Disclosure Letter:
(a) Each Reid Company is in compliance in all material
respects with each Legal Requirement that is applicable to it or to the
conduct or operation of its business.
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) constitutes a violation by a Reid
Company of, or a failure on the part of a Reid Company to comply with,
any Legal Requirement, or (ii) may give rise to any obligation on the
part of any Reid Company to undertake, or to bear all or any portion of
the cost of, any remedial action, except where such violation, failure
or obligation would not have a Reid Material Adverse Effect.
(c) No Reid Company has received any outstanding notice from
any Governmental Body or any other Person regarding (i) any actual or
alleged violation of any Legal Requirement, or (ii) any actual or
alleged obligation on the part of a Reid Company to undertake, or to
bear the cost of, any remedial action of any nature, except where such
violation or obligation would not have a Reid Material Adverse Effect.
(d) Each Reid Company holds all Governmental Authorizations
that are required in connection with the business of such Reid Company.
Each such Governmental Authorization is valid and in full force and
effect except where the failure to keep such authorization valid and in
full force and effect will not have a Reid Material Adverse Effect.
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(e) Each Reid Company is in compliance with all of the terms
and requirements of each Governmental Authorization applicable to it,
except where the failure to be in compliance would not have a Reid
Material Adverse Effect.
(f) No Reid Company has received any outstanding notice from
any Governmental Body or any other Person regarding (i) any actual or
alleged violation of any term or requirement of any material
Governmental Authorization, or (ii) any actual or proposed revocation,
withdrawal, suspension, cancellation, termination of, or modification
to any material Governmental Authorization.
(g) All applications required to have been filed for the
renewal of any material Governmental Authorizations of the Reid
Companies have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been made
with respect to such Governmental Authorizations have been duly made on
a timely basis with the appropriate Governmental Bodies.
(h) The Governmental Authorizations held by the Reid Companies
constitute all of the Governmental Authorizations necessary to permit
each Reid Company to lawfully conduct and operate its business in all
material respects in the manner it currently operates such business.
(i) To Reid's Knowledge, since January 1, 1996, none of the
officers, employees or agents of the Reid Companies, nor any other
Person acting on behalf of any of them or any Reid Company has,
directly or indirectly, given or agreed to give any gift or similar
benefit to any customer, supplier, governmental employee or other
person in violation of any Legal Requirement, including, without
limitation, the Foreign Corrupt Practices Act.
(j) Since January 1, 1996, no Reid Company has effected a
recall or withdrawal of any of its products and, to Reid's Knowledge,
no facts have existed that, if known by the applicable Governmental
Body, would have resulted in a recall or withdrawal.
3.12 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Section 3.12(a) of the Disclosure
Letter, there is no Proceeding:
(i) pending or, to Reid's Knowledge, threatened
against any Reid Company that, alone or in the aggregate, has
had or could (if decided adversely) reasonably be expected to
have, a Reid Material Adverse Effect; or
(ii) that challenges, or that may have the effect of
preventing or making illegal, any of the Contemplated
Transactions.
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The Reid Parent has made available, or has caused the
applicable Reid Company to make available, to the Suiza Parent copies
of all pleadings, correspondence, and other documents relating to each
pending Proceeding related to any Reid Company.
(b) Except as set forth in Section 3.12(b) of the Disclosure
Letter:
(i) there is no Order to which any Reid Company is
subject;
(ii) no Affiliate, agent, or employee of any Reid
Company is subject to any Order that materially prohibits such
Affiliate, agent, or employee from engaging in or continuing
any conduct, activity, or practice relating to the business of
such Reid Company; and
(iii) no event has occurred or circumstance exists
that constitutes or results in (with or without notice or
lapse of time) a violation of or failure to comply with any
term or requirement of any Order to which any Reid Company is
subject.
3.13 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Section 3.13 of the Disclosure Letter, since the date of the Reid Balance Sheet,
each Reid Company has conducted its businesses only in the Ordinary Course of
Business and there has not been any Reid Material Adverse Effect or any:
(a) change in the authorized or issued equity interests of any
Reid Company; grant of any option or right to purchase equity interests
in any Reid Company; issuance of any security convertible into equity
interests of any Reid Company; grant of any registration rights;
purchase, redemption, retirement, or other acquisition by such Reid
Company of any equity interests; or declaration or payment of any
dividend or other distribution or payment in respect of equity
interests;
(b) amendment to the Organizational Documents of any Reid
Company;
(c) except to the extent required by an agreement in effect on
the date hereof and listed in Section 3.13 of the Disclosure Letter,
payment or increase by any Reid Company of any bonuses, salaries or
other compensation to any Affiliate of such Reid Company, or (except in
the Ordinary Course of Business) any employee, officer or director of
any Reid Company, or entry into any employment, severance or similar
Contract with any Affiliate or employee, officer or director of any
Reid Company;
(d) adoption of, or increase in the payments to or benefits
under, any Reid Plan;
(e) damage to or destruction or loss of any material asset or
property of any Reid Company that exceeds $100,000 in value,
individually or in the aggregate, and is not covered by insurance;
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(f) entry into, termination of, or receipt of notice of
termination of any Contract or transaction involving a total remaining
commitment by or to any Reid Company that could exceed $100,000 or any
breach or default (or event that with notice or lapse of time would
constitute a breach or default) under any such Contract;
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, license or other disposition of any asset or
property valued in excess of $100,000, individually or in the
aggregate, of any Reid Company or any Encumbrance on any material asset
or property of any Reid Company;
(h) any incurrence of indebtedness for borrowed money, except
in the Ordinary Course of Business, in excess of $100,000 in the
aggregate;
(i) change in the accounting methods used by any Reid Company;
(j) Contract, whether oral or written, by any Reid Company to
do any of the foregoing; or
(k) change in any material Tax elections, material change in
any method of accounting with respect to any material Taxes, material
amendment of any material Tax Return, or settlement or compromise of
any proceeding with respect to any material Tax.
3.14 CONTRACTS; NO DEFAULTS.
(a) Except for Reid Permitted Encumbrances, Section 3.14(a) of
the Disclosure Letter contains a complete and accurate list of:
(i) each Contract that involves performance of
services or delivery of goods or materials by or to any Reid
Company of an amount or value that could exceed $100,000;
(ii) each Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or
receipts of any Reid Company that could exceed $100,000 or
that is otherwise material to any Reid Company;
(iii) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Contract affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or
personal property used by any Reid Company (except personal
property leases, real property leases and installment and
conditional sales agreements having a value per item or
aggregate payments of less than $100,000);
(iv) each Contract containing (A) covenants not to
compete, (B) employee non-solicitation and/or no-hire
agreements, (C) "most favored nations" provisions or (D)
similar agreements that materially restrict the business
activity
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of any Reid Company or limit the freedom of any Reid Company
to engage in any line of business or to compete with any
Person;
(v) each employment, consulting, noncompetition,
separation, collective bargaining, union or labor Contract
applicable to any Reid Company;
(vi) each Contract by and between any Reid Company
and the Reid Parent or any Reid Company or any Affiliate of
any Reid Company or, to Reid's Knowledge, any immediate family
member of an Affiliate of a Reid Company;
(vii) each Contract under which any Reid Company is
obligated to indemnify, or entitled to indemnification from,
any third party, excluding any agreement that requires
indemnification solely for a breach of such agreement and
excluding any indemnification obligation or right that could
not reasonably be expected to involve more than $100,000;
(viii) each Contract for capital expenditures by any
Reid Company in excess of $100,000;
(ix) each Contract to which any Reid Company is a
party concerning Intellectual Property; and
(x) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) With respect to the Contracts identified in Section
3.14(a) of the Disclosure Letter:
(i) each Contract is in full force and effect and is
valid and enforceable in accordance with its terms except to
the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other laws relating or affecting creditors'
rights generally and by general equity principles;
(ii) the Reid Parent has delivered to the Suiza
Parent a copy of each such Contract that is in writing and a
written summary accurately describing the material provisions
of each such Contract that is not in writing;
(iii) each Reid Company is in compliance with all
material terms and requirements of such Contracts; and
(iv) no Reid Company has given to or received from
any other Person any notice regarding any actual or alleged
violation or default of any such Contract.
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(c) Section 3.14(c) of the Disclosure Letter includes a
complete list of each customer of any Reid Company that has accounted
for more than $1,000,000 in gross sales of the Reid Companies for the
twelve months ended December 31, 1998 (the "REID MATERIAL CUSTOMERS").
None of the Reid Material Customers has notified any Reid Company or
the Reid Parent of any intention to, or to Reid's Knowledge, otherwise
threatened to, terminate or materially alter its relationship with any
Reid Company, and there has been no material dispute with a Reid
Material Customer since January 1, 1997.
3.15 INSURANCE.
(a) The Reid Parent has delivered to the Suiza Parent true and
complete copies of all policies of insurance to which any Reid Company
is a party or under which any Reid Company, or any director (or similar
Affiliate) of a Reid Company, is covered.
(b) Section 3.15 of the Disclosure Letter describes:
(i) any self-insurance arrangement by any Reid
Company, including any reserves established thereunder; and
(ii) all material obligations of any Reid Company to
third parties with respect to insurance (including such
obligations under leases and service agreements) and
identifies the policy under which such coverage is provided.
(c) All policies to which any Reid Company is a party or that
provide coverage to any Reid Company, taken together, provide adequate
insurance coverage for the assets and the operations of the Reid
Companies for all risks normally insured against by a Person carrying
on the same business as the Reid Companies.
(d) No Reid Company has received (i) any refusal of coverage
or any notice that a defense will be afforded with reservation of
rights, or (ii) any notice of cancellation or any other indication that
any insurance policy is no longer in full force or effect or will not
be renewed or will be renewed only with a material increase in cost or
that the issuer of any policy is not willing or able to perform its
obligations thereunder.
3.16 ENVIRONMENTAL MATTERS. Except as set forth in Section 3.16 of the
Disclosure Letter and except as would not, individually or in the aggregate,
reasonably be expected to result in a Reid Material Adverse Effect:
(a) No Reid Company has violated or is in violation of any
Environmental Law.
(b) None of the Reid Facilities or any facility formerly owned
or operated by the Reid Parent or any Reid Company contains any
Hazardous Materials in amounts exceeding the levels permitted by
applicable Environmental Law and/or under circumstances that would
require remediation or removal under Environmental Law.
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(c) No Reid Company has engaged in any Hazardous Activities,
and no Hazardous Materials have been disposed of, arranged to be
disposed of, released or transported in violation of any applicable
Environmental Law or in a manner that could reasonably be expected to
result in liability under or relating to Environmental Laws, to or from
any of the Reid Facilities or any facility formerly owned or operated
by the Reid Parent or any Reid Company.
(d) There have been no material environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance
or noncompliance with, or potential liability under or relating to, any
Environmental Law conducted by or on behalf of any Reid Company, or
which are in the possession of any Reid Company, relating to the
facilities, business or activities of any Reid Company or any of the
Reid Facilities that have not been made available to the Suiza Parents.
(e) Neither any Reid Company nor the Reid Parent has received
any actual or threatened Order or notice or other written communication
from any Governmental Body or the current or prior owner or operator of
any Reid Facilities or any other Person, of any actual or potential
violation or failure to comply with any Environmental Law, or of any
actual or threatened obligation to undertake or bear any cost, damage,
expense, liability, or obligation arising from or under any
Environmental Law.
(f) No Reid Company has assumed, contractually or by operation
of law, any liability or obligation under or relating to Environmental
Laws.
3.17 LABOR RELATIONS; COMPLIANCE. Section 3.17 of the Disclosure Letter
includes a complete list of all current employees of each Reid Company as of the
date set forth therein, including date of employment, current title and
compensation, and date and percentage of last increase in compensation and
indicating any employees on disability or other permitted leaves of absence.
There is not presently pending or existing (a) any strike, slowdown, picketing,
work stoppage, or material employee grievance process, or (b) any material
Proceeding against or affecting any Reid Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters. To Reid's Knowledge, no event has occurred or circumstance exists that
could provide the basis for any work stoppage or other material labor dispute.
There is no lockout of any employees by any Reid Company. Each Reid Company has
made good faith efforts to comply with, and to Reid's Knowledge has complied in
all material respects with, all Legal Requirements relating to employment, equal
employment opportunity, nondiscrimination, immigration, wages, hours, benefits,
collective bargaining, the payment of social security and similar taxes,
occupational safety and health, and plant closing.
3.18 INTELLECTUAL PROPERTY.
(a) Section 3.18(a) of the Disclosure Schedule contains a
complete and accurate list and summary description of, with respect to
all Intellectual Property owned, held or used by each Reid Company
("REID IP"), all patents, registrations or applications and all
material unregistered Reid IP.
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(b) Except as disclosed in Section 3.18(b) of the Disclosure
Schedule, (i) the Reid Companies own or have the right to use all the
Intellectual Property necessary or desirable to conduct their
businesses in all material respects as currently conducted and
consistent with past practice, free of all Encumbrances; (ii) to Reid's
Knowledge, all of the Reid IP is valid, enforceable and unexpired, has
not been abandoned, does not infringe, impair or make unauthorized use
of ("INFRINGE") the Intellectual Property of any third party and is not
being Infringed by any third party; (iii) no Order or Proceeding is
pending, or to Reid's Knowledge, threatened, that limits or challenges
the ownership, use, validity or enforceability of any Reid IP; and (iv)
the Reid Companies have taken all reasonable steps to protect, maintain
and safeguard the Reid IP, including without limitation the Reid IP
that is confidential in nature.
3.19 BROKERS OR FINDERS. None of the Reid Parties or their Affiliates
or agents have incurred any obligation or liability, contingent or otherwise,
for brokerage or finders' fees or agents' commissions or other similar payment
in connection with this Agreement or the Contemplated Transactions for which any
Reid Party, Holdings, the Company, or any Suiza Party or any of their Affiliates
will be liable, except for the $5 million fee, plus expenses, to be paid to
Vestar at the Effective Time pursuant to the VCP Management Agreement and as set
forth in Section 3.19 of the Disclosure Letter.
3.20 COMPETING INTERESTS. Except as set forth in Section 3.20 of the
Disclosure Letter, neither the Reid Parent, nor any Person that controls, is
controlled by or is under common control with either Reid Parent, nor, to Reid's
Knowledge, any Affiliate of any Reid Company owns, directly or indirectly, an
interest in any Person that is a competitor, customer or supplier of any Reid
Company or that otherwise has material business dealings with any Reid Company,
other than ownership of less than 1% of publicly traded securities of such
Person.
3.21 INVESTMENT INTENT. The Reid Parent is acquiring its Member Units
pursuant to the Merger for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act.
3.22 PRODUCT WARRANTY AND PRODUCT LIABILITY. There are no material
product warranty or product liability claims pending or, to Reid's Knowledge,
threatened against the Reid Parent or any Reid Company. The Reid Parent has made
available to the Suiza Parents a complete and accurate list of all warranty
information provided to or relied upon by their respective customers. Section
3.22 of the Disclosure Letter sets forth a complete and accurate summary of
product warranty or product liability claims over $100,000 made against the Reid
Parent or any Reid Company within the past two years.
3.23 YEAR 2000 COMPLIANCE. Except as set forth in Section 3.23 of the
Disclosure Letter, to Reid's Knowledge, the properties and assets of each Reid
Company, including, but not limited to, computer hardware, microprocessor driven
equipment, software and data, owned or used by any Reid Company, will accurately
process, in all material respects, date and time data after December 31, 1999,
and no Reid Company will suffer a material loss of functional ability when
processing dates and related data outside the 1900-1999 year range.
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3.24 NO MISREPRESENTATIONS. The representations, warranties and
statements made by the Reid Parties in or pursuant to this Agreement are true,
complete and correct in all material respects and do not contain any untrue
statement of a material fact or omit to state any material fact necessary to
make any such representation, warranty or statement, under the circumstances in
which it is made, not misleading.
SECTION 4
REPRESENTATIONS AND WARRANTIES OF SUIZA PARTIES
The Suiza Parent represents and warrants to the Reid Parent as follows
(provided, however, that the Disclosure Letter sets forth certain exceptions to
such representations and warranties or discloses certain matters in response to
such representations and warranties, in each case identified by the applicable
Section numbers below):
4.1 ORGANIZATION AND GOOD STANDING.
(a) Each Suiza Company and the Suiza Parent is a corporation
or limited liability company duly organized, validly existing, and in
good standing under the laws of its state of formation, with full
corporate or limited liability company power and authority to conduct
its business as it is now being conducted. Each Suiza Company is duly
qualified to do business as a foreign corporation and is in good
standing under the laws of each state or other jurisdiction in which
the nature of the activities conducted by it or the ownership or
leasing of its properties requires such qualification, except where
such failure to so qualify or to be in good standing could not
reasonably be expected to have a Suiza Material Adverse Effect.
(b) The Suiza Parent has made available to the Reid Parent
complete and correct copies of the Organizational Documents of each
Suiza Company, as currently in effect.
(c) Except as listed on Section 4.1(c) of the Disclosure
Letter, no Suiza Company owns any direct or indirect equity or debt
interest in any other Person (except other Suiza Companies), and no
Suiza Company is obligated or committed to acquire any such interest.
4.2 AUTHORITY; NO CONFLICT; CONSENTS.
(a) This Agreement constitutes the legal, valid and binding
obligation of each Suiza Company and the Suiza Parent, enforceable
against such entities in accordance with its terms except to the extent
that its enforceability may be limited by bankruptcy, insolvency,
reorganization, fraudulent conveyance, fraudulent transfer, moratorium
or other laws relating to or affecting creditors' rights generally and
by general equity principles.
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(b) Each Suiza Company and the Suiza Parent have the requisite
corporate right, power, authority and capacity to execute and deliver
this Agreement and to perform their obligations under this Agreement.
The execution, delivery and performance of this Agreement by each Suiza
Company and the Suiza Parent have been duly authorized by all necessary
corporate action on the part of such entities and their owners.
(c) Except as disclosed in Section 4.2 of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions
will, directly or indirectly:
(i) conflict with any provision of the Organizational
Documents of any Suiza Company or the Suiza Parent;
(ii) result in a violation of, or give any
Governmental Body or other Person the right to exercise any
remedy or obtain any relief under, any Legal Requirement or
any Order to which any Suiza Company or the Suiza Parent is
subject;
(iii) result in a violation of any of the terms or
requirements of, or give any Governmental Body the right to
revoke, withdraw, suspend, cancel, terminate, or modify, any
Governmental Authorization that is held by any Suiza Company
or the Suiza Parent;
(iv) result in a violation or breach of any provision
of, or give any Person the right to declare a default or
exercise any remedy under, or to accelerate the maturity or
performance of, or to cancel, terminate, or modify, any
Contract of any Suiza Company described in Section 4.14(a); or
(v) result in the imposition or creation of any
Encumbrance upon any of the assets owned or used by any Suiza
Company.
(d) No Suiza Company nor the Suiza Parent is or will be
required to obtain any material Consent from any Person or Governmental
Body in connection with the execution and delivery of this Agreement or
the consummation or performance of any of the Contemplated
Transactions, except the Material Consents disclosed in Section 4.2 of
the Disclosure Letter, which will be obtained by Closing.
4.3 CAPITALIZATION. The authorized and outstanding equity interests of
each Suiza Company (without giving effect to the Suiza Packaging Restructuring)
are listed in Section 4.3 of the Disclosure Letter. The Suiza Parent or one of
the Suiza Companies is and will be on the Closing Date the record and beneficial
owner and holder of all such equity interests, free and clear of all
Encumbrances except as set forth in Section 4.3 of the Disclosure Letter. All of
such equity interests have been duly authorized and validly issued and are fully
paid and nonassessable. There are no Contracts relating to the issuance, sale,
or transfer of any equity interests in any Suiza Company except as set forth in
Section 4.3 of the Disclosure Letter. None
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of the outstanding equity interests in any Suiza Company was issued in violation
of the Securities Act.
4.4 FINANCIAL STATEMENTS. Included within Section 4.4 of the Disclosure
Letter is the unaudited combined balance sheet and unaudited combined statement
of operations of Suiza Packaging (Franklin Plastics, Inc. and subsidiaries for
the year ended December 31, 1998 and the PCI Companies for the period from the
date of acquisition to December 31, 1998) (together, the "SUIZA FINANCIAL
STATEMENTS"). The Suiza Financial Statements fairly present in all material
respects the financial condition and results of operations of Suiza Packaging,
as at and for the year ended December 31, 1998. The Suiza Financial Statements
have been prepared in accordance with generally accepted accounting principles,
consistently applied, subject to the absence of footnote disclosure. All
inventories and raw materials reflected in the balance sheets included in the
Suiza Financial Statements (the "SUIZA BALANCE SHEET") or acquired since the
date thereof are, in all material respects, of good and merchantable quality,
salable in the Ordinary Course of Business (in the case of inventory held for
sale), currently usable (in the case of other inventory and raw materials), or
adequate reserves have been established with respect thereto. All accounts
receivable, net of applicable reserves, reflected in the Suiza Balance Sheet or
acquired since the date thereof arose in the Ordinary Course of Business and are
not subject to material set-off, counterclaim or other reduction.
4.5 BOOKS AND RECORDS. The books of account and minute books of each
Suiza Company, all of which have been made available to the Reid Parent, are
complete and correct in all material respects. At the Closing, all of those
books and records will be in the possession of the applicable Suiza Company.
4.6 TITLE TO PROPERTIES; ENCUMBRANCES.
(a) Section 4.6(a) of the Disclosure Letter includes a complete
list (including the street address, where applicable) of each Suiza
Facility and one or more recent asset registers listing tangible
personal property owned by the Suiza Companies as of the date
indicated. The tangible personal property of the Suiza Companies is in
good repair and operating condition, normal wear and tear excepted.
(b) Except as described in Section 4.6(a) of the Disclosure Letter,
each Suiza Company owns all the properties and assets (whether real,
personal, or mixed and whether tangible or intangible) that it purports
to own located in the Suiza Facilities owned or operated by the Suiza
Companies or reflected as owned in the books and records of the Suiza
Companies, including all of the properties and assets reflected in the
Suiza Balance Sheet (except for personal property sold since the date
of the Suiza Balance Sheet in the Ordinary Course of Business of the
Suiza Companies), and all of the properties and assets purchased or
otherwise acquired by the Suiza Companies since the date of the Suiza
Balance Sheet (except for personal property acquired and sold since the
date of the Suiza Balance Sheet in the Ordinary Course of Business of
the Suiza Companies). Except as described in Section 4.6(b) of the
Disclosure Letter, all material properties and assets reflected in the
Suiza Balance Sheet are free and clear of all Encumbrances, except for
Permitted Encumbrances.
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(c) To Suiza's Knowledge, there are no proceedings pending or
threatened that would alter the current zoning classification of the
Suiza Facilities or alter any applicable laws, statutes, regulations,
codes, conditions or restrictions related to zoning or land use that
would adversely affect the existing use of the Suiza Facilities in the
business of the Suiza Companies. Except as described in Section 4.6(c)
of the Disclosure Letter, no Suiza Company has received any written
notice from any insurance company of any defects or inadequacies in the
Suiza Facilities that would, if not corrected, result in the
termination of existing insurance coverage or a material increase in
the present cost thereof. No Suiza Company has received any written
notice providing for or threatening the discontinuation of necessary
utilities to the Suiza Facilities. The Suiza Parent is not a "foreign
person" as that term is defined in Section 1445 of the IRC.
(d) The assets, properties and rights of the Suiza Companies
as of the Closing Date constitute all assets, properties and rights
necessary for the conduct of the business of the plastics packaging
business of the Suiza Parties as currently conducted in the United
States, except for (i) the operations of Neva Plastics, Inc. in Puerto
Rico, and (ii) the operations conducted by Affiliates of Suiza Foods
that manufacture plastic packaging products solely for their own use.
Except as disclosed in Section 4.6(d) of the Disclosure Letter, the
Suiza Parent or the Suiza Companies own all of such plastic packaging
operations or assets.
4.7 NO UNDISCLOSED LIABILITIES. The Suiza Companies have no liabilities
or obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise) except for (a) liabilities or obligations
reflected or reserved against in the Suiza Balance Sheet, (b) current
liabilities incurred by the Suiza Companies in the Ordinary Course of Business
since the date of the Suiza Balance Sheet, (c) performance Obligations under
Contracts disclosed or not required to be disclosed pursuant to Section 4.14,
and (d) matters disclosed in Section 4.7 of the Disclosure Letter.
4.8 TAXES. Except as set forth in Section 4.8 of the Disclosure Letter:
(a) Each Suiza Company has filed or caused to be filed on a
timely basis all Tax Returns that are or were required to be filed by
it pursuant to applicable Legal Requirements. Each Suiza Company has
paid, or made provision for the payment of, all Taxes that have become
due and payable as Taxes imposed on such Suiza Company pursuant to
those Tax Returns or otherwise, or pursuant to any assessment received
by such Suiza Company, except such Taxes, if any, as are being
contested in good faith and as to which adequate reserves (other than
deferred Taxes reflecting differences between the book and tax basis in
assets and liabilities) have been provided in the applicable Interim
Suiza Balance Sheet.
(b) No Suiza Company has been granted an extension of time for
filing any Tax Return that has not yet been filed.
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(c) The charges, accruals, and reserves with respect to Taxes
on the respective books of each Suiza Company are adequate in all
material respects. There exists no proposed tax assessment against any
Suiza Company except as disclosed in the Suiza Balance Sheet. All Taxes
that any Suiza Company is or was required by Legal Requirements to
withhold or collect have been duly withheld or collected and, to the
extent required, have been paid timely to the proper Governmental Body;
including without limitation all estimated payments of Taxes for the
taxable period beginning January 1, 1999 in amounts that the Suiza
Parent and each Suiza Company believes are appropriate under all Legal
Requirements.
(d) All Tax Returns filed by any Suiza Company are true,
correct, and complete in all material respects, with respect to Taxes
imposed on such Suiza Company.
(e) There are no outstanding agreements, waivers, or
arrangements extending the statutory period of limitation applicable to
any claim for, or the period for the collection or assessment of, Taxes
due from or with respect to any Suiza Company for any taxable period.
(f) No Proceeding is pending or, to Suiza's Knowledge,
threatened in regard to any Taxes due from or with respect to any Suiza
Company or any Tax Return filed by or with respect to any Suiza
Company.
4.9 NO MATERIAL ADVERSE CHANGE. Since the date of the Suiza Balance
Sheet, there has not been any material adverse change in the business,
operations, properties, prospects, assets, or financial condition of the Suiza
Companies, taken as a whole, except as set forth on Section 4.9 of the
Disclosure Letter.
4.10 EMPLOYEE BENEFITS.
(a) Section 4.10(a) of the Disclosure Letter lists each Suiza
Plan.
(b) Except as set forth in Section 4.10(b) of the Disclosure
Letter:
(i) The terms and operations of each Suiza Plan,
including the filing of reports and returns, have at all times
been in accordance with ERISA, the IRC and each other
applicable Legal Requirement, except for any failure to comply
that could not reasonably be expected to have a Suiza Material
Adverse Effect.
(ii) No Suiza Company has a contribution obligation
to a "multiemployer plan" within the meaning of Section
4001(a)(3) of ERISA.
(iii) Other than routine claims for benefits, there
are no audits by the IRS or the DOL or actions, suits, claims
or investigations pending or, to Suiza's Knowledge, threatened
against or with respect to any of the Suiza Plans or their
assets except for any audits, actions, suits, claims or
investigations that could not reasonably be expected to have a
Suiza Material Adverse Effect.
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(iv) With respect to any Employee Benefit Plan of any
Suiza Company that is a "Defined Benefit Plan" with the
meaning of ERISA Section 3(35), (A) such Suiza Company has not
incurred and is not reasonably likely to incur any liability
under Title IV of ERISA (other than for the payment of
premiums and contributions, all of which have been paid when
due) and which have remained unsatisfied, (B) such Suiza
Company has not incurred any accumulated funding deficiency
within the meaning of IRC Section 412 which remains
outstanding and has not applied for or obtained a waiver of
any minimum funding standard or an extension of any
amortization period under IRC Section 412, and (C) no
"Reportable Event" as defined in Section 4043 of ERISA) has
occurred or is expected to occur, which in the case of any of
clause (A), (B) or (C), could reasonably be expected to have a
Suiza Material Adverse Effect.
(v) With respect to each Employee Benefit Plan
currently maintained or contributed to by any Suiza Company or
any ERISA Affiliate of a Suiza Company, or with respect to
which any Suiza Company or ERISA Affiliate of a Suiza Company
has liability (the "SUIZA CONTROLLED GROUP PLANS"), each such
Suiza Control Group Plan has been operated in compliance with
ERISA, applicable tax qualification requirements and all other
applicable Legal Requirements except where noncompliance could
not reasonably be expected to have a Suiza Material Adverse
Effect.
(vi) None of the Suiza Companies, the Suiza Parent,
any ERISA Affiliate of a Suiza Company nor any plan fiduciary
of any Suiza Company Plan has engaged in any material
transaction in violation of Section 406(a) of ERISA or any
"prohibited transaction" (as defined in IRC Section 4975(c)(1)
that would subject any Suiza Company, the Company, the Reid
Parent or any ERISA Affiliate of the foregoing to any material
taxes, penalties or other material liabilities resulting from
such transaction.
(c) Except as set forth in Section 4.10(c) of the Disclosure
Letter, no Suiza Company is a party to or subject to any collective
bargaining agreement, contract, commitment or arrangement, nor does any
other written agreement determine the terms and conditions of
employment of any employee of any Suiza Company, nor will this
Agreement or the transactions contemplated hereby cause a termination
or renegotiation of, or trigger any rights or result in a default
under, any such agreement. To Suiza's Knowledge, no attempts are
presently being made to organize or represent any employees or group of
employees of any Suiza Company.
(d) No officer, director or employee of any of the Suiza
Companies will be entitled to any additional benefits or payments or
any acceleration of the time of vesting of any payment or benefit under
any Suiza Plan as a result of the transactions contemplated by this
Agreement either alone or in combination with any other event or
occurrence (whether or not such benefit or payment would be subject to
any excise tax or penalty under Section 280G or Section 4999 of the
Code).
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4.11 COMPLIANCE WITH LEGAL REQUIREMENTS; GOVERNMENTAL AUTHORIZATIONS.
Except as set forth in Section 4.11 of the Disclosure Letter:
(a) Each Suiza Company is in compliance in all material
respects with each Legal Requirement that is applicable to it or to the
conduct or operation of its business.
(b) No event has occurred or circumstance exists that (with or
without notice or lapse of time) (i) constitutes a violation by a Suiza
Company of, or a failure on the part of a Suiza Company to comply with,
any Legal Requirement, or (ii) may give rise to any obligation on the
part of any Suiza Company to undertake, or to bear all or any portion
of the cost of, any remedial action, except where such violation,
failure or obligation would not have a Suiza Material Adverse Effect.
(c) No Suiza Company has received any outstanding notice from
any Governmental Body or any other Person regarding (i) any actual or
alleged violation of any Legal Requirement, or (ii) any actual or
alleged obligation on the part of a Suiza Company to undertake, or to
bear the cost of, any remedial action of any nature, except where such
violation or obligation would not have a Suiza Material Adverse Effect.
(d) Each Suiza Company holds all Governmental Authorizations
that are required in connection with the business of such Suiza
Company. Each such Governmental Authorization is valid and in full
force and effect except where the failure to keep such authorization
valid and in full force and effect will not have a Suiza Material
Adverse Effect.
(e) Each Suiza Company is in compliance with all of the terms
and requirements of each Governmental Authorization applicable to it,
except where the failure to be in compliance would not have a Suiza
Material Adverse Effect.
(f) No Suiza Company has received any outstanding notice from
any Governmental Body or any other Person regarding (i) any actual or
alleged violation of any term or requirement of any material
Governmental Authorization, or (ii) any actual or proposed revocation,
withdrawal, suspension, cancellation, termination of, or modification
to any material Governmental Authorization.
(g) All applications required to have been filed for the
renewal of any material Governmental Authorizations of the Suiza
Companies have been duly filed on a timely basis with the appropriate
Governmental Bodies, and all other filings required to have been made
with respect to such Governmental Authorizations have been duly made on
a timely basis with the appropriate Governmental Bodies.
(h) The Governmental Authorizations held by the Suiza
Companies constitute all of the Governmental Authorizations necessary
to permit each Suiza Company to lawfully conduct and operate its
business in all material respects in the manner it currently operates
such business.
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(i) To Suiza's Knowledge, since January 1, 1996, none of the
officers, employees or agents of the Suiza Companies, nor any other
Person acting on behalf of any of them or any Suiza Company has,
directly or indirectly, given or agreed to give any gift or similar
benefit to any customer, supplier, governmental employee or other
person in violation of any Legal Requirement, including, without
limitation, the Foreign Corrupt Practices Act.
(j) Since January 1, 1996, no Suiza Company has effected a
recall or withdrawal of any of its products, and, to Suiza's Knowledge,
no facts have existed that, if known by the applicable Governmental
Body, would have resulted in a recall or withdrawal.
4.12 LEGAL PROCEEDINGS; ORDERS.
(a) Except as set forth in Section 4.12(a) of the Disclosure
Letter, there is no Proceeding:
(i) pending or, to Suiza's Knowledge, threatened
against any Suiza Company that, alone or in the aggregate, has
had or could (if decided adversely) reasonably be expected to
have, a Suiza Material Adverse Effect; or
(ii) that challenges, or that may have the effect of
preventing or making illegal, any of the Contemplated
Transactions.
The Suiza Parent has made available, or have caused the
applicable Suiza Company to make available, to the Reid Parent copies
of all pleadings, correspondence, and other documents relating to each
pending Proceeding related to any Suiza Company.
(b) Except as set forth in Section 4.12(b) of the Disclosure
Letter:
(i) there is no Order to which any Suiza Company is
subject;
(ii) no Affiliate, agent, or employee of any Suiza
Company is subject to any Order that materially prohibits such
Affiliate, agent, or employee from engaging in or continuing
any conduct, activity, or practice relating to the business of
such Suiza Company; and
(iii) no event has occurred or circumstance exists
that constitutes or results in (with or without notice or
lapse of time) a violation of or failure to comply with any
term or requirement of any Order to which any Suiza Company is
subject.
4.13 ABSENCE OF CERTAIN CHANGES AND EVENTS. Except as set forth in
Section 4.13 of the Disclosure Letter, since the date of the Suiza Balance
Sheet, each Suiza Company has
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conducted its businesses only in the Ordinary Course of Business and there has
not been any Suiza Material Adverse Effect or any:
(a) change in the authorized or issued equity interests of any
Suiza Company; grant of any option or right to purchase equity
interests in any Suiza Company; issuance of any security convertible
into equity interests of any Suiza Company; grant of any registration
rights; purchase, redemption, retirement, or other acquisition by such
Suiza Company of any equity interests; or declaration or payment of any
dividend or other distribution or payment in respect of equity
interests;
(b) amendment to the Organizational Documents of any Suiza
Company;
(c) except to the extent required by an agreement in effect on
the date hereof and listed in Section 4.13 of the Disclosure Letter,
payment or increase by any Suiza Company of any bonuses, salaries or
other compensation to any Affiliate of such Suiza Company, or (except
in the Ordinary Course of Business) any employee, officer or director
of any Suiza Company, or entry into any employment, severance or
similar Contract with any Affiliate or employee, officer or director of
any Suiza Company;
(d) adoption of, or increase in the payments to or benefits
under, any Suiza Plan.
(e) damage to or destruction or loss of any material asset or
property of any Suiza Company that exceeds $100,000 in value,
individually or in the aggregate, and is not covered by insurance;
(f) entry into, termination of, or receipt of notice of
termination of any Contract or transaction involving a total remaining
commitment by or to any Suiza Company that could exceed $100,000 or any
breach or default (or event that with notice or lapse of time would
constitute a breach or default) under any such Contract;
(g) sale (other than sales of inventory in the Ordinary Course
of Business), lease, license or other disposition of any asset or
property valued in excess of $100,000, individually or in the
aggregate, of any Suiza Company or any Encumbrance on any material
asset or property of any Suiza Company;
(h) any incurrence of indebtedness for borrowed money, except
in the Ordinary Course of Business, in excess of $100,000 in the
aggregate;
(i) change in the accounting methods used by any Suiza
Company; or
(j) Contract, whether oral or written, by any Suiza Company to
do any of the foregoing; or
(k) change in any material Tax elections, material change in
any method of accounting with respect to any material Taxes, material
amendment of any
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material Tax Return, or settlement or compromise of any proceeding with
respect to any material Tax.
4.13A ABSENCE OF CERTAIN CHANGES AND EVENTS -- FRANKLIN. Except as set
forth in Section 4.13A of the Disclosure Letter, since the date of the Suiza
Balance Sheet, Franklin has conducted its business only in the Ordinary Course
of Business and has not purchased, redeemed, retired, or acquired any of its
equity interests, or declared or paid any dividend or other distribution or
payment in respect of its equity interests.
4.14 CONTRACTS; NO DEFAULTS.
(a) Except for Suiza Permitted Encumbrances, Section 4.14(a)
of the Disclosure Letter contains a complete and accurate list of:
(i) each Contract that involves performance of
services or delivery of goods or materials by or to any Suiza
Company of an amount or value that could exceed $100,000;
(ii) each Contract that was not entered into in the
Ordinary Course of Business and that involves expenditures or
receipts of any Suiza Company that could exceed $100,000 or
that is otherwise material to any Suiza Company;
(iii) each lease, rental or occupancy agreement,
license, installment and conditional sale agreement, and other
Contract affecting the ownership of, leasing of, title to, use
of, or any leasehold or other interest in, any real or
personal property used by any Suiza Company (except personal
property leases, real property leases and installment and
conditional sales agreements having a value per item or
aggregate payments of less than $100,000);
(iv) each Contract containing (A) covenants not to
compete, (B) employee non-solicitation and/or no-hire
agreements, (C) "most-favored nations" provisions; or (D)
similar agreements that materially restrict the business
activity of any Suiza Company or limit the freedom of any
Suiza Company to engage in any line of business or to compete
with any Person;
(v) each employment, consulting, noncompetition,
separation, collective bargaining, union or labor Contract
applicable to any Suiza Company;
(vi) each Contract by and between any Suiza Company
and the Suiza Parent or any Suiza Company or any Affiliate of
any Suiza Company or, to Suiza's Knowledge, any immediate
family member of an Affiliate of a Suiza Company;
(vii) each Contract under which any Suiza Company is
obligated to indemnify, or entitled to indemnification from,
any third party, excluding any
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agreement that requires indemnification solely for a breach of
such agreement and excluding any indemnification obligation or
right that could not reasonably be expected to involve more
than $100,000;
(viii) each Contract for capital expenditures by any
Suiza Company in excess of $100,000;
(ix) each Contract to which any Suiza Company is a
party concerning Intellectual Property; and
(x) each amendment, supplement, and modification
(whether oral or written) in respect of any of the foregoing.
(b) With respect to the Contracts identified in Section
4.14(a) of the Disclosure Letter:
(i) each Contract is in full force and effect and is
valid and enforceable in accordance with its terms except to
the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent transfer,
moratorium or other laws relating or affecting creditors'
rights generally and by general equity principles;
(ii) the Suiza Parent has delivered to the Reid
Parent a copy of each such Contract that is in writing and a
written summary accurately describing the material provisions
of each such Contract that is not in writing;
(iii) each Suiza Company is in compliance with all
material terms and requirements of such Contracts; and
(iv) no Suiza Company has given to or received from
any other Person any notice regarding any actual or alleged
violation or default of any such Contract.
(c) Section 4.14(c) of the Disclosure Letter includes a
complete list of each customer of any Suiza Company that has accounted
for more than $1,000,000 in gross sales of the Suiza Companies for the
twelve months ended December 31, 1998 (the "SUIZA MATERIAL CUSTOMERS").
None of the Suiza Material Customers has notified any Suiza Company or
the Suiza Parent of any intention to, or to Suiza's Knowledge,
otherwise threatened to, terminate or materially alter its relationship
with any Suiza Company, and there has been no material dispute with a
Suiza Material Customer since January 1, 1997.
4.15 INSURANCE.
(a) The Suiza Parent has delivered to the Reid Parent true and
complete copies of all policies of insurance to which any Suiza Company
is a party or under which
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any Suiza Company, or any director (or similar Affiliate) of a Suiza
Company, is covered.
(b) Section 4.15 of the Disclosure Letter describes:
(i) any self-insurance arrangement by any Suiza
Company, including any reserves established thereunder; and
(ii) all material obligations of any Suiza Company to
third parties with respect to insurance (including such
obligations under leases and service agreements) and
identifies the policy under which such coverage is provided.
(c) All policies to which any Suiza Company is a party or that
provide coverage to any Suiza Company, taken together, provide adequate
insurance coverage for the assets and the operations of the Suiza
Companies for all risks normally insured against by a Person carrying
on the same business as the Suiza Companies.
(d) No Suiza Company has received (i) any refusal of coverage
or any notice that a defense will be afforded with reservation of
rights, or (ii) any notice of cancellation or any other indication that
any insurance policy is no longer in full force or effect or will not
be renewed or will be renewed only with a material increase in cost or
that the issuer of any policy is not willing or able to perform its
obligations thereunder.
4.16 ENVIRONMENTAL MATTERS. Except as set forth in Section 4.16 of the
Disclosure Letter and except as would not, individually or in the aggregate,
reasonably be expected to result in a Suiza Material Adverse Effect:
(a) No Suiza Company has violated or is in violation of any
Environmental Law.
(b) None of the Suiza Facilities or any facility formerly
owned or operated by the Suiza Parent or any Suiza Company contains any
Hazardous Materials in amounts exceeding the levels permitted by
applicable Environmental Law and/or under circumstances that would
require remediation or removal under Environmental Law.
(c) No Suiza Company has engaged in any Hazardous Activities,
and no Hazardous Materials have been disposed of, arranged to be
disposed of, released or transported in violation of any applicable
Environmental Law or in a manner that could reasonably be expected to
result in liability under or relating to Environmental Laws, to or from
any of the Suiza Facilities or any facility formerly owned or operated
by the Suiza Parent or any Suiza Company.
(d) There have been no material environmental investigations,
studies, audits, tests, reviews or other analyses regarding compliance
or noncompliance with, or potential liability under or relating to, any
Environmental Law conducted by or on behalf of any Suiza Company, or
which are in the possession of any Suiza Company, relating to the
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facilities, business or activities of any Suiza Company or any of the
Suiza Facilities that have not been made available to the Reid Parents.
(e) No Suiza Company or the Suiza Parent has received any
actual or threatened Order or notice or other written communication
from any Governmental Body or the current or prior owner or operator of
any Suiza Facilities or any other Person, of any actual or potential
violation or failure to comply with any Environmental Law, or of any
actual or threatened obligation to undertake or bear any cost, damage,
expense, liability, or obligation arising from or under any
Environmental Law.
(f) No Suiza Company has assumed, contractually or by
operation of law, any liability or obligation under or relating to
Environmental Laws.
4.17 LABOR RELATIONS; COMPLIANCE. Section 4.17 of the Disclosure Letter
includes a complete list of all current employees of each Suiza Company as of
the date set forth therein, including date of employment, current title and
compensation, and date and percentage of last increase in compensation and
indicating any employees on disability or other permitted leaves of absence.
There is not presently pending or existing (a) any strike, slowdown, picketing,
work stoppage, or material employee grievance process, or (b) any material
Proceeding against or affecting any Suiza Company relating to the alleged
violation of any Legal Requirement pertaining to labor relations or employment
matters. To Suiza's Knowledge, no event has occurred or circumstance exists that
could provide the basis for any work stoppage or other material labor dispute.
There is no lockout of any employees by any Suiza Company. Each Suiza Company
has made good faith efforts to comply with, and to Suiza's Knowledge has
complied in all material respects with, all Legal Requirements relating to
employment, equal employment opportunity, nondiscrimination, immigration, wages,
hours, benefits, collective bargaining, the payment of social security and
similar taxes, occupational safety and health, and plant closing.
4.18 INTELLECTUAL PROPERTY.
(a) Section 4.18(a) of the Disclosure Schedule contains a
complete and accurate list and summary description of, with respect to
all Intellectual Property owned, held or used by each Suiza Company
("SUIZA IP"), all patents, registrations or applications and all
material unregistered Suiza IP.
(b) Except as disclosed in Section 4.18(b) of the Disclosure
Schedule, (i) the Suiza Companies own or have the right to use all the
Intellectual Property necessary or desirable to conduct their
businesses in all material respects as currently conducted and
consistent with past practice, free of all Encumbrances; (ii) to
Suiza's Knowledge, all of the Suiza IP is valid, enforceable and
unexpired, has not been abandoned, does not Infringe the Intellectual
Property of any third party and is not being Infringed by any third
party; (iii) no Order or Proceeding is pending, or to Suiza's
Knowledge, threatened, that limits or challenges the ownership, use,
validity or enforceability of any Suiza IP; and (iv) the Suiza
Companies have taken all reasonable steps to protect, maintain and
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safeguard the Suiza IP, including without limitation the Suiza IP that
is confidential in nature.
4.19 BROKERS OR FINDERS. Except as set forth in Section 4.19 of the
Disclosure Letter, none of the Suiza Parties, or their Affiliates or agents have
incurred any obligation or liability, contingent or otherwise, for brokerage or
finders' fees or agents' commissions or other similar payment in connection with
this Agreement or the Contemplated Transactions for which any Suiza Party,
Holdings, the Company or the Reid Party or any of their Affiliates will be
liable.
4.20 COMPETING INTERESTS. Except as set forth in Section 4.20 of the
Disclosure Letter, neither the Suiza Parent nor any Person that controls, is
controlled by or is under common control with the Suiza Parent, nor, to Suiza's
Knowledge, any Affiliate of any Suiza Company owns, directly or indirectly, an
interest in any Person that is a competitor, customer or supplier of any Suiza
Company or that otherwise has material business dealings with any Suiza Company,
other than ownership of less than 1% of publicly traded securities of such
Person.
4.21 INVESTMENT INTENT. The Suiza Parent is acquiring its Member Units
pursuant to the Mergers for its own account and not with a view to their
distribution within the meaning of Section 2(11) of the Securities Act.
4.22 PRODUCT WARRANTY AND PRODUCT LIABILITY. There are no material
product warranty or product liability claims pending or, to Suiza's Knowledge,
threatened against the Suiza Parent or any Suiza Company. The Suiza Parent has
made available to the Reid Parent a complete and accurate list of all warranty
information provided to or relied upon by their respective customers. Section
4.22 of the Disclosure Letter sets forth a complete and accurate summary of
product warranty or product liability claims over $100,000 made against the
Suiza Parent or any Suiza Company within the past two years.
4.23 HOLDINGS AND THE COMPANY. Except for the negotiation and execution
of this Agreement and the other documents expressly contemplated hereby, and
except for its obligations hereunder and thereunder, neither Holdings nor the
Company nor any subsidiary thereof has engaged in any business activities or
entered into any agreement or arrangement, and Holdings and the Company and
their subsidiaries have no liabilities or obligations of any nature (whether
known or unknown and whether absolute, accrued, contingent or otherwise).
4.24 YEAR 2000 COMPLIANCE. Except as set forth in Section 4.24 of the
Disclosure Letter, to Suiza's Knowledge, the properties and assets of each Suiza
Company, including, but not limited to, computer hardware, microprocessor driven
equipment, software and data, owned or used by any Suiza Company, will
accurately process, in all material respects, date and time data after December
31, 1999, and no Suiza Company will suffer a material loss of functional ability
when processing dates and related data outside the 1900-1999 year range.
4.25 NO MISREPRESENTATIONS. The representations, warranties and
statements made by Suiza in or pursuant to this Agreement are true, complete and
correct in all material respects and do not contain any untrue statement of a
material fact or omit to state any material fact necessary
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to make any such representation, warranty or statement, under the circumstances
in which it is made, not misleading.
SECTION 5
REPRESENTATIONS AND WARRANTIES OF VESTAR
Vestar represents and warrants to the Suiza Parties as follows:
5.1 ORGANIZATION AND GOOD STANDING.
(a) Vestar is a limited liability company duly organized,
validly existing, and in good standing under the laws of its state of
formation, with full power and authority to conduct its business as it
is now being conducted
(b) Vestar has made available to the Suiza Parent complete and
correct copies of its Organizational Documents, as currently in effect.
5.2 AUTHORITY; NO CONFLICT; CONSENTS.
(a) This Agreement constitutes the legal, valid and binding
obligation of Vestar, enforceable against it in accordance with its
terms except to the extent that its enforceability may be limited by
bankruptcy, insolvency, reorganization, fraudulent conveyance,
fraudulent transfer, moratorium or other laws relating to or affecting
creditors' rights generally and by general equity principles.
(b) Vestar has the requisite limited liability company right,
power, authority and capacity to execute and deliver this Agreement and
to perform its obligations under this Agreement. The execution,
delivery and performance of this Agreement by Vestar have been duly
authorized by all necessary limited liability company action, on the
part of such entity and its owners.
(c) Except as disclosed in Section 5.2 of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions
will, directly or indirectly:
(i) conflict with any provision of the Organizational
Documents of Vestar; or
(ii) result in a violation of, or give any
Governmental Body or other Person the right to exercise any
remedy or obtain any relief under, any Legal Requirement or
any Order to which Vestar is subject.
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SECTION 6
REPRESENTATIONS AND WARRANTIES OF SUIZA FOODS
Suiza Foods represents and warrants to the Reid Parties as follows:
6.1 ORGANIZATION AND GOOD STANDING.
(a) Suiza Foods is a corporation duly organized, validly
existing, and in good standing under the laws of its state of
formation, with full corporate power and authority to conduct its
business as it is now being conducted
(b) Suiza Foods has made available to the Reid Parents
complete and correct copies of its Organizational Documents, as
currently in effect.
6.2 AUTHORITY; NO CONFLICT; CONSENTS.
(a) This Agreement constitutes the legal, valid and binding
obligation of Suiza Foods, enforceable against such entity in
accordance with its terms except to the extent that its enforceability
may be limited by bankruptcy, insolvency, reorganization, fraudulent
conveyance, fraudulent transfer, moratorium or other laws relating to
or affecting creditors' rights generally and by general equity
principles.
(b) Suiza Foods has the requisite corporate right, power,
authority and capacity to execute and deliver this Agreement and to
perform its obligations under this Agreement. The execution, delivery
and performance of this Agreement by Suiza Foods has been duly
authorized by all necessary corporate action on the part of such entity
and its owners.
(c) Except as disclosed in Section 6.2 of the Disclosure
Letter, neither the execution and delivery of this Agreement nor the
consummation or performance of any of the Contemplated Transactions
will, directly or indirectly:
(i) conflict with any provision of the Organizational
Documents of Suiza Foods; or
(ii) result in a violation of, or give any
Governmental Body or other Person the right to exercise any
remedy or obtain any relief under, any Legal Requirement or
any Order to which Suiza Foods is subject.
SECTION 7
COVENANTS OF REID PARTIES PRIOR TO CLOSING DATE
7.1 ACCESS AND INVESTIGATION. Following the date of this Agreement, the
Reid Parties will (a) afford the Suiza Parties and their Representatives and
their lenders and their
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Representatives (collectively, "SUIZA'S ADVISORS") reasonable access during
normal business hours to the personnel, properties, contracts, books and
records, and other documents and data of the Reid Companies, (b) furnish the
Suiza Parties and Suiza's Advisors with copies of all such contracts, books and
records, and other existing documents and data as the Suiza Parties may
reasonably request with respect to the Reid Companies, and (c) furnish the Suiza
Parties and Suiza's Advisors with such additional financial, operating, and
other data and information with respect to the Reid Companies as the Suiza
Parties and Suiza's Advisors may reasonably request, including financial
statements.
7.2 OPERATION OF THE BUSINESS OF THE REID COMPANIES. Between the date
of this Agreement and the Closing Date, each Reid Company will, and the Reid
Parent will cause the Reid Companies to:
(a) conduct the business of each Reid Company only in the
Ordinary Course of Business, including without limitation, not
declaring or paying cash dividends or making cash or other
distributions on equity securities, or redeeming or repurchasing equity
securities;
(b) use their commercially reasonable efforts to preserve
intact the current business organization of each Reid Company, keep
available the services of the current officers, employees, and agents
of each Reid Company, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and
others having business relationships with each Reid Company;
(c) otherwise report periodically to the Suiza Parent
concerning the status of the business, operations, and finances of the
Reid Companies;
(d) not, (i) change any material Tax elections, (ii)
materially change any method of accounting with respect to any material
Taxes, (iii) materially amend any material Tax Return, or (iv) settle
or compromise any proceeding with respect to any material Tax; and
(e) make all estimated tax payments due during such period in
amounts appropriate under applicable Legal Requirements.
7.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, the Reid
Companies will not, and the Reid Parent will cause the Reid Companies not to,
without the prior consent of the Suiza Parent, take any affirmative action, or
fail to take any reasonable action within their or its control, as a result of
which any of the changes or events listed in Section 3.13 will occur.
7.4 NOTIFICATION. Between the date of this Agreement and the Closing
Date, the Reid Parent will promptly notify the Suiza Parent in writing if the
Reid Parent or any Reid Company becomes aware of any fact or condition that
causes or constitutes a material breach of any of the representations and
warranties of any Reid Party as of the date of this Agreement, or if any Reid
Parent or any Reid Company becomes aware of the occurrence after the date of
this Agreement
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of any fact or condition that would (except as expressly contemplated by this
Agreement) cause or constitute a material breach of any such representation or
warranty had such representation or warranty been made as of the time of
occurrence or discovery of such fact or condition. During the same period, the
Reid Parent will promptly notify the Suiza Parent of the occurrence of any
material breach of any covenant of the Reid Parent or any Reid Company in this
Section 7 or of the occurrence of any event that may make the satisfaction of
the conditions in Section 9 impossible.
7.5 DISTRIBUTIONS AND CERTAIN OTHER RESTRICTED PAYMENTS. Between the
date of this Agreement and the Closing Date, the Reid Companies will not, and
the Reid Parent will cause the Reid Companies not to, (a) declare or pay any
distributions in respect of any equity interests of any Reid Company or (b)
directly or indirectly purchase, redeem or otherwise acquire or retire any
equity interests of any Reid Company.
7.6 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 11, the Reid Parties will not, and will cause
their Representatives not to, directly or indirectly (a) solicit, initiate,
encourage (including by way of furnishing information) or take any action
knowingly to facilitate the submission of any inquiries, proposals or offers
(whether or not in writing) from any person (other than any Suiza Party)
relating to, other than the Contemplated Transactions, (i) any acquisition or
purchase of 5% or more of the assets of the Reid Parent or any other direct or
indirect subsidiary of the Reid Parent that owns any of the packaging assets
contemplated to be part of the Contemplated Transactions, (ii) any direct or
indirect acquisition or purchase of any equity securities of any Reid Parent or
any other direct or indirect subsidiary of the Reid Parent that owns any of the
packaging assets contemplated to be part of the Contemplated Transactions, (iii)
any merger, consolidation, business combination, sale of substantially all
assets, recapitalization, liquidation, dissolution or similar transaction
involving the Reid Parent or any other direct or indirect subsidiary of the Reid
Parent that owns any of the packaging assets contemplated to be part of the
Contemplated Transactions or (iv) any other transaction the consummation of
which would or would reasonably be expected to impede, interfere with, prevent
or materially delay the Contemplated Transactions or which would or would
reasonably be expected to materially dilute the benefits to the Suiza Parties of
the Contemplated Transactions (collectively, the "REID TRANSACTION PROPOSALS"),
or agree to or endorse any Reid Transaction Proposal, or (b) enter into or
participate in any discussions or negotiations regarding any of the foregoing,
or furnish to any other person any information with respect to its business,
properties or assets in connection with the foregoing, or otherwise cooperate in
any way with, or knowingly assist or participate in, facilitate or encourage,
any effort or attempt by any other person (other than any Suiza Party) to do or
seek any of the foregoing. If Vestar or the Reid Parent receives or becomes
aware of a Reid Transaction Proposal after the date hereof, Vestar or the Reid
Parent shall provide the Suiza Parent with prompt written notice thereof and
shall promptly inform the Suiza Parent of the terms and conditions of such
proposal and the identity of the persons making it. Vestar and the Reid Parent
will immediately cease and cause their advisors, agents and other intermediaries
to cease any and all existing activities, discussions or negotiations with any
parties conducted heretofore with respect to any of the foregoing. Vestar and
the Reid Parent agrees not to release any third party from, or waive any
provisions of, any confidentiality or standstill agreement to which Vestar or
the Reid Parent is a party.
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7.7 COMMERCIALLY REASONABLE EFFORTS. Between the date of this Agreement
and the Closing Date, the Reid Parent and each Reid Company will use
commercially reasonable efforts to cause the conditions in Section 9 to be
satisfied. None of the Reid Parties shall have any obligation to comply with any
request or requirement imposed by any Governmental Body in connection therewith
if the Reid Parties, in the exercise of their reasonable discretion, elect not
to do so. Without limiting the generality of the foregoing, the Reid Parties
shall not be obligated to comply with any request by, or any requirement of, any
Governmental Body (i) to dispose of any assets or operations; or (ii) to comply
with any restriction on the manner in which it conducts its operations.
7.8 ASSISTANCE WITH PERMITS AND FILINGS. The Reid Parent and each Reid
Company will furnish the Suiza Parent with all information that is required for
inclusion in any application or filing to be made by any Suiza Party or its
affiliates to any Governmental Body in connection with the Contemplated
Transactions. The Reid Parent and each Reid Company will use commercially
reasonable efforts to assist the Suiza Parent in obtaining any Governmental
Authorizations, or any Consents related thereto, that the Suiza Parent, Holdings
or the Company will require in connection with the Contemplated Transactions.
7.9 CONFIDENTIALITY. The Reid Parent and each Reid Company will
maintain in confidence, and will cause their respective Representatives to
maintain in confidence, any information furnished to them by or on behalf of
either of the Suiza Parent, any Suiza Company or Suiza's Representatives in
connection with this Agreement or the Contemplated Transactions to the extent
required by, and in accordance with, the provisions of the letter dated March
23, 1999 executed by the Reid Parent and the Suiza Parent.
7.10 ASSIGNMENT OF INDEMNIFICATION RIGHTS. The Reid Parties shall use
commercially reasonable efforts to cause any and all contracts under which the
Reid Parent is, or may in the future be, entitled to indemnification payments
from an unaffiliated third party in connection with the assets or operations of
the Reid Parent, to be assigned to a Reid Company.
7.11 APPRAISAL. The parties hereto agree to engage a reputable
appraiser to appraise the fair market values of (i) the fully diluted capital
stock of Franklin and (ii) the fully diluted Member Units.
SECTION 8
COVENANTS OF SUIZA PARTIES PRIOR TO CLOSING DATE
8.1 ACCESS AND INVESTIGATION. Following the date of this Agreement, the
Suiza Parties will (a) afford the Reid Parties and their Representatives and
their lenders and their Representatives (collectively, "REID'S ADVISORS")
reasonable access during normal business hours to the personnel, properties,
contracts, books and records, and other documents and data of the Suiza
Companies, (b) furnish the Reid Parties and Reid's Advisors with copies of all
such contracts, books and records, and other existing documents and data as the
Reid Parties may
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reasonably request with respect to the Suiza Companies, and (c) furnish the Reid
Parties and Reid's Advisors with such additional financial, operating, and other
data and information with respect to the Suiza Companies as the Reid Parties may
reasonably request, including financial statements.
8.2 OPERATION OF THE BUSINESS OF THE SUIZA COMPANIES. Between the date
of this Agreement and the Closing Date, each Suiza Company will, and the Suiza
Parent will cause the Suiza Companies to:
(a) conduct the business of each Suiza Company only in the
Ordinary Course of Business, including without limitation, not
declaring or paying cash dividends or making cash or other
distributions on equity securities, or redeeming or repurchasing equity
securities; except as described in Schedule 8.2;
(b) use their commercially reasonable efforts to preserve
intact the current business organization of each Suiza Company, keep
available the services of the current officers, employees, and agents
of each Suiza Company, and maintain the relations and good will with
suppliers, customers, landlords, creditors, employees, agents, and
others having business relationships with each Suiza Company;
(c) otherwise report periodically to the Reid Parent
concerning the status of the business, operations, and finances of the
Suiza Companies; and
(d) not, (i) change any material Tax elections, (ii)
materially change any method of accounting with respect to any material
Taxes, (iii) materially amend any material Tax Return, or (iv) settle
or compromise any proceeding with respect to any material Tax.
8.2A OPERATION OF THE BUSINESS OF FRANKLIN. Between the date of this
Agreement and the Closing Date, Franklin will conduct its business only in the
Ordinary Course of Business, including not declaring or paying cash dividends or
making cash or other distributions on equity securities, or redeeming or
repurchasing equity securities, except as described in Schedule 8.2A;
8.3 NEGATIVE COVENANT. Except as otherwise expressly permitted by this
Agreement, between the date of this Agreement and the Closing Date, the Suiza
Parent and the Suiza Companies will not, and the Suiza Parent will cause the
Suiza Companies not to, without the prior consent of the Reid Parent, take any
affirmative action, or fail to take any reasonable action within their or its
control, as a result of which any of the changes or events listed in Sections
4.13 or 4.13A will occur.
8.4 NOTIFICATION. Between the date of this Agreement and the Closing
Date, the Suiza Parent will promptly notify the Reid Parent in writing if the
Suiza Parent or Suiza Company becomes aware of any fact or condition that causes
or constitutes a material breach of any of the representations and warranties of
any Suiza Party as of the date of this Agreement, or if the Suiza Parent or
Suiza Company becomes aware of the occurrence after the date of this
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Agreement of any fact or condition that would (except as expressly contemplated
by this Agreement) cause or constitute a material breach of any such
representation or warranty had such representation or warranty been made as of
the time of occurrence or discovery of such fact or condition. During the same
period, the Suiza Parent will promptly notify the Reid Parent of the occurrence
of any material breach of any covenant of the Suiza Parent or Suiza Company in
this Section 8 or of the occurrence of any event that may make the satisfaction
of the conditions in Section 10 impossible.
8.5 DISTRIBUTIONS AND CERTAIN OTHER RESTRICTED PAYMENTS. Between the
date of this Agreement and the Closing Date, the Suiza Companies will not, and
the Suiza Parent will cause the Suiza Companies not to, (a) declare or pay any
distributions in respect of any equity interests of any Suiza Company or (b)
directly or indirectly purchase, redeem or otherwise acquire or retire any
equity interests of any Suiza Company.
8.6 NO NEGOTIATION. Until such time, if any, as this Agreement is
terminated pursuant to Section 11, the Suiza Parties will not, and will cause
their Representatives not to, directly or indirectly (a) solicit, initiate,
encourage (including by way of furnishing information) or take any action
knowingly to facilitate the submission of any inquiries, proposals or offers
(whether or not in writing) from any person (other than any Reid Party) relating
to, other than the Contemplated Transactions, (i) any acquisition or purchase of
5% or more of the assets of the Suiza Parent or any other direct or indirect
subsidiary of Suiza Foods that owns any of the packaging assets contemplated to
be part of the Contemplated Transactions, (ii) any direct or indirect
acquisition or purchase of any equity securities of Suiza Parent or any other
direct or indirect subsidiary of Suiza Foods that owns any of the packaging
assets contemplated to be part of the Contemplated Transactions, (iii) any
merger, consolidation, business combination, sale of substantially all assets,
recapitalization, liquidation, dissolution or similar transaction involving the
Suiza Parent or any other direct or indirect subsidiary of Suiza Foods that owns
any of the packaging assets contemplated to be part of the Contemplated
Transactions or (iv) any other transaction the consummation of which would or
would reasonably be expected to impede, interfere with, prevent or materially
delay the Contemplated Transactions or which would or would reasonably be
expected to materially dilute the benefits to the Reid Parties of the
Contemplated Transactions (collectively, the "SUIZA TRANSACTION PROPOSALS"), or
agree to or endorse any Suiza Transaction Proposal, or (b) enter into or
participate in any discussions or negotiations regarding any of the foregoing,
or furnish to any other person any information with respect to its business,
properties or assets in connection with the foregoing, or otherwise cooperate in
any way with, or knowingly assist or participate in, facilitate or encourage,
any effort or attempt by any other person (other than any Reid Party) to do or
seek any of the foregoing. If Suiza Foods or the Suiza Parent receives or
becomes aware of a Suiza Transaction Proposal after the date hereof, Suiza Foods
or the Suiza Parent shall provide the Reid Parent with prompt written notice
thereof and shall promptly inform the Reid Parent of the terms and conditions of
such proposal and the identity of the persons making it. Suiza Foods and the
Suiza Parent will immediately cease and cause their advisors, agents and other
intermediaries to cease any and all existing activities, discussions or
negotiations with any parties conducted heretofore with respect to any of the
foregoing. Suiza Foods and the Suiza Parent agree not to release any third party
from, or waive any provisions of, any confidentiality or standstill agreement to
which Suiza Foods or the Suiza Parent is a party.
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8.7 COMMERCIALLY REASONABLE EFFORTS. Between the date of this Agreement
and the Closing Date, the Suiza Parties will use commercially reasonable efforts
to cause the conditions in Section 10 to be satisfied. None of the Suiza Parties
shall have any obligation to comply with any request or requirement imposed by
any Governmental Body in connection therewith if the Suiza Parties, in the
exercise of their reasonable discretion, elect not to do so. Without limiting
the generality of the foregoing, the Suiza Parties shall not be obligated to
comply with any request by, or any requirement of, any Governmental Body (i) to
dispose of any assets or operations; or (ii) to comply with any restriction on
the manner in which it conducts its operations.
8.8 ASSISTANCE WITH PERMITS AND FILINGS. The Suiza Parent and each
Suiza Company will furnish the Reid Parent with all information that is required
for inclusion in any application or filing to be made by any Reid Party or its
affiliates to any Governmental Body in connection with the Contemplated
Transactions. The Suiza Parent and each Suiza Company will use commercially
reasonable efforts to assist the Reid Parent in obtaining any Governmental
Authorizations, or any Consents related thereto, that either Reid Parent,
Holdings or the Company will require in connection with the Contemplated
Transactions.
8.9 CONFIDENTIALITY. Suiza Foods, the Suiza Parent and each Suiza
Company will maintain in confidence, and will cause their respective
Representatives to maintain in confidence, any non-public information furnished
to them by or on behalf of the Reid Parent, any Reid Company or Reid's
Representatives in connection with this Agreement or the Contemplated
Transactions to the extent required by, and in accordance with, the provisions
of the letter dated March 23, 1999 executed by the Reid Parent and the Suiza
Parent. In the case of Suiza Foods, Suiza Foods hereby agrees to be bound by the
terms of such letter as if Suiza Foods were a party thereto.
8.10 TENDER OFFER. After the date hereof (the "COMMENCEMENT DATE"),
Suiza Foods may cause PCI to commence a tender offer to purchase all of the PCI
Notes for cash at a purchase price that is mutually agreeable to Suiza Foods,
the Reid Parent and Vestar (the "TENDER OFFER"). Pursuant to the Tender Offer,
PCI would agree to purchase the PCI Notes that are validly tendered and not
withdrawn prior to the expiration date set forth in the Offer to Purchase (the
"INITIAL EXPIRATION DATE"). PCI may, at any time and from time to time until
July 31, 1999 (assuming all the conditions to the Tender Offer have not been
met), extend the Initial Expiration Date. The date that is the later of the
Initial Expiration Date and the latest time and date to which the Tender Offer
may be extended is called the "EXPIRATION DATE." The consummation of the Tender
Offer would be conditioned upon a mutually agreeable minimum principal amount of
the PCI Notes having been validly tendered and not withdrawn at the Expiration
Date and upon the satisfaction of such conditions as shall be mutually agreed
among Suiza Foods, the Reid Parent and Vestar. If the Tender Offer is commenced,
PCI shall comply with, and make any filings or take any other actions required
to be taken under state or federal law in connection with the commencement and
consummation of the Tender Offer. If the Tender Offer is commenced, concurrently
with the Tender Offer Suiza intends to cause PCI to solicit and obtain the
consent (the "CONSENTS") of the holders of a majority in principal amount of the
PCI Notes to the adoption of amendments to the covenants and the provisions of
the Indenture governing the PCI Notes to be mutually agreed among Suiza Foods,
the Reid Parent
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and Vestar (the "PROPOSED AMENDMENTS"). The purchase of PCI Notes pursuant to
the Tender Offer, if any, shall be funded out of the proceeds from the financing
referred to in Section 9.10 and Section 10.8. If the Tender Offer is not made,
or the Tender Offer's minimum tender condition or any other condition is not
met, or the Tender Offer is successful but less than all the PCI Notes are
tendered and purchased, the PCI Notes not repurchased shall remain outstanding
as indebtedness of PCI.
8.11 ASSIGNMENT OF INDEMNIFICATION RIGHTS. The Suiza Parties shall use
commercially reasonable efforts to cause any and all contracts under which
Franklin is, or may in the future be, entitled to indemnification payments from
an unaffiliated third party in connection with the assets or operations of
Franklin, to be assigned to a Suiza Company.
8.12 CONTRIBUTION BY SUIZA PARENT. Prior to the Closing, Suiza Foods
shall cause Franklin to transfer to a Franklin Company all assets used or held
by Franklin in connection with its plastics packaging business, and all of its
liabilities associated with such assets, pursuant to a Bill of Sale, Assignment
and Assumption Agreement in the form attached as Exhibit F hereto.
8.13 APPRAISAL. The parties hereto agree to engage a reputable
appraiser to appraise the fair market values of (i) the fully diluted capital
stock of Franklin and (ii) the fully diluted Member Units.
SECTION 9
CONDITIONS PRECEDENT TO THE SUIZA PARTIES' OBLIGATION TO CLOSE
The obligation of the Suiza Parties to complete the Contemplated
Transactions, and take the other actions required to be taken by them at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by the Suiza Parent, in
whole or in part):
9.1 ACCURACY OF REPRESENTATIONS. All of the representations and
warranties of any Reid Party in this Agreement must have been accurate in all
material respects as of the date of this Agreement and must be accurate in all
material respects as of the Closing Date as if made on the Closing Date, except
to the extent that any such representation or warranty is made as of a specified
date, in which case such representation and warranty shall be true and correct
in all material respects as of such date; and the Reid Parent shall have
delivered to the Suiza Parent a closing certificate, executed by an officer of
the Reid Parent and dated the Closing Date, to that effect.
9.2 REID'S PERFORMANCE.
(a) All of the covenants and obligations that the Reid Parent
or any Reid Company is required to perform or to comply with pursuant
to this Agreement at or prior to the Closing must have been duly
performed and complied with in all material respects;
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and the Reid Parent shall have delivered to the Suiza Parent a closing
certificate, executed by an officer of the Reid Parent and dated the
Closing Date, to that effect.
(b) Each document required to be delivered by the Reid Parent
or any Reid Company pursuant to Section 2.5 must have been delivered.
9.3 ABSENCE OF MATERIAL ADVERSE EFFECTS. Since the date of this
Agreement, no Reid Material Adverse Effect shall have occurred.
9.4 CONSENTS. Any Material Consents that the Suiza Parent, any Suiza
Company, the Reid Parent, any Reid Company or the Company are required to obtain
to consummate the Contemplated Transactions must have been obtained and must be
in full force and effect. Without limiting the generality of the foregoing, all
filings pursuant to the New Jersey Industrial Site Recovery Act, the Connecticut
Transfer Act and the HSR Act shall have been made by the Suiza Parties and the
Reid Parties, and the required waiting period under the HSR Act shall have
expired or been terminated without any threat or commencement of antitrust
proceedings with respect to the Contemplated Transactions and without any
request or requirement upon any Suiza Party or any of its affiliates to comply
with any request or requirement imposed by the FTC, the DOJ or any other
Governmental Body in connection with the HSR Act.
9.5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against the Suiza Parent, or against any
Person affiliated with the Suiza Parent, any Proceeding (a) involving any
challenge to, or seeking damages or other relief in connection with, any of the
Contemplated Transactions, or (b) that may have the effect of preventing or
making illegal any of the Contemplated Transactions.
9.6 NO PROHIBITION. Neither the consummation nor the performance of any
of the Contemplated Transactions will, directly or indirectly (with or without
notice or lapse of time) result in a material violation of, or cause the Suiza
Parent or any Person affiliated with the Suiza Parent to suffer any material
adverse effect under, any applicable Legal Requirement or Order.
9.7 LEGAL OPINION. The Reid Parent shall have delivered to the Suiza
Parent a legal opinion of the Reid Parent's counsel, substantially in the form
attached hereto as Exhibit D.
9.8 CAPITAL CONTRIBUTION. Vestar shall have contributed $60.8 million
in cash to Holdings.
9.9 CASH PAYMENT. The Company or Holdings shall have distributed to the
Suiza Parent the payment required by Section 2.2(c), payable in immediately
available funds, in accordance with payment instructions from the Suiza Parent
delivered to the Company or Holdings at least two days prior to the Closing.
9.10 FINANCING. The Company or Holdings shall have received financing
in the amounts and in all material respects on the other terms and conditions
set forth in the executed commitment letter from Bankers Trust Company and the
executed "highly confident" letter from
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Donaldson Lufkin & Jenrette Securities Corporation, each delivered in connection
with the Proposed Transaction and made available to the parties hereto.
9.11 FIRPTA CERTIFICATE. The Reid Parent shall have delivered to the
Suiza Parent at the Closing a certificate complying with the Code and Treasury
Regulations, in form and substance reasonable satisfactory to the Suiza Parent,
duly executed and acknowledged, certifying that the transactions contemplated
hereby are exempt from withholding under Section 1445 of the Code.
9.12 DISCHARGE OF INDEBTEDNESS Holdings and the Company shall have
fully discharged the Reid Indebtedness listed in Section 10.11(a) of the
Disclosure Letter and the Suiza Indebtedness listed in Section 10.11(b) of the
Disclosure Letter.
9.13 SUIZA BANK CONSENT. The Suiza Parties shall have received the
consent, termination and release of First Union National Bank, as agent, to
release the liens on the stock and assets of the Suiza Companies, pledged as
security in connection with the Credit Agreement dated as of May 22, 1998 by and
among Suiza Foods, the lenders named therein and First Union National Bank, as
agent.
SECTION 10
CONDITIONS PRECEDENT TO THE REID PARTIES' OBLIGATION TO CLOSE
The obligation of the Reid Parties to complete the Contemplated
Transactions and take the other actions required to be taken by them at the
Closing is subject to the satisfaction, at or prior to the Closing, of each of
the following conditions (any of which may be waived by the Reid Parent, in
whole or in part):
10.1 ACCURACY OF REPRESENTATIONS. All of the Suiza Parties'
representations and warranties in this Agreement must have been accurate in all
material respects as of the date of this Agreement and must be accurate in all
material respects as of the Closing Date as if made on the Closing Date, except
to the extent that any such representation or warranty is made as of a specified
date, in which case such representation and warranty shall be true and correct
in all material respects as of such date; and the Suiza Parent shall have
delivered to the Reid Parent a closing certificate, executed by an officer of
the Suiza Parent and dated the Closing Date, to that effect.
10.2 SUIZA'S PERFORMANCE.
(a) All of the covenants and obligations that the Suiza Parent
or any Suiza Company is required to perform or to comply with pursuant
to this Agreement at or prior to the Closing must have been duly
performed and complied with in all material respects; and the Suiza
Parent shall have delivered to the Reid Parent a closing certificate,
executed by an officer of the Suiza Parent and dated the Closing Date,
to that effect.
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(b) Each document required to be delivered by the Suiza Parent
or any Suiza Company pursuant to Section 2.5 must have been delivered.
10.3 ABSENCE OF MATERIAL ADVERSE EFFECTS. Since the date of this
Agreement, no Suiza Material Adverse Effect shall have occurred.
10.4 CONSENTS. Any Material Consents that the Suiza Parent, any Suiza
Company, any Reid Company, Holdings or the Company are required to obtain to
consummate the Contemplated Transactions must have been obtained and must be in
full force and effect. Without limiting the generality of the foregoing, all
filings pursuant to the New Jersey Industrial Site Recovery Act, the Connecticut
Transfer Act and HSR Act shall have been made by the Suiza Parties and the Reid
Parties, and the required waiting period under the HSR Act shall have expired or
been terminated without any threat or commencement of antitrust proceedings with
respect to the Contemplated Transactions and without any request or requirement
upon any Reid Party or any of their affiliates to comply with any request or
requirement imposed by the FTC, the DOJ or any other Governmental Body in
connection with the HSR Act.
10.5 NO PROCEEDINGS. Since the date of this Agreement, there must not
have been commenced or threatened against the Reid Parent, or against any Person
affiliated with the Reid Parent, any Proceeding (a) involving any challenge to,
or seeking damages or other relief in connection with, any of the Contemplated
Transactions, or (b) that may have the effect of preventing or making illegal
any of the Contemplated Transactions.
10.6 NO PROHIBITION. Neither the consummation nor the performance of
any of the Contemplated Transactions will, directly or indirectly (with or
without notice or lapse of time) result in a material violation of, or cause the
Reid Parent or any Person affiliated with the Reid Parent to suffer any material
adverse effect under, any applicable Legal Requirement or Order.
10.7 LEGAL OPINION. The Suiza Parent shall have delivered to the Reid
Parent a legal opinion of Suiza Parent's counsel, in form and substance
reasonably acceptable to the Reid Parent's legal counsel, with respect to the
matters referred to in Exhibit E.
10.8 FINANCING. The Company shall have received financing in the
amounts and in all material respects on the other terms and conditions set forth
in the executed commitment letter from Bankers Trust Company and the executed
"highly confident" letter from Donaldson Lufkin & Jenrette Securities
Corporation, each delivered in connection with the Proposed Transaction and made
available to the parties hereto.
10.9 FIRPTA CERTIFICATE. The Suiza Parent shall have delivered to the
Reid Parent at the Closing a certificate complying with the Code and Treasury
Regulations, in form and substance reasonably satisfactory to the Reid Parent,
duly executed and acknowledged, certifying that the transactions contemplated
hereby are exempt from withholding under Section 1445 of the Code.
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10.10 DISCHARGE OF INDEBTEDNESS. Holdings and the Company shall have
fully discharged the Reid Indebtedness listed in Section 10.10(a) of the
Disclosure Letter and the Suiza Indebtedness listed in Section 10.10(b) of the
Disclosure Letter.
10.11 SUIZA BANK CONSENT. The Suiza Parties shall have received the
consent, termination and release of First Union National Bank, as agent, to
release the liens on the stock and assets of the Suiza Companies, pledged as
security in connection with the Credit Agreement dated as of May 22, 1998 by and
among Suiza Foods, the lenders named therein and First Union National Bank, as
agent.
SECTION 11
TERMINATION
11.1 TERMINATION EVENTS. This Agreement may, by notice given prior to
or at the Closing, be terminated:
(a) by the Suiza Parent or the Reid Parent if a material
breach of any provision of this Agreement has been committed by the
other party, and such breach has not been cured within thirty days of
the breaching party first having knowledge of such breach, or waived by
the nonbreaching party.
(b) (i) by the Suiza Parent if satisfaction of any condition
in Section 9 is or becomes impossible (other than through the failure
of the Suiza Parent or Suiza Company to comply with its obligations
under this Agreement) and the Suiza Parent has not waived such
condition, or (ii) by the Reid Parent, if satisfaction of such
condition in Section 10 is or becomes impossible (other than through
the failure of the Reid Parent or any Reid Company to comply with their
respective obligations under this Agreement) and the Reid Parent has
not waived such condition;
(c) by mutual consent of the Suiza Parent and the Reid Parent;
or
(d) by the Suiza Parent or the Reid Parent if the Closing has
not occurred (other than through the failure of any party seeking to
terminate this Agreement or its affiliates to comply fully with its
obligations under this Agreement) on or before July 31, 1999 or such
later date as the parties may agree upon.
11.2 EFFECT OF TERMINATION. Each party's right of termination under
Section 11.1 is in addition to any other rights it may have under this Agreement
or otherwise, and the exercise of a right of termination will not be an election
of remedies. If this Agreement is terminated pursuant to Section 11.1, all
further obligations of the parties under this Agreement will terminate, except
that the obligations in Sections 7.9, 8.9 and 13.1 will survive; provided,
however, that if this Agreement is terminated by a party because of the breach
of the Agreement by the other party or one of its affiliates, the terminating
party's right to pursue all legal remedies will survive such termination
unimpaired.
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SECTION 12
INDEMNIFICATION; REMEDIES
12.1 REPRESENTATIONS; SURVIVAL. Except for the express representations
and warranties contained in Sections 3, 4, 5 and 6 and in any certificate
delivered pursuant to this Agreement, none of the parties to this Agreement are
making any representation or warranty whatsoever, express or implied, including
but not limited to any implied warranty or representation as to condition,
merchantability or suitability, as to any of the properties or assets of the
Reid Companies or the Suiza Companies. It is understood that, except as
otherwise specified in this Agreement and except to the extent included within
or incorporated into the Disclosure Letter, any cost estimates, projections or
other predictions, any data, any financial information or any memoranda or
offering materials or presentations provided or addressed to any party to this
Agreement or any other Person are not and shall not be deemed to be or to
include representations or warranties of any party to this Agreement. Except as
otherwise provided in this Section 12.1, all representations and warranties in
this Agreement and any other certificate or document delivered pursuant to this
Agreement will terminate eighteen months after the Closing; provided, however,
that (a) if any breach of the representations and warranties set forth in
Sections 3.1, 3.2, 3.8, 3.10, 3.11, 3.12 or 3.16 or in Sections 4.1, 4.2, 4.8,
4.10, 4.11, 4.12 or 4.16 constitutes a violation of any Legal Requirement, then
such representations and warranties and any claim for indemnification applicable
to such a violation shall survive for the applicable statute of limitation with
respect thereto; and (b) with respect to the representations and warranties set
forth in Sections 3.3, 3.13(a), 3.19, 4.3, 4.13(a), 4.13A, 4.19 and 4.23, such
representations and warranties and any claim for indemnification with respect
thereto will survive until the expiration of the applicable statute of
limitations.
12.2 INDEMNIFICATION AND PAYMENT OF DAMAGES WITH RESPECT TO BREACHES BY
REID PARTIES. Notwithstanding any investigation by any Suiza Parties or their
Representatives, the parties hereto agree to cause Holdings, in accordance with
Section 12.11, to indemnify, defend and hold harmless the Company, the Suiza
Parent, Suiza Foods and their respective Representatives, equity owners,
controlling persons, and Affiliates (collectively, "SUIZA'S INDEMNIFIED
PERSONS") for, and will pay to Suiza's Indemnified Persons the amount of, any
loss, liability, claim, damage (including incidental damages, but excluding
consequential damages and damages for business interruption and lost profits),
expense (including costs of investigation and defense and reasonable attorneys'
fees) or diminution of value, whether or not involving a third-party claim
(collectively, "DAMAGES"), arising, directly or indirectly, from or in
connection with:
(a) any breach of any representation or warranty made by any
Reid Party in this Agreement or in any certificate delivered by any
Reid Party pursuant to this Agreement that survives the Closing in
accordance with Section 12.1 or any allegation by a third party that,
if true, would constitute such a breach; provided that any claim for
indemnification pursuant to this subparagraph (a) is made within the
time period specified in Section 12.1 for the survival of the
applicable representation or warranty that has been breached or is the
subject of the third party claim;
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(b) any breach by the Reid Parent or any Reid Company of any
covenant or obligation of such Person in this Agreement;
(c) any Proceeding commenced by any third party after Closing
relating to actions or omissions of the Reid Parent or any Reid Company
that occurred prior to Closing, except to the extent reduced by
insurance in accordance with the provisions of Section 12.6; or
(d) any claim by any Person, including, without limitation,
for brokerage or finder's fees or commissions or similar payments based
upon any agreement or understanding alleged to have been made by any
such Person with the Reid Parent or any Reid Company (or any Person
acting on their behalf) in connection with any of the Contemplated
Transactions.
12.3 INDEMNIFICATION AND PAYMENT OF DAMAGES WITH RESPECT TO BREACHES BY
SUIZA PARTIES. Notwithstanding any investigation by the Reid Parties or their
Representatives, the parties hereto agree to cause Holdings, in accordance with
Section 12.11, to indemnify, defend and hold harmless the Company, the Reid
Parent, Vestar and their respective Representatives, equity owners, controlling
persons, and affiliates (collectively, "REID'S INDEMNIFIED PERSONS") for, and
will pay to Reid's Indemnified Persons the amount of, any Damages arising,
directly or indirectly, from or in connection with:
(a) any breach of any representation or warranty made by any
Suiza Party in this Agreement or in any certificate delivered by any
Suiza Party pursuant to this Agreement that survives the Closing in
accordance with Section 12.1 or any allegation by a third party that,
if true, would constitute such a breach; provided that any claim for
indemnification pursuant to this subparagraph (a) is made within the
time period specified in Section 12.1 for the survival of the
applicable representation or warranty that has been breached or is the
subject of the third party claim;
(b) any breach by the Suiza Parent or any Suiza Company of any
covenant or obligation of such Person in this Agreement;
(c) any Proceeding commenced by any third party after Closing
relating to actions or omissions of the Suiza Parent or any Suiza
Company that occurred prior to Closing, except to the extent reduced by
insurance in accordance with the provisions of Section 12.6; or
(d) any claim by any Person, including, without limitation,
for brokerage or finder's fees or commissions or similar payments based
upon any agreement or understanding alleged to have been made by any
such Person with the Suiza Parent or any Suiza Company (or any Person
acting on their behalf) in connection with any of the Contemplated
Transactions.
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12.4 INDEMNIFICATION AND PAYMENT OF DAMAGES BY HOLDINGS AND THE
COMPANY. Holdings and the Company will, jointly and severally, indemnify, defend
and hold harmless Suiza's Indemnified Persons and Reid's Indemnified Persons
for, and will pay to Suiza's Indemnified Persons and Reid's Indemnified Persons
the amount of, any Damages arising, directly or indirectly, from or in
connection with the operation of the business of Holdings and the Company and
their subsidiaries following the Closing; provided, however, that this Section
12.4 shall not be available to the extent that such Damages arise from or in
connection with any action or event that gives rise to an indemnifiable claim
under Section 12.2 or Section 12.3, as the case may be.
12.5 CERTAIN OTHER INDEMNIFIABLE MATTERS.
(a) The Suiza Parent and Suiza Foods shall, jointly and severally,
indemnify, defend and hold harmless Holdings and the Company from, and
will pay to Holdings and the Company the amount of, any Damages arising
directly or indirectly, from or in connection with (i) any Taxes with
respect to any and all Taxes of any member of a consolidated, combined
or unitary group of which any Suiza Company (or any predecessor) is or
was a member on or prior to the Closing Date by reason of the liability
of any Suiza Company pursuant to Treasury Regulation Section
1.1502-6(a) (or any analogous or similar state, local or foreign law or
regulation), as a transferee or successor, by contract or otherwise;
(ii) any Taxes of any Franklin Company with respect to any Tax period,
or portion thereof, beginning on or after January 1, 1999 and ending on
or prior to the Closing Date, other than the state taxes measured by
income (whether or not denominated as income taxes), if any, with
respect to a tax period, or portion thereof, beginning after June 30,
1999 and prior to the Closing Date but excluding income Taxes resulting
from the transactions contemplated pursuant to this Agreement.
(b) The parties agree to cause Holdings, in accordance with
Section 12.11, to indemnify, defend and hold harmless the Suiza
Indemnified Persons for, and will pay to Suiza's Indemnified Persons
the amount of, any Damages arising directly or indirectly, from or in
connection with any liability or obligations of any Reid Party, or the
successor or assignee of any Reid Party, owed or claimed to be owed to
B. Joseph Rokus, his heirs, successors and assigns, currently existing
or accruing hereafter, pursuant to the Settlement Agreement and Mutual
Release dated September 15, 1998, by and among Vestar Reid LLC and its
affiliates, ING Equity Partners, L.P. I, Mr. Rokus and other
stockholders of Reid Holdings; the Master Reorganization Agreement
dated October 15, 1997 by and between Vestar Reid LLC and Reid
Holdings; the Amended and Restated Warrant to Purchase Shares of Class
A Common Stock of Reid Holdings dated October 15, 1997 and held by Mr.
Rokus; the Agreement dated as of April 28, 1999 among Vestar Reid LLC,
Vestar, the Reid Parent, Reid Plastics, Mr. Rokus and Tari Rokus; the
Agreement dated as of April 28, 1999 among Vestar Reid LLC, Vestar, the
Reid Parent, Reid Plastics, Mr. Rokus, Tari Rokus and Shirley Frahm;
and pursuant to any other liabilities or obligations of any Reid Party,
Holdings, the Company or any of its subsidiaries, including Reid
Plastics LLC, to Mr. Rokus, whether contained in a written agreement or
otherwise, other than obligations to pay compensation (including
salary, severance and awards under any compensation or incentive plans
or programs) and
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provide perquisites and employee benefits under the Amended and
Restated Employment Agreement dated September 15, 1998, as amended on
April 28, 1999, by and between Reid Plastics, Inc. and Mr. Rokus.
(c) The provisions of Section 12.6 shall not apply to this
Section 12.5.
12.6 LIMITATIONS ON AMOUNT.
(a) In determining the amount of Damages hereunder, any
insurance proceeds that are realized or that could reasonably be
expected to be realized by such Indemnified Person (if a claim were
properly pursued under the relevant insurance arrangements), as well as
any costs associated with obtaining such insurance proceeds, will be
considered.
(b) The maximum aggregate amount to which Suiza's Indemnified
Persons will be entitled to indemnification under paragraph (a) of
Section 12.2 is limited to $21 million, and the maximum aggregate
amount to which Reid's Indemnified Persons will be entitled to
indemnification under paragraph (a) of Section 12.3 is limited to $63
million.
(c) Notwithstanding the foregoing, the limitations set forth
in Section 12.6(b) will not apply to Damages arising from or in
connection with a breach or alleged breach of the representations and
warranties of the Reid Parties set forth in Section 3.3, 3.8, 3.13(a)
or 3.19 or of the Suiza Parties set forth in Sections 4.3, 4.8,
4.13(a), 4.13A, 4.19, 4.23, 8.2(a) or 8.2A.
12.7 PROCEDURE FOR INDEMNIFICATION - THIRD PARTY CLAIMS.
(a) Promptly after receipt by an Indemnified Person under
Section 12.2, 12.3, 12.4 or 12.5 of notice of the commencement of any
Proceeding against it, such Indemnified Person will, if a claim is to
be made against an indemnifying party under such Section, give notice
to the indemnifying party of the commencement of such claim, but the
failure to notify the indemnifying party will not relieve the
indemnifying party of any liability that it may have to any Indemnified
Person, except to the extent that the indemnifying party demonstrates
that the defense of such action is prejudiced by the indemnifying
party's failure to give such notice.
(b) If any Proceeding referred to in Section 12.7(a) is
brought against an Indemnified Person and it gives notice to the
indemnifying party of the commencement of such Proceeding, the
indemnifying party will, to the extent that it wishes (unless (i) the
indemnifying party is also a party to such Proceeding and the
Indemnified Person determines in good faith that joint representation
would be inappropriate, or (ii) the indemnifying party fails to provide
reasonable assurance to the Indemnified Person of its financial
capacity to defend such Proceeding and provide indemnification with
respect to such Proceeding), assume the defense of such Proceeding with
counsel satisfactory to the Indemnified Person and, after notice from
the indemnifying party to the Indemnified Person of its election to
assume the defense of such Proceeding and an acknowledgment
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of its indemnification obligation with respect thereto, the
indemnifying party will not, as long as it diligently conducts such
defense, be liable to the Indemnified Person under this Section 12 for
any fees of other counsel or any other expenses with respect to the
defense of such Proceeding, in each case subsequently incurred by the
Indemnified Person in connection with the defense of such Proceeding,
other than reasonable costs of investigation. If the indemnifying party
assumes the defense of a Proceeding in accordance with the preceding
sentence, (i) no compromise or settlement of such claims may be
effected by the indemnifying party without the Indemnified Person's
consent (which consent shall not be unreasonably withheld) unless (A)
there is no finding or admission of any violation of Legal Requirements
or any violation of the rights of any Person and no effect on any other
claims that may be made against the Indemnified Person, and (B) the
sole relief provided is monetary damages that are paid in full by the
indemnifying party and (ii) the Indemnified Person will have no
liability with respect to any compromise or settlement of such claims
effected without its consent (which consent shall not be unreasonably
withheld). If notice is given to an indemnifying party of the
commencement of any Proceeding and the indemnifying party does not,
within 20 days after the Indemnified Person's notice is given, give
notice to the Indemnified Person of its election to assume the defense
of such Proceeding, the indemnifying party will be bound by any
determination made in such Proceeding or any compromise or settlement
reasonably effected by the Indemnified Person.
(c) Notwithstanding the foregoing, if an Indemnified Person
determines in good faith that there is a reasonable probability that a
Proceeding may adversely affect it or its Affiliates other than as a
result of monetary damages for which it would be entitled to
indemnification under this Agreement, the Indemnified Person may, by
notice to the indemnifying party, assume the exclusive right to defend,
compromise, or settle such Proceeding, but the indemnifying party will
not be bound by any determination of a Proceeding so defended or any
compromise or settlement effected without its consent (which may not be
unreasonably withheld).
(d) To the extent that Holdings or the Company is entitled to
indemnification from the Suiza Parent or the Reid Parent pursuant to
this Section 12, Holdings or the Company may offset such claim against
distributions otherwise payable to such indemnifying party under the
Holdings LLC Agreement.
12.8 PROCEDURE FOR INDEMNIFICATION - OTHER CLAIMS. A claim for
indemnification for any matter not involving a third-party claim may be asserted
by notice to the party from whom indemnification is sought.
12.9 MITIGATION. Upon and after becoming aware of any event that could
reasonably be expected to give rise to any Damages that are indemnifiable under
this Section 12, the Indemnified Party shall make reasonable efforts to mitigate
such Damages.
12.10 EXCLUSIVE REMEDY. The parties acknowledge and agree that, upon
and following the Closing, the indemnification rights provided in this Section
12 shall be the sole and exclusive
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remedy available to the parties for any claim or cause of action arising out of
or in respect of any breach of this Agreement or any other matter indemnifiable
hereunder.
12.11 PAYMENTS IN PREFERRED UNITS.
(a) If Damages arise, directly or indirectly, from or in
connection with anything described in paragraphs (a) through (d) of
Section 12.2 or in Section 12.5(b), the Reid Parent shall have the
option to pay the Damages of Suiza's Indemnified Persons in cash;
provided that such option must be exercised in connection with a breach
of Section 3.3, 3.13(a), 3.19 or the indemnity provided in Section
12.5(b) and to the extent that the Reid Parent, Vestar or their
controlled Affiliates are entitled to and receive cash indemnification
payments for Damages from an unaffiliated third party, which the Reid
Parent, Vestar or their controlled Affiliates (as the case may be)
shall use commercially reasonable efforts to collect. To the extent
such option is not exercised, Holdings shall reimburse Suiza's
Indemnified Persons in cash for all of their cash out-of-pocket Damages
and shall issue to the Suiza Parent Preferred Units having an aggregate
liquidation preference equal to (A) the aggregate amount of all Damages
referred to in the first sentence of this Section 12.11(a) multiplied
by (B) the quotient of the percentage of Member Units owned by the
Suiza Parent divided by the percentage of Member Units owned by the
Reid Parent and Vestar, collectively (rounded to the nearest $1,000).
The Suiza Parent will be entitled to indemnification under this Section
12.11(a) with respect to payments made under paragraph (a) of Section
12.2 or with respect to any Damages suffered by Holdings or the Company
itself arising, directly or indirectly, from or in connection with
anything described in paragraph (a) of Section 12.2 only to the extent
and in the amount that, at any point in time and on a cumulative basis,
the aggregate amount of the Damages to the Suiza Parent exceeds $5
million; provided, however, that such limitations shall not apply to
Damages arising from or in connection with a breach or alleged breach
of the representations and warranties of the Reid Parties set forth in
Section 3.3, 3.8, 3.13(a) or 3.19 or the indemnity provided in Section
12.5(b).
(b) If Damages arise, directly or indirectly, from or in
connection with anything described in paragraphs (a) through (d) of
Section 12.3 or in Section 12.5(a), the Suiza Parent shall have the
option to pay the Damages of Reid's Indemnified Persons in cash;
provided that such option must be exercised in connection with a breach
of Section 4.3, 4.13(a), 4.13A, 4.19, 4.23, 8.2(a), 8.2A or the
indemnity provided in Section 12.5(a) and to the extent that Suiza
Foods or its controlled Affiliates are entitled to and receive cash
indemnification payments for Damages from an unaffiliated third party,
which Suiza Foods or its controlled Affiliates (as the case may be)
shall use commercially reasonable efforts to collect. To the extent
such option is not exercised, Holdings shall reimburse Reid's
Indemnified Persons in cash for all of their cash out-of-pocket Damages
and shall issue to the Reid Parent and Vestar Preferred Units having an
aggregate liquidation preference equal to (A) the aggregate amount of
all Damages referred to in the first sentence of this Section 12.11(b)
multiplied by (B) the quotient of the percentage of Member Units owned
by the Reid Parent and Vestar, collectively, divided by the percentage
of Member Units owned by the Suiza Parent (rounded to the nearest
$1,000). Any Preferred Units distributed to the Reid Parent and Vestar
shall be distributed pro rata
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to each of them in accordance with their relative percentage of Member
Units held by them at such time. The Reid Parent and Vestar will be
entitled to indemnification under this Section 12.11(b) with respect to
payments made under paragraph (a) of Section 12.3 or with respect to
any Damages suffered by Holdings or the Company itself arising,
directly or indirectly, from or in connection with anything described
in paragraph (a) of Section 12.3 only to the extent and in the amount
that, at any point in time and on a cumulative basis, the aggregate
amount of the Damages to the Reid Parent and Vestar exceeds $5 million;
provided, however, that such limitations shall not apply to Damages
arising from or in connection with a breach or alleged breach of the
representations and warranties of the Suiza Parties set forth in
Sections 4.3, 4.8, 4.13(a), 4.13A, 4.19, 4.23, 8.2(a), 8.2A or the
indemnity provided in Section 12.5(a).
(c) The parties to this Agreement agree to cause Holdings to
issue the Preferred Units that are required to be issued pursuant to
this Section 12.11.
SECTION 13
POST CLOSING COVENANTS
13.1 NONDISCLOSURE.
(a) The Reid Parties and the Suiza Parties acknowledge and
agree that all customer, prospect and marketing lists, sales data,
intellectual property, proprietary information, trade secrets and other
confidential information of the Reid Companies (collectively, "REID
CONFIDENTIAL INFORMATION") are valuable assets of the Reid Companies
and will be owned exclusively by the Company following the Closing. The
Suiza Parties agree to, and agree to cause their respective
Representatives to, treat the Reid Confidential Information as
confidential and not to disclose such information or make use of such
information for their own purposes or for the benefit of any other
Person (other than the Suiza Companies or, after the Closing, Holdings,
the Company and its subsidiaries). The foregoing confidentiality
obligations will not apply to information that (a) is at the time of
receipt or thereafter becomes publicly known through no wrongful act of
any Suiza Party, (b) is received from a third party not under an
obligation to keep such information confidential and without breach of
this Agreement or (c) is required to be disclosed pursuant to any
Proceedings or an Order.
(b) The Suiza Parties and the Reid Parties acknowledge and
agree that all customer, prospect and marketing lists, sales data,
intellectual property, proprietary information, trade secrets and other
confidential information of the Suiza Companies (collectively, "SUIZA
CONFIDENTIAL Information") are valuable assets of the Suiza Companies
and will be owned exclusively by the Company following the Closing. The
Reid Parties agree to, and agree to cause their respective
Representatives to, treat the Suiza Confidential Information as
confidential and not to disclose such information or make use of such
information for their own purposes or for the benefit of any other
Person (other than the Reid Companies or, after the Closing, Holdings,
the Company and its subsidiaries). The foregoing confidentiality
obligations will not apply to information
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<PAGE> 70
that (a) is at the time of receipt or thereafter becomes publicly known
through no wrongful act of any Reid Party, (b) is received from a third
party not under an obligation to keep such information confidential and
without breach of this Agreement or (c) is required to be disclosed
pursuant to any Proceedings or an Order.
13.2 RECORDS RETENTION. Suiza Foods, the Suiza Parent, the Reid Parent,
Holdings, the Company and its subsidiaries agree that so long as any books,
records and files, including Tax Records (as defined below) relating to the
Suiza Companies, the Reid Companies, Holdings, the Company or any of its
subsidiaries that are retained by the Suiza Parent relating to Holdings, the
Company or any subsidiary, or Business Records of the Reid Companies that are
delivered to the control of Holdings, the Company or its subsidiaries pursuant
to this Agreement, or Business Records of the Suiza Companies that are delivered
to the control of Holdings, the Company or its subsidiaries pursuant to this
Agreement (collectively, "BUSINESS RECORDS"), remain in existence and available,
each of the parties hereto (at its expense) shall have the right upon prior
notice to inspect and make copies of the same at any time during business hours
for any proper purpose. Each party hereto shall undertake reasonable measures
(a) to preserve in good order to the extent required by law the Business Records
relating to the Suiza Companies, the Reid Companies, Holdings and the Company,
(b) not destroy or allow the destruction of any such Business Records without
first offering in writing to deliver them to the other party, (c) retain to the
extent required by law and provide the other parties with any records or other
information relating to liability for Taxes, and (d) provide the other parties
with any final determination of any such amount required to be shown on any Tax
Return of the other parties for any period. Without limiting the generality of
the foregoing, each of the parties hereto shall retain until the expiration of
the applicable statutory period of limitations (including any extensions),
complete copies of all returns, supporting work schedules and other records or
information (collectively, "TAX RECORDS"), delivered to such party, or retained
by such party, pursuant to this Agreement, which are relevant to such Tax Return
for all tax periods or portions thereof ending before or including the Closing
Date.
13.3 ALLOCATION OF PURCHASE PRICE. The parties will agree on the
allocation of value among the assets of the Reid Companies and the Suiza
Companies as necessary or desirable.
13.4 RELEASE OF ENCUMBRANCES. Immediately following the Closing,
Holdings and the Company will cause any Encumbrances, other than Permitted
Encumbrances, on the Company's assets or the assets of any subsidiary of the
Company, securing any of the Reid Indebtedness and Suiza Indebtedness to be
released.
13.5 PAYMENT OF TAXES. Holdings and the Company shall, jointly and
severally, pay the amount of any Taxes of any Reid Company with respect to any
Tax period beginning after December 31, 1998 and with respect to any Tax of the
Reid Parent for any Tax period, or portion thereof, ending on or prior to the
Closing Date; provided, that, any state income tax resulting from the
transactions contemplated pursuant to this Agreement (other than a transfer tax
measured on a basis of income) shall be considered an indemnifiable Damage
subject to the provisions of Section 12.11(a). Holdings and the Company shall,
jointly and severally, pay (i) the amount of any Taxes of any PCI Company with
respect to any Tax period beginning after December 31, 1998, (ii) the amount of
any state taxes measured by income (whether or not
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<PAGE> 71
denominated as income taxes), if any, with respect to a tax period, or portion
thereof, beginning after June 30, 1999 and prior to the Closing Date, of any
Franklin Company; provided that, for purposes of calculating the state taxes,
Suiza Foods will use commercially reasonable efforts to cause amortization
deductions to be claimed as a deduction on the tax return, and (iii) the amount
of any transfer taxes incurred by any Franklin Company as a result of the
Contemplated Transactions (provided, that with respect to (i), (ii) and (iii) no
payment shall be made for income taxes as a result of the transactions
contemplated pursuant to this Agreement), provided, that, for purposes of the
calculation of any Taxes of any Suiza Company, any losses, credits or deductions
including any net operating loss carryovers of the Suiza Companies shall be
deemed to offset income other than as a result of the Contemplated Transactions.
This Section 13.5 is intended to provide a mechanism for the cash payment of any
such Taxes, and is not intended to relieve any party from its economic
responsibility to other parties for indemnification against such Taxes, as is
provided for in Sections 12.2 and 12.3 of this Agreement. The covenant for
payment under this Section 13.5 shall not be limited or reduced under any
section of this Agreement.
13.6 EMPLOYEE BENEFITS. Immediately following the Closing, Holdings and
the Company and its subsidiaries will provide health and welfare benefits to
their employees. To the extent permitted by applicable tax-qualification
requirements, employees who are participants in the Suiza Foods 401(k) Plan as
of the Effective Time and who are employees of the Company or its subsidiaries
immediately after the Effective Time ("TRANSFERRED EMPLOYEES") shall be offered
the option of distribution of their Suiza Foods 401(k) Plan accounts, and any
non-vested amounts in such accounts shall be fully vested (regardless of whether
they elect a distribution). The Company or its subsidiaries shall provide the
Transferred Employees the opportunity to participate in a 401(k) plan as soon as
practicable after the Effective Time, which plan shall provide credit for
vesting and eligibility purposes for service previously credited under the Suiza
Foods 401(k) Plan, and shall, to the extent permitted by applicable tax
qualification requirements, permit direct rollovers from the Suiza Foods 401(k)
Plan, including rollovers of any outstanding plan loans.
SECTION 14
GENERAL PROVISIONS
14.1 EXPENSES.
(a) For investment banking services rendered in connection
with the Contemplated Transactions, Holdings and the Company have
entered into and will perform their obligations under the VCP
Management Agreement.
(b) If this Agreement is not terminated pursuant to Section
11, and the Closing occurs, then:
(i) except as otherwise expressly provided in this
Agreement, Holdings and the Company, jointly and severally,
will bear all fees and expenses incurred by any Reid Party
(the "Reid Expenses") and all fees and expenses (other
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<PAGE> 72
than the fees and expenses referred to in Section 4.19)
incurred by any Suiza Party (the "Suiza Expenses") in
connection with the preparation, execution, and performance of
this Agreement and the Contemplated Transactions, including
all fees and expenses of each of their Representatives; and
(ii) prior to the Closing, the Reid Parent and the
Suiza Parent will agree on a good faith estimate of the Reid
Expenses and the Suiza Expenses, and Holdings and the Company,
jointly and severally, will reimburse the Reid Companies for
such estimated Reid Expenses and the Suiza Companies for such
estimated Suiza Expenses immediately after the Closing. Within
60 days after the Closing, the Reid Parent and the Suiza
Parent will agree on the actual Reid Expenses and the actual
Suiza Expenses and make any payments that may be necessary to
reconcile any difference between the estimated and actual
amounts; and
(iii) Suiza Foods will bear all reasonable fees and
expenses incurred by Peter Bernon and Alan Bernon for legal
representation in connection with this Agreement and the
Contemplated Transactions.
(c) If this Agreement is terminated pursuant to Section 11,
then:
(i) except as otherwise expressly provided in this
Agreement, the Reid Parent will bear all Reid Expenses; and
(ii) except as otherwise expressly provided in this
Agreement, the Suiza Parent will bear all Suiza Expenses.
14.2 PUBLIC ANNOUNCEMENTS. So long as this Agreement is in effect, the
Suiza Parent and the Reid Parent agree to consult with each other in issuing any
press release or otherwise making any public statement with respect to the
transactions contemplated by this Agreement, and none of the parties to this
Agreement will issue any press release or make any public statement prior to
such consultation, except as may be required by Legal Requirements.
14.3 NOTICES. All notices, consents, waivers, and other communications
under this Agreement must be in writing and will be deemed to have been duly
given when (a) delivered by hand (with written confirmation of receipt), (b)
sent by telecopier (with written confirmation of receipt), or (c) when received
by the addressee, if sent by a nationally recognized overnight delivery service,
in each case to the appropriate addresses and telecopier numbers set forth below
(or to such other addresses and telecopier numbers as a party may designate by
notice to the other parties):
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<PAGE> 73
If to any Reid Party: with a copy to:
Reid Plastics Holdings, Inc. Simpson Thacher & Bartlett
1225 Seventeenth Street, Suite 1660 425 Lexington Avenue
Denver, Colorado 80202 New York, New York 10017
Attention: John R. Woodard Attention: Peter J. Gordon
Telecopy: (303) 292-6639 Telecopy: (212) 455-2502
and
Vestar Packaging LLC
1225 Seventeenth Street, Suite 1660
Denver, Colorado 80202
Attention: John R. Woodard
Telecopy: (303) 292-6639
If to any Suiza Party: with a copy to:
Suiza Foods Corporation Hughes & Luce, L.L.P.
2515 McKinney Avenue, Suite 1200 1717 Main Street,
Dallas, Texas 75201 Suite 2800
Attention: President and General Counsel Dallas, Texas 75201
Telecopy: (214) 303-3400 Attention: William A.
McCormack
Telecopy: (214) 939-5849
14.4 ATTORNEY'S FEES AND COSTS. In the event of a breach by any party
to this Agreement and commencement of a subsequent legal action in a court of
law or forum of arbitration, or in the event legal counsel is consulted in the
event of any such breach or in anticipation of any such prospective legal
action, the prevailing party in any such dispute shall be entitled to
reimbursement of reasonable attorney's fees and expenses.
14.5 FURTHER ASSURANCES. The parties agree (a) to furnish upon request
to each other such further information, (b) to execute and deliver to each other
such other documents, and (c) to do such other acts and things, all as the other
party may reasonably request for the purpose of carrying out the intent of this
Agreement and the documents referred to in this Agreement.
14.6 WAIVER. The rights and remedies of the parties to this Agreement
are cumulative and not alternative. Neither the failure nor any delay by any
party in exercising any right, power, or privilege under this Agreement or the
documents referred to in this Agreement will operate as a waiver of such right,
power, or privilege, and no single or partial exercise of any such right, power,
or privilege will preclude any other or further exercise of such right, power,
or privilege or the exercise of any other right, power, or privilege. To the
maximum extent permitted by applicable law, (a) no claim or right arising out of
this Agreement or the documents referred to in this Agreement can be discharged
by one party, in whole or in part, by a waiver or renunciation of the claim or
right unless in a writing signed by the other party; (b) no waiver that may be
given by a party will be applicable except in the specific instance for which it
is given; and (c) no notice to or demand on one party will be deemed to be a
waiver of any obligation of such party
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or of the right of the party giving such notice or demand to take further action
without notice or demand as provided in this Agreement or the documents referred
to in this Agreement.
14.7 ENTIRE AGREEMENT AND MODIFICATION. This Agreement supersedes all
prior agreements between the parties with respect to its subject matter and
constitutes (along with the documents referred to in this Agreement) a complete
and exclusive statement of the terms of the agreement between the parties with
respect to its subject matter, except as expressly agreed in any writing dated
as of the date of this Agreement or in a later writing which expressly refers to
this Agreement. This Agreement may not be amended except by a written agreement
executed by the party to be charged with the amendment.
14.8 ASSIGNMENTS, SUCCESSORS AND NO THIRD PARTY RIGHTS. No party may
assign any of its rights under this Agreement or its Interests without the prior
consent of the other parties. Subject to the preceding sentence, this Agreement
will apply to, be binding in all respects upon, and inure to the benefit of the
successors and permitted assigns of the parties. Nothing expressed or referred
to in this Agreement will be construed to give any Person other than the parties
to this Agreement any legal or equitable right, remedy, or claim under or with
respect to this Agreement or any provision of this Agreement. This Agreement and
all of its provisions and conditions are for the sole and exclusive benefit of
the parties to this Agreement and their successors and assigns.
14.9 SEVERABILITY. If any provision of this Agreement is held invalid
or unenforceable by any court of competent jurisdiction, the other provisions of
this Agreement will remain in full force and effect. Any provision of this
Agreement held invalid or unenforceable only in part or degree will remain in
full force and effect to the extent not held invalid or unenforceable.
14.10 SECTION HEADINGS, CONSTRUCTION. The headings of Sections in this
Agreement are provided for convenience only and will not affect its construction
or interpretation. All references to "Section" or "Sections" refer to the
corresponding Section or Sections of this Agreement. All words used in this
Agreement will be construed to be of such gender or number as the circumstances
require. Unless otherwise expressly provided, the word "including" does not
limit the preceding words or terms.
14.11 TIME OF ESSENCE. With regard to all dates and time periods set
forth or referred to in this Agreement, time is of the essence.
14.12 GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE
OF DELAWARE APPLICABLE TO CONTRACTS ENTERED INTO AND TO BE PERFORMED IN THE
STATE OF DELAWARE.
14.13 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original copy of this
Agreement and all of which, when taken together, will be deemed to constitute
one and the same agreement.
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[Remainder of page intentionally left blank]
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<PAGE> 76
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first written above.
SUIZA FOODS CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
PLASTIC CONTAINERS, INC., a Delaware corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CONTINENTAL CARIBBEAN CONTAINERS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CONTINENTAL PLASTIC CONTAINERS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
FRANKLIN PLASTICS, INC., a Delaware corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ALLENTOWN PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
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<PAGE> 77
ATLANTA CONTAINER, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CHESTER COUNTY CONTAINER CORP.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
FIRST CAPITAL PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
FLORIDA PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ILLINOIS PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
KENTWOOD PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
LIQUITAINE ACQUISITION CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
71
<PAGE> 78
MAINE PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
MARLBOROUGH PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
MIDDLESEX PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
NEW JERSEY PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
NORTH CAROLINA PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
OHIO STATE PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
72
<PAGE> 79
FRANKLIN PLASTICS, INC., a Massachusetts corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
RICHMOND CONTAINER, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
ROSTAN ACQUISITION CORPORATION
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
SHERMAN PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
VANGUARD MANUFACTURING, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CONSOLIDATED PLASTECHS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
VESTAR PACKAGING LLC
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
73
<PAGE> 80
REID PLASTICS HOLDINGS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
REID PLASTICS, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
S-W REALTY CO.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
REID INTERMEDIATE, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
PLASTIC CONTAINERS, INC., an Alabama corporation
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
REID PLASTICS WEST, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
PROPAK INDUSTRIAL, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
74
<PAGE> 81
JUICE TREE, INC.
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CONSOLIDATED CONTAINER HOLDINGS LLC
By: Franklin Plastics, Inc.,
its Manager
By:
----------------------------------
Name:
--------------------------------
Title:
-------------------------------
CONSOLIDATED CONTAINER COMPANY LLC
By: Consolidated Container Holdings LLC,
its Manager
By: Franklin Plastics, Inc.,
its Manager
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
REID PLASTICS GROUP LLC
By: Consolidated Container Company LLC,
its Manager
By: Consolidated Container Holdings LLC,
its Manager
By: Franklin Plastics, Inc., its Manager
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
75
<PAGE> 82
EXHIBIT E
Legal opinions of counsel to the Suiza Parties will be delivered with respect to
the matters referred to in:
1. The first sentence of Section 4.1(a);
2. Section 4.2(b);
3. to the knowledge of such counsel, Section 4.2(c);
4. to the knowledge of such counsel, Section 4.2(d);
5. the first sentence of Section 6.1(a);
6. Section 6.2(b);
7. to the knowledge of such counsel, Section 6.2(c); and
8. that Holdings LLC, Franklin, or Holdings LLC and Franklin between them
should be entitled to a current federal income tax deduction for the amount
of any bond tender premium paid in connection with a tender offer for the
PCI Notes in accordance with Section 8.10.
F-1
<PAGE> 1
EXHIBIT 2.2
Amendment No. 1 dated as of June 28, 1999 to Contribution and Merger
Agreement dated as of April 29, 1999 among Suiza Corporation, Franklin
Plastics, Inc., the Suiza Companies identified therein, Vestar Packaging LLC,
Reid Plastics Holdings, Inc., the Reid Companies identified therein, Reid
Plastics Group LLC, Consolidated Container Holdings LLC and Consolidated
Container Company LLC (the "Merger and Contribution Agreement").
Whereas, the parties hereto have agreed to amend the Contribution and
Merger Agreement as more fully described herein;
Now, therefore, in consideration of the premises, the parties hereto agree
as follows:
1. Defined Terms. Unless otherwise defined herein, terms defined in the
Contribution and Merger Agreement shall have their defined meanings when used
herein.
2. Amendments. The Contribution and Merger Agreement is hereby amended as
follows:
(a) The forms of Unit Option Plan, Unit Option Agreement and Redemption
Agreement attached as Exhibit B to the Contribution and Merger Agreement
hereby are replaced with the forms thereof.
(b) There hereby is added to Section 12.5 of the Contribution and
Merger Agreement the following paragraph:
"(c) The parties agree to cause Holdings, in accordance with Section
12.11, to indemnify, defend and hold harmless Reid's Indemnified
Persons for, and will pay to Reid's Indemnified Persons the amount
of, any Damages incurred by any of Holdings and its subsidiaries and
Reid's Indemnified Persons arising directly or indirectly, from or
in connection with, any infringement or alleged infringement prior
to the Closing Date of U.S. Patent No. 4,605,576, entitled
"Multilayer Plastic Articles" (the "Jabarin Patent"), and U.S.
Patent No. 4,434,264, entitled "High Clarity Propylene Polymer
Compositions of Improved Impact Strength" (the "Ficker Patent"), by
any Suiza Party or any Affiliate thereof."
(c) There hereby is added to the first sentence of Section 12.11(b) of
the Contribution and Merger Agreement following the words "Section 12.3 or
in Section 12.5(a)" the words "or in Section 12.5(c)".
(d) There hereby is added at the beginning of each of the first and
second sentences of Section 2.3(b) the words
<PAGE> 2
"Except as otherwise expressly agreed in writing by Suiza Foods,
Holdings and Vestar,"; and there hereby is added at the end of the
second sentence of Section 2.3(b) the words", and Holdings shall pay
Franklin an amount in cash equal to the exercise price paid to Holdings
upon exercise of such Franklin Replacement Option."
(e) The second sentence of Section 7.13 of Exhibit A hereby is
amended by adding at the beginning thereof the words "Except as
otherwise expressly agreed in writing by Suiza Foods, the Company and
Vestar,"; and there hereby is added at the end of said second sentence
the words", and the Company shall pay Franklin an amount in cash equal
to the exercise price paid to the Company upon exercise of such
Franklin Replacement Option."
3. Continuing Effect of Merger Agreement. This Amendment shall
not constitute a waiver or amendment of any other provision of the Contribution
and Merger Agreement not expressly referred to herein and shall not be construed
as a waiver or consent to any future action on the part of any party hereto that
would require a waiver or consent of any other party hereto. Except as expressly
amended herein, the provisions of the Contribution and Merger Agreement are and
shall remain in full force and effect.
4. Counterparts. This Amendment may be executed by the parties
hereto in any number of counterparts, and all of such counterparts taken
together shall be deemed to constitute one and the same instrument.
5. Effectiveness. This Amendment shall become effective upon the
execution and delivery of this Amendment by all parties hereto. This Amendment
shall have no force or effect prior thereto.
6. Governing Law. The Contribution and Merger Agreement, as
amended hereby, and the rights and obligations of the parties thereto shall be
governed by, and construed and enforced in accordance with, and the rights of
parties shall be governed by, the laws of the State of Delaware applicable to
contracts entered into and to be performed in the State of Delaware.
<PAGE> 3
3
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed and delivered as of the day and year first above written.
SUIZA FOODS CORPORATION
By: /s/ MICHELLE P. GOOLSBY
----------------------------------------
Name: MICHELLE P. GOOLSBY
Title: Executive VP and General Counsel
PLASTIC CONTAINERS, INC.
By: /s/ TIMOTHY W. BRACHER
----------------------------------------
Name: Timothy W. Bracher
Title: SVP and Chief Financial Officer
CONTINENTAL CARIBBEAN
CONTAINERS, INC.
By: /s/ TIMOTHY W. BRACHER
----------------------------------------
Name: Timothy W. Bracher
Title: SVP and Chief Financial Officer
CONTINENTAL PLASTIC CONTAINERS,
INC.
By: /s/ TIMOTHY W. BRACHER
----------------------------------------
Name: Timothy W. Bracher
Title: SVP and Chief Financial Officer
FRANKLIN PLASTICS, INC., A
DELAWARE CORPORATION
By: /s/ MICHELLE P. GOOLSBY
----------------------------------------
Name: MICHELLE P. GOOLSBY
Title: VP
<PAGE> 4
4
ALLENTOWN PLASTICS, INC.
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:
Title: VP
ATLANTA CONTAINER, INC.
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:
Title: VP
CHESTER COUNTY CONTAINER CORP.
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:
Title: VP
FIRST CAPITAL PLASTICS, INC.
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:
Title: VP
FLORIDA PLASTICS, INC.
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:
Title: VP
<PAGE> 5
5
ILLINOIS PLASTICS, INC.
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:
Title: VP
KENTWOOD PLASTICS, INC.
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:
Title: VP
LIQUITAINE ACQUISITION CORPORATION
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:
Title: VP
MAINE PLASTICS, INC.
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:
Title: VP
MARLBOROUGH PLASTICS, INC.
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:
Title: VP
MIDDLESEX PLASTICS, INC.
By: /s/ [ILLEGIBLE]
--------------------------------------
Name:
Title: VP
<PAGE> 6
6
NEW JERSEY PLASTICS, INC.
By: /s/ MICHELLE GOOLSBY
--------------------------------------
Name:
Title: VP
NORTH CAROLINA PLASTICS, INC.
By: /s/ MICHELLE GOOLSBY
--------------------------------------
Name:
Title: VP
OHIO STATE PLASTICS, INC.
By: /s/ MICHELLE GOOLSBY
--------------------------------------
Name:
Title: VP
FRANKLIN PLASTICS, INC.
A MASSACHUSETTS CORPORATION
By: /s/ MICHELLE GOOLSBY
--------------------------------------
Name:
Title: VP
RICHMOND CONTAINER, INC.
By: /s/ MICHELLE GOOLSBY
--------------------------------------
Name:
Title: VP
ROSTAN ACQUISITION CORPORATION
By: /s/ MICHELLE GOOLSBY
--------------------------------------
Name:
Title: VP
<PAGE> 7
7
SHERMAN PLASTICS, INC.
By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title: VP
VANGUARD MANUFACTURING, INC.
By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title: VP
CONSOLIDATED PLASTECHS, INC.
By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title: VP
VESTAR PACKAGING LLC
By: Vestar Capital Partners
III, L.P., its Managing
Member
By: Vestar Associates III,
L.P., its General Partner
By: Vestar Associates
Corporation III, its
General Partner
By: /s/ [ILLEGIBLE]
------------------------------------
Name:
Title:
<PAGE> 1
EXHIBIT 99.1
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CONSOLIDATED CONTAINER HOLDINGS LLC
<PAGE> 2
LIMITED LIABILITY COMPANY AGREEMENT
OF
CONSOLIDATED CONTAINER HOLDINGS LLC
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C> <C>
ARTICLE I ORGANIZATIONAL MATTERS......................................................................1
1.1 Formation...................................................................................1
1.2 Name........................................................................................1
1.3 Registered Office and Principal Office of Company; Addresses of Members.....................1
1.4 Term........................................................................................2
1.5 Assumed Name Certificate....................................................................2
1.6 Ownership...................................................................................2
1.7 No Individual Authority.....................................................................2
1.8 Title to Company Property...................................................................2
1.9 Limits of Company...........................................................................2
ARTICLE II DEFINITIONS.................................................................................2
ARTICLE III PURPOSE.....................................................................................9
3.1 Purposes and Scope..........................................................................9
ARTICLE IV CAPITAL CONTRIBUTIONS......................................................................10
4.1 Initial Capital Contributions..............................................................10
4.2 Non-Contemplated Contributions.............................................................10
4.3 Capital Accounts...........................................................................11
4.4 Interest...................................................................................14
4.5 No Withdrawal..............................................................................14
4.6 Limitation on Capital Contributions and Loans..............................................14
ARTICLE V ALLOCATIONS................................................................................15
5.1 Allocation of Profits and Losses...........................................................15
5.2 Special Allocations........................................................................16
5.3 Curative Allocations.......................................................................17
5.4 Tax Allocations: Code Section 704(c).......................................................18
5.5 Allocations Upon Option Exercise...........................................................18
5.6 Other Allocation Rules.....................................................................19
ARTICLE VI DISTRIBUTIONS..............................................................................19
6.1 Distributions of Available Cash............................................................19
6.2 Amounts Withheld...........................................................................20
</TABLE>
i
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
6.3 Excess Distributions.......................................................................20
6.4 Tax Distributions..........................................................................21
ARTICLE VII MANAGEMENT OF THE COMPANY..................................................................22
7.1 Management Committee.......................................................................22
7.2 Major Decisions............................................................................24
7.3 Approval of Major Decisions................................................................26
7.4 Officers...................................................................................26
7.5 Certificate of Formation...................................................................26
7.6 Compensation and Reimbursement of Member Expenses..........................................26
7.7 Outside Activities; Noncompetition.........................................................27
7.8 Transactions with Affiliates...............................................................29
7.9 Indemnification of Members.................................................................30
7.10 Liability of the Members...................................................................32
7.11 Preemptive Rights..........................................................................32
7.12 Certain Anti-dilutive Rights...............................................................33
7.13 Exercise of Certain Options................................................................35
ARTICLE VIII RIGHTS AND OBLIGATIONS OF MEMBERS..........................................................35
8.1 Limitation of Liability....................................................................35
8.2 Return of Capital..........................................................................35
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS.....................................................36
9.1 Records and Accounting.....................................................................36
9.2 Fiscal Year................................................................................36
9.3 Reports....................................................................................36
9.4 Documents..................................................................................37
9.5 Certain Administrative Expenses of RPH.....................................................37
ARTICLE X TAX MATTERS................................................................................37
10.1 Tax Matters Partner........................................................................37
10.2 Annual Tax Returns.........................................................................37
10.3 Notice and Limitations on Authority........................................................38
10.4 Tax Elections..............................................................................38
10.5 Actions in Event of Audit..................................................................39
10.6 Organizational Expenses....................................................................39
10.7 Taxation as a Partnership..................................................................39
ARTICLE XI TRANSFERS OF UNITS; NEW MEMBERS............................................................39
11.1 Transfer Restrictions......................................................................39
11.3 Transfer to Affiliates and Pledgees........................................................39
11.3 [Reserved].................................................................................40
11.4 Registration...............................................................................40
11.5 Right of First Refusal; Tag-Along Rights...................................................40
11.6 Drag-Along Rights..........................................................................44
11.7 Put Rights.................................................................................44
</TABLE>
ii
<PAGE> 4
<TABLE>
<CAPTION>
<S> <C> <C>
11.8 Prohibited Transfers.......................................................................46
11.9 Rights of Assignee.........................................................................46
11.10 Admission as a New Member..................................................................47
11.11 Distributions and Allocations in Respect of Transferred Units..............................48
11.12 Conversion to Corporate Form...............................................................48
ARTICLE XII PREFERRED UNITS............................................................................49
12.1 Issuance of Preferred Units................................................................49
12.2 Terms of Preferred Units...................................................................49
ARTICLE XIII DISSOLUTION AND LIQUIDATION................................................................51
13.1 Dissolution................................................................................51
13.2 Continuation of the Company................................................................51
13.3 Liquidation................................................................................52
13.4 Reserves...................................................................................53
13.5 Distribution in Kind.......................................................................53
13.6 Disposition of Documents and Records.......................................................53
13.7 Negative Capital Accounts..................................................................54
13.8 Filing of Certificate of Cancellation......................................................54
13.9 Return of Capital..........................................................................54
13.10 Waiver of Partition........................................................................54
ARTICLE XIV AMENDMENT OF AGREEMENT.....................................................................54
14.1 Amendment Procedures.......................................................................54
ARTICLE XV GENERAL PROVISIONS.........................................................................55
15.1 Addresses and Notices......................................................................55
15.2 Titles and Captions........................................................................56
15.3 Pronouns and Plurals.......................................................................56
15.4 Further Action.............................................................................56
15.5 Binding Effect.............................................................................56
15.6 Integration................................................................................56
15.7 No Third Party Beneficiary.................................................................56
15.8 Waiver.....................................................................................56
15.9 Counterparts...............................................................................57
15.10 Applicable Law.............................................................................57
15.11 Invalidity of Provisions...................................................................57
15.12 Confidentiality............................................................................57
</TABLE>
iii
<PAGE> 5
LIMITED LIABILITY COMPANY AGREEMENT
OF
CONSOLIDATED CONTAINER HOLDINGS LLC
This LIMITED LIABILITY COMPANY AGREEMENT of CONSOLIDATED CONTAINER HOLDINGS LLC
(the "Agreement") is entered into as of July 1, 1999, by and among Franklin
Plastics, Inc., a Delaware corporation ("Franklin"), Reid Plastics Holdings,
Inc. ("RPH"), and Vestar Packaging LLC, a Delaware limited liability company
("Vestar"), together with any Person who becomes a Member as provided herein.
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 Formation. The Company was formed as a limited liability
company by the filing of the Certificate in accordance with the Delaware Act on
April 20, 1999. The Members hereby enter into this Agreement in order to set
forth the rights and obligations of the Members and certain matters related
thereto. Except as expressly provided and permitted herein to the contrary, the
rights and obligations of the Members and the administration and termination of
the Company shall be governed by the Delaware Act.
1.2 Name. The name of the Company shall be, and the business of
the Company shall be conducted under the name of, "Consolidated Container
Holdings LLC." The Company's business may be conducted under any other name or
names approved by the Management Committee.
1.3 Registered Office and Principal Office of Company; Addresses
of Members.
(a) The registered office of the Company in the State of
Delaware shall be 1209 Orange Street, Wilmington, Delaware 19805, and
the registered agent for service of process on the Company at such
registered office shall be Corporation Service Company, 1013 Centre
Road, Wilmington, DE 19805. The principal place of business of the
Company shall be at 2515 McKinney, Suite 850, Dallas, Texas 75201, or
such other location as determined by the Management Committee. The
Company may maintain offices at such other locations as the Management
Committee deems advisable.
(b) The addresses of the Members as of the Closing Date are
set forth in Section 15.1. The address of a Member may be changed in
accordance with the requirements set forth in Section 15.1.
1
<PAGE> 6
1.4 Term. The existence of the Company commenced on the
Commencement Date, and the Company shall continue in existence until the
dissolution of the Company pursuant to the express provisions of Article XIII
hereof (other than a dissolution that is followed by the reconstitution of the
Company pursuant to Section 13.2).
1.5 Assumed Name Certificate. The Members shall execute and file
any assumed or fictitious name certificate or certificates or any similar
documents required by law to be filed in connection with the formation and
operation of the Company.
1.6 Ownership. The interest of each Member in the Company shall be
personal property for all purposes. All property and interests in property, real
or personal, owned by the Company shall be deemed owned by the Company as an
entity, and no Member, individually, shall have any ownership of such property
or interest except by having an ownership interest in the Company as a Member.
Each of the Members irrevocably waives, during the term of the Company and
during any period of its liquidation following any dissolution, any right that
it may have to maintain any action for partition with respect to any of the
assets of the Company.
1.7 No Individual Authority. No Member shall have any authority to
act for, or to undertake or assume, any obligation, debt, duty or responsibility
on behalf of any other Member or the Company except as otherwise expressly
provided in this Agreement.
1.8 Title to Company Property. It is the desire and intention of
the Members that legal title to all property of the Company shall be held and
conveyed in the name of the Company.
1.9 Limits of Company. The relationship between the parties hereto
shall be limited to the carrying on of the business of the Company in accordance
with the terms of this Agreement. Such relationship shall be construed and
deemed to be a limited liability company for the sole and limited purpose of
carrying on such business. Except as otherwise provided for or contemplated in
this Agreement, nothing herein shall be construed to create a partnership
between the Members or to authorize any Member to act as general agent for any
other Member.
ARTICLE II
DEFINITIONS
The following definitions shall for all purposes, unless otherwise
clearly indicated to the contrary, apply to the terms used in this Agreement.
"Adjusted Capital Account" means, with respect to any Member, a special
account maintained for such Member, the balance of which shall equal such
Member's Capital Account balance, increased by the amount (if any) of such
Member's share of the Company Minimum Gain and Member Minimum Gain of the
Company.
2
<PAGE> 7
"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such
Member is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to
Regulations Section 1.704-1(b)(2)(iv)(c), the penultimate sentence of
Regulations Section 1.704-2(g)(1), or the penultimate sentence of
Regulations Section 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
"Affiliate" means, with respect to a particular Person, any other
Person directly or indirectly Controlling, Controlled by, or under common
Control with such Person.
"Agreement" means this Limited Liability Company Agreement of
Consolidated Container Holdings LLC, as it may be further amended, supplemented
or restated from time to time in accordance with the terms of this Agreement.
"As-Converted Units" shall mean, with respect to any Member that shall
own Preferred Units at the time the Suiza Member, in the case of any Reid
Member, or the Reid Members, in the case of the Suiza Member, propose to effect
a sale of its Units in accordance with the terms hereof, a number of Units equal
to the aggregate Liquidation Preference of the number of Preferred Units owned
by such Member divided by the price per Unit proposed to be paid for each Unit
proposed to be sold by such Suiza Member or Reid Member, as the case may be.
"Available Cash" of the Company as of any date means all cash funds of
the Company on hand as of such date after: (a) payment of all expenditures of
any kind, including operating expenses and capital expenditures, that are due
and payable as of such date or that are expected to become due and payable in
the next 30 days; and (b) provision for adequate reserves (working capital and
capital), with the amount of such reserves to be determined by the Management
Committee (acting reasonably and in good faith).
"Blocked Affiliate Transfer" has the meaning set forth in Section 11.2.
"Book Depreciation" has the meaning set forth in Section 4.3(b)(v).
"Book Value" has the meaning set forth in Section 4.3(c).
3
<PAGE> 8
"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the Government of the United States shall
not be regarded as a Business Day.
"Capital Account" means the capital account maintained for a Member
pursuant to Section 4.3 with respect to Units held by such Member.
"Capital Contribution" means, with respect to any Member, the amount of
money and the initial Book Value of any property (other than money) contributed
to the Company with respect to the interest in the Company held by such Member,
reduced by the amount of any liabilities of the Member assumed by the Company or
which are secured by any property contributed by such Member to the Company.
"Certificate" means the Certificate of Formation of the Company filed
with the Secretary of State of Delaware, as it may be amended or restated from
time to time.
"Change in Control" means the first to occur of the following events:
(i) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all of the assets of Suiza
Foods, RPH or Vestar, as the case may be, to any person, or "group" of related
persons, as defined in Rule 13d-5 under the Securities Exchange Act of 1934 (a
"Group"); (ii) a majority of the board of directors of Suiza Foods, RPH or
Vestar, as the case may be, shall consist of persons who are not Continuing
Directors; or (iii) the acquisition by any person or Group of the power,
directly or indirectly, to vote or direct the voting of securities having more
than 50% of the ordinary voting power for the election of directors of Suiza
Foods, RPH or Vestar, as the case may be, or to designate a majority of the
directors of Suiza Foods, RPH or Vestar, as the case may be, or (iv) a merger of
Suiza Foods, RPH or Vestar, as the case may be, with another entity in which the
previous shareholders or members of the merging entity do not continue to own at
least a majority of the voting equity securities of the surviving entity.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. All references herein to the Code shall include any
corresponding provision or provisions of succeeding law.
"Commencement Date" means the date that the Certificate of Formation
was filed with the Secretary of State of Delaware.
"Company" means Consolidated Container Holdings LLC, a Delaware limited
liability company established by filing of the Certificate with the Secretary of
State of Delaware.
"Company Estimated Net Taxable Income" has the meaning set forth in
Section 6.4(a).
"Company Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(d).
4
<PAGE> 9
"Company Option" has the meaning set forth in Section 5.5(b).
"Competing Business" has the meaning set forth in Section 7.7(b).
"Continuing Director" means, as of the date of determination, any
person who (i) was a member of the board of directors or management committee of
Suiza Foods, RPH or Vestar, as the case may be, on the date of this Agreement,
or (ii) was nominated for election or elected to the board of directors or
management committee of Suiza Foods, RPH or Vestar, as the case may be, with the
affirmative vote of a majority of the Continuing Directors who were members of
such board of directors at the time of such nomination or election.
"Contributions" means the contribution by Franklin of the member
interests of PCI to Consolidated Container Company LLC and the contribution by
Vestar of $60,800,000 to the Company, both pursuant to the Merger Agreement.
"Control" (and derivations thereof) means, with respect to a particular
Person, (a) the ownership, directly or indirectly, of more than 50% of the
equity or voting interests in such Person or (b) the right to elect or appoint,
together with others who are required to act in concert with such Person, more
than 50% of the directors or members of another governing body that directs the
management and policies of such Person.
"Delaware Act" means the Delaware Revised Limited Liability Company
Act, 6 Del. C. Section 18-101, et seq., as amended from time to time.
"Dissolution Event" has the meaning set forth in Section 13.1(b).
"Event of Bankruptcy" means, with respect to any Member or the Company,
any of the following acts or events:
(a) making an assignment for the benefit of creditors;
(b) filing a voluntary petition in bankruptcy;
(c) becoming the subject of an order for relief or being
declared insolvent or bankrupt in any federal or state bankruptcy or
insolvency proceeding;
(d) filing a petition or answer seeking a reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or
similar relief under any statute, law, or regulation;
(e) filing an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in a
proceeding of the type described in parts (a) through (d) of the
definition;
5
<PAGE> 10
(f) seeking, consenting to, or acquiescing in the appointment
of a trustee, receiver, or liquidator of all or any substantial part of
its properties; or
(g) the expiration of 90 days after the date of the
commencement of a proceeding against such Person seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any statute, law, or regulation if
the proceeding has not been previously dismissed or the expiration of
60 days after the date of the appointment, without such Person's
consent or acquiescence, of a trustee or receiver for the liquidation
of such Person or of all or any substantial part of such Person's
properties, if the appointment has not been previously vacated or
stayed, or the expiration of 60 days after the date of expiration of a
stay, if the appointment has not been previously vacated.
"Fair Market Value" has the meaning set forth in Section 11.7(c).
"Financial Statements" means the audited financial statements called
for in Section 9.3.
"Fiscal Year" means the 12-month period ending December 31 of each
year; provided that the initial Fiscal Year shall be the period beginning on the
Commencement Date and ending December 31, 1999, and the last Fiscal Year shall
be the period beginning on January 1 of the calendar year in which the final
liquidation and termination of the Company is completed and ending on the date
such final liquidation and termination is completed (to the extent any
computation or other provision hereof provides for an action to be taken on a
Fiscal Year basis, an appropriate proration or other adjustment shall be made in
respect of the initial and final Fiscal Years to reflect that such periods are
less than full calendar year periods).
"Franklin Managers" means the Managers designated by Franklin pursuant
to Section 7.1.
"Franklin Replacement Options" has the meaning set forth in Section
7.13.
"Indemnitee" has the meaning set forth in Section 7.9.
"Independent Accountants" means any of the five largest nationally
recognized accounting firms in the United States, as selected by the Management
Committee. Deloitte & Touche LLP shall be the initial Independent Accountant.
"Initial Liquidation Preference" has the meaning set forth in Section
12.2.
"Initial Public Offering" means any underwritten public offering of
securities of RPH (which is intended to be the corporate successor to the
Company in the event of an Initial Public Offering, by merger of the Company
and, subject to Section 11.12 hereof, Franklin into RPH), or its successor, the
gross proceeds of which exceed $50,000,000.
"Liquidation Preference" has the meaning set forth in Section 12.2.
6
<PAGE> 11
"Liquidator" has the meaning set forth in Section 13.3.
"Losses" has the meaning set forth in Section 4.3(b).
"Major Decision" has the meaning set forth in Section 7.2.
"Management Committee" means a committee appointed by Franklin, RPH and
Vestar in accordance with Section 7.1 hereof.
"Manager" has the meaning set forth in Section 7.1.
"Member" means Franklin, RPH, Vestar and any other Person who is
admitted as a member in the Company on and after the Closing Date and whose
admission has been reflected on the books and records of the Company.
"Member Minimum Gain" shall mean partner nonrecourse debt minimum gain
as determined under the rules of Regulations Section 1.704-2(i).
"Member Nonrecourse Deduction" has the meaning set forth in Regulations
Section 1.704-2(i)(1) and (2).
"Merger Agreement" means the Contribution and Merger Agreement dated as
of April 29, 1999, among Suiza Foods, Franklin, the Suiza Companies identified
therein, RPH, Reid Plastics, Inc., a Delaware corporation, the Reid Companies
identified therein, Vestar, and the Company.
"Mergers" means the Mergers, as defined in the Merger Agreement,
pursuant to which the Suiza Companies and the Reid Companies will be merged into
the Company.
"Net Income" of a Person means the net income of such Person,
determined in accordance with generally accepted accounting principles.
"Nonrecourse Deductions" has the meaning set forth in Section 1.704-2
(b)(1) of the Regulations.
"PCI" means Plastic Containers, Inc., a Delaware corporation and
wholly-owned subsidiary of Continental Can Company, Inc. or, after certain
corporate restructuring transactions, Plastic Containers LLC, a Delaware limited
liability company and wholly-owned subsidiary of Franklin.
"Percentage Interest" means the percentage interest of a Member in
certain allocations of Profits, Losses, and other items of income, gain, loss,
or deduction and certain distributions of cash and property, which with respect
to each Member shall be equal to the number of Units owned by such Member as a
percentage of the total number of Units owned by all Members at any given time.
7
<PAGE> 12
"Person" means an individual, corporation, partnership, limited
liability company, trust, estate, unincorporated organization, association, or
other entity.
"Plastics Operations" means any manufacture, distribution or sale of
plastic packaging products and the conduct of any operations ancillary thereto,
including but not limited to any operations conducted by any Reid Company or any
Suiza Company immediately prior to Closing.
"Preferred Capital Account" means the capital account maintained for a
Member pursuant to Section 4.3 with respect to Preferred Units held by such
Member.
"Preferred Capital Account Deficit" means, with respect to any Member,
the amount by which the aggregate Liquidation Preference of the Preferred Units
held by such Member exceeds such Member's Preferred Capital Account.
"Preferred Units" means the preferred interest of a Member of the
Company issued in accordance with Article XII.
"Principal Companies" has the meaning set forth in Section 7.7(b).
"Pro Rata Share" has the meaning set forth in Section 7.11(a).
"Profits" has the meaning set forth in Section 4.3(b).
"Redemption Price" has the meaning set forth in Section 12.2.
"Registration Rights Agreement" has the meaning set forth in Section
11.12(b).
"Regulations" means the Treasury Regulations promulgated under the
Code, as amended and in effect (including corresponding provisions of any
succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 5.3.
"Reid Companies" has the meaning given to it in the Merger Agreement.
"Reid Members" means RPH, Vestar, and any Affiliate of either of them
that becomes a Member, or for purposes of Article XI, an RPH stockholder.
"RPH" means Reid Plastics Holdings, Inc., a Delaware corporation.
"RPH Managers" means the Manager designated by RPH pursuant to Section
7.1.
"Suiza Companies" has the meaning given to it in the Merger Agreement.
"Suiza Foods" means Suiza Foods Corporation, a Delaware corporation.
8
<PAGE> 13
"Suiza Member" means Franklin and any Affiliate of Franklin that
becomes a Member; provided, however, that for purposes of Section 7.7, neither
Peter M. Bernon or Alan J. Bernon shall ever be included within the definition
of "Suiza Member".
"Tax Matters Partner" has the meaning set forth in Section 10.1.
"Units" means the interest of a Member in the Company, including,
without limitation, such Member's right: (a) to a distributive share of the
Profits, Losses, and other items of income, gain, loss, deduction, and credit of
the Company; (b) to a distributive share of the assets of the Company; and (c)
to participate in the management and operation of the Company as provided in
this Agreement. The initial number of Units of each Member is set forth below:
<TABLE>
<CAPTION>
--------------------------- ----------------------------------------------------
MEMBER INITIAL NUMBER OF UNITS
--------------------------- ----------------------------------------------------
<C> <S>
Franklin 4,900,000
--------------------------- ----------------------------------------------------
--------------------------- ----------------------------------------------------
RPH 3,050,000
--------------------------- ----------------------------------------------------
--------------------------- ----------------------------------------------------
Vestar 2,050,000
--------------------------- ----------------------------------------------------
--------------------------- ----------------------------------------------------
TOTAL 10,000,000
--------------------------- ----------------------------------------------------
</TABLE>
"VCP Affiliates" has the meaning set forth in Section 7.7(d).
"Vestar" means Vestar Packaging LLC, a Delaware limited liability
company.
"Unpaid Distribution Amount" shall mean, for each Preferred Unit, the
amount of distributions accrued during the most recently completed calendar
quarter which distributions have neither been paid nor been taken into account
through an increase in Liquidation Preference on such Preferred Units.
"Unusual Items" of income or loss mean any extraordinary items of
income or loss, any nonoperating gains or losses resulting from the sale of
assets, any merger or acquisition expenses and any restructuring charges, all as
reflected in or determined from the Financial Statements.
ARTICLE III
PURPOSE
3.1 Purposes and Scope. Subject to the provisions of this
Agreement, the purposes of the Company are to:
(a) acquire (directly or through subsidiaries) the
operations of the Reid Companies and the Suiza Companies through the
Mergers and the Contributions;
(b) own, operate, manage, maintain, improve, develop,
purchase, sell or exchange, and otherwise acquire or dispose of,
Plastics Operations; provided, however, that the Company may also
invest or expend up to $25 million in the aggregate to own,
9
<PAGE> 14
operate, manage, maintain, improve, develop, purchase, and otherwise
acquire or dispose of non-plastic packaging operations;
(c) borrow money in furtherance of any or all of the
objectives of the Company business, and to secure the same by mortgage,
pledge, or other liens; and
(d) do any and all other acts or things that may be incidental
or necessary to carry on the business of the Company as herein
contemplated. The Company shall not engage in any other business or
activity not intended to implement the foregoing without the prior
written consent of the Management Committee.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Initial Capital Contributions. The initial Capital Contributions of
Franklin and Reid are being effected on the Closing Date through the Mergers.
The initial Capital Contributions of PCI and Vestar are being effected on the
Closing Date through the Contributions. The Members hereby agree that they will
take all reasonable steps to determine each Member's Capital Account as of the
Closing Date within 30 days after the Closing Date.
4.2 Non-Contemplated Contributions.
(a) If the Management Committee approves (in accordance with
the Major Decision provisions of Section 7.3) any additional Capital
Contributions beyond those required by Section 4.1, the Company shall
deliver a written notice to all of the Members (a "Contribution
Notice") requesting such additional Capital Contributions. Each
Contribution Notice shall specify the following information:
(i) the aggregate amount of Capital
Contributions requested in the Contribution Notice;
(ii) the amount of additional cash funds each Member
is required to contribute to the Company (which Capital
Contributions shall be made by the Members in proportion to
their Percentage Interests);
(iii) the date on which such additional Capital
Contributions are due, which date shall be approved in advance
by the Management Committee; and
(iv) wiring or other instructions for the bank
account into which the required Capital Contribution is to be
deposited.
(b) Any Capital Contributions made pursuant to Section 4.2(a)
shall be spent by the Company in accordance with the general directions
of the Management Committee, as approved in connection with the
approval of such Capital Contributions.
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<PAGE> 15
(c) Except as provided in Section 4.1 hereof and in the
foregoing provisions of this Section 4.2, no Member shall be required
to make any Capital Contribution.
(d) Upon the exercise of a Franklin Replacement Option, for
all purposes, including Capital Accounts and Percentage Interests, a
number of Units shall be considered transferred from Franklin to RPH
and Vestar such that RPH's and Vestar's respective Percentage Interests
immediately after the exercise of the Franklin Replacement Option shall
be equal to their respective Percentage Interests immediately prior to
such exercise.
4.3 Capital Accounts.
(a) Maintenance Rules. The Company shall maintain for each
Member a separate Capital Account and, if applicable, a Preferred
Capital Account in accordance with this Section 4.3, which shall
control the division of assets upon liquidation of the Company as
provided in Section 13.3. The Capital Account and Preferred Capital
Account shall be maintained in accordance with the following
provisions:
(i) Such Capital Account shall be increased by the
cash amount or Book Value of any property contributed by such
Member to the Company pursuant to this Agreement, such
Member's share of Profits allocable to Units and any items in
the nature of income or gain which are specially allocated to
such Member pursuant to Section 5.2 and Section 5.3 hereof
with respect to Units held by such Member, and the amount of
any Company liabilities assumed by such Member or which are
secured by any property distributed to such Member.
(ii) Such Capital Account shall be decreased by the
cash amount or Book Value of any property distributed to such
Member pursuant to this Agreement, such Member's allocable
share of Losses and any items in the nature of deductions or
losses which are specially allocated to such Member pursuant
to Section 5.2 and Section 5.3 hereof, and the amount of any
liabilities of the Member assumed by the Company or which are
secured by any property contributed by such Member to the
Company.
(iii) Such Preferred Capital Account shall be
established upon issuance of Preferred Units to such Member in
an amount equal to the Initial Liquidation Preference of the
Preferred Units so issued.
(iv) Such Preferred Capital Account shall be
increased by such Member's share of Profits allocable to
Preferred Units and any items in the nature of income or gain
which are specially allocated to such Member pursuant to
Section 5.2 and Section 5.3 hereof with respect to Preferred
Units held by such Member.
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<PAGE> 16
(v) In the event all or a portion of an interest in
the Company is transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital
Account and/or Preferred Capital Account of the transferor to
the extent it relates to the transferred interest; provided,
however, that if the transfer causes a termination of the
Company under Section 708(b)(1)(B) of the Code, then the
Company shall be deemed to have contributed its assets to a
new limited liability company in exchange for interests in the
new limited liability company, followed by a distribution of
the interests in the new limited liability company to the
Company and liquidation of the Company. Such deemed
liquidation and reconstitution shall not cause the Company to
be dissolved or reconstituted for purposes other than
maintenance of the Capital Accounts and federal income tax,
unless otherwise provided in Article XII.
(vi) Notwithstanding anything in this Section 4.3 to
the contrary, upon the exercise of a Franklin Option or a
Partnership Option the initial Capital Account of the
exercising Member shall be equal to the exercise price of such
option.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts and Preferred Capital
Accounts generally are intended to comply with Section 1.704-1(b) of
the Regulations and shall be interpreted and applied in a manner
consistent with such Regulations. If the Management Committee
reasonably determines that it is prudent to modify the manner in which
the Capital Accounts or Preferred Capital Accounts, or any increases or
decreases to the Capital Accounts or Preferred Capital Accounts, are
computed in order to comply with such Regulations, the Management
Committee may authorize such modifications, provided that it does not
have any effect on the amounts distributable to any Person pursuant to
Section 13.3 hereof upon the dissolution of the Company.
(b) Definition of Profits and Losses. "Profits" and "Losses"
mean, for each Fiscal Year or other period, an amount equal to the
Company's taxable income or loss for such year or period, determined in
accordance with Code Section 703(a) (for this purpose, all items of
income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income
or loss), with the following adjustments:
(i) Income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing
Profits and Losses pursuant to this Section 4.3(b) shall be
added to such taxable income or loss;
(ii) Any expenditures of the Company described in
Code Section 705(a)(2)(B), or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits and Losses pursuant to this Section 4.3(b)
shall be subtracted from such taxable income or loss;
12
<PAGE> 17
(iii) In the event the Book Value of any Company
asset is adjusted pursuant to Section 4.3(c)(ii) or Section
4.3(c)(iii), the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for
purposes of computing Profits and Losses;
(iv) Gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to
the Book Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its
Book Value;
(v) In lieu of the deduction for depreciation, cost
recovery or amortization taken into account in computing such
taxable income or loss, there shall be taken into account
"Book Depreciation" as defined in this Section 4.3(b)(v).
"Book Depreciation" for any asset means for any Fiscal Year or
other period an amount that bears the same ratio to the Book
Value of that asset at the beginning of such Fiscal Year or
other period as the federal income tax depreciation,
amortization or other cost recovery deduction allowable for
that asset for such year or other period bears to the adjusted
tax basis of that asset at the beginning of such year or other
period. If the federal income tax depreciation, amortization,
or other cost recovery deduction allowable for any asset for
such year or other period is zero, then Book Depreciation for
that asset shall be determined with reference to such
beginning Book Value using any reasonable method selected by
the Management Committee; and
(vi) Notwithstanding any other provision of this
Section 4.3(b), any items that are specially allocated
pursuant to Section 5.2 or Section 5.3 shall not be taken into
account in computing Profits and Losses.
(c) Definition of Book Value. "Book Value" means for any asset
the asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Book Value of any asset contributed
by a Member to the Company shall be the gross fair market
value of such asset, as determined by the Management
Committee.
(ii) The Book Values of all Company assets shall be
adjusted to equal their respective gross fair market values,
as determined by the Management Committee, as of the following
times: (A) the acquisition of an additional interest in the
Company by any new or existing Member in exchange for more
than a de minimis capital contribution if the Management
Committee reasonably determines that such adjustment is
necessary or appropriate to reflect the relative economic
interests of the Members in the Company; (B) the distribution
by the Company to a Member of more than a de minimis amount of
Company property as consideration
13
<PAGE> 18
for an interest in the Company if the Management Committee
reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the
Members in the Company; and (C) the liquidation of the Company
within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g);
(iii) The Book Value of any Company asset distributed
to any Member shall be the gross fair market value of such
asset on the date of distribution, as determined by the
Management Committee.
(iv) The Book Values of Company assets shall be
increased (or decreased) to reflect any adjustment to the
adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)
and Section 5.2(d) hereof; provided, however, that Book Values
shall not be adjusted pursuant to this Section 4.3(c)(iv) to
the extent the Management Committee determines that an
adjustment pursuant to Section 4.3(c)(ii) is necessary or
appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this Section
4.3(c)(iv).
(v) If the Book Value of an asset has been determined
or adjusted pursuant to Section 4.3(c)(i), Section 4.3(c)(ii),
or Section 4.3(c)(iv) hereof, such Book Value shall thereafter
be adjusted by the Book Depreciation taken into account with
respect to such asset for purposes of computing Profits and
Losses.
4.4 Interest. Except as otherwise provided in this Agreement, no
interest shall be paid by the Company on Capital Contributions or on balances in
Capital Accounts or Preferred Capital Accounts.
4.5 No Withdrawal. No Member shall be entitled to withdraw any part of
its Capital Contribution or its Capital Account or Preferred Capital Account or
to receive any distribution from the Company, except as provided in Articles IV,
VI, and XII.
4.6 Limitation on Capital Contributions and Loans. Except as
specifically provided in this Agreement, no Member may contribute capital, loan,
or advance money to the Company.
ARTICLE V
ALLOCATIONS
5.1 Allocation of Profits and Losses.
(a) Allocation of Profit Generally. After giving effect to the
allocations set forth in Section 5.2 and Section 5.3, and after giving
effect to all distributions of cash or property (other than cash or
property to be distributed pursuant to Article XIII), Profits for any
Fiscal Year shall be allocated to the Members in the following manner:
14
<PAGE> 19
(i) First, to each Member with Preferred Units in
proportion to their Preferred Capital Account Deficit until
the Preferred Capital Account balances of each such Member
equal the aggregate Liquidation Preference of the Preferred
Units held by such Member;
(ii) Second, to each Member with a negative balance
in its Adjusted Capital Account, pro rata in accordance with
such negative Adjusted Capital Account balances, until such
negative Adjusted Capital Account balances have been
eliminated; and
(iii) Third, to the Members in proportion to their
Percentage Interests.
(b) Allocation of Losses.
(i) After giving effect to the provisions of Section
5.2 and Section 5.3, and subject to the limitation set forth
in Section 5.1(b)(ii), Losses for any Fiscal Year shall be
allocated to the Members in the following manner:
(A) First, to the Members until each of
their Adjusted Capital Account balances is reduced to
zero dollars ($0), in proportion to their Adjusted
Capital Account balances; and
(B) Next, to the Members in proportion to
their Percentage Interests.
(ii) Notwithstanding anything to the contrary in
Section 5.1(b)(i):
(A) The Losses allocated pursuant to Section
5.1(b)(i) hereof to any Member for any Fiscal Year
shall not exceed the maximum amount of Losses that
may be allocated to such Member without causing such
Member to have an Adjusted Capital Account Deficit at
the end of such Fiscal Year.
(B) If some but not all of the Members would
have an Adjusted Capital Account Deficit as a
consequence of an allocation of Losses pursuant to
Section 5.1(b)(i) hereof, the limitations set forth
in this Section 5.1(b)(ii) shall be applied by
allocating Losses pursuant to this Section 5.1(b)(ii)
only to those Members who would not have an Adjusted
Capital Account Deficit as a consequence of receiving
such an allocation of Losses (with the allocation of
such Losses among such Members to be determined by
the Management Committee, based on the allocation
that is most likely to effectuate the distribution
priorities set forth in Section 6.1 hereof).
15
<PAGE> 20
(C) If no Member may receive an additional
allocation of Losses pursuant to Section
5.1(b)(ii)(B) above, such additional Losses not
allocated pursuant to Section 5.1(b)(ii)(B) shall be
allocated solely to the Members in proportion to
their Percentage Interests.
5.2 Special Allocations.
(a) Minimum Gain Chargeback--Company Nonrecourse Liabilities.
If there is a net decrease in Company Minimum Gain during any Company
Fiscal Year, certain items of income and gain shall be allocated (on a
gross basis) to the Members in the amounts and manner described in
Regulations Section 1.704-2(f) and (j)(2)(i) and (ii), subject to the
exemptions set forth in Regulations Section 1.704-2(f)(2), (3), (4),
and (5). This Section 5.2(a) is intended to comply with the minimum
gain chargeback requirement (set forth in Regulations Section
1.704-2(f)) relating to Company nonrecourse liabilities (as defined in
Regulations Section 1.704-2(b)(3)) and shall be so interpreted.
(b) Minimum Gain Chargeback--Member Nonrecourse Debt. If there
is a net decrease in Member Minimum Gain during any Company Fiscal
Year, certain items of income and gain shall be allocated (on a gross
basis) as quickly as possible to those Members who had a share of the
Member Minimum Gain (determined pursuant to Regulations Section
1.704-2(i)(5)) in the amounts and manner described in Regulations
Section 1.704-2(i)(4), (j)(2)(ii), and (j)(2)(iii). This Section 5.2(b)
is intended to comply with the minimum gain chargeback requirement (set
forth in Regulations Section 1.704-2(i)(4)) relating to partner
nonrecourse debt (as defined in Regulations Section 1.704-2(b)(4)) and
shall be so interpreted.
(c) Qualified Income Offset. If, after applying Section 5.2(a)
and Section 5.2(b), any Member has an Adjusted Capital Account Deficit,
items of Company income and gain shall be specially allocated (on a
gross basis) to each such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Member as quickly as possible.
(d) Optional Basis Adjustments. To the extent an adjustment to
the adjusted tax basis of any Company asset pursuant to Code Sections
734(b) or 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall
be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Members in a manner
consistent with the manner in which their Capital Accounts are required
to be adjusted pursuant to such Section of the Regulations.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year shall be specially allocated among the Members in
proportion to their Percentage Interests.
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<PAGE> 21
(f) Member Nonrecourse Deductions. Member nonrecourse
deductions shall be allocated pursuant to Regulations Section
1.704-2(b)(4) and (i)(1) to the Member who bears the economic risk of
loss with respect to the deductions.
(g) Special Allocation: Economic Sharing Arrangement.
Notwithstanding anything to the contrary in this Article V, the Members
acknowledge and agree that the manner in which distributions are to be
made pursuant to Section 6.1 correctly reflects the Members' economic
sharing arrangement in the Company. To the extent that allocations of
Profits, Losses, and other items of income, gain, loss, and deduction
set forth in this Article V (other than this Section 5.2(g)) could
produce an economic sharing arrangement among the Members different
than that described in Section 6.1, then the Company shall specially
allocate items of gross income, gain, loss, and deduction among the
Members in any manner that may be required to cause the allocations of
Profits, Losses, and other items of income, gain, loss, and deduction
described in Article V to be consistent with the economic sharing
arrangement described in Section 6.1.
5.3 Curative Allocations. The allocations set forth in Section
5.1(b)(ii) and Section 5.2(a) through Section 5.2(f) hereof (the "Regulatory
Allocations") are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Company income, gain, loss, or
deduction pursuant to this Section 5.3. Therefore, notwithstanding any other
provisions of this Article V (other than the Regulatory Allocations), the
Management Committee shall make such offsetting special allocations of Company
income, gain, loss, or deduction in whatever manner it determines appropriate so
that, after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Section 5.1(a),
Section 5.1(b)(i), and Section 5.2(g) hereof. In exercising its discretion under
this Section 5.3, the Management Committee shall take into account future
Regulatory Allocations under Sections 5.2(a) and 5.2(b) that, although not yet
made, are likely to offset other Regulatory Allocations previously made under
Sections 5.2(e) and 5.2(f).
5.4 Tax Allocations: Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for
tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its initial Book Value
(computed in accordance with Section 4.3(c)(i) hereof).
(b) If the Book Value of any Company asset is adjusted
pursuant to Section 4.3(c)(ii) hereof, subsequent allocations of
income, gain, loss, and deduction with respect to such asset shall take
account of any variation between the adjusted basis of such
17
<PAGE> 22
asset for federal income tax purposes and its Book Value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
(c) Any elections or other decisions relating to such
allocation shall be made by the Management Committee.
(d) Allocations pursuant to this Section 5.4 are solely for
purposes of federal, state, and local taxes and shall not affect or in
any way be taken into account in computing any Person's Capital
Account, Adjusted Capital Account, or share of Profits, Losses, and
other items or distributions pursuant to any provision of this
Agreement.
5.5 Allocations Upon Option Exercise
(a) Upon the exercise of a Reid Option, any deduction arising
solely as a result of such exercise shall be specially allocated to
RPH.
(b) Notwithstanding anything in this Article V to the
contrary, upon the exercise of a Franklin Replacement Option, or any
other option to purchase Units granted by the Company from time to time
(a "Company Option"), or both, allocations shall be made in the
following order and priority:
(i) first, if there has been an exercise of a Company
Option, all Company income shall be allocated in the year of
such exercise and thereafter to the exercising Member until an
amount of Company income has been allocated to such exercising
Member such that, after such allocation, the proportion that
the exercising Member's Adjusted Capital Account balance bears
to the total Adjusted Capital Account balances of all Members
is equal to the exercising Member's Percentage Interest
immediately after such exercise,
(ii) second, according to the provisions of this
Article V, except that if there has been an exercise of a
Franklin Replacement Option, all allocations that would have
been made to Franklin under this Article V shall be made to
Members who have exercised a Franklin Replacement Option (the
"Franklin Option Members") in the year of exercise and
thereafter until an amount of Company income has been
allocated to the Franklin Option Members such that, after such
allocation, the proportion that each Franklin Option Member's
Adjusted Capital Account balance bears to the total Adjusted
Capital Account balances of all Members is equal to the
exercising Member's Percentage Interest immediately after such
exercise, and
(ii) third, according to the provisions of this
Article V.
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<PAGE> 23
5.6 Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any
other item allocable to any period, Profits, Losses, and any such other
item shall be determined on a daily, monthly, or other basis, as
determined by the Management Committee using any permissible method
under Code Section 706 and the Regulations thereunder.
(b) For federal income tax purposes, every item of income,
gain, loss and deduction shall be allocated among the Members in
accordance with the allocations under Sections 5.1, 5.2, 5.3, 5.4 and
5.5.
(c) The Members are aware of the income tax consequences of
the allocations made by this Article V and hereby agree to be bound by
the provisions of this Article V in reporting their shares of Company
income and loss for income tax purposes.
(d) The Members agree that the Members' Percentage Interests
represent the Members' respective interests in Company profits for
purposes of allocating excess nonrecourse liabilities (as defined in
Regulations Section 1.752-3(a)(3)) pursuant to Regulations Section
1.752-3(a)(3).
(e) Notwithstanding anything herein to the contrary, if a
deduction arises solely as a result of a cancellation of the Units held
as a result of a prior exercise by the holder of the Franklin
Replacement Option by reason of the exercise of the holders' put rights
pursuant to Section 7 of the applicable Replacement Units Option
Agreement, then any such deduction shall be especially allocated to
Franklin.
ARTICLE VI
DISTRIBUTIONS
6.1 Distributions of Available Cash. The Management Committee shall
review the Company's accounts at the end of each calendar quarter to determine
whether distributions are appropriate. Subject to Section 18-607 of the Delaware
Act, the Management Committee shall authorize such distributions of Available
Cash as it may determine in its sole discretion. All such distributions of cash
shall be made to the Members in the following manner:
(a) First, to each Member with Preferred Units in proportion
to the sum of (i) the amount by which the Liquidation Preference
exceeds the Initial Liquidation Preference and (ii) the aggregate
Unpaid Distribution Amount for all of the Preferred Units owned by each
such Member; and
(b) Second, to each Member in proportion to the Percentage
Interests.
Notwithstanding anything to the contrary above, if Available Cash is
derived from a transaction that occurs in connection with the dissolution,
termination and liquidation of the
19
<PAGE> 24
Company, any Available Cash that is derived from or attributable to such a
transaction shall be distributed to the Members in accordance with Section
13.3 hereof.
6.2 Amounts Withheld. Notwithstanding any other provision of this
Agreement to the contrary, each Member hereby authorizes the Company to withhold
and to pay over, or otherwise pay, any withholding or other taxes payable by the
Company with respect to such Member as a result of such Member's participation
in the Company. If and to the extent that the Company shall be required to
withhold or pay any such taxes, such Member shall be deemed for all purposes of
this Agreement to have received a payment from the Company as of the time such
withholding or tax is paid, which payment shall be deemed to be a distribution
with respect to such Member's Units to the extent that the Member (or any
successor to such Member's Units) is entitled to receive a distribution. Any
withholdings authorized by this Section 6.2 shall be made at the maximum
applicable statutory rate under the applicable tax law unless the Company shall
have received an opinion of counsel or other evidence satisfactory to the
Management Committee to the effect that a lower rate is applicable, or that no
withholding is applicable.
6.3 Excess Distributions. To the extent that the aggregate of actual
and deemed distributions to a Member under this Article VI for any period
exceeds the distributions to which such Member is entitled for such period, the
amount of such excess shall be considered an amount upon which the Company shall
pay a preferred return to all other Members, in proportion to the Percentage
Interests of such other Members, until such excess has been repaid to the
Company by the Member receiving such excess distribution, which repayment shall
be made out of distributions to which such Member would otherwise be
subsequently entitled if the Member does not otherwise repay such excess. The
preferred return payable hereunder shall be seven and one-half percent (7.5%)
per annum, accruing from and after the date on which such excess is distributed.
Notwithstanding any other provision in this Agreement to the contrary, if an
excess distribution or advance distribution made to a Member or a shortfall tax
distribution as calculated under Section 6.4(c) remains outstanding when such
Member or any other Member disposes of its interest in the Company, by transfer,
liquidation, conversion into stock of RPH or otherwise, a payment by such Member
or an adjustment to such other Member's Units shall be made to settle the
outstanding amount; provided, that, any adjustment to the Member's Units in the
Company will be made in Preferred Units to insure that Vestar and Reid,
collectively, own at least 51% of the common equity in the Company.
6.4 Tax Distributions.
(a) Notwithstanding anything to the contrary in Section 6.1,
the Managers shall cause the Company from time to time to distribute to
(x) RPH and Franklin (and to an option holder or transferee who becomes
a Member as a result of option exercise or Unit transfer) an amount
equal to the excess of (i) the Company's Estimated Net Taxable Income
(defined below) for the applicable Fiscal Year (or portion thereof) to
which such distribution relates which is allocable to such Member in
excess of the cumulative Company Estimated Net Taxable Income allocated
to such Member from prior Fiscal Years, multiplied by the actual
effective federal and state and local tax rates (including, to the
extent applicable, alternative minimum tax, if any) applicable to the
relevant
20
<PAGE> 25
corporation or individual, as the case may be, in effect
during the Fiscal Year to which such distribution relates, over (ii)
the sum of distributions already made to such Member during the
relevant Fiscal Year, and (y) Vestar an amount equal to the excess of
(i) the Company's Estimated Net Taxable Income for the applicable
Fiscal Year (or portion thereof) to which such distribution relates
which is allocable to Vestar in excess of the cumulative Company
Estimated Net Taxable Income allocated to such Member from prior Fiscal
Years, multiplied by the maximum marginal federal income and New York
State and New York City individual tax rate (including, to the extent
applicable, alternative minimum tax, if any) in effect during the
Fiscal Year to which such distribution relates, over (ii) the sum of
distributions already made to Vestar during the relevant Fiscal Year
(distributions under (i) or (ii) being referred to herein as "Tax
Distributions"). For these purposes, "Company Estimated Net Taxable
Income" means (Y) the estimate of the aggregate amount of items of
taxable income and gain of the Company for the applicable Fiscal Year
(or portion thereof) to which such distribution relates, minus (Z) the
estimate of the aggregate amount of items of taxable deduction and loss
for such Fiscal Year (or portion thereof) to which such distribution
relates. The Managers shall determine the Company Estimated Net Taxable
Income and each Member's allocable share of Company Estimated Net
Taxable Income. For purposes of calculating RPH's or Franklin's actual
effective tax rates, all other non-Company items of income, deduction,
gain, loss and credits available to such Member shall be taken into
account. The Members acknowledge and agree that the sole purpose of
this Section 6.4(a) is to enable the Company to distribute sufficient
cash to each Member to permit each Member to timely satisfy its
estimated income tax obligations, if any, arising from the Member's
allocable share of the Company's taxable income. The Manager shall make
such distributions on or about April 15, June 15, September 15 and
December 15 of each year and/or on any other date that similarly
coincides with the due date of any estimated income tax obligation of
any Member. The provisions of this Section 6.4(a) shall apply to
Company Net Taxable Income allocated to the Members as a result of a
final adjustment by a taxing authority to Company Net Taxable Income;
provided, that, no Tax Distribution shall be made to Franklin as a
result of the disallowance of the current deduction claimed by the
Company for the bond tender premium paid in connection with the
redemption of the PCI Notes; provided, further, that any Tax
Distribution made to RPH or Vestar as a result of such disallowance
shall not be deemed an advance distribution as provided in Section
6.4(b) and thus not subject to the provisions of Section 6.4(d);
provided, further, that amounts that would otherwise be payable as
subsequent Tax Distributions to Franklin shall be deemed paid in an
amount equal to the Tax Distributions made to RPH and Vestar as a
result of such disallowance, but in the event of a final adjustment by
a taxing authority disallowing the deduction of the bond tender premium
claimed by Franklin, any amounts that Franklin would have received as
Tax Distributions but for the deemed payment described above shall be
paid to it and Franklin shall receive a Tax Distribution both in
accordance with Section 6.4(a) as a result of the disallowance of the
current deduction claimed by the Company for the bond tender premium.
Notwithstanding anything to the contrary in this Section 6.4, an option
holder who becomes a Member as a result of exercise is not entitled to
a Tax Distribution relating to compensatory income allocated
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pursuant to Section 5.5 of this Agreement from the Company to such
option holder as a result of such option exercise.
(b) For purposes of this Agreement, amounts distributed to the
Members pursuant to Section 6.4(a) shall be deemed to be advance
distributions of amounts to be distributed pursuant to Section 6.1.
(c) If a Member receives an actual Tax Distribution for the
year in an amount less than the Member's Adjusted Tax Distribution
Amount, then such shortfall tax distribution will be subject to the
provisions of Section 6.4(d). The Member's Adjusted Tax Distribution
Amount, for purposes of this clause is equal to (y) the largest Tax
Distribution Amount of all the Members multiplied by (z) such Member's
Percentage Interest. Tax Distribution Amount for each Member is
determined by dividing the actual Tax Distribution made to a Member by
such Member's Percentage Interest.
(d) In the case of a shortfall tax distribution as computed
under Section 6.4(c), the amount of such shortfall shall be considered
an amount upon which the Company shall pay a preferred return to such
Member until such shortfall has been repaid to the Company by the
Member receiving the largest Tax Distribution Amount, which repayment
shall be made out of distributions to which such Member would otherwise
be subsequently entitled unless the Members agree to settle the
outstanding amounts through payments. The preferred return payable
hereunder shall be seven and one-half percent (7.5%) per annum,
accruing from and after the date on which such shortfall tax
distribution is created.
ARTICLE VII
MANAGEMENT OF THE COMPANY
7.1 Management Committee.
(a) The Company shall be managed by a Management Committee
consisting initially of seven individuals (the "Managers"). Two
Managers shall be appointed by RPH, two Managers shall be appointed by
Vestar, two Managers shall be appointed by Franklin, and one Manager
shall be the Chief Executive Officer of the Company (who initially
shall be William Estes). RPH, Vestar and Franklin shall have the right
to remove and replace those Managers appointed by them at any time
effective immediately upon written notice. The initial RPH Managers
shall be Ronald V. Davis and Leonard Lieberman, the initial Vestar
Managers shall be James P. Kelley and John R. Woodard, and the initial
Franklin Managers shall be Peter M. Bernon and ____________________.
RPH may designate one of the RPH Managers as the Chairman of the
Management Committee, and such Manager will preside (when present) at
all meetings of the Management Committee. The Management Committee may
be expanded in size from time to time to add "independent" Managers or,
at the request of the Reid Parent and Vestar, B. Joseph Rokus. For each
independent Manager added, or if B. Joseph Rokus is added to the
Management Committee, RPH and Vestar shall be entitled to jointly
appoint such additional Managers
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as may be necessary to ensure that RPH and Vestar, jointly, are able to
designate a majority in number of the Managers.
(b) Subject to the rights expressly granted to the Members or
to particular Members hereunder, the Management Committee shall have
general powers of supervision, direction and control over the business
of the Company. The Management Committee shall have the general powers
and duties typically vested in the board of directors of a corporation
and all other powers and duties over the Company and its business,
except as expressly provided elsewhere in this Agreement.
(c) The presence of Managers entitled to cast at least a
majority of votes shall be necessary to constitute a quorum at any
meeting of the Management Committee. Except as expressly provided with
respect to Major Decisions in Section 7.3, any matter submitted to a
vote or consent of the Management Committee at which a quorum is
present may be approved by a majority of the votes represented at such
meeting. No Member or Manager, acting solely in its capacity as a
Member or Manager, shall have the power and authority to act for and
bind the Company with respect to any matter unless such matter has been
approved by the Management Committee as set forth herein.
(d) Any Manager may participate in a meeting through use of a
conference telephone, video conference or similar communication
equipment, so long as all Managers participating in the meeting can
hear one another, and any Manager participating in such manner will be
considered "present" at such meeting. Accurate minutes of each meeting
of the Management Committee shall be maintained by a Manager or officer
designated by the Management Committee for that purpose.
(e) Meetings of the Management Committee for any purpose may
be called at any time by any Manager. Unless waived as set forth below,
at least two Business Days notice of the time, place and general
subject matter of each meeting of the Management Committee shall be
delivered personally to each of the Managers or personally communicated
to them by another Manager or an officer of the Company, and confirmed
in writing by facsimile, or communicated by FedEx or other comparable
overnight courier service (receipt requested). Notice shall be
transmitted to the last known facsimile number or address of the
Manager as shown on the records of the Company. Such notice as above
provided shall be considered due, legal and personal notice to such
Manager. With respect to any meeting not duly called or noticed in
accordance with the foregoing provisions, any transactions carried out
at such meeting will be as valid as if they had occurred at a meeting
duly called and noticed if: (i) all Managers are present at the
meeting; or (ii) those Managers not present at the meeting sign a
waiver of notice of such meeting, whether before or after the meeting.
(f) Any action required or permitted to be taken by the
Management Committee may be taken without a meeting and will have the
same force and effect as if taken by a vote of the Managers at a
meeting properly called and noticed, if authorized by a writing signed
individually or collectively by all, but not less than all, of the
Managers.
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7.2 Major Decisions. The term "Major Decision" means any decision by
the Management Committee with respect to any of the following matters:
(a) issuing any Units or any security, including any
indebtedness, convertible into Units, or any other form of equity in
the Company, other than (i) granting options to management employees of
the Company to purchase up to 810,811 Units in the aggregate, (ii)
issuing Units pursuant to the exercise of such options, (iii) issuing
Units pursuant to the options held by certain employees of Franklin
that have been converted into options to acquire Units pursuant to the
Merger Agreement, and (iv) issuing Units or any security, including any
indebtedness, convertible into Units, or any other form of equity in
the Company, in one or more private offerings (excluding any issuances
referred to in (i), (ii) or (iii) above) where the aggregate purchase
price for all such issuances does not exceed $50 million;
(b) accepting or requiring any Member to make any additional
Capital Contribution to the Company;
(c) incurring indebtedness or entering into guarantees for
borrowed money (excluding trade payables incurred in the ordinary
course of business or refinancing of indebtedness incurred in
connection with the transactions contemplated by the Merger Agreement
or borrowing after the Closing Date under the Tranche C term loan
facility or the revolving credit facility included in the senior bank
financing of the Company on the Closing Date and refinancings thereof)
in excess of $80 million;
(d) selling, leasing, pledging or granting a security interest
or encumbrance in all or substantially all of the Company's assets,
except in connection with the incurrence of indebtedness for borrowed
money that does not involve a Major Decision under the preceding
paragraph;
(e) acquiring (whether through an asset purchase, merger,
equity purchase or otherwise) any Plastics Operations or other assets
(excluding acquisitions of raw materials and supplies in the ordinary
course of business) having a value, individually or in the aggregate
for any series of related transactions, in excess of $80 million;
(f) selling or otherwise disposing of any Plastics Operations
or other assets (excluding sales or other dispositions of inventory in
the ordinary course of business) having a value, individually or in the
aggregate for any series of related transactions, in excess of $80
million;
(g) except as otherwise permitted in Section 7.6(b) or Section
7.8, entering into or amending any transaction or agreement between the
Company and a Member or an Affiliate of a Member, including any
amendment to the VCP Management Agreement;
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(h) making any material election or other decision pursuant to
Section 5.4(c), which relates to Code Section 704(c);
(i) any change in the purpose or scope of the Company pursuant
to Article III;
(j) amending or granting a waiver with respect to this
Agreement;
(k) authorizing any consolidation, dissolution, or liquidation
of the Company or any merger in which the Company does not survive,
other than pursuant to an Initial Public Offering;
(l) converting the Company into a corporation, other than
pursuant to an Initial Public Offering;
(m) executing or delivering any assignment for the benefit of
creditors of the Company;
(n) filing any voluntary petition in bankruptcy or
receivership with respect to the Company;
(o) authorizing the payment in cash of distributions on the
Preferred Units under Section 12.2(b);
(p) authorizing the optional redemption of Preferred Units
under Section 12.2(c); or
(q) entering into any agreement with any Person that would
afford such Person priority over any of Suiza, Franklin, RPH or any
other person contemplated to be a party to the Registration Rights
Agreement with regard to the exercise of incidental registration rights
pursuant to Section 2.2(a) and 2.2(b) of the Registration Rights
Agreement.
7.3 Approval of Major Decisions. Notwithstanding any contrary
provisions of Section 7.1:
(a) Any Major Decision must be approved by the affirmative
vote of not less than a majority of the Managers present and entitled
to vote at a meeting of the Management Committee at which a quorum is
present. Such affirmative vote shall include (i) the vote of the
Franklin Manager specifically designated by Suiza from time to time for
approval of Major Decisions, who shall initially be
____________________, and (ii) the vote of the Vestar Manager
specifically designated by Vestar from time to time for approval of
Major Decisions, who shall initially be James P. Kelley.
(b) Section 7.2 and the requirement for the affirmative vote
of the Franklin Manager described in Section 7.3(a)(i) shall not apply
from and after the date of the first
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to occur of the following events: (i) a Change in Control of Suiza
Foods, (ii) an Initial Public Offering, or (iii) Franklin holds less
than 10% of the Percentage Interests.
(c) Section 7.2 and the requirement for the affirmative vote
of the Vestar Manager described in Section 7.3(a)(ii) shall not apply
from and after the date of the first to occur of the following events:
(i) a Change in Control of RPH, (ii) a Change in Control of Vestar,
(iii) an Initial Public Offering, or (iv) RPH and Vestar, collectively,
hold less than 10% of the Percentage Interests.
7.4 Officers. The officers of the Company shall include a President, a
Secretary and such other officers as the Management Committee in its discretion
may appoint, and such officers will have any powers delegated to them by the
Management Committee (subject to any limitations on the authority of the
Management Committee set forth in this Agreement).
7.5 Certificate of Formation. The President or another officer of the
Company shall cause to be filed at the Company's expense such certificates or
documents (including, without limitation, copies, renewals, amendments or
restatements of the Certificate) as may be determined by such officer to be
reasonable and necessary or appropriate for the formation or qualification and
operation of a limited liability company in the State of Delaware and in any
other state in which the Company may elect to do business.
7.6 Compensation and Reimbursement of Member Expenses.
(a) Except as provided in Section 7.6(b), no Member shall be
compensated for any services rendered to the Company by such Member or
its designees on the Management Committee. Notwithstanding anything to
the contrary in this Agreement, each Member shall be reimbursed for
out-of-pocket expenses that such Member makes for or on behalf of the
Company, to the extent such expenses are authorized by the Management
Committee.
(b) Vestar will perform certain advisory services for the
Company pursuant to the VCP Management Agreement as defined in the
Merger Agreement.
7.7 Outside Activities; Noncompetition.
(a) Subject to Section 7.7(b), (c) and (d), a Member, any
Affiliate of a Member, and any director, officer, partner, or employee
of a Member or any Affiliate thereof, may have business interests and
engage in business activities in addition to those relating to the
Company and may engage in any businesses and activities for its own
account and for the accounts of others without having or incurring any
obligation to offer any interest in or funds from such properties,
businesses or activities to the Company or any Member, and no other
provision of this Agreement shall be deemed to prohibit the Members or
any such other Person from conducting such other businesses and
activities. Neither the Company nor any Member shall have any rights by
virtue of this Agreement or the limited liability company relationship
created hereby in any business ventures of the
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other Member or any Affiliate of such Member or any director, officer,
partner, or employee of the other Member or any Affiliate thereof.
(b) Neither Suiza Foods, nor the Suiza Member, nor any
Controlled Affiliates of Suiza Foods or the Suiza Member (collectively,
the "Suiza Affiliates") may, directly or indirectly, operate or acquire
any interest in a business or operation that (1) manufactures or sells
(i) plastic packaging products that are substantially similar to the
products then manufactured or sold by any of the Suiza Companies or the
Reid Companies (prior to the Closing Date) and the Company and its
subsidiaries (after the Closing Date) (collectively, the "Principal
Companies") or (ii) plastic bottles for dairy, water, juice or other
beverages and (2) sells such products in a common geographic market as
the substantially similar products then sold by the Principal Companies
or in any Proposed Geographic Market (collectively, a "Competing
Business"); provided that:
(i) nothing in this Section 7.7(b) shall restrict (A)
the continued ownership or operation in the ordinary course of
business of Neva Plastics, Inc. in Puerto Rico, (B) the
operations conducted by Controlled Affiliates of Suiza Foods
that manufacture plastic packaging products solely for their
own use, or (C) subject to the terms and conditions of the
Supply Agreement, the acquisition of a Competing Business
which generated 50% or less of the revenues of the total
enterprise being acquired by the Suiza Affiliate for the
twelve months preceding such acquisition; provided that, for
purposes of this subsection (c), within six months of such
acquisition the Suiza Affiliate offers to sell to the Company
the Competing Business and agrees to work in good faith to
establish a mutually acceptable purchase price for the
Competing Business, or if a mutually acceptable purchase price
is not agreed upon, the Suiza Affiliate transfers the
Competing Business to an unaffiliated third party within
twelve months of the acquisition; and
(ii) this Section 7.7(b) shall be of no force or
effect from and after the later of the fifth anniversary of
the Closing Date and the date on which the Suiza Members and
their Controlled Affiliates, in the aggregate, cease to own
10% or more of the Units.
(c) Neither RPH nor any of its Affiliates (excluding the
Company and its subsidiaries) may, directly or indirectly, engage or
participate in any Plastics Operations in the United States, Mexico and
any other country in which any of the Principal Companies does
business; provided that this Section 7.7(c) shall be of no force or
effect from and after the later of the fifth anniversary of the Closing
Date and the date on which Vestar and RPH and their Controlled
Affiliates, in the aggregate, cease to own 10% of the Units.
(d) Entities Controlled by Vestar Equity Partners, L.P. or
Vestar Capital Partners III, L.P. or any merchant banking fund or other
entity Controlled by Vestar Equity Partners, L.P. or Vestar Capital
Partners III, L.P. or by the Controlling persons of Vestar Equity
Partners, L.P. or Vestar Capital Partners III, L.P. (collectively, the
"VCP Affiliates") shall not, directly or indirectly, (x) acquire a
Controlling interest in, or (y) after
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the date hereof, make an equity investment valued at the time of
investment at $75 million or more in, any Competing Business; provided
that:
(i) nothing in this Section 7.7(d) shall restrict (A)
the continued ownership or operation in the ordinary course of
business of Russell Stanley Holdings, Inc. and its
subsidiaries and their respective transferees and successors
(collectively, "Russell-Stanley"), or (B) any action taken or
transaction effected by Russell-Stanley or by
Russell-Stanley's Affiliates in respect of Russell-Stanley if
immediately following such action or transaction
Russell-Stanley is not Controlled by the VCP Affiliates;
(ii) nothing in this Section 7.7(d) shall restrict
any acquisition of a Competing Business that (A) generated
less than $25 million in revenues for the twelve months
preceding such acquisition; provided that in no event shall
any VCP Affiliate acquire any enterprise with respect to which
a Competing Business generated more than 50% of the revenues
of the total enterprise being acquired by the VCP Affiliate
for the twelve months preceding such acquisition, or (B)
generated 50% or less of the revenues of the total enterprise
being acquired by the VCP Affiliate for the twelve months
preceding such acquisition; provided that within six months of
such acquisition the VCP Affiliate offers to sell to the
Company the Competing Business and agrees to work in good
faith to establish a mutually acceptable purchase price for
the Competing Business, or if a mutually acceptable purchase
price is not agreed upon, the VCP Affiliate transfers the
Competing Business to an unaffiliated third party within
twelve months of the acquisition, or (C) is in a product
category for which the Principal Companies have less than $25
million in revenues; and
(iii) this Section 7.7(d) shall be of no force or
effect from and after the later of the fifth anniversary of
the Closing Date and the date on which Vestar and RPH, in the
aggregate, cease to own 10% of the Units.
(e) The Members acknowledge and agree that their respective
obligations under this Section 7.7 are a material inducement and
condition to this Agreement and the obligations of the parties
hereunder and that the restrictions and remedies contained in this
Section 7.7 are reasonable as to time, geographic area and scope of
activity and do not impose a greater restraint than is necessary to
protect the goodwill and other legitimate business interests of the
Company. It is the intent of all parties hereto that the foregoing
restrictions against unlawful and unfair competitive activities be
given the fullest effect consistent with applicable law.
(f) If any of the provisions of this Section 7.7 is found by a
court of competent jurisdiction to contain unreasonable or unnecessary
limitations as to time, geographic area or scope of activity, then such
court is hereby directed to reform such provisions to the minimum
extent necessary to cause the limitations contained therein as to time,
geographical area and scope of activity to be reasonable and
enforceable.
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(g) The Members acknowledge and agree that (i) the Company
would be irreparably harmed by any violation of their respective
obligations under this Section 7.7 and that, in addition to all other
rights or remedies available at law or in equity, the parties will be
entitled to injunctive and other equitable relief to prevent or enjoin
any such violation, without posting any bond whatsoever and (ii) this
Section 7.7 will inure to the benefit of the Company and its successors
(including its successors by merger) regardless of whether the parties
bound hereby continue as Members of the Company or members or
stockholders of any successor to the Company.
(h) For purposes of this Section 7.7, a "Proposed Geographic
Market" shall mean any geographic market in which the Company and its
subsidiaries intend to sell products substantially similar to products
sold by the Principal Companies, such intent being evidenced by (i) a
resolution of the Management Committee to conduct business or begin
operations in such geographic market or (ii) the approval by the
Management Committee of a budget authorizing capital expenditures
specifically for the conduct of business in such geographic market.
7.8 Transactions with Affiliates. Except as otherwise permitted in
Section 7.6(b), and except for any transaction or agreement approved as a Major
Decision pursuant to Section 7.3, the Company may not enter into any transaction
or agreement with any Member or any Affiliate of a Member if the terms of such
transaction or agreement are materially less favorable to the Company than the
terms that could be obtained by the Company through an arms length transaction
or agreement with an unrelated party.
7.9 Indemnification of Members. The Company shall indemnify and hold
harmless the Members and their Affiliates (other than the Company and its
subsidiaries), and their respective directors, officers, constituent partners,
employees and advisors and other representatives, and the Managers designated by
the Members (individually, an "Indemnitee"), as follows (provided that no such
indemnification shall be available to a Member and its Affiliates in respect of
any claim which is an indemnifiable claim against any of them pursuant to
Section 12.2 or 12.3 of the Merger Agreement):
(a) In any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, to which an Indemnitee was or is a party or is
threatened to be made a party by reason of the fact that such
Indemnitee is or was a Member or an Affiliate of a Member (other than
the Company and its subsidiaries) or a director, officer, employee, or
constituent partner of a Member or an Affiliate of a Member (other than
the Company and its subsidiaries), or a Manager, the Company shall
indemnify such Indemnitee against attorneys' fees, judgments, fines,
penalties, settlements, and reasonable expenses actually incurred by
such Indemnitee in connection with the defense or settlement of such
action, suit or proceeding, if such Indemnitee acted in good faith, and
in the case of the exercise of authority by the Indemnitee under the
Delaware Act or this Agreement, other than service for another
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enterprise, in a manner reasonably believed by such Indemnitee to be in
the best interests of the Company and, in all other cases, that the
Indemnitee's conduct was at least not opposed to the Company's best
interests, and with respect to any criminal action or proceeding, the
Indemnitee did not have reasonable cause to believe that his conduct
was unlawful. In no event, however, shall indemnification ever be made
in relation to a proceeding in which the Indemnitee has been found
liable for fraud or a criminal act or for gross negligence or willful
or intentional misconduct, in the Indemnitee's performance of its duty
to the Company or in relation to a proceeding which arises out of a
material violation by the Indemnitee of the terms and provisions of
this Agreement. The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere, or its
equivalent, shall not, of itself, create a presumption that an
Indemnitee did not act in good faith and in a manner reasonably
believed by such Indemnitee to be in the best interests of the Company
or not opposed to the Company's best interests.
(b) Promptly after receipt by an Indemnitee of notice of the
commencement of any proceeding against it, such Indemnitee will, if a
claim is to be made against an Indemnitor, give notice to the
Indemnitor of the commencement of such claim, but the failure to notify
the Indemnitor will not relieve the Indemnitor of any liability that it
may have to any Indemnitee, except to the extent that the Indemnitor
demonstrates that the defense of such action is prejudiced by the
Indemnitee's failure to give such notice.
(c) If any proceeding is brought against an Indemnitee and it
gives notice to the Indemnitor of the commencement of such proceeding,
the Indemnitor will, to the extent that it wishes (unless (i) the
Indemnitor is also a party to such proceeding and the Indemnitee
determines in good faith that joint representation would be
inappropriate, or (ii) the Indemnitor fails to provide reasonable
assurance to the Indemnitee of its financial capacity to defend such
proceeding and provide indemnification with respect to such
proceeding), assume the defense of such proceeding with counsel
satisfactory to the Indemnitee and, after notice from the Indemnitor to
the Indemnitee of its election to assume the defense of such proceeding
and an acknowledgment of its indemnification obligation with respect
thereto, the Indemnitor will not, as long as it diligently conducts
such defense, be liable to the Indemnitee under this section for any
fees of other counsel or any other expenses with respect to the defense
of such proceeding, in each case subsequently incurred by the
Indemnitee in connection with the defense of such proceeding, other
than reasonable costs of investigation. If the Indemnitor assumes the
defense of a proceeding in accordance with the preceding sentence, (i)
no compromise or settlement of such claims may be effected by the
Indemnitor without the Indemnitee's consent (which consent shall not be
unreasonably withheld) unless (A) there is no finding or admission of
any violation of legal requirements or any violation of the rights of
any Person and no effect on any other claims that may be made against
the Indemnitee, and (B) the sole relief provided is monetary damages
that are paid in full by the Indemnitor and (ii) the Indemnitee will
have no liability with respect to any compromise or settlement of such
claims effected without its consent (which consent shall not be
unreasonably withheld). If notice is given to an Indemnitor of the
commencement of any proceeding
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and the Indemnitor does not, within 20 days after the Indemnitee's
notice is given, give notice to the Indemnitee of its election to
assume the defense of such proceeding, the Indemnitor will be bound by
any determination made in such proceeding or any compromise or
settlement reasonably effected by the Indemnitee.
(d) Notwithstanding the foregoing, if an Indemnitee determines
in good faith that there is a reasonable probability that a proceeding
may adversely affect it or its Affiliates other than as a result of
monetary damages for which it would be entitled to indemnification
under this Agreement, the Indemnitee may, by notice to the Indemnitor,
assume the exclusive right to defend, compromise, or settle such
proceeding, but the Indemnitor will not be bound by any determination
of a proceeding so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).
(e) Any indemnification permitted under this Section 7.9 shall
be made only out of the assets of the Company and no Member shall be
obligated to contribute to the capital of or loan funds to, the Company
to enable the Company to provide such indemnification.
(f) The indemnification provided by this Section 7.9 shall be
in addition to any other rights to which each Indemnitee may be
entitled under any agreement or vote of the Members, as a matter of law
or otherwise, as to action in the Indemnitee's capacity as a Member, as
a director, officer, employee, or constituent partner of a Member, or
as a Manager, and shall continue as to an Indemnitee who has ceased to
serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns, administrators, and personal representatives of
the Indemnitee.
(g) Except as otherwise provided in this Agreement, the
Company may purchase and maintain insurance on behalf of any one or
more Indemnitees if approved by the Management Committee.
(h) In no event may an Indemnitee subject a Member to personal
liability by reason of the indemnification provisions of this
Agreement.
(i) The provisions of this Section 7.9 are for the benefit of
the Indemnitees and the heirs, successors, assigns, administrators, and
personal representatives of the Indemnitees and shall not be deemed to
create any rights for the benefit of any other Persons.
7.10 Liability of the Members.
(a) Neither the Members nor their respective owners,
directors, officers, employees, or agents nor their designated Managers
shall be liable to the Company or to the other Members for errors in
judgment or for any acts or omissions that do not constitute gross
negligence or willful or wanton misconduct.
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(b) Each Member may exercise any of the powers granted to them
by this Agreement and perform any of the duties imposed upon them
hereunder either directly or by or through agents.
7.11 Preemptive Rights.
(a) Grant of Preemptive Rights. The Company will not issue or
sell any new Units without first complying with this Section 7.11;
provided, however, that the Company may (i) grant options to management
employees of the Company to purchase up to ____ Units in the aggregate,
which represents 7.5% of the total Units on a fully diluted basis,
taking into account, for the purpose of the denominator only, the Units
initially issued and the options rolled over from Franklin, (ii) issue
Units pursuant to the exercise of such options, and (iii) issue Units
pursuant to the options held by certain employees of Franklin that have
been converted into options to acquire Units pursuant to the Merger
Agreement, without first complying with this Section 7.11. The Company
hereby grants to each of Franklin, RPH and Vestar the preemptive right
to purchase up to its Pro Rata Share of any new Units that the Company
may, from time to time, propose to sell or issue, other than in an
Initial Public Offering. For purposes of this Agreement, Pro Rata Share
means, with respect to each of Franklin, RPH and Vestar, the percentage
of all outstanding fully diluted Units of the Company beneficially
owned by each of Franklin, RPH and Vestar.
(b) Notice. If the Company proposes to issue or sell new
Units, the Company will provide each of Franklin, RPH and Vestar with
written notice of its intention (the "New Units Notice"). The New Unit
Notice will describe the type of new Units to be offered and the price
and other terms upon which the Company proposes to issue or sell the
new Units.
(c) Exercise of Preemptive Rights. Each of Franklin, RPH and
Vestar will have 30 days from the date of receipt of the New Units
Notice and any information delivered by or on behalf of the Company to
any proposed purchasers or as it may reasonably request to facilitate
their investment decision, to agree to purchase up to its Pro Rata
Share of the new Units for the price and upon the other terms specified
in the New Units Notice. Each of Franklin, RPH and Vestar will provide
written notice to the Company stating the quantity of such new Units
that it agrees to purchase. The sale of the new Units will occur in
accordance with the terms on which the new Units will otherwise be
sold.
(d) Failure to Exercise Preemptive Rights. If any or all of
Franklin, RPH or Vestar fail to exercise fully such preemptive right
within such 30-day period, the Company will have 60 days to sell the
new Units at no less than 95% of the price set forth in the New Units
Notice and otherwise upon substantially the same terms specified in the
New Units Notice. In the event that the Company has not sold such new
Units within such 60-day period, the Company will not thereafter issue
or sell any new Units without again complying with this Section 7.11.
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(e) Termination of Preemptive Rights. The preemptive rights
existing pursuant to this Section 7.11 shall terminate if the Company
(or its corporate successor) consummates an Initial Public Offering.
7.12 Certain Anti-dilutive Rights.
(a) If at any time after the date hereof the Company shall
issue or sell any Units or any immediately exercisable warrants,
options or rights to subscribe for or purchase Units or other
immediately exercisable securities exercisable or convertible into
Units, and the consideration per Unit for, and/or the price per Unit at
which, such warrants, options or rights are exercisable for or such
securities are convertible into, such Units is less than the Fair
Market Value of the Units immediately prior to such issuance or sale,
then, forthwith upon such issuance or sale, the number of Suiza
Member's Units shall be adjusted so that for each Unit held by a Suiza
Member, such Suiza Member shall be entitled to receive a number of
Units equal to the product of (a) the number of Units held by such
Suiza Member before such adjustment and (b) a fraction the numerator of
which shall be the number of Units outstanding immediately prior to
such issuance or sale, plus the number of additional Units offered for
sale or issuable pursuant to such warrants, options or rights and the
denominator of which shall be the number of Units outstanding
immediately prior to such issuance or sale, plus the number of Units
which the aggregate offering price of the Units so offered for sale
and/or the exercise price for the Units issuable pursuant to such
warrants, options or rights would purchase at such Fair Market Value
(determined by multiplying such number of Units offered or issuable by
the offering price per Unit of such Units or the exercise price of such
warrants, options or rights and dividing the product so obtained by
such Fair Market Value); provided, however, that the Company may (i)
grant options to management employees of the Company to purchase up to
___ Units in the aggregate, which represents [7.5%] of the total Units
on a fully diluted basis, taking into account, for the purpose of the
denominator only, the Units initially issued and the options rolled
over from Franklin and RPH, (ii) issue Units pursuant to the exercise
of such options, (iii) issue Units pursuant to the options held by
certain employees of Franklin that have been converted into options to
acquire Units pursuant to the Merger Agreement, (iv) issue Units to a
buyer if the Suiza designated Manager had the opportunity to veto the
sale of the Units under Section 7.2(a) but elected not to do so, and
(v) issue Units in connection with the conversion of the Preferred
Units in accordance with the term of this Agreement, without first
complying with this Section 7.12.
(b) If at any time after the date hereof the Company shall
issue or sell to any person any securities convertible into or
exercisable for Units ("Convertible Securities") (other than securities
described in Section 7.12(a) above), whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the
price per Unit for which Units are issuable upon such conversion or
exchange is less than the Fair Market Value in effect immediately prior
to the time of such issue or sale, then the number of the Suiza
Member's Units shall be adjusted as provided in Section 7.12(a) above
on the basis that (i) the maximum number of Units necessary to effect
the conversion or exchange of
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all such Convertible Securities shall be deemed to have been issued and
outstanding, (ii) the price per Unit of such Units shall be deemed to
be the average price in any range of prices at which such additional
Units are issuable to such holders upon conversion, and (iii) the
Company shall be deemed to have received all of the consideration
payable (including amounts payable upon conversion) therefor, if any,
as of the date of the actual issuance of such Convertible Securities.
No adjustment of the number of the Suiza Member's Units shall be made
under this Section 7.12(b) upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants,
options or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such
warrants, options or other rights pursuant to Section 7.12(a) above. No
further adjustments of the number of the Suiza Member's Units shall be
made upon the actual issuance of such Units upon conversion or exchange
of such Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant, option or
other right to subscribe for or to purchase any such Convertible
Securities for which adjustments of the number of Suiza Member's Units
have been or are to be made pursuant to other provisions of this
Section 7.12, no further adjustments of the number of the Suiza
Member's Units shall be made by reason of such issue or sale. For the
purposes of this Section 7.12(b), the date as of which the number of
Units shall be computed shall be the earlier of (i) the date on which
the Company shall enter into a firm contract for the issuance of such
Convertible Securities and (ii) the date of actual issuance of such
Convertible Securities. Such adjustments shall be made upon each
issuance of Convertible Securities and shall become effective
immediately after such issuance.
(c) No adjustment in the number of the Suiza Member's Units
issuable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one quarter of one percent
(0.25%) in the number of the Suiza Member's Units; provided, however,
that any adjustments which by reason of this Section 7.12(c) are not
required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations shall be made to the
nearest one-thousandth of a Unit.
(d) The number of Units outstanding at any given time shall
not include Units directly or indirectly owned or held by or for the
account of the Company or any of its subsidiaries, and the disposition
of any such Units shall be considered an issue or sale of Units for the
purposes of this Section 7.12.
(e) Units issued (i) pursuant to the option plans and
allocation of options referred to in Section 2.3 of the Merger
Agreement, (ii) to members of the Company's management as part of a
stock option plan or other stock-based incentive plan with the approval
of a majority of the holders of Units, or (iii) by the Company as
consideration in a merger, acquisition or other business combination,
shall be deemed to be issued at Fair Market Value for the purposes of
this Section 7.12.
(f) No adjustment in the number of the Suiza Member's Units
issuable hereunder shall be required if the Franklin Manager(s) voted
in favor of the issuance or
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sale of Units by the Company, and the affirmative vote of such Franklin
Manager(s) was required under this Agreement for approval of such
issuance or sale.
(g) The rights existing pursuant to this Section 7.12 shall
terminate if the Company (or its corporate successor) consummates an
Initial Public Offering.
7.13 Exercise of Certain Options. The Company has granted the options
to purchase Units listed on Exhibit 7.13(a) to certain employees of the Company
formerly employed by Franklin in replacement of such persons' options to
purchase Franklin stock (the "Franklin Replacement Options"). Upon each exercise
of any of the Franklin Replacement Options, Franklin shall transfer to the
Company for cancellation, without payment therefor by the Company, a number of
Units equal to the number of Units issued upon such exercise of a Franklin
Replacement Option. Options granted by RPH to its or its Affiliates' employees
shall remain options to purchase RPH common stock.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF MEMBERS
8.1 Limitation of Liability. The Members shall have no liability under
this Agreement except as provided in Article IV and Article VI of this
Agreement.
8.2 Return of Capital. No Member shall be entitled to the withdrawal or
return of its Capital Contribution, except to the extent, if any, that
distributions made pursuant to this Agreement or upon termination of the Company
may be considered as such by law and then only to the extent provided for in
this Agreement.
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 Records and Accounting. The officers of the Company shall keep or
cause to be kept appropriate books and records with respect to the Company's
business (including without limitation, any books, records, statements, or
information required to be maintained by the Company under the Delaware Act),
which shall at all times be kept at the principal office of the Company or such
other office as the Management Committee may approve for such purposes. Any
books and records maintained by the Company in the regular course of its
business, including books of account and records of Company proceedings, may be
kept on, or be in the form of, punch cards, magnetic tape, photographs,
micrographics or any other information storage device, provided that the books
and records so kept are convertible into clearly legible written form within a
reasonable period of time. The books of the Company shall be maintained for
financial reporting purposes on the accrual basis of accounting.
9.2 Fiscal Year. The Fiscal Year of the Company shall be the calendar
year for tax and accounting purposes.
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9.3 Reports.
(a) The officers of the Company shall deliver to each Member,
not later than 60 days following the end of each Fiscal Year, Financial
Statements, including a balance sheet, an income statement, and an
annual statement of source and application of funds of the Company for
such Fiscal Year prepared in accordance with generally accepted
accounting principles and audited by the Independent Accountants.
(b) No later than 30 days after the last day of each fiscal
quarter during the term of this Agreement, the officers of the Company
shall cause the Company to prepare, or cause to be prepared and
delivered to each Member, a balance sheet together with a profit and
loss statement for such fiscal quarter together with a cumulative
profit and loss statement for the year-end with comparative statements
for the previous year if applicable.
(c) No later than 30 days after the last day of each calendar
month during the term of this Agreement, the officers of the Company
shall cause the Company to prepare, or cause to be prepared and
delivered to each Member, a balance sheet together with a profit and
loss statement for such calendar month together with a cumulative
profit and loss statement for the year-end with comparative statements
for the previous year if applicable.
9.4 Documents. Each Member shall have the right to inspect, review and
make copies (with such copies at Company expense) of documents relating to the
business of the Company.
9.5 Certain Administrative Expenses of RPH. The Company shall reimburse
RPH for all administrative costs and expenses of RPH, including but not limited
to, costs associated with financial audits and tax filings.
ARTICLE X
TAX MATTERS
10.1 Tax Matters Partner. RPH shall be the "Tax Matters Partner" for
Federal income tax purposes pursuant to Section 6231 of the Code with respect to
each applicable taxable year of the Company. RPH is authorized to do whatever is
necessary to qualify as such.
10.2 Annual Tax Returns.
(a) RPH shall prepare or cause the Independent Accountants to
prepare, at the Company's expense, and shall timely file, or cause the
timely filing of, all tax returns and shall, on behalf of the Company,
timely file, or cause the timely filing of, all other writings required
by any governmental authority having jurisdiction to require such
filing. RPH shall submit the proposed returns to each Member for its
review and approval no later than 15 days prior to the due date of the
returns, after giving effect to any extensions of
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time unless an extension would effectively make or make unavailable a
material tax election.
(b) If a Member disagrees with the treatment of any
partnership item (within the meaning of Section 6231(a)(3) of the Code
and Regulations) on a tax return of the Company, then such Member shall
give written notice to RPH. If, after good faith consultation, an
agreement regarding the treatment of such item cannot be reached within
ten (10) days after the receipt of notice, the Company shall seek
written advice from a mutually agreed upon independent tax counsel or
mutually agreed upon Independent Accountants. Such advice shall
recommend the treatment which is consistent with the terms of this
Agreement, the respective interests of the Members, and for which there
exists substantial authority in support thereof. Such recommended
treatment shall be the one reported on the return.
(c) Without the prior approval of the Management Committee, no
Member shall file an amended return of the Company or a request for an
administrative adjustment under Section 6227 of the Code, nor shall any
Member (other than the Tax Matters Member, as provided herein) commence
any administrative or judicial proceeding relating to a return of the
Company. If, after good faith consultation, such approval is not
provided, no Member shall file such return or request, or commence such
proceeding unless a mutually agreed upon independent tax counsel
renders an opinion that there is substantial authority for the proposed
treatment of the tax items with respect to which such return, request,
or proceeding relates. Nothing herein shall be construed to prevent a
Member from undertaking any administrative or judicial proceeding with
respect to its own return.
10.3 Notice and Limitations on Authority.
(a) Each Member shall notify the other Members upon receipt of
any notice regarding a material audit or tax examination of the Company
and upon any request for material information by United States federal,
state, local, or other tax authorities.
(b) RPH shall, within ten (10) days after the receipt thereof,
forward to each Member a photocopy of any material correspondence
relating to the Company received from the Internal Revenue Service. RPH
shall, within ten (10) days thereof, advise each Member in writing of
the substance of any material conversation affecting the Company held
with any representative of the Internal Revenue Service.
(c) RPH shall have all the authority granted by the Code and
Regulations to the Tax Matters Partner, including the authority:
(i) to enter into a settlement agreement with the
Internal Revenue Service which purports to bind Members other
than the Tax Matters Partner;
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(ii) to file a petition as contemplated in Section
6226(a) or 6228 of the Code;
(iii) to intervene in any action as contemplated in
Section 6226(b)(5) of the Code;
(iv) to file any request contemplated in Section
6227(b) of the Code; and
(v) to enter into an agreement extending the period
of limitations as contemplated in Section 6229(b)(1)(B) of the
Code.
10.4 Tax Elections. RPH shall do all acts, make all elections and take
whatever reasonable steps are required to maximize, in the aggregate, the
federal, state, and local income tax advantages available to the Company and
shall defend all tax audits and litigation with respect thereto at the expense
of the Company. RPH shall maintain the books, records, and tax returns of the
Company in a manner consistent with the acts, elections and steps taken by the
Company. In making any election for each Fiscal Year for tax purposes, RPH shall
make such election, to the extent reasonably possible, in a manner that
maximizes the benefit and minimizes the detriment of each such election to each
Member.
10.5 Actions in Event of Audit. If an audit of the Company's tax
returns occurs, RPH shall, at the expense of the Company, notify the Members
thereof, participate in the audit and contest, and settle or otherwise
compromise assertions of the auditing agent which may be adverse to the Company
in accordance with this Article X. RPH may, if it determines that the retention
of accountants or other professionals would be in the best interests of the
Company, retain such accountants or other professionals to assist in such
audits. The Company shall indemnify and reimburse RPH for all reasonable
expenses, including legal and accounting fees, claims, liabilities, losses and
damages borne by RPH or its Affiliates which were incurred in connection with
any administrative or judicial proceeding with respect to any audit of the
Company's tax returns, except to the extent caused by the gross negligence or
willful misconduct of RPH.
10.6 Organizational Expenses. The Company shall elect to deduct
expenses incurred in organizing the Company ratably over a 60-month period as
provided in Section 709 of the Code.
10.7 Taxation as a Partnership. No election shall be made by the
Company or any Member for the Company to be excluded from the application of any
of the provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or from
any similar provisions of any state tax laws.
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ARTICLE XI
TRANSFERS OF UNITS; NEW MEMBERS
11.1 Transfer Restrictions. After the Closing Date, a Member may not
transfer any of its Units or Preferred Units except as specifically permitted
pursuant to this Article XI. After the fourth anniversary of the Closing Date,
the Reid Members shall be permitted to sell all or less than all of their Units
or Preferred Units, subject to Section 11.5. For purposes of this Article XI,
the term "transfer," when used with respect to any units, includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange, or any
other disposition.
11.2 Transfer to Affiliates and Pledgees. A Member may (A) pledge all
or any portion of its Units or Preferred Units to a financial institution to
secure bona fide indebtedness of such Member or its Affiliates and transfer such
Units or Preferred Units to the pledgee in connection with or following
foreclosure of such pledge, provided that (i) neither such financial institution
nor any of its Affiliates shall be engaged in Plastics Operations, (ii) if the
financial institution forecloses on the Units or Preferred Units, the financial
institution agrees to become a party to, and be bound to the same extent as the
pledgor by the terms of, this Agreement pursuant to the provisions of Section
11.10, and (iii) if the financial institution forecloses on the Units, (x) such
Units shall automatically become non-voting Units, and (y) such financial
institution shall have no right to appoint Managers and no rights under Sections
7.2, 7.3, 7.11, 7.12, 11.5, 11.6 or 11.7; and (B) transfer all or any portion of
its Units or Preferred Units to an Affiliate of such Member upon compliance with
Section 11.4, provided that such Affiliate agrees to become a party to, and be
bound to the same extent as its transferor by the terms of, this Agreement
pursuant to the provisions of Section 11.10, and provided further that such a
transfer to an Affiliate of such Member would not result in a federal income tax
termination of the Company pursuant to Section 708(b)(1)(B) of the Code. If a
proposed transfer to an Affiliate is prohibited under the proviso in the
preceding sentence concerning Section 708(b)(1)(B) (a "Blocked Affiliate
Transfer"), no other transfer to an Affiliate may be made without the prior
written consent of the Member proposing the Blocked Affiliate Transfer until the
Blocked Affiliate Transfer is no longer prohibited by such proviso, at which
time the Blocked Affiliate Transfer may occur. If the Member proposing such
transfer does not effect such transfer within 30 days after the time that such
transfer becomes no longer prohibited, other transfers to Affiliates may be made
(still subject to the provisos above).
11.3 [Reserved]
11.4 Registration. If any Units or Preferred Units are to be assigned,
transferred or sold, either: (a) such Units or Preferred Units shall be
registered under the Securities Act of 1933, as amended, and any applicable
state securities laws; or (b) the transferor shall provide an opinion of counsel
that the proposed assignment, transfer, or sale is exempt from such registration
requirements, which opinion shall not be deemed provided unless and until it is
accepted by the Management Committee, which acceptance shall not be unreasonably
withheld. The Company and the Members have no obligation or intention whatsoever
either to register Units or Preferred
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Units for resale under any federal or state securities laws or to take any
action which would make available to any Person any exemption from the
registration requirements of such laws.
11.5 Right of First Offer; Tag-Along Rights.
(a) If, after the fourth anniversary of the Closing Date and
prior to the Initial Public Offering, the Reid Members desire to sell
all or less than all the Units and/or Preferred Units held by such
Members and/or the stock of RPH owned by Vestar or its Affiliates (or
any successive equity interests in successors of RPH), the Reid Members
shall offer such Units and/or Preferred Units and/or stock to the Suiza
Member by giving written notice (the "Notice") to the Suiza Member to
such effect, enclosing the offer to sell such Units and/or Preferred
Units and/or stock to the Suiza Member, the consideration per Unit
and/or Preferred Units and/or share, and the other material terms of
the offer. Upon receipt of the Notice, the Suiza Member shall have the
right and option to purchase such Units and/or Preferred Units and/or
stock offered by the Reid Members, pro rata according to their
respective holdings of Units or in such other proportions as they may
agree upon, for cash at the purchase price per Unit and/or share
specified in the Notice, exercisable for 30 days after receipt of the
Notice. Failure of the Suiza Member to respond to such Notice within
such 30-day period shall be deemed to constitute a notification to the
Reid Member of the Suiza Member's decision not to purchase such Units
and/or Preferred Units and/or stock under this Section 11.5(a).
(b) The Suiza Member may exercise the right and option to
purchase all (but not less than all) of such Units and/or Preferred
Units and/or stock offered by the Reid Members by giving written notice
of exercise to the Reid Members within such 30-day period, specifying
the date (not later than three Business Days after the date of such
notice) upon which payment of the purchase price for the Units and/or
Preferred Units and/or stock shall be made and the identity of the
Suiza Member who will purchase such Units and/or Preferred Units and/or
stock. The Reid Members shall deliver to the Suiza Member at the
Company's principal office, at least one day prior to the payment date,
wire transfer instructions, and on or before the payment date specified
in such notice, appropriate documentation transferring such Units
and/or Preferred Units and/or stock, against payment of the purchase
price therefor by the Suiza Member in immediately available funds.
(c) In the event that all of the Units and/or Preferred Units
and/or stock offered by the Reid Members are not purchased by the Suiza
Member, subject to the Suiza Member's rights as set forth in the
remainder of this Section 11.5, during the 90-day period commencing on
the expiration of the rights and options provided for in this Section
11.5, the Reid Members may sell the unpurchased Units and/or Preferred
Units and/or stock offered by the Reid Members to a third party for a
consideration equal to or greater than 95% of the consideration
specified in the Notice, free of the restrictions contained in this
Section 11.5 (but subject to the other terms and conditions hereof).
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(d) If the Suiza Member elects not to exercise its rights to
purchase Units and/or Preferred Units and/or stock of the Reid Members
under subsections (a), (b) and (c) of this Section 11.5, the Suiza
Member shall have the right (but not the obligation) to participate in
the Reid Members' sale of Units and/or Preferred Units and/or stock by
requiring the Reid Members' proposed transferee to purchase a number of
Units from the Suiza Member as set forth in Section 11.5(e).
(e) (i) If the Suiza Member owns any Preferred Units, the
Suiza Member shall be permitted to require that the proposed
transferee purchase from such Suiza Member exercising its
tag-along rights pursuant to Section 11.5(d) above (the
"Tagging Member"), in lieu of a number of Units (other than
Converted Units, as defined below) proposed to be transferred
by the Reid Members, a number of Units not in excess of the
number of As-Converted Units held by the Suiza Member (and not
in excess of the number of Units proposed to be sold to such
transferee by the Reid Members); provided, however, to the
extent that any Converted Units proposed to be sold by the
Suiza Member ("Suiza Converted Units") would displace
Converted Units proposed to be sold by the Reid Members ("Reid
Converted Units"), the number of Suiza Converted Units and
Reid Converted Units to be sold shall be treated as "Units"
and determined in accordance with the formula set forth in
Section 11.5(e)(iii). Subject to the proviso in the
immediately preceding sentence, the number of Converted Units
that the Suiza Member elects to sell to the proposed
transferee in accordance with this Section 11.5(e)(i) shall
directly reduce, on a one-for-one basis, the number of Units
to be sold by the Reid Members, pro rata in accordance with
the number of Units proposed to be sold by each Reid Member,
to such proposed transferee. Any Suiza Member exercising its
tag-along rights pursuant to this Section 11.5(e)(i) shall
convert such number of its Preferred Units into the number of
As-Converted Units proposed to be transferred by it (such
newly issued Units, together with any Units issued to a Reid
Member pursuant to Section 12.2(f), "Converted Units") in
accordance with the formula set forth in the definition of
"As-Converted Units" immediately prior to the closing of the
purchase of the Units pursuant to Section 11.5(g).
(ii) In lieu of, or in addition to, the tag-along rights
afforded to the Suiza Member pursuant to Section 11.5(e)(i),
if the Suiza Member owns any Preferred Units and the
Transferring Member (as defined below) proposes to transfer
Preferred Units, the proposed transferee shall be required to
purchase a number of Preferred Units from the Suiza Member up
to the product (rounded up to the nearest whole number) of (i)
the quotient determined by dividing (A) the aggregate number
of Preferred Units beneficially owned on a fully diluted basis
by the Suiza Member and sought by the Suiza Member to be
included in the contemplated transfer by (B) the aggregate
number of Preferred Units beneficially owned (including those
beneficially owned by Vestar or its Affiliate through its
ownership of RPH) on a fully diluted basis by the proposed
transferring Members
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(the "Transferring Members") and all Tagging Members and
sought by the Transferring Members and all Tagging Members to
be included in the contemplated transfer, in each case as
Preferred Units, and (ii) the total number of Preferred Units
proposed to be directly or indirectly transferred to the
transferee in the contemplated transfer (which includes the
proportion of Preferred Units owned by RPH equal to the
proportion of shares of RPH proposed to be transferred).
(iii) Subject to Section 11.5(e)(i), the proposed
transferee shall be required to purchase a number of Units of
the Tagging Members up to the product (rounded up to the
nearest whole number) of (i) the quotient determined by
dividing (A) the aggregate number of Units (other than
Converted Units to be sold in accordance with Section
11.5(e)(i) but including Converted Units to be sold in
accordance with this Section 11.5(e)(iii) pursuant to Section
11.5(e)(i)) beneficially owned on a fully diluted basis by the
Tagging Member and sought by the Tagging Member to be included
in the contemplated transfer by (B) the aggregate number of
Units (other than as aforesaid) beneficially owned (including
those beneficially owned by Vestar or its Affiliate through
its ownership of RPH) on a fully diluted basis by the proposed
Transferring Members, including any Units displaced pursuant
to Section 11.5(e)(i), and all Tagging Members and sought by
the Transferring Members and all Tagging Members to be
included in the contemplated transfer and (ii) the total
number of Units (other than Converted Units to be sold in
accordance with Section 11.5(e)(i)) proposed to be directly or
indirectly transferred to the transferee in the contemplated
transfer (which includes the proportion of Units owned by RPH
equal to the proportion of shares of RPH proposed to be
transferred).
(iv) Any transfers made by the Tagging Member
pursuant to this Section 11.5(e) shall be at the same price
per Unit or Preferred Unit (including, in the case of a sale
of shares of RPH, the price per Unit underlying the specified
per share price) and upon the same terms and conditions
(including without limitation time of payment and form of
consideration) as to be paid and given to the Transferring
Members; provided that in order to be entitled to exercise its
right to sell Units to the proposed transferee pursuant to
this Section 11.5, the Suiza Member must agree to make to the
transferee the same representations, warranties, covenants,
indemnities and agreements as the Reid Members agree to make
in connection with the proposed transfer of the Units and/or
shares of the Reid Members (except that in the case of
representations and warranties pertaining specifically to the
Reid Members, the Suiza Member shall make the comparable
representations and warranties pertaining specifically to
itself).
(f) In connection with a proposed sale of their Units and/or
Preferred Units and/or stock of RPH, the Reid Members shall inform the
proposed transferee of the tag-along rights provided for in Section
11.5(e) and obtain the proposed transferee's agreement to purchase
Units and/or Preferred Units or shares in accordance with the terms
hereof. The tag-along rights provided by this Section 11.5 must be
exercised by the
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<PAGE> 47
Suiza Member within the same 30 day period following receipt of the
Notice as is provided for the right and option to purchase provided in
Section 11.5(a), by delivery of a written notice to the Reid Members
indicating the Suiza Member's desire to exercise its tag-along rights
and specifying the number of Units (including Converted Units) and/or
Preferred Units it desires to sell. If the proposed transferee fails to
purchase Units and/or Preferred Units from the Suiza Member after
properly exercising its tag-along rights, then the Reid Members shall
not be permitted to make the proposed transfer, and any such attempted
transfer shall be void and of no effect.
(g) If the Suiza Member exercises its rights to tag-along
under this Section 11.5, the closing of the purchase of the Units
and/or Preferred Units with respect to which such rights have been
exercised shall take place concurrently with the closing of the sale of
the Reid Members' Units and/or Preferred Units and/or shares. No
transfer shall occur pursuant to this Section 11.5 unless the
transferee shall agree to become a party to, and be bound to the same
extent as its transferor by the terms of, this Agreement pursuant to
the provisions of Section 11.9.
(h) For purposes of this Section 11.5(e), (f) and (g) and with
respect to the Suiza Member's tag along rights as set forth therein,
"Suiza Member" shall be deemed to include any employee optionee who
exercises options to acquire Units pursuant to Company option plans,
provided that the exercising optionee agrees to become a party to, and
be bound to the same extent as the Suiza Member by the terms of, this
Agreement pursuant to the provisions of Section 11.10.
11.6 Drag-Along Rights.
If the Reid Members propose to sell all of their Units in the
Company and/or stock in RPH (or any successive equity interests in
successors of RPH) and the Suiza Member have not exercised their right
to buy or to sell pursuant to Section 11.5 within the time periods
required, then the Reid Members shall have the right (but not the
obligation) to require the Suiza Member and all other Members to
participate in such sale by requiring the Suiza Member and all other
Members to sell their Units to the proposed purchaser on the same terms
as have been offered by such purchaser to the Reid Members. The
election by the Reid Members to require the Suiza Member and all other
Members to participate in such sale shall be exercisable by the Reid
Members within thirty days after the date on which the Suiza Member
notify the Reid Members of their election not to purchase the Units (or
shares) of the Reid Members, and in the event that the Reid Members do
not elect to do so within such thirty days, the Reid Members will be
deemed conclusively to have waived such right. Notwithstanding anything
to the contrary elsewhere herein, Sections 7.2 and 7.3 shall not apply
to prevent the Reid Members from exercising their rights under this
Section 11.6. For purposes of this Section 11.6 and with respect to the
Reid Members' drag along rights as set forth herein, "Suiza Members"
shall be deemed to include any employee optionee who exercises options
to acquire Units pursuant to Company option plans.
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11.7 Put Rights. (a) At any time on or after the fourth anniversary of
the Closing Date and prior to the Initial Public Offering, the Suiza Member
shall have the right, but not the obligation, to offer to sell to the Reid
Members all (but not less than all) the Units and/or Preferred Units held by the
Suiza Member and/or the stock of Franklin owned by Continental Can Company, Inc.
or its Affiliates (or any successive equity interests in successors of Franklin)
at Fair Market Value, which shall be determined in accordance with the
procedures set forth in Section 11.7(c). If after 30 days after the
determination of the Fair Market Value, the Reid Members decline to purchase
such Units and/or Preferred Units, the Suiza Member shall have the right, but
not the obligation, to offer to sell to the Company all (but not less than all)
its Units and/or Preferred Units or Franklin Stock at Fair Market Value. In the
event of such an offer by written notice to the Company, the Company shall
either (i) notify in writing the Suiza Member within 30 days of its receipt of
such written offer of its intention to purchase the Units and/or Preferred Units
or stock and purchase all such Units and/or Preferred Units or stock for cash
within 30 days after its notice of its intent to purchase the Units and/or
Preferred Units or stock or (ii) notify the Suiza Member, by written notice
within 30 days after receipt of such written offer, that the Company will use
its reasonable best efforts to either (A) cause a sale of business of the
Company as expeditiously as practicable or (B) consummate an Initial Public
Offering as expeditiously as practicable. Sections 7.2 and 7.3 shall not apply
to any action taken by the Company pursuant to or in connection with the
preceding sentence. If the Company is unable to sell the business or consummate
an Initial Public Offering within 180 days following the expiration of the 30
day period referred to in this subsection, however, the Suiza Member shall have
the right to sell its Units and/or Preferred Units or stock without further
restriction or impediment, except that (x) any transferee shall agree to become
a party to, and be bound to the same extent as the Suiza Member by the terms of,
this Agreement pursuant to the provisions of Section 11.10, and (y) the Reid
Members shall have the right to tag along with any such sale on effectively the
same terms as set forth for the Suiza Member in Section 11.5(e), (f) and (g) and
the Suiza Member shall have the right to drag along the Reid Members on
effectively the same terms as set forth for the Reid Members in Section 11.6,
provided the Suiza Member agrees to purchase the Reid Members' RPH stock in
addition to Units if the Reid Members so request in writing; provided, further,
however that at such time, if the Suiza Member so requests in writing, RPH in a
writing reasonably satisfactory in form and substance to the Suiza Member
represents and warrants to the Suiza Member that RPH has no assets other than
its Units and Preferred Units and has no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent or
otherwise), and provides customary indemnification (with no "basket" or "cap"
and payable solely in cash without any offsets) to the Suiza Member for any
breach thereof. Such representation, warranty and indemnity shall survive until
the expiration of the applicable statute of limitations.
(b) If, after the fourth anniversary of the Closing Date and prior to
an Initial Public Offering, any of the Managers appointed by Franklin vote
against a proposal to effect an Initial Public Offering or a sale of the Company
or all or substantially all of its assets, thereby causing such proposal not to
be approved pursuant to Section 7.3, the Reid Members shall have the right, but
not the obligation, within 30 days after such proposal was not approved, to
offer to sell to the Suiza Member all (but not less than all) their Units and/or
Preferred Units and stock of RPH at
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Fair Market Value, which shall be determined in accordance with the procedures
set forth in Section 11.7(c). If after 30 days after the determination of the
Fair Market Value, the Suiza Member declines to purchase such Units and/or
Preferred Units and stock, the Reid Members shall have the right, but not the
obligation, to offer to sell to the Company all (but not less than all) their
Units and/or Preferred Units and stock at Fair Market Value. In the event of
such an offer by written notice to the Company, the Company shall either (i)
purchase all such Units and/or Preferred Units and stock for cash within 30 days
after its notice of its intent to purchase the Units and/or Preferred Units and
stock or (ii) notify the Reid Members, by written notice within 30 days after
receipt of such written notice, that the Company will use its reasonable best
efforts to either (A) cause a sale of business of the Company as expeditiously
as practicable or (B) consummate an Initial Public Offering as expeditiously as
practicable. Sections 7.2 and 7.3 shall not apply to any action taken by the
Company pursuant to or in connection with the preceding sentence. For the
purpose of this Section 11.7(b), a sale of all of the Units and Preferred Units
owned by Vestar together with a sale of all of the shares of RPH shall be deemed
to be a sale of all of the Units and Preferred Units owned by the Reid Members.
If the Company is unable to sell the business or consummate an Initial Public
Offering within 180 days following the expiration of the 30 day period referred
to in this subsection, however, the Reid Members shall have the right to sell
their Units (as well as their RPH stock) and Preferred Units without further
restriction or impediment, except that (x) any transferee shall agree to become
a party to, and be bound to the same extent as the Reid Members by the terms of,
this Agreement pursuant to the provisions of Section 11.10, and (y) the Suiza
Member shall have the right to tag along with any such sale on the terms set
forth in Section 11.5(e), (f), and (g), and the Reid Members shall have the
right to drag along the Suiza Member on the terms set forth in Section 11.6,
provided the Reid Members agree to purchase the stock of Franklin owned by
Continental Can Company, Inc. or its Affiliates in addition to Units if the
Suiza Member so requests in writing; provided further, however that at such
time, Suiza Foods in a writing reasonably satisfactory in form and substance to
the Reid Members represents and warrants to the Reid Member that Franklin has no
assets other than its Units and Preferred Units and has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise), and provides customary indemnification (with
no "basket" or "cap" and payable solely in cash without any offsets) to the Reid
Members for any breach thereof. Such representation, warranty and indemnity
shall survive until the expiration of the applicable statute of limitations.
(c) "Fair Market Value" of any Units and/or Preferred Units or stock
means as of any date the fair market value thereof, as mutually determined by
the Suiza Members and the Reid Members. If the parties cannot agree on a Fair
Market Value, they will select a mutually acceptable independent appraiser to
determine such value. If the parties cannot mutually agree upon an independent
appraiser within 30 days, each of the Suiza Members and the Reid Members shall
have an additional 15 days to select an independent appraiser and the two
independent appraisers selected by the parties shall then have 15 days to select
a third independent appraiser. The independent appraiser or appraisers selected
shall determine the Fair Market Value of the Units, Preferred Units and stock
and deliver an opinion in writing to the parties within 30 days after its or
their engagement. The determination of the appraiser or appraisers shall be
final. The Company will bear the cost of the appraisal.
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11.8 Prohibited Transfers. Any transfer or purported transfer, whether
by operation of law or otherwise, of any Units shall be null and void and of no
legal effect if such transfer is prohibited by this Article XI or by other
provisions of this Agreement.
11.9 Rights of Assignee.
(a) Except as provided in this Article XI, and as required by
operation of law, the Company shall not be obligated for any purpose
whatsoever to recognize the transfer by any Member of any Units and/or
Preferred Units if such transfer violates the terms of this Article XI.
(b) Any transfer of Units and/or Preferred Units must be in
writing, may not contravene any of the provisions of this Agreement or
the Delaware Act, and must be executed by the transferor and delivered
to the Company and recorded on the books of the Company. Any transfer
which contravenes any of the provisions of this Agreement or the
Delaware Act shall be of no force and effect and shall not be
recognized by the Company.
(c) A transferee of Units and/or Preferred Units who is not
already a Member or is not admitted as a Member pursuant to Section
11.10 shall have no right to require any information or account of the
Company's transactions or to inspect the Company books or to vote, but
shall only be entitled to receive the allocations and distributions to
which his transferor would otherwise be entitled under this Agreement.
(d) Any transferee who does not become a Member and desires to
make a further transfer of such Units and/or Preferred Units shall be
subject to all of the provisions of this Article XI to the same extent
and in the same manner as any Member desiring to transfer his Units
and/or Preferred Units.
(e) A transferee or assignee of Units and/or Preferred Units,
whether or not admitted as a Member hereunder, shall have no rights
under Sections 7.11, 7.12 or 11.7 hereunder.
11.10 Admission as a New Member.
(a) Subject to the other provisions of this Article XI, a
permitted transferee of a Unit and/or Preferred Unit (if such
transferee is not already a Member) or a Person who exercises an
employee option to acquire Units pursuant to a Company option plan
shall be admitted as a Member only after the satisfactory completion of
items (i) through (iv) below, and if applicable, item (v):
(i) The transferee or optionee accepts and agrees to
be bound by the terms and provisions of this Agreement;
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(ii) a counterpart of this Agreement and such other
documents or instruments as the Management Committee may
reasonably require is executed by the transferee or optionee
to evidence such acceptance and agreement;
(iii) the transferee or optionee pays or reimburses
the Company for all reasonable legal fees, filing, and
publication costs incurred by the Company in connection with
the admission of the transferee or optionee as a Member;
(iv) the Management Committee approves the admission
of such permitted transferee or optionee, which approval may
be withheld in the reasonable discretion of such Management
Committee; provided that such approval will not be required in
connection with a transfer to or by a pledgee in connection
with or following foreclosure of such pledge; and provided
further, that Alan J. Bernon and Peter M. Bernon shall in any
event be permitted transferees or optionees; and
(v) if the transferee is not an individual, the
transferee provides the Company with evidence satisfactory to
counsel for the Company of the authority of such transferee to
become a Member under the terms and provisions of this
Agreement.
(b) The Management Committee or officers of the Company shall
make all official filings and publications as promptly as practicable
after the satisfaction by the transferee or optionee of the conditions
contained in this Article XI to the admission of such transferee or
optionee as a Member.
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11.11 Distributions and Allocations in Respect of Transferred Units. If
any Units and/or Preferred Units are sold, assigned, or transferred during any
Fiscal Year without violating the provisions of this Article XI, Profits,
Losses, and all other items attributable to the transferred (or adjusted)
interest for such period shall be divided and allocated between the affected
Persons by taking into account their varying interests during the period in
accordance with Code Section 706(d), using any conventions permitted by law and
approved by the Management Committee. All distributions on or before the date of
such transfer shall be made to the transferor. Solely for purposes of making
such allocations and distributions in the case of a transfer, the Company shall
recognize such transfer not later than the end of the calendar month during
which it is given notice of such transfer, provided that if the Company does not
receive a notice stating the date such Units and/or Preferred Units were
transferred and such other information as the Management Committee may
reasonably require within 30 days after the end of the Fiscal Year during which
the transfer occurs, then all of such items shall be allocated, and all
distributions shall be made, to the Person who, according to the books and
records of the Company, on the last day of the Fiscal Year during which the
transfer occurs, was the owner of the Units and/or Preferred Units. Neither the
Company nor any Member shall incur any liability for making allocations and
distributions in accordance with the provisions of this Section 11.11, whether
or not any Member or the Company has knowledge of any transfer of ownership of
any interest.
11.12 Conversion to Corporate Form.
(a) In the event that the Management Committee shall determine
that the business of the Company should be conducted in the form of a
corporation rather than a limited liability company so that an Initial
Public Offering can occur, the Managers shall have the power to merge
the Company into RPH, and take such other action as they shall deem
advisable in connection therewith. Franklin anticipates that it will
simultaneously merge into RPH in the event of an Initial Public
Offering. RPH agrees to permit the merger of Franklin into RPH at such
time if Franklin so requests in writing at least 60 days prior to the
merger of the Company into RPH and if Suiza Foods (and/or the successor
by operation of law to Suiza Foods or the transferee of substantially
all of its assets) in a writing reasonably satisfactory in form and
substance to RPH represents and warrants to RPH at that time that
Franklin has no assets other than its Units and Preferred Units and has
no liabilities or obligations of any nature (whether known or unknown
and whether absolute, accrued, contingent or otherwise), and provides
customary indemnification (with no "basket" or "cap" and payable solely
in cash without any offsets) to RPH for any breach thereof. Such
representation, warranty and indemnity shall survive until the
expiration of the applicable statute of limitations. In connection with
any such merger of the Company and/or Franklin into RPH, the Members or
Franklin Shareholders, as the case may be, shall receive, in exchange
for their Units or shares of Franklin Stock, shares of common stock of
RPH in proportion to their Units and, if Franklin is merged into RPH,
warrants to purchase Franklin stock will be exchanged for RPH stock
equal in value to such warrants.
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(b) Prior to taking such action to merge the Company and/or
Franklin into RPH, the Management Committee shall submit to the
Members, and the Members agree to approve, the proposed forms of an
amended certificate of incorporation, by-laws and any other governing
documents for RPH. In addition, each of the Members agrees to take all
action necessary with respect to its Units in order to approve any
merger of the Company and/or Franklin into RPH in accordance with this
Section 11.12. Upon such merger, RPH shall enter into a Registration
Rights Agreement with each of the Members with respect to the stock of
RPH substantially in the form attached hereto as Exhibit 11.12(b).
ARTICLE XII
PREFERRED UNITS
12.1 Issuance of Preferred Units. The Company shall issue Preferred
Units to those Members, at the times and with an aggregate liquidation
preference as specified in the Merger Agreement. Upon any such issuance (i) the
initial Capital Contributions described in Section 4.1 shall be deemed to be
retroactively and proportionately reduced in an aggregate amount equal to the
aggregate initial liquidation preference of the Preferred Units so issued and
(ii) consequently, the Capital Account of each Member shall be reduced in
proportion to their Percentage Interests in an aggregate amount for all Members
equal to the aggregate initial liquidation preference of the Preferred Units so
issued.
12.2 Terms of Preferred Units.
(a) Liquidation Preference. Each Preferred Unit shall have an
initial liquidation preference equal to $1,000 (the "Initial
Liquidation Preference"). Such liquidation preference shall be
increased from time to time as a result of the accrual of distributions
as described in Section 12.2(b) and shall be decreased from time to
time by the amount of distributions made on such Preferred Unit
pursuant to Section 6.1 (such liquidation preference as so increased or
decreased from time to time, the "Liquidation Preference").
(b) Distribution Rights. Each Preferred Unit shall accrue
distribution rights at a rate of 3.125% per calendar quarter on the
average daily Liquidation Preference during such calendar quarter.
Subject to Section 7.2(o), such distribution rights shall be payable in
cash within 15 days of the end of such calendar quarter. If the full
amount of any distribution is not made within such 15 day period, the
Liquidation Preference on such Preferred Unit shall be deemed to be
increased by the amount of such distribution not so made. Such increase
shall be deemed to have occurred on the first day of such 15 day period
and shall accrue distribution rights from that day forward until paid
or redeemed, together with any future distributions thereon, in full.
(c) Optional Redemption. Subject to Section 7.2(p), the
Company, at its option, may redeem Preferred Units, in whole or in
part, at any time or from time to time, at a redemption price per
Preferred Unit equal to the sum of (A) the aggregate Liquidation
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Preference of the Preferred Units to be redeemed, (B) the aggregate
Unpaid Distribution Amount with respect to such Preferred Units and (C)
distributions that accrued on such Preferred Units during that portion
of the calendar quarter in which such redemption occurs (such sum, the
"Redemption Price").
(d) Mandatory Redemption. The Company shall redeem, prior to
redeeming or repurchasing any other Units, all Preferred Units at the
Redemption Price upon the occurrence of the following: (i) a sale,
lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the
Company, (ii) an Initial Public Offering or (iii) the merger of the
Company into RPH in accordance with Section 11.12.
(e) Redemption Procedures. In the event the Company shall
redeem (either optionally or mandatorily) Preferred Units, notice of
such redemption shall be given by first class mail, postage prepaid,
mailed not less than 10 nor more than 60 days prior to the redemption
date, to each holder of record of the Preferred Units to be redeemed.
Each such notice shall state: (i) the redemption date, (ii) the number
of Preferred Units to be redeemed and, if fewer than all the Preferred
Units held by such holder are to be redeemed, the number of such
Preferred Units to be redeemed from such holder, (iii) the Redemption
Price and (iv) that distributions on the Preferred Units to be redeemed
will cease to accrue on the redemption date. Notice having been mailed
as aforesaid, from and after the redemption date (unless there shall be
a default by the Company in providing money for the payment of the
redemption price) distributions on the Preferred Units so called for
redemption shall cease to accrue, and such Preferred Units shall no
longer be deemed to be outstanding, and all rights of the holders
thereof (except the right to receive from the Company the Redemption
Price) shall cease.
(f) Conversion Rights. Any Preferred Units held by any Suiza
Member shall not be convertible into Units except as provided in
Section 11.5(e)(i). Any Preferred Units held by any Reid Member may be
converted into Units at any time following the fourth anniversary of
the Closing Date in connection with a proposed sale of Units made in
accordance with Section 11.5. If, after the fourth anniversary of the
Closing Date, any Reid Member proposes to sell Units, such Reid Member
shall be permitted to convert Preferred Units into a number of Units
determined by dividing the aggregate Liquidation Preference of the
number of Preferred Units sought to be converted by the price per Unit
proposed to be paid for each Unit proposed to be sold by such Reid
Member; provided, however, that no Reid Member shall be permitted to
exercise such conversion right so as to receive a greater number of
Units than will be transferred by it in such sale. Any such conversion
shall be made immediately prior to the closing of any such sale.
(g) Voting Rights. The approval of the holders of a majority
of all of the Preferred Units (as measured by liquidation value) at the
time outstanding, given in person or by proxy, either in writing or by
a vote at a meeting called for the purpose at which the holders of
Preferred Units shall vote together as a class, shall be necessary for
authorizing, effecting or validating the amendment, alteration or
repeal, whether by merger,
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consolidation or otherwise, of any of the provisions of this Agreement
so as to affect adversely the powers, preferences or other special
rights of the Preferred Units. Except as set forth herein or required
by applicable law, holders of Preferred Units shall have no voting
rights and their consent shall not be required for taking any corporate
action.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
13.1 Dissolution.
(a) Except as set forth in this Agreement, no Member shall
have the right to terminate this Agreement or to dissolve the Company
by its express will or by withdrawal without the consent of the other
Members.
(b) The Company shall be dissolved upon the first to occur of
any of the following events: (each such event is referred to as a
"Dissolution Event"):
(i) any Member suffers an Event of Bankruptcy;
(ii) an election to dissolve the Company is
unanimously approved in writing by the Members; or
(iii) any other event occurs that, under the Delaware
Act, would cause the Company's dissolution.
13.2 Continuation of the Company. Upon the occurrence of an event
described in Section 13.1(b)(i) or Section 13.1(b)(iii), the Company shall be
carried on without dissolution if approved by Members holding 50% or more of the
Percentage Interests. In all other cases, upon the occurrence of an event
described in Section 13.1(b), the Company shall be deemed to be dissolved and
reconstituted only if Members holding 100% of the Percentage Interests
(excluding for these purposes any Percentage Interests held by the Member with
respect to which such Dissolution Event occurred) elect to continue the Company
within 90 days of such event. If no election to continue the Company is made
within 90 days of such event, the Company shall conduct only those activities
necessary to wind up its affairs. If an election to continue the Company is made
upon the occurrence of an event described in Section 13.1(b), then:
(a) the Company shall be deemed to be reconstituted and shall
continue until the end of the term for which it is formed unless
earlier dissolved in accordance with this Article XIII; and
(b) all necessary steps shall be taken to amend or restate
this Agreement and the Certificate of Formation, provided that the
right of Members holding 100% of the Percentage Interests (excluding
for these purposes any Percentage Interests held by a Member with
respect to which such Dissolution Event occurred) to continue the
Company shall not exist and may not be exercised unless the Company has
received an opinion of
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counsel acceptable to the Management Committee that (i) the exercise of
the right would not result in the loss of limited liability of any
Member; and (ii) neither the Company nor the reconstituted Company
would be treated as an association taxable as a corporation for federal
income tax purposes upon the exercise of such right to continue.
13.3 Liquidation.
(a) Upon the dissolution of the Company, unless an election to
continue the Company is made pursuant to Section 13.2, RPH shall serve
as liquidator ("Liquidator") of the Company.
(b) Upon dissolution or resignation of the Liquidator, a
successor and substitute Liquidator (who shall have and succeed to all
rights, powers and duties of the original Liquidator) shall within 30
days thereafter be approved by the Members holding 70% of the
Percentage Interests. The right to appoint a successor or substitute
Liquidator in the manner provided herein shall be recurring and
continuing for so long as the functions and services of the Liquidator
are authorized to continue under the provisions hereof, and every
reference herein to the Liquidator will be deemed to refer also to any
such successor or substitute Liquidator appointed in the manner herein
provided.
(c) Except as expressly provided in this Article XIII, the
Liquidator appointed in the manner provided herein shall have and may
exercise, without further authorization or consent of any of the
parties hereto, all of the powers conferred upon the Management
Committee under the terms of this Agreement to the extent necessary or
desirable in the good faith judgment of the Liquidator to carry out the
duties and functions of the Liquidator hereunder for and during such
period of time as shall be reasonably required in the good faith
judgment of the Liquidator to complete the winding up and liquidation
of the Company as provided for herein.
(d) Except as otherwise provided in this Article XIII
(including Section 13.5 below), the Liquidator shall liquidate the
assets of the Company, and, after making all allocations and
distributions otherwise required by this Agreement, shall apply and
distribute the net proceeds of such liquidation in the following order
of priority:
(i) to the creditors of the Company, including
Members, in the order of priority provided by applicable law;
(ii) to the Members with Preferred Units in
proportion to the sum of (A) the aggregate Liquidation
Preference of the Preferred Units held by such Member, (B) the
aggregate Unpaid Distribution Amount with respect to such
Preferred Units and (C) dividends that accrued on such
Preferred Units during that portion of the calendar quarter in
which such liquidation occurs; and
(iii) then, the remaining balance of the liquidation
proceeds, if any, to the Members in accordance with their
respective positive Capital Account
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balances, after taking into account all allocations of Profit,
Loss and other items of income, gain, loss and deduction, and
distributions for all periods, including prior distributions
made pursuant to this Article XIII provided, that, profit or
loss of the Company resulting from the sale or other
disposition of all or substantially all of the Company's
Assets or otherwise associated with the liquidation of the
Company shall be allocated in a manner designed, to the extent
possible, to cause the Capital Account balance of each Member
to equal the amount that would be distributed to such Member
if all of the Company's Assets were distributed to the Members
in accordance with the provisions of Section 6.1 of this
Agreement; provided, however, that, notwithstanding anything
in this Article XIII to the contrary, the Liquidator may place
in escrow a reserve of cash or other assets of the Company for
contingent liabilities in an amount determined by the
Liquidator to be appropriate for such purposes.
13.4 Reserves. After all of the assets of the Company have been
distributed, the Company shall terminate. If at any time thereafter any funds in
any cash reserve fund referred to in Section 13.3(d) are released because the
need for such cash reserve fund has ended, such funds shall be distributed to
the Members in the same manner as if such distribution had been made pursuant to
Section 13.3(d).
13.5 Distribution in Kind. Notwithstanding the provisions of Section
13.3 which require the liquidation of the assets of the Company, but subject to
the order of priorities set forth therein and subject also to Section 13.4, if
upon the dissolution of the Company the Management Committee determines that an
immediate sale of part or all of the Company's assets would be impractical or
would cause undue loss to the Members, the Liquidator may, in good faith, defer
for a reasonable time the liquidation of any assets except those necessary to
satisfy liabilities of the Company (other than those to Members). The Liquidator
may distribute to the Members, in lieu of cash, such Company assets as the
Liquidator deems not suitable for liquidation. Any distributions in kind shall
be subject to such conditions relating to the disposition and management thereof
as the Liquidator and the Management Committee deem reasonable and equitable.
The Management Committee shall value any property distributed in kind based upon
such property's fair market value as determined using such reasonable method of
valuation as it may adopt.
13.6 Disposition of Documents and Records. All documents and records of
the Company, including, without limitation, all financial records, vouchers,
canceled checks and bank statements, shall be delivered to RPH upon termination
of the Company. RPH shall retain such documents and records for a period of not
less than six (6) years and shall make such documents and records available
during normal business hours to any other Member for inspection and copying at
the other Member's cost and expense.
13.7 Negative Capital Accounts. If, after the allocations of Profit,
Loss, and other items of income, gain, loss, deduction or credit under Article V
and after distributions of cash under Article VI, any Member shall ever have a
negative balance in such Member's Capital Account, no Member shall have any
obligation to restore such negative balance, or to make any
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contribution to the capital of the Company by reason thereof, and such negative
balance shall under no circumstances be considered a liability of the Company or
of any Member.
13.8 Filing of Certificate of Cancellation. Upon the completion of the
distribution of Company property as provided in Sections 13.3, 13.4, and 13.5,
the Company shall be terminated, and the Liquidator (or the Members if
necessary) shall cause the Certificate to be canceled and will take such other
actions as may be necessary to terminate the Company.
13.9 Return of Capital. No Member shall be personally liable for the
return of the Capital Contributions of any other Members, or any portion
thereof, it being expressly understood that any such return shall be made solely
from Company assets.
13.10 Waiver of Partition. Each Member hereby waives any rights to
partition of the Company property.
ARTICLE XIV
AMENDMENT OF AGREEMENT
14.1 Amendment Procedures.
(a) Amendments to this Agreement may be proposed by any
Member, which shall give written notice to all Members of the text of
such amendment, together with a statement of the purpose of such
amendment.
(b) Proposed amendments to this Agreement shall be adopted,
subject to Section 7.2, if they have been approved in writing by
Members holding 80% of the Percentage Interests; provided, however,
that no amendment shall be adopted without the consent of each Member
affected if the amendment adversely affects such Member's economic
interests relating to the Member's Units or if the amendment adversely
affects such Member's rights with respect to management or control of
the Company, except, in each case, for such amendments that adversely
affect all Members' economic interests and rights proportionately. The
President shall, within a reasonable time after the adoption of any
amendment to this Agreement, make official filings or publications
required or desirable to reflect such amendment, including any required
filing for recordation of any parallel amendment to the Certificate.
ARTICLE XV
GENERAL PROVISIONS
15.1 Addresses and Notices. Any notice provided in or permitted under
this Agreement shall be made in writing and may be given or served by: (a)
delivering the same in person to the party to be notified; (b) depositing the
same in the mail, postage prepaid, registered or certified with return receipt
requested, and addressed to the party to be notified at the address herein
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specified; (c) delivering the same on a prepaid basis via a nationally
recognized courier service, such as Federal Express; or (d) sending the same by
facsimile transmission, followed by delivery of a hard copy via a nationally
recognized courier service, such as Federal Express. If notice is deposited in
the mail pursuant to this Section 15.1, it will be deemed received on the third
(3rd) Business Day after it is so deposited. Notice given in any other manner
shall be deemed received only if and when actually received by the party to be
notified. For the purpose of notice, the address of the parties shall be, until
changed as hereinafter provided for, as follows:
<TABLE>
<CAPTION>
<C> <S>
If to any RPH or Vestar: with a copy to:
Reid Plastic Holdings, Inc. Simpson Thacher & Bartlett
21700 East Copley Drive, Suite 200 425 Lexington Avenue
Diamond Bar, California 91765 New York, New York 10017
Attention: Chief Financial Officer Attention: Peter J. Gordon
Telecopy: (909) 612-2410 Telecopy: (212) 455-2502
and
Vestar Packaging, LLC
Seventeenth Street Plaza
1225 17th Street, Suite 1660
Denver, CO 80202
Attention: John R. Woodard
Telecopy: (303) 292-6639
If to Franklin: with a copy to:
Suiza Foods Corporation Hughes & Luce, L.L.P.
2515 McKinney Ave., LB 30, Suite 1200 1717 Main Street, Suite 2800
Dallas, Texas 75201 Dallas, Texas 75201
Attention: President and General Counsel Attention: William A. McCormack
Telecopy: (214) 303-3499 Telecopy: (214) 939-5849
</TABLE>
The parties shall have the right from time to time and at any time to change
their respective addresses and each shall have the right to specify as its
address any other address by at least 15 days' prior written notice to the other
parties. Each party shall have the right from time to time to specify additional
parties (not to exceed two additional parties) to whom notice hereunder must be
given by delivering to the other party 15 days' prior written notice thereof,
setting forth the address of such additional parties. Notice required to be
delivered hereunder to any party shall not be deemed to be effective until the
additional parties, if any, designated by such party have been given notice in a
manner deemed effective pursuant to the terms of this Section 15.1.
15.2 Titles and Captions. All article and section titles and captions
in this Agreement are for convenience only. They shall not be deemed part of
this Agreement and in no way define, limit, extend or describe the scope or
intent of any provisions hereof. Except as specifically
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provided otherwise, references to "Articles" and "Sections" are to Articles and
Sections of this Agreement.
15.3 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa. The locative adverbs "hereof,"
"herein," "hereafter," etc. refer to this Agreement as a whole.
15.4 Further Action. The parties shall execute all documents, provide
all information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
15.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives, and permitted assigns.
15.6 Integration. This Agreement constitutes the entire agreement among
the parties hereto pertaining to the subject matter hereof and supersedes all
prior agreements and understandings pertaining thereto.
15.7 No Third Party Beneficiary. This Agreement is made solely and
specifically between and for the benefit of the parties hereto, and their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and no other Person whatsoever shall have
any rights, interest, or claims hereunder or be entitled to any benefits under
or on account of this Agreement as a third party beneficiary or otherwise. It is
expressly understood that the right of the Company or the Members to require any
additional Capital Contributions under the terms of this Agreement shall not be
construed as conferring any rights or benefits to or upon any Person not a party
to this Agreement, or the holder of any obligations secured by a mortgage, deed
of trust, security interest or other lien or encumbrance upon or affecting the
Company or any interest of a Member therein.
15.8 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
15.9 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto or, in the case of a
transferee, upon executing and delivering such documents as required by the
Management Committee.
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15.10 APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE
OF DELAWARE APPLICABLE TO CONTRACTS ENTERED INTO AND TO BE PERFORMED IN THE
STATE OF DELAWARE.
15.11 Invalidity of Provisions. If any provision of this Agreement is
declared or found to be illegal, unenforceable or void, in whole or in part,
then the parties shall be relieved of all obligations arising under such
provision, but only to extent that it is illegal, unenforceable or void, it
being the intent and agreement of the parties that this Agreement shall be
deemed amended by modifying such provision to the extent necessary to make it
legal and enforceable while preserving its intent or, if that is not possible,
by substituting therefor another provision that is legal and enforceable and
achieves the same objectives.
15.12 Confidentiality. Each party to this Agreement agrees to keep
confidential the terms of this Agreement and any materials provided in
connection with this Agreement. Notwithstanding the foregoing, each party to
this Agreement may disclose the terms, and any all materials provided in
connection with this Agreement, (a) to its counsel, accountants, auditors or
other agents whose professional responsibility it is to hold such information
confidential, (b) as may be required by any statute, court order, administrative
order or decree or governmental ruling or regulation of the United States or
other applicable jurisdiction, including Internal Revenue Service auditors, or
as may be requested by the Internal Revenue Service or any other governmental
entity, or (c) to such other Persons as are reasonably deemed necessary by such
party to protect the interests of such party or for the purposes of enforcing
such documents and who agree to hold such information confidential on the terms
hereof.
SIGNATURE PAGES ARE ATTACHED HERETO
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have executed this Agreement as of the day and year first above written.
MEMBERS:
REID PLASTIC HOLDINGS, INC.,
a Delaware corporation
By: /s/ RONALD V. DAVIS
Name: Ronald V. Davis
Title: President and Chief Executive Officer
VESTAR PACKAGING LLC, a
Delaware limited liability company
By: /s/ STEVEN M. SILVER
Name: Steven M. Silver
Title:
FRANKLIN PLASTICS, INC., a Delaware
corporation
By: /s/ MICHELLE P. GOOLSBY
Name: Michelle P. Goolsby
Title: Vice President
