INVESTMENT AGREEMENT
AGREEMENT, dated as of December 29, 1997, among AMERICAN
INDUSTRIAL PARTNERS CAPITAL FUND, L.P., a Delaware limited partnership ("AIP"),
FIRST PLAZA GROUP TRUST, a New York trust ("First Plaza"), LEEWAY & CO., a
Massachusetts partnership ("Leeway" and, together with First Plaza and AIP, the
"Principal Stockholders"), the other persons listed on Annex A (the "Other
Stockholders" and, together with the Principal Stockholders, the
"Stockholders"), AMERICAN INDUSTRIAL PARTNERS MANAGEMENT COMPANY, INC., a
Delaware corporation ("AIPM"), CREATIVE EXPRESSIONS GROUP, INC., a Delaware
corporation ("CEG") and SF HOLDINGS GROUP, INC., a Delaware corporation
("Buyer").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Sweetheart Holdings Inc., a Delaware corporation
("Holdings"), and The Xxxxx Group, Inc., a Delaware corporation ("Xxxxx"), are
each engaged in the business of manufacturing paper and plastic disposable
beverage service and meal service products and food packaging products for the
foodservice industry;
WHEREAS, the Stockholders are the beneficial and record owners
of all of the outstanding capital stock of Holdings;
WHEREAS, each of CEG, Buyer and Xxxxx is controlled by Xxxxxx
Xxxxxx ("Mehiel");
WHEREAS, in order to induce the Stockholders to enter into
this Agreement, Mehiel is concurrently entering into an agreement with AIP for
the benefit of the Stockholders in the form attached hereto as Exhibit A with
respect to the capitalization of Buyer ("the Mehiel Agreement");
WHEREAS, prior to the closing of the transactions contemplated
by this Agreement (the "Closing"), Buyer will be the beneficial and record
owner of all of the outstanding capital stock of Xxxxx; and
WHEREAS, the Stockholders, CEG and Buyer desire to realize
the benefits of jointly operating the businesses of Xxxxx and Holdings and, in
connection therewith, the Stockholders desire to sell, and Buyer wishes to
purchasefrom the Stockholders, an interest in Holdings on the terms and
conditions set forth herein in exchange for, among other consideration, an
equity interest in Buyer.
NOW, THEREFORE, in consideration of the mutual agreements
hereinafter set forth, and intending to be legally bound hereby, the parties
hereto agree as follows:
ARTICLE I
INVESTMENT
1.01. Preliminary Corporate Actions. Prior to the Closing,
the Stockholders will cause Holdings to (i) file the amendment to its
certificate of incorporation described on Exhibit B hereto (the "Charter
Amendment") and amend its by-laws as described on Exhibit B hereto
(collectively with the Charter Amendment, the "Amendments") and (ii) pay a pro
rata dividend-in-kind on the outstanding Common Stock, par value $.01 per
share, of Holdings ("Holdings Common Stock") consisting of shares of Non-Voting
Common Stock, par value $.01 per share ("Holdings Non-Voting Common Stock") on
the basis of 4.2 shares of Holdings Non-Voting Common Stock for each outstanding
share of Holdings Common Stock (the "Dividend").
1.02. The Investment. Upon the terms and subject to the
conditions of this Agreement, at the Closing, each Stockholder will sell,
assign, transfer and deliver to Buyer, and Buyer will purchase from such
Stockholder, the number of shares of Holdings Common Stock and Holdings
Non-Voting Common Stock owned by such Stockholder as set forth on Annex A, free
and clear of all claims, liens, encumbrances, security interests, charges or
restrictions on transfer of any nature whatsoever (each, an "Encumbrance"),
except those created in favor of Buyer under this Agreement. The shares of
Holdings Common Stock and Holdings Non-Voting Common Stock to be purchased by
Buyer from the Stockholders are collectively referred to herein as the
"Shares."
1.03. Consideration. Upon the terms and subject
to the conditions contained in this Agreement, in consideration of the
aforesaid sale, assignment, transfer and delivery of the Shares at the Closing,
Buyer will pay or cause to be paid to the Stockholders for the Shares: (i) an
aggregate of $88,000,000 in cash (the "Cash Purchase Price"), (ii) a demand
promissory note of Buyer in the aggregate principal amount of $7,000,000 (the
"Demand Note") and (iii) an aggregate of $30,000,000 in aggregate stated value
of a series of exchangeable preferred stock of Buyer having the terms set forth
on Exhibit C hereto (the "Buyer Preferred Stock" or, alternatively, "Buyer
Securities").
-2-
ARTICLE II
RELATED MATTERS
2.01. Xxxxx Acquisition. Prior to the Closing,
in connection with the consummation of the transactions contemplated hereby,
Buyer shall acquire all of the outstanding capital stock of Xxxxx (the "Xxxxx
Acquisition").
2.02. Capitalization of Buyer. CEG shall capitalize Buyer
with not less than $23 million in cash available for use to pay a portion of
the Cash Purchase Price; provided, however, that Xxxxx may provide up to $9
million of such funds.
2.03. Buyer Financing. Mehiel has obtained a highly confident
letter from a nationally recognized investment bank, a copy of which has been
delivered to AIP, with respect to the offering (the "High Yield Offering") by
Buyer of $78,000,000 aggregate principal amount of Senior Discount Notes of
Buyer (the "Discount Notes"). Buyer agrees to use its reasonable best efforts
to consummate the High Yield Offering. Buyer will not include any information
with respect to the Stockholders in the offering memorandum prepared in
connection with the High Yield Offering without the prior written consent of
AIP, which shall not be unreasonably delayed or withheld.
2.04. Options. At the Closing, all outstanding options to
purchase shares of Holdings Common Stock ("Options") shall become immediately
exercisable in full, all Options shall be settled by the Stockholders in
exchange for cash (the "Option Payment") and the Stockholders shall deliver
evidence reasonably satisfactory to Buyer that all rights of all holders in
respect of the Options have been released.
2.05. Management Services Agreement. At the
Closing, in recognition of the management services to be rendered by Buyer,
AIPM will assign a portion of its rights and Buyer will assume a portion of
AIPM's obligations under the Restated Management Services Agreement, dated
August 31, 1993 (the "Existing Management Agreement"), among Holdings,
Sweetheart Cup Company, Inc. ("Cup") and AIPM pursuant to an assignment (the
"Management Agreement Assignment") on the terms attached hereto as Exhibit
2.05.
2.06. Certain Expenses. At the Closing, Holdings will pay the
first $4,500,000 plus 50% of the next $500,000, up to an aggregate of
$4,750,000, of the fees and expenses listed in Section 2.06 of the Stockholders
Disclosure Schedule and the Stockholders agree to pay any such fees and
expenses in excess thereof.
-3-
2.07. Certain Agreements. (a) At the Closing, the
Stockholders and Buyer will execute a Stockholders' Agreement, on the terms set
forth in Exhibit D hereto (the "Holdings Stockholders Agreement"), pursuant to
which the Stockholders and Buyer will agree to certain matters with respect to
the voting and transfer of the Holdings Common Stock and the Holdings
Non-Voting Common Stock following the Closing.
(b) At the Closing, the Stockholders and Buyer will execute a
Stockholders' Agreement, on the terms set forth in Exhibit E hereto (the "Buyer
Stockholders' Agreement"), pursuant to which (i) the Stockholders will agree to
certain transfer restrictions with respect to the Buyer Securities which the
Stockholders receive from Buyer at the Closing and (ii) Buyer will agree to
provide to the Stockholders certain registration rights with respect to the
Buyer Securities which the Stockholders receive from Buyer at the Closing.
ARTICLE III
THE CLOSING
3.01. Time and Place of Closing. Upon the terms and subject
to the conditions contained in this Agreement, the closing of the transactions
contemplated by this Agreement (the "Closing") will take place at the offices
of Kramer, Levin, Naftalis & Xxxxxxx, 000 Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx
00000 at 9:30 A.M. (local time) on the second Business Day (as hereinafter
defined) following the date on which all of the conditions to each party's
obligations hereunder have been satisfied or waived; or at such other place or
time or both as the parties may agree. The date on which the Closing actually
occurs and the transactions contemplated hereby become effective is referred to
herein as the "Closing Date."
3.02. Deliveries by AIP. At the Closing, AIP, as
representative of the Stockholders, will deliver or cause to be delivered the
following to Buyer:
(a) Stock certificates representing the Shares
accompanied by stock powers duly endorsed in blank or accompanied by
duly executed instruments of transfer.
(b) The stock books, stock ledgers, minute books and
corporate seals of Holdings.
(c) The Holdings Stockholders' Agreement, the Buyer
Stockholders' Agreement and the Management Agreement Assignment.
-4-
(d) The certificates and other documents contemplated
by Article IX hereof.
(e) Certified copies of Holdings' Certificate of
Incorporation and By-Laws, as amended by the Amendments.
(f) Such other documentation as may be reasonably
necessary for the consummation of the transactions contemplated hereby.
3.03. Deliveries by Buyer. At the Closing, Buyer will
deliver or cause to be delivered the following to AIP, as representative of the
Stockholders:
(a) The Cash Purchase Price in immediately available
funds to an account designated in writing by AIP at least one Business
Day prior to the Closing.
(b) Buyer Preferred Stock registered in the names of
the Stockholders.
(c) If issued pursuant to Section 1.03(c), Discount
Notes registered in the names of the Stockholders.
(d) The Holdings Stockholders Agreement, the Buyer
Stockholders' Agreement and the Management Agreement Assignment.
(e) The certificates and other documents contemplated
by Article VIII hereof.
(f) Such other documentation as may be reasonably
necessary for the consummation of the transactions contemplated hereby.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS
Each Stockholder (with respect to matters relating to such
Stockholder) and each Principal Stockholder (with respect to matters relating
to Holdings and the Holdings Subsidiaries (as hereinafter defined)), severally
but not jointly, hereby represents and warrants to Buyer (all such
representations and warranties relating to Holdings and the Holdings
Subsidiaries being made to the best knowledge of such Principal Stockholder
based on discussions with and inquiries of management of Holdings and Cup) as
follows:
4.01. Corporate Organization; Etc. Each of Holdings and the
Subsidiaries (as hereinafter defined) of
-5-
Holdings (each a "Holdings Subsidiary" and collectively, the "Holdings
Subsidiaries"), is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to conduct its business as it is now
being conducted and to own, lease and operate its property and assets. Each of
Holdings and the Holdings Subsidiaries is qualified or licensed to do business
as a foreign corporation and is in good standing in each jurisdiction in which
ownership of property or the conduct of its business requires such
qualification or license except where the failure to be so qualified or
licensed is not reasonably likely to have a material adverse effect on the
business, properties, financial condition or results of operations of Holdings
and the Holdings Subsidiaries, taken as a whole (a "Holdings Material Adverse
Effect"). Section 4.01 of the Stockholders Disclosure Schedule sets forth a
complete and correct list of all jurisdictions in which Holdings and each
Holdings Subsidiary is qualified or licensed to do business. True and complete
copies of the Certificate of Incorporation and By-Laws (or other comparable
governing documents) of each of Holdings and the Holdings Subsidiaries, as
presently in effect, have been heretofore delivered to Buyer.
4.02. Capitalization of Holdings and Cup. The authorized
capital stock of Holdings consists of 3,000,000 shares of Holdings Common
Stock, of which 1,046,000 are issued and outstanding and owned by the
Stockholders. Upon filing of the Charter Amendment, the authorized capital
stock of Holdings will be increased to include 7,000,000 shares of Holdings
Non-Voting Common Stock. Such Stockholder is the record and beneficial owner of
the number of shares of Holdings Common Stock, and following the Dividend will
also be the record and beneficial owner of the number of shares of Holdings
Non-Voting Common Stock, set forth opposite such Stockholder's name in Annex A.
Such Stockholder has good title to such shares of Holdings Common Stock, and
will have good title to such shares of Holdings Non-Voting Common Stock, in
each case free and clear of all Encumbrances, except for the restrictions on
transfer contained in the Stockholders Agreement, dated as of August 30, 1993
(the "Existing Stockholders Agreement"), by and among, AIP, First Plaza, Leeway
and the other stockholders named therein (none of which will prevent the
consummation of the transactions contemplated hereby). The authorized capital
stock of Cup consists of 1,000 shares of common stock, par value $.05 per share
(the "Cup Common Stock"), all of which are issued and outstanding and are
owned, of record and beneficially, by Holdings. As of the date of this
Agreement, 74,073 shares of Holdings Common Stock were reserved for issuance
upon the exercise of outstanding Options. All the issued and outstanding shares
of Holdings Common Stock and Cup Common Stock are, and all of the shares of
Holdings Common Stock issued in the Dividend will be,
-6-
duly authorized, validly issued, fully paid and nonassessable and were not
issued in violation of any preemptive rights. Except as set forth above, there
are no outstanding (a) securities convertible into or exchangeable for the
capital stock of Holdings or of Cup, (b) options, warrants or other rights to
purchase or subscribe for capital stock of Holdings or of Cup, or (c)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance of any capital stock of Holdings or of Cup, any such
convertible or exchangeable securities or any such options, warrants or rights,
pursuant to which, in any of the foregoing cases, Holdings or any Holdings
Subsidiary is subject or bound. The consummation of the transactions
contemplated hereby will convey to Buyer good title to the Shares set forth
opposite such Stockholder's name on Annex A, free and clear of all proxies,
voting agreements and other Encumbrances, except for those created in favor of
Buyer under this Agreement.
4.03. Holdings Subsidiaries. All of the Holdings Subsidiaries
are listed in Section 4.03(a) of the Stockholders Disclosure Schedule together
with their jurisdictions of incorporation or organization and the percentage
interest held directly or indirectly by Holdings. All issued and outstanding
capital stock of the Holdings Subsidiaries is duly authorized, validly issued,
fully paid and nonassessable, and, except as set forth in Section 4.03(b) of
the Stockholders Disclosure Schedule, is owned, directly or indirectly by
Holdings, free and clear of all Encumbrances. There are no outstanding (a)
securities convertible into or exchangeable for the capital stock of any of the
Holdings Subsidiaries, (b) options, warrants or other rights to purchase or
subscribe for capital stock of any of the Holdings Subsidiaries or (c)
contracts, commitments, agreements, understandings or arrangements of any kind
relating to the issuance of any capital stock of any of the Holdings
Subsidiaries, any such convertible or exchangeable securities or any such
options, warrants or rights pursuant to which, in any of the foregoing cases,
Holdings or any Holdings Subsidiary is subject or bound.
4.04. Authority Relative to this Agreement. Such Stockholder
has all requisite legal authority and power to execute and deliver this
Agreement, the Holdings Stockholders' Agreement and the Buyer Stockholders'
Agreement and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement, the Holdings Stockholders'
Agreement and the Buyer Stockholders' Agreement and the consummation of the
transactions contemplated hereby and thereby by such Stockholder have been duly
and validly authorized by all required action, if any, on the part of such
Stockholder and no other proceedings on the part of such Stockholder are
necessary to authorize this Agreement, the Holdings Stockholders' Agreement or
the Buyer Stockholders' Agreement
-7-
or to consummate the transactions contemplated hereby or thereby. This
Agreement has been duly and validly executed and delivered by such Stockholder
and, assuming this Agreement has been duly authorized, executed and delivered
by Buyer and the other Stockholders, constitutes a valid and binding agreement
of such Stockholder, enforceable against such Stockholder in accordance with
its terms. Upon the execution and delivery thereof by such Stockholder (and
assuming the due authorization, execution and delivery thereof by Buyer and the
other Stockholders), the Holdings Stockholders' Agreement and the Buyer
Stockholders' Agreement will constitute valid and binding agreements of such
Stockholder, enforceable against such Stockholder in accordance with their
terms. BY ITS EXECUTION OF THIS AGREEMENT, SUCH STOCKHOLDER HAS DULY EMPOWERED
AIP TO ACT AS ITS REPRESENTATIVE FOR THE PURPOSES SET FORTH IN THIS AGREEMENT.
4.05. Consents and Approvals; No Violations. Except as set
forth in Section 4.05 of the StockholdersDisclosure Schedule, neither the
execution and delivery of this Agreement, the Holdings Stockholders' Agreement
or the Buyer Stockholders' Agreement by such Stockholder nor the consummation
of the transactions contemplated hereby or thereby by such Stockholder will (a)
violate any provision of the Certificate of Incorporation or By-Laws (or other
comparable governing documents) of Holdings or the organizational documents, if
any, of such Stockholder, (b) require any consent, waiver, approval,
authorization or permit (a "Consent") of, or filing with or notification to,
any governmental or regulatory authority, agency or commission, including
courts of competent jurisdiction, domestic or foreign (a "Governmental
Entity"), except (i) for filings with the Federal Trade Commission (the "FTC")
and with the Antitrust Division of the United States Department of Justice
(the "DOJ") pursuant to the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of
1976, as amended, and the rules and regulations promulgated thereunder (the
"HSR Act"), (ii) for filings with the Securities and Exchange Commission (the
"SEC") pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), (iii) filings under the Investment Canada Act (Canada) and the
Competition Act (Canada), and (iv) where the failure to obtain such Consent or
make such filing or notification is not reasonably likely to have a Holdings
Material Adverse Effect, (c) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default or give rise to
any right of termination or cancellation under, any of the terms, conditions or
provisions of any indenture, mortgage, note, bond, encumbrance, license,
government registration, contract, lease, agreement or other instrument or
obligation (each, an "Obligation") to which Holdings or any Holdings Subsidiary
is a party or by which Holdings or any Holdings Subsidiary or any of their
respective property or assets may be bound, except such
-8-
violations, breaches and defaults which are not reasonably likely to have a
Holdings Material Adverse Effect or those to which requisite waivers or
consents have been obtained (which waivers or consents have been disclosed to
Buyer) or (d) violate any order, writ, judgment, injunction, writ, decree, law,
statute, ordinance, rule or regulation (each, an "Order") of any Governmental
Entity applicable to such Stockholder, Holdings or any Holdings Subsidiary,
except such violations which are not reasonably likely to have a Holdings
Material Adverse Effect.
4.06. Financial Statements. Holdings has previously provided
to Buyer the audited consolidated balance sheets and the related consolidated
statements of operations, shareholders' equity and cash flows (including any
related notes) as of and for the fiscal years ended September 30, 1995, 1996
and 1997 (such balance sheet as of September 30, 1997 being hereinafter
referred to as the "Balance Sheet" and all such financial statements being
hereinafter collectively referred to as the "Financial Statements"). The
Financial Statements fairly present the consolidated financial position and the
consolidated results of operations, shareholders' equity and cash flows of
Holdings and its consolidated Subsidiaries as of the dates or for the periods
presented therein in conformity with generally accepted accounting principles
("GAAP"), applied on a consistent basis during the periods involved, except as
otherwise noted therein.
4.07. Absence of Certain Changes. Except as set forth in
Section 4.07 of the Stockholders Disclosure Schedule, since the date of the
Balance Sheet, neither Holdings nor any Holdings Subsidiary has (a) suffered
any adverse change in its business, operations or financial position, except
such changes which, in the aggregate, are not reasonably likely to have a
Holdings Material Adverse Effect, (b) suffered any damage, destruction or loss,
whether covered by insurance or not, which would reasonably be expected to have
a Holdings Material Adverse Effect, (c) conducted its business in any respect
not in the ordinary and usual course consistent with past practice, except in
connection with the transactions contemplated hereby, (d) changed in any
respect any accounting principle or policy, (e) except in the ordinary course
of business consistent with past practice, sold, transferred or otherwise
disposed of, any of its property or assets in excess of $200,000, (f) made any
loan to, or entered into any other transaction with, any of its directors or
officers or any Stockholder or any Affiliate (as hereinafter defined) of a
Stockholder (excluding Holdings and the Holdings Subsidiaries), (g) made any
capital expenditure or series of related capital expenditures either involving
more than $1,000,000 or other than in the ordinary course of business, (h)
other than as contemplated by the Dividend, made any dividend payment or other
distribution with respect to shares of its capital
-9-
stock (other than to Holdings or another Holdings Subsidiary) or repurchased,
redeemed or otherwise acquired any shares of its capital stock or (i) suffered
any adverse change in its relationships with its employees, unions, suppliers
or customers which is reasonably likely to have a Holdings Material Adverse
Effect.
4.08. Compliance with Law. Except as set forth in Section
4.08(a) of the Stockholders Disclosure Schedule, Holdings and the Holdings
Subsidiaries have complied and are currently in compliance with all applicable
Orders of any Governmental Entity, except such non-compliances which, in the
aggregate, are not reasonably likely to have a Holdings Material Adverse
Effect. Except as set forth in Section 4.08(b) of the Stockholders Disclosure
Schedule, Holdings and the Holdings Subsidiaries have all governmental licenses
and permits to conduct their businesses as currently conducted, except where
the failure to have such licenses and permits, in the aggregate, is not
reasonably likely to have a Holdings Material Adverse Effect.
4.09. Contracts and Commitments. Section 4.09(a) of the
Stockholders Disclosure Schedule sets forth a complete list of all (a)
employment, severance, termination, consulting and retirement agreements to
which Holdings or any of the Holdings Subsidiaries is presently a party or by
which Holdings or any of the Holdings Subsidiaries is bound (the "Benefit
Arrangements"), (b) collective bargaining agreements, (c) agreements (including
leases) which provide for aggregate future payments by or to Holdings or any
Holdings Subsidiary of more than $250,000 which are not terminable by Holdings
or any Holdings Subsidiary on less than ninety days' notice without penalty
(other than purchase orders entered into in the ordinary course of business),
(d) agreements containing covenants limiting the freedom of Holdings or any
Holdings Subsidiary to compete with any person in any line of business or in
any area or territory, (e) license agreements, (f) indentures, mortgages and
notes or other debt instruments evidencing indebtedness, (g) agreements with
any Stockholder or any Affiliate of a Stockholder (excluding Holdings and the
Holdings Subsidiaries), (h) agreements under which it has advanced or loaned
any amount to any of its directors or officers other than in the ordinary
course of business, (i) guarantees of any obligations for borrowing or
performance, (j) agreements or arrangements for the sale or lease of any of its
assets other than in the usual, regular and ordinary course of business, (k)
agreements or other arrangements for the purchase of any real estate,
machinery, equipment, or other capital assets in excess of $250,000, (l)
agreements or arrangements pursuant to which it is or may be obligated,
contingent or otherwise, on account of or arising out of prior acquisitions or
sales of businesses or assets, (m) leases or other agreements for the use of
personal property with rent in excess of $250,000 per year, (n) agreements or
-10-
arrangements for the future purchase of materials, supplies, services,
merchandise or equipment parts in excess of $250,000, or (o) agreements or
arrangements relating to cleanup, abatement or other actions in connection with
environmental liabilities (collectively, the "Contracts") to which Holdings or
any Holdings Subsidiary is a party. Each Contract listed or required to be
listed in Section 4.09(a) of the Stockholders Disclosure Schedule is valid,
binding and enforceable against Holdings or any Holdings Subsidiary and the
other parties thereto in accordance with its terms and is in full force and
effect, except where the failure to be so valid, binding and enforceable or in
full force and effect would not have a Holdings Material Adverse Effect. Each
of Holdings and the Holdings Subsidiaries has performed all material
obligations required to be performed by it to date under each of the Contracts.
Except as set forth in Section 4.09(b) of the Stockholders Disclosure Schedule,
Holdings and the Holdings Subsidiaries are not in default under any of the
Contracts (nor has any event occurred which, with notice or lapse of time or
both, would constitute a default), except such defaults which, in the
aggregate, are not reasonably likely to have a Holdings Material Adverse
Effect. Except pursuant to the express provisions of the instruments set forth
in Section 4.09(c) of the Stockholders Disclosure Schedule, neither Holdings
nor any Holdings Subsidiary is a party to any agreement which would require any
payment to be made by Holdings or any Holdings Subsidiary to any other party in
connection with the consummation of the transactions contemplated by this
Agreement (either alone or upon the occurrence of any additional acts or
events).
4.10. No Undisclosed Liabilities. Neither Holdings nor any
Holdings Subsidiary has any liability (whether accrued, absolute, contingent or
otherwise and whether known or unknown) other than (a) liabilities reflected or
reserved against (to the extent of the reserves therefor) in the Balance Sheet
(or, to the extent expressly quantified therein, in the notes thereto), (b)
obligations incurred or arising in the ordinary course of business of Holdings
or such Holdings Subsidiary since the date of the Balance Sheet, (c)
liabilities with respect to the matters described in Section 4.10 of the
Stockholders Disclosure Schedule and (d) other liabilities which, either
individually or in the aggregate, would not be required to be reflected on a
balance sheet prepared in accordance with GAAP.
4.11. No Default. Except as set forth in Section 4.11 of the
Stockholders Disclosure Schedule, neither Holdings nor any Holdings Subsidiary
is in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (a) its Certificate of Incorporation or By-Laws (or
other comparable governing documents) or (b) any Order of any Governmental
-11-
Entity applicable to Holdings or any Holdings Subsidiary, except with respect
to clause (b) such defaults and violations which, in the aggregate, are not
reasonably likely to have a Holdings Material Adverse Effect.
4.12. Litigation. Except as set forth in Section 4.12(a) of
the Stockholders Disclosure Schedule, there is no action, suit or proceeding
pending or threatened against Holdings or any Holdings Subsidiary before any
Governmental Entity none of which is reasonably likely to have a Holdings
Material Adverse Effect. Except as set forth in Section 4.12(b) of the
Disclosure Schedule, neither Holdings nor any Holdings Subsidiary has received
notice that it is subject to any outstanding Order of any Governmental Entity
none of which is reasonably likely to have a Holdings Material Adverse Effect.
4.13. Taxes. (a) Except as set forth in Section 4.13(a) of
the Stockholders Disclosure Schedule, Holdings and each Holdings Subsidiary has
duly filed all material returns, declarations, reports, estimates, information
returns and statements ("Returns") required to be filed with respect to it in
respect of any Taxes (as hereinafter defined) and Holdings and each Holdings
Subsidiary has timely paid all Taxes that are shown to be due and payable
on such Returns. Except as set forth in Section 4.13 of the Stockholders
Disclosure Schedule, neither Holdings nor any Holdings Subsidiary has requested
any extension of time within which to file any currently unfiled Returns, and
no extension of a statute of limitations relating to any Taxes is in effect
with respect to Holdings or any Holdings Subsidiary. Except as set forth in
Section 4.13(b) of the Stockholders Disclosure Schedule and except for Taxes
which are not in the aggregate material, all Taxes due and owing by Holdings
and each Holdings Subsidiary have been paid or adequately provided for, net of
any reserves provided for matters set forth in Section 4.13(b) of the
Disclosure Schedule, in the Financial Statements. Except as set forth in
Section 4.13(b) of the Stockholders Disclosure Schedule, no material
deficiencies for any Taxes have been asserted in writing or assessed against
Holdings or any Holdings Subsidiary which remain unpaid or for which adequate
provision, net of any reserves provided for matters set forth in Section
4.13(b) of the Stockholders Disclosure Schedule, has not been made in the
Financial Statements, and there are no pending or threatened actions, suits,
proceedings, audits, investigations or claims for or relating to any liability
in respect of Taxes of Holdings or of any Holdings Subsidiary which is
reasonably likely to have a Holdings Material Adverse Effect. There are no
liens for Taxes upon the assets of Holdings or of any Holdings Subsidiary which
are reasonably likely to have a Holdings Material Adverse Effect. For purposes
of this Agreement, "Taxes" shall mean all taxes, assessments and charges
imposed by any federal, provincial, state, local, municipal
-12-
or foreign taxing authority including interest, penalties and additions
thereto.
(b) The Stockholders are the beneficial owners of the Shares
and are not "foreign persons" within the meaning of Section 1445(b)(2) of the
Internal Revenue Code of 1986, as amended (the "Code").
(c) Except as set forth in Section 4.13(c) of the
Stockholders Disclosure Schedule, (i) neither Holdings nor any Holdings
Subsidiary has, with respect to any assets or property held, filed a consent to
the application of Section 341(f) of the Code; (ii) neither Holdings nor any
Holdings Subsidiary is a party to or bound by any Tax allocation or Tax sharing
agreement or has any current or potential contractual obligation to indemnify
any other person with respect to Taxes; (iii) since August 30, 1993, neither
Holdings nor any Holdings Subsidiary has been a member of an affiliated group
within the meaning of Section 1504 of the Code, or filed or been included in a
combined, consolidated or unitary return of any person, other than of Holdings
and each Holdings Subsidiary; (iv) neither Holdings nor any Holdings Subsidiary
has agreed or is required, as a result of a change in method of accounting or
otherwise, to include any adjustment under Section 481 of the Code (or any
corresponding provision of state, local or foreign law) in taxable income; and
(v) neither Holdings nor any Holdings Subsidiary is a party to any agreement,
contract, arrangement or plan that would result (taking into account the
transactions contemplated by this Agreement), separately or in the aggregate,
in the payment of any "excess parachute payments" within the meaning of Section
280G of the Code.
4.14. Employee Benefit Plans; ERISA. (a) Section 4.14(a) of
the Stockholders Disclosure Schedule contains a complete list of all employee
benefit plans within the meaning of Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA"), and all severance, bonus or
other incentive compensation, deferred compensation, relocation, tuition
assistance, stock purchase, stock option or award, vacation or disability
plans, programs and policies (the "Plans") that Holdings or any Holdings
Subsidiary maintains or contributes to on behalf of its current or former
employees, officers, and/or their dependents or beneficiaries or that Holdings,
any Holdings Subsidiary, any predecessors thereto, or any entity that is or was
a member of the same controlled group (within the meaning of Section 414(b),
(c) or (m) of the Code or Section 4001(a)(4) of ERISA) as Holdings or any
Holdings Subsidiary have maintained, contributed to, sponsored, or had an
obligation to contribute to since their commencement of business to the extent
that Holdings or any Holdings Subsidiary has or may have any potential
liability with respect to such Plan. Holdings has heretofore delivered to Buyer
true and complete copies of each Plan and
-13-
each related trust agreement maintained or contributed to by Holdings or any
Holdings Subsidiary as well as, if applicable, (i) complete copies of each of
the latest reports filed with respect to such Plan with the Internal Revenue
Service (the "IRS"), the Department of Labor, the Pension Benefit Guaranty
Corporation (the "PBGC") or any other governmental agency and (ii) copies of
the latest ruling and determination letters issued with respect to such Plan
and (iii) copies of the most recent insurance contracts, summary plan
descriptions and summary of material modifications. There is no Plan that is a
multi-employer plan within the meaning of Section 3(37) of ERISA as to which
Holdings or any Holdings Subsidiary has any liability, contingent or otherwise.
(b) Except as set forth in Section 4.14(b) of the
Stockholders Disclosure Schedule, (i) there have been no non-exempt prohibited
transactions within the meaning of Section 406 of ERISA, or Section 4975 of the
Code with respect to any of the Plans; (ii) there is no outstanding liability
under Title IV of ERISA with respect to any of the Plans other than for payment
of premiums to the PBGC; (iii) the PBGC has not instituted proceedings to
terminate any of the Plans; (iv) none of the Plans has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA or Section
412 of the Code) whether or not waived, as of the last day of the most recent
fiscal year of each of the Plans ended prior to the date of this Agreement and
since such date, there has not been a material adverse change in the funded
status of any Plan and all required contributions under each Plan for all
periods through and including the Closing shall have been timely made; (v) each
of the Plans has been operated and administered in all material respects in
accordance with its terms and applicable laws, no transaction has occurred with
respect to any Plan which could subject Holdings or any Holdings Subsidiary to
any tax or penalty under ERISA, the Code or other applicable laws that is
reasonably likely to have a Holdings Material Adverse Effect, and all assets of
the pension plans set forth in Section 4.14(a) of the Stockholders Disclosure
Schedule are under the control of trustees and/or investment managers appointed
exclusively by Holdings or a Holdings Subsidiary; (vi) each Employee Benefit
Plan which is an "employee pension benefit plan" within the meaning of Section
3(2) of ERISA (a "Qualified Plan") and which is subject to Parts 2 and 4 of
Subtitle B of Title I of ERISA has received a favorable determination letter
from the Internal Revenue Service covering all amendments required by the Tax
Reform Act of 1986 and prior legislation including all amendments required to
have been adopted through the last day of the 1995 Plan year and nothing has
occurred since the date of such determination letters that would adversely
affect the qualified status of such plans or the tax exempt status of such
trusts; and (vii) no Plan is a "multiple employer plan" as described in
-14-
Section 3(40) of ERISA or Section 413(c) of the Code; (ix) no amendment to a
plan requiring the provision of security to such Plan, pursuant to Section 307
of ERISA, has been adopted; (x) the consummation of the transactions
contemplated hereby will not accelerate the vesting or the timing of payment of
any benefits under any Plan nor the funding of such benefits with any trust or
otherwise; (xi) for the 1997 Plan year, each Qualified Plan satisfies the
coverage requirements of Section 410(b)(1) or (b)(2) of the Code; (xii) neither
Holdings nor any Holdings Subsidiary has received or is aware of any actions,
claims (other than routine claims for benefits), lawsuits or arbitrations
pending or, to the best knowledge of Holdings, threatened with respect to any
Employee Benefit Plan or against any fiduciary of any Employee Benefit Plan,
and neither Holdings nor any Holdings Subsidiary has knowledge of any facts
that could give rise to any such actions, claims lawsuits or arbitrations which
could reasonably be expected to have a Holdings Material Adverse Effect; (xiii)
no Employee Benefit Plan provides for the continuation of coverage for medical,
health or death benefits (through insurance or otherwise) for any participant
or any dependent or beneficiary of any participant after such participant's
retirement or other termination of employment except as may be required by Part
6 of Subtitle B of Title I of ERISA and Section 4980B of the Code ("COBRA");
(xiv) no reportable event within the meaning of Section 4043 of ERISA with
respect to which the 30-day notice has not been waived has occurred within the
preceding 24 months with respect to any Employee Benefit Plan subject to Title
IV of ERISA, nor would the consummation of the transactions contemplated hereby
require any notice to the PBGC pursuant to Section 4043(b) of ERISA; and (xv)
the sum of the amount previously reserved on Holdings' financial statements and
the amount of corporate assets intended to be used to satisfy and currently
invested in fixed income assets with respect to the unfunded benefit
liabilities of the Sweetheart Cup Co. Inc. Lily-Tulip Inc. Salary Retirement
Plan is not less than $17.7 million as of the date hereof.
4.15. Properties. (a) Section 4.15(a) of the Stockholders
Disclosure Schedule lists all real property owned by Holdings and the Holdings
Subsidiaries and Section 4.15(b) contains a list of all leases and subleases,
together with any amendments thereto, with respect to all real property leased
by Holdings and the Holdings Subsidiaries. Each of Holdings and the Holdings
Subsidiaries has good, valid and, in the case of real property, marketable fee
simple, title to all of the assets and properties which it owns and which are
reflected on the Balance Sheet (except for assets and properties sold, consumed
or otherwise disposed of by Holdings or any Holdings Subsidiary in the ordinary
course of business since the date of the Balance Sheet), and such assets and
properties are owned free and clear of all Encumbrances,
-15-
except for (i) Encumbrances listed in Section 4.15(c) of the Stockholders
Disclosure Schedule, (ii) liens for current Taxes not yet due and payable or
for Taxes the validity of which is being contested in good faith, (iii)
Encumbrances to secure indebtedness reflected on the Balance Sheet or
indebtedness incurred in the ordinary course of business and consistent with
past practice after the date thereof, (iv) mechanic's, materialmen's and other
Encumbrances which have arisen in the ordinary course of business and (v)
Encumbrances which, in the aggregate, are not reasonably likely to have a
Holdings Material Adverse Effect or materially adversely interfere with the use
of such material assets and properties as they are presently being used.
(b) Each of Holdings and the Holdings Subsidiaries has a valid
and binding leasehold interest in all material real and personal assets and
properties used or held for use in connection with the conduct of their
respective businesses and operations as heretofore conducted and as presently
planned to be conducted, other than such real and personal assets and
properties as are owned by Holdings or a Holdings Subsidiary.
(c) Except as set forth in Section 4.15(d) of the Stockholders
Disclosure Schedule, the plants, buildings, structures and equipment of
Holdings and the Holdings Subsidiaries are in all material respects in good
operating condition and repair (reasonable wear and tear and routine repairs
and maintenance excepted) and adequate in quality and quantity for the current
normal operations of the businesses of Holdings and the Holdings Subsidiaries.
4.16. Patents, Trademarks, Etc. Section 4.16(a) of the
Stockholders Disclosure Schedule sets forth a list of all United States and
Canadian patents, trademarks, trade names, service marks, copyrights and
applications, including foreign applications, therefor which are material to
the conduct of the business of Holdings and the Holdings Subsidiaries taken as
a whole (the "Patent and Trademark Rights"). Section 4.16(a) of the Disclosure
Schedule also sets forth the owner or licensor and any licensee of the Patent
and Trademark Rights. Except as set forth in Section 4.16(b) of the
Stockholders Disclosure Schedule, (a) Holdings and the Holdings Subsidiaries
own or possess adequate licenses or other valid rights to use all Patent
and Trademark Rights, (b) the validity of the Patent and Trademark Rights and
the title thereto of Holdings or any Holdings Subsidiary are not being
questioned in any litigation to which Holdings or any Holdings Subsidiary is a
party, nor is any such litigation threatened, (c) none of Holdings or the
Holdings Subsidiaries has granted a license or reached an understanding with
any third party or entered into a written agreement relating in whole or in
part to any of the Patent and Trademark Rights and (d) the conduct of the
business of Holdings and the Holdings Subsidiaries as
-16-
now conducted does not infringe or otherwise conflict with any valid patents,
trademarks, trade name, service marks or copyrights of others in any way which
is reasonably likely to have a Holdings Material Adverse Effect.
4.17. Insurance. All material insurance policies (the
"Insurance Policies") with respect to the property, assets, operations and
business of Holdings and the Holdings Subsidiaries are valid and enforceable in
accordance with their terms and are in full force and effect. Except as set
forth in Section 4.17 of the Stockholders Disclosure Schedule, as of the date
of this Agreement, there are no pending material claims against the Insurance
Policies by Holdings or any Holdings Subsidiary as to which the insurers have
denied liability. Each Stockholder makes no representation or warranty that
such insurance will be continued or is continuable after the Closing.
4.18. Environmental Matters. (a) Except as set forth in
Section 4.18 of the Stockholders Disclosure Schedule, Holdings and the Holdings
Subsidiaries hold, and are in substantial compliance with, all material
permits, licenses and government authorizations required for Holdings and the
Holdings Subsidiaries to conduct their respective businesses under any federal
and state statutes and regulations relating to pollution or protection of human
health or the environment, including the Comprehensive Environmental Response,
Compensation, and Liability Act, the Resource Conservation and Recovery Act,
the Clean Air Act, the Clean Water Act, and similar state laws ("Environmental
Laws"), and Holdings and the Holdings Subsidiaries are otherwise in compliance
with all applicable Environmental Laws, except where the failure to be in
compliance would not be reasonably likely to have a Holdings Material Adverse
Effect.
(b) Except as set forth in Section 4.18 of the Stockholders
Disclosure Schedule, neither Holdings nor any Holdings Subsidiary has received
any written request for information, or has been notified that it is a
potentially responsible party, under the Comprehensive Environmental Response,
Compensation, and Liability Act or any similar state law with respect to any
on-site or off-site location for which liability is currently being asserted.
(c) Except as set forth in Section 4.18 of the Stockholders
Disclosure Schedule, neither Holdings nor any Holdings Subsidiary has entered
into or agreed to, and is not subject to, any Order relating to compliance with
any Environmental Law or to investigation or cleanup of regulated substances
under any Environmental Law.
(d) Except as set forth in Section 4.18 of the Stockholders
Disclosure Schedule, no asbestos-containing material that could reasonably be
expected to pose a current
-17-
hazard to health is present at any facility or property owned or operated by
Holdings or any Holdings Subsidiary that could reasonably be expected to have a
Holdings Material Adverse Effect.
(e) Except as set forth in Section 4.18 of the Stockholders
Disclosure Schedule, neither Holdings nor any Holdings Subsidiary has either
expressly or by operation of law assumed or otherwise become subject to the
liability of any other person pursuant to any Environmental Law or any related
common law theory that could reasonably be expected to have a Holdings Material
Adverse Effect.
(f) Except as set forth in Section 4.18 of the Stockholders
Disclosure Schedule, no other facts, events, or circumstances with respect to
the past or present operations or sites of Holdings, any Holdings Subsidiary,
or any predecessor or Affiliate thereof would form the basis for any liability
(including contingent liability) or corrective or remedial obligation pursuant
to any Environmental Law or any related common law theory, including without
limitation any liability or obligation for onsite or offsite cleanup costs,
fines or penalties, property damage, personal injury or natural resources
damages that could reasonably be expected to have a Holdings Material Adverse
Effect.
4.19. Labor Relations. Except as set forth in
Section 4.19 of the Stockholders Disclosure Schedule, no unionization drive or
election is currently being conducted with respect to any employees of Holdings
or any of Holdings Subsidiaries. Except as set forth in Section 4.19 of the
Stockholders Disclosure Schedule, there is no unfair labor practice complaint
or other proceeding against Holdings or any Holdings Subsidiary pending before
the National Labor Relations Board or the Ontario Labor Relations Board or any
other Governmental Authority, which, if adversely decided, is reasonably likely
to have a Holdings Material Adverse Effect, and there is no labor strike
pending or involving or threatened against Holdings or any Holdings Subsidiary
which is reasonably likely to have a Holdings Material Adverse Effect.
4.20. Brokers and Finders. Except for Xxxxxxx, Xxxxx & Co.,
none of the Stockholders, Holdings, any Holdings Subsidiary or any of their
respective officers, directors or employees has employed any broker or finder
or incurred any liability for any investment banking fees, brokerage fees,
commissions or finders' fees in connection with the transactions contemplated
by this Agreement.
4.21. SEC Documents. Holdings and Cup have timely filed all
reports, schedules and definitive proxy statements required to be filed under
the Exchange Act with the Securities and Exchange Commission (the "SEC") since
September 1, 1993 (as such documents have since the time of
-18-
their filing been amended, the "Sweetheart SEC Documents"). As of their
respective dates, the Sweetheart SEC Documents complied in all material
respects with the requirements of the Exchange Act and the rules and
regulations of the SEC promulgated thereunder applicable to such Sweetheart SEC
Documents and none of the Sweetheart SEC Documents contained any untrue
statement of a material fact or omitted to state a material fact required to be
stated therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
4.22. Acquisition of Buyer Securities for Investment. Such
Stockholder is acquiring the Buyer Preferred Stock, Discount Notes, if any, and
Bridge Notes, if any, set forth opposite such Stockholder's name on Annex B for
investment and not with a view toward, or for sale in connection with, any
distribution thereof, nor with any present intention of distributing or selling
any such Buyer Securities. Such Stockholder agrees that such Buyer Securities
may not be sold, transferred, offered for sale, pledged, hypothecated or
otherwise disposed of without registration under the Securities Act, except
pursuant to an exemption from such registration under the Securities Act.
4.23. Canadian Subsidiary. (a) The value of all of the assets
of Lily Cups, Inc. ("Lily Cups") based on the financial statements of Lily Cups
for the fiscal year immediately preceding the Closing Date is less than Cdn
$172 million and is less than 50% of the total of all the assets of Holdings
and the Holdings Subsidiaries as shown on the consolidated financial statements
of such entities for the fiscal year immediately preceding the Closing Date.
(b) As of November 30, 1997, (i) the aggregate book value of
the assets in Canada owned by Lily Cups was less than $32,390,000 and (ii) the
gross aggregate revenues from sales in, from or into Canada of Holdings and the
Holdings Subsidiaries and their Affiliates (as such terms and values are
defined and determined pursuant to the Competition Act (Canada) were less than
$64,900,000.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF CEG AND BUYER
CEG and Buyer, jointly and severally, represent and warrant
to the Stockholders as follows:
5.01. Corporate Organization; Etc. Each of CEG and Buyer is a
corporation duly organized, validly existing and in good standing under the
laws of the jurisdiction of its incorporation and has all requisite corporate
power and authority to conduct its business as it is now being conducted and to
own, lease and operate its property and
-19-
assets. Xxxxx is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation and has all
requisite corporate power and authority to conduct its business as it is now
being conducted and to own, lease and operate its property and assets, except
where the failure to have such power or authority (a) is not, in the aggregate,
reasonably likely to have a material adverse effect on the business, financial
condition or results of operations of Xxxxx or (b) would not materially impair,
hinder or adversely affect the ability of CEG or Buyer to perform any of its
obligations under this Agreement or to consummate the transactions contemplated
hereby (either of such effects, a "Buyer Material Adverse Effect").
5.02. Capitalization of Buyer and Xxxxx. Upon consummation
of the Xxxxx Acquisition, the authorized capital stock of Buyer will consist of
(i) 400,000 shares of Class A Common Stock, par value $0.001 per share, of
which 118,270 shares will be issued and outstanding, subject to increase for
shares issued in connection with the CEG capitalization pursuant to Section
2.02, (ii) 20,000 shares of Class B Common Stock, par value $.001 per share, of
which 2,666 shares will be issued and outstanding, (iii) 100,000 shares of
Class C Common Stock, par value $0.001 per share, of which no shares are issued
and outstanding as of the date hereof, (iv) such number of shares of Preferred
Stock as is necessary to consummate the transactions contemplated hereby, of
which no shares are issued and outstanding as of the date hereof; and (v)
100,000 shares of Class B Preferred Stock, par value $.01 per share, of which
no shares are issued and outstanding as of the date hereof. Upon consummation
of the Xxxxx Acquisition, the authorized capital stock of Xxxxx will consist of
100,000 shares of Common Stock, par value $.01 per share ("Xxxxx Common
Stock"), of which 100,000 shares will be issued and outstanding and owned by
Buyer. Upon consummation of the Xxxxx Acquisition, all of the issued and
outstanding shares of capital stock of Buyer and Xxxxx will be duly authorized,
validly issued, fully paid and nonassessable and will not have been issued in
violation of any preemptive rights. Except as set forth on Section 5.02 of the
Disclosure Schedule being delivered by Buyer in connection with the execution
of this Agreement (the "Buyer Disclosure Schedule"), there are no, and upon
consummation of the Xxxxx Acquisition there will not be any, outstanding (a)
securities convertible into or exchangeable for the capital stock of Buyer or
Xxxxx, (b) options, warrants or other rights to purchase or subscribe for
capital stock of Buyer or Xxxxx or (c) contracts, commitments, agreements,
understandings or arrangements of any kind relating to the issuance of any
capital stock of Buyer or Xxxxx, any such convertible or exchangeable
securities or any such options, warrants or rights, pursuant to which, in any
of the foregoing cases, Buyer or Xxxxx will be subject or bound.
-20-
When issued to the Stockholders, the Buyer Preferred Stock will be duly
authorized, validly issued, fully paid and nonassessable and not issued in
violation of any preemptive rights.
5.03. Authority Relative to this Agreements. (a) Buyer has all
requisite corporate authority and power to execute and deliver this Agreement,
the Buyer Securities, the Holdings Stockholders' Agreement and the Buyer
Stockholders' Agreement and to consummate the transactions contemplated hereby
and thereby. CEG has all requisite corporate authority and power to execute and
deliver this Agreement and to consummate the transactions contemplated hereby.
The execution and delivery of this Agreement, and, in the case of Buyer, the
Buyer Securities, the Holdings Stockholders' Agreement and the Buyer
Stockholders' Agreement and the consummation of the transactions contemplated
hereby and thereby have been duly and validly authorized by all required
corporate action on the part of CEG and Buyer, as the case may be, and no other
corporate proceedings on the part of CEG or Buyer are necessary to authorize
this Agreement, the Buyer Securities, the Holdings Stockholders' Agreement or
the Buyer Stockholders' Agreement or to consummate the transactions
contemplated hereby or thereby. This Agreement has been duly and validly
executed and delivered by each of CEG and Buyer and, assuming this Agreement
has been duly authorized, executed and delivered by the Stockholders,
constitutes a valid and binding agreement of each of CEG and Buyer, enforceable
against each of CEG and Buyer in accordance with its terms. Upon the execution
and delivery thereof by Buyer (and, in the case of the Holdings Stockholders'
Agreement and the Buyer Stockholders' Agreement, assuming such agreements have
been duly authorized, executed and delivered by the Stockholders), the Buyer
Securities, the Holdings Stockholders' Agreement and the Buyer Stockholders'
Agreement will constitute valid and binding agreements of Buyer, enforceable
against Buyer in accordance with their terms.
5.04. Consents and Approvals; No Violations. Except as set
forth in Section 5.04 of the Buyer Disclosure Schedule, neither the execution
and delivery of this Agreement, the Buyer Securities, the Holdings
Stockholders' Agreement or the Buyer Stockholders' Agreement by CEG and/or
Buyer, as the case may be, nor the consummation of the transactions
contemplated hereby or thereby by CEG or Buyer, as the case may be, will (a)
violate any provision of the Certificate of Incorporation or By-Laws of CEG,
Buyer or Xxxxx, (b) require any Consent of, or filing with or notification to,
any Governmental Entity, except (i) for filings with the FTC and the DOJ
pursuant to the HSR Act, (ii) for filings with the SEC pursuant to the Exchange
Act, (iii) for filings under the Investment Canada Act (Canada) and the
Competition Act (Canada) and (iv) where the failure
-21-
to obtain such Consent or make such filing or notification is not reasonably
likely to have a Buyer Material Adverse Effect, (c) result in a violation or
breach of, or constitute (with or without due notice or lapse of time or
both) a default (or give rise to any right of termination or cancellation)
under, any of the terms, conditions or provisions of any Obligation to which
CEG, Buyer or Xxxxx is a party or by which CEG, Buyer or Xxxxx or any of its
properties or assets may be bound, except such violations, breaches and
defaults which are not reasonably likely to have a Buyer Material Adverse
Effect or (d) violate any Order of any Governmental Entity applicable to CEG,
Buyer or Xxxxx, except such violations which are not reasonably likely to have
a Buyer Material Adverse Effect.
5.05. SEC Documents. Xxxxx has timely filed all reports,
schedules and definitive proxy statements required to be filed under the
Exchange Act with the Securities and Exchange Commission (the "SEC") since July
27, 1997 (as such documents have since the time of their filing been amended,
the "Xxxxx SEC Documents"). As of their respective dates, the Xxxxx SEC
Documents complied in all material respects with the requirements of the
Exchange Act and the rules and regulations of the SEC promulgated thereunder
applicable to such Xxxxx SEC Documents and none of the Xxxxx SEC Documents
contained any untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the statements
therein, in light of the circumstances under which they were made, not
misleading.
5.06. Acquisition of Stock for Investment. Buyer is
is acquiring the Shares for investment and not with a view toward, or for sale
in connection with, any distribution thereof, nor with any present intention of
distributing or selling such Shares. Buyer agrees that the Shares may not be
sold, transferred, offered for sale, pledged, hypothe- cated or otherwise
disposed of without registration under the Securities Act, except pursuant to
an exemption from such registration under the Securities Act.
5.07. Financial Capability. The funds to be borrowed
pursuant to the High Yield Offering, together with the funds to be provided
pursuant to the Mehiel Agreement will provide all of the funds required to pay
the Cash Purchase Price.
5.08. Brokers and Finders. Except for SBC Warburg Dillon
Read Inc. and the investment bank referred to in Section 2.03, whose fees will
be paid by Buyer, none of Buyer or Xxxxx or any of their officers, directors or
employees has employed any investment banker, broker or finder or incurred any
liability for any investment banking fees, brokerage fees, commissions or
finders' fees in connection with the transactions contemplated by this
Agreement.
-22-
5.09. Buyer's Sophistication. Buyer is an informed and
sophisticated purchaser, and has engaged expert advisors, experienced in the
evaluation and purchase of companies such as Holdings and the Holdings
Subsidiaries. Buyer has undertaken such investigation as it has deemed
necessary to enable it to make an informed and intelligent decision with
respect to this Agreement and the transactions contemplated hereby. Buyer
acknowledges that none of the Stockholders or Holdings (or their agents or
representatives) has made any representation or warranty as to Holdings or any
Holdings Subsidiary or their prospects (financial or otherwise), except as
expressly set forth in this Agreement, the Stockholders Disclosure Schedule and
the Exhibits hereto and any other certificate or instrument delivered pursuant
to the terms hereof or thereof. It is therefore expressly understood and agreed
that, except as expressly set forth in this Agreement, the Stockholders
Disclosure Schedule and the Exhibits hereto and any other certificate or
instrument delivered pursuant to the terms hereof or thereof, Buyer accepts the
condition of the properties of Holdings and the Holdings Subsidiaries "AS IS,
WHERE IS" without any representation, warranty or guarantee, express or
implied, as to merchantability, fitness for a particular purpose or otherwise
as to the condition, size, extent, quantity, type or value of such property.
ARTICLE VI
COVENANTS OF THE PARTIES
6.01. Conduct of Business of Holdings. Except as contemplated
by this Agreement, as set forth in Section 6.01 of the Stockholders Disclosure
Schedule or with the prior written consent of Buyer during the period from the
date of this Agreement to the Closing Date, the Stockholders will use their
reasonable best efforts to cause Holdings and each Holdings Subsidiary to (i)
conduct its business and operations in the ordinary course of business
consistent with past practice except as contemplated hereby and (ii) use their
reasonable best efforts consistent therewith to preserve intact its properties,
assets and business organizations, to keep available the services of its
officers and employees and to maintain satisfactory relationships with
customers, suppliers, distributors and others having commercially beneficial
business relationships with it, in each case in the ordinary course of business
consistent with past practice. Without limiting the generality of the
foregoing, and except as otherwise provided in this Agreement or as
contemplated hereby (including by the Dividend) or as set forth in Section 6.01
of the Stockholders Disclosure Schedule, the Stockholders will cause Holdings,
Cup or any other Holdings Subsidiary not to, prior to the Closing Date, without
the prior written consent of Buyer:
-23-
(a) issue, sell or pledge, or authorize or propose the
issuance, sale or pledge of (i) additional shares of capital stock, or
securities convertible into any such shares, or any rights, warrants or options
to acquire any such shares or other convertible securities or (ii) any other
securities in respect of, in lieu of, or in substitution for, the shares of
capital stock of Holdings outstanding on the date hereof;
(b) except for the Dividend, declare or pay any dividend or
distribution on any shares of capital stock of Holdings;
(c) redeem, purchase or otherwise acquire any outstanding
shares of capital stock of Holdings (or any warrants, rights or options to
acquire shares of capital stock of Holdings);
(d) except for the Amendments, amend its Certificate of
Incorporation or By-Laws (or other comparable governing documents);
(e) incur any indebtedness for borrowed money or issue any
debt securities or assume, guarantee or endorse the obligations of any other
Person (except pursuant to existing agreements consistent with past practice);
(f) (i) increase the rate or terms of compensation of any of
its directors, officers or employees, or (ii) pay or agree to pay any pension,
retirement allowance or other employee benefit not required or permitted by any
existing Plan, Benefit Arrangement or other agreement or arrangement to any
such director, officer or employee, whether past or present;
(g) sell, transfer or otherwise dispose of, any of its
property or assets having a fair market value in excess of $50,000 in the
aggregate (other than inventory in the ordinary course of business) or mortgage
or encumber any of its property or assets having a book value of $50,000 or
more or a fair market value in excess of $50,000 in the aggregate;
(h) except for required payments pursuant to the Management
Services Agreement, make any loan to, or (except for transactions at arms'
length in the ordinary course of business) enter into or effect any other
transaction with any of its directors or officers, or any Stockholder or any
Affiliate of any Stockholder (excluding Holdings and the Holdings
Subsidiaries);
(i) enter into other agreements, commitments or contracts,
except agreements, commitments or contracts made in the ordinary course of
business consistent with past practice; or
-24-
(j) make any capital expenditures other than replacement
capital expenditures without providing Buyer reasonable opportunity to review
and consent to such expenditures, such consent not to be unreasonably withheld;
or
(k) agree or commit to take any of the foregoing actions.
6.02. Access to Information. (a) From the date of this
Agreement to the Closing Date, the Stockholders will use their reasonable best
efforts to cause Holdings and each Holdings Subsidiary to (i) give Buyer and
its authorized representatives reasonable access to all books, records, offices
and other facilities and properties of Holdings and the Holdings Subsidiaries,
(ii) permit Buyer to make such inspections thereof as Buyer may reasonably
request and (iii) cause its officers to furnish Buyer and its authorized
representatives with such financial and operating data and other information
with respect to the business and properties of Holdings and the Holdings
Subsidiaries as Buyer and its authorized representatives may from time to time
reasonably request; provided, however, that any such access shall be conducted
at a reasonable time and in such a manner as not to interfere unreasonably with
the operation of the business of Holdings or the Holdings Subsidiaries; and
provided, further, that such right of access shall not grant to Buyer the right
to conduct invasive environmental testing of any kind. All such information and
access shall be subject to the terms and conditions of the letter agreement
executed in August 1996 (the "Confidentiality Agreement"), between Xxxxx and
Holdings.
(b) After the Closing, upon reasonable written notice, Buyer
will give or cause to be given to the Stockholders and their authorized
representatives, reasonable access to such information relating to Holdings and
the Holdings Subsidiaries as is reasonably necessary for the preparation or
filing of any tax return, financial statement or report, or is otherwise
reasonably requested; provided, however, that any such access shall be
conducted at a reasonable time and in such a manner as not to interfere
unreasonably with the operations of the business of Holdings or the Holdings
Subsidiaries.
6.03. Disclosure Supplements. From time to time prior to the
Closing Date, the Stockholders will supplement or amend the Stockholders
Disclosure Schedule with respect to any matter hereafter arising which, if
existing or occurring at or prior to the date of this Agreement, would have
been required to be set forth or described in the Stockholders Disclosure
Schedule or which is necessary to complete or correct any information in the
Stockholders Disclosure Schedule or in any representation or warranty of the
Stockholders which has been rendered inaccurate thereby.
-25-
For purposes of determining the satisfaction of the condition set forth in
Section 9.01 hereof and for purposes of Section 10.01(e) hereof, no such
supplement or amendment shall be given effect.
6.04. Consents and Approvals. Each of the parties hereto
shall use its reasonable best efforts to obtain as promptly as practicable all
consents, authorizations, approvals and waivers required in connection with the
consummation of the transactions contemplated by this Agreement.
6.05. Filings. Promptly, after the execution of this
Agreement, each of the parties hereto shall (and the Stockholders shall use its
reasonable best efforts to cause Holdings and each Holdings Subsidiary to)
prepare and make or cause to be made any required filings, submissions and
notifications under the laws of any domestic or foreign jurisdictions to the
extent that such filings are necessary to consummate the transactions
contemplated hereby and will use its reasonable best efforts to take all other
actions necessary to consummate the transactions contemplated hereby in a
manner consistent with applicable law. Each of the parties hereto will furnish
to the other parties such necessary information and reasonable assistance as
such other parties may reasonably request in connection with the foregoing.
6.06. Covenant to Satisfy Conditions. The Stockholders will
use their reasonable best efforts to ensure that the conditions set forth in
Article IX hereof are satisfied, insofar as such matters are within the control
of the Stockholders, and Buyer will use its reasonable best efforts to ensure
that the conditions set forth in Article VIII hereof are satisfied, insofar as
such matters are within the control of Buyer.
6.07. Further Assurances. (a) Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use its
reasonable best efforts to take, or cause to be taken, all action, and to do,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to consummate and make effective the transactions
contemplated by this Agreement. Without limiting the generality of the
foregoing, the parties agree to use their reasonable best efforts to negotiate
definitive forms of the Buyer Securities, the Holdings Stockholders' Agreement,
the Buyer Stockholders' Agreement, the Management Agreement Assignment, the
Demand Note and such documentation as is necessary to consummate the Dividend
and the Xxxxx Acquisition as soon as practicable following the date hereof (the
"Definitive Documentation"). All of the Definitive Documentation shall be in
form and substance reasonably satisfactory to Buyer and AIP and shall be
consistent with the terms set forth in
-26-
the Exhibits to this Agreement. If at any time after the Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement, the parties hereto shall, at Buyer's expense, take or cause to be
taken all such necessary action, including, without limitation, the execution
and delivery of such further instruments and documents as may be reasonably
requested by any party for such purposes or otherwise to consummate and make
effective the transactions contemplated hereby.
(b) Holdings shall indemnify, defend and hold harmless the
Stockholders, their respective Affiliates and, if applicable, their respective
directors, officers, shareholders, partners, attorneys, accountants, agents and
employees and their heirs, successors and assigns from, against and in respect
of any damages, claims, losses, charges, actions, suits, proceedings,
deficiencies, Taxes, interest, penalties, and reasonable costs and expenses
(including, without limitation, reasonable attorneys' fees, removal costs,
remediation costs, closure costs, fines, penalties and expenses of
investigation and ongoing monitoring) imposed on, sustained, incurred or
suffered by or asserted against any such party, directly or indirectly,
relating to or arising out of the ownership by the Stockholders of the Shares
or the operation by Holdings and the Holdings Subsidiaries of their respective
businesses, regardless of when they arose or arise and regardless of by whom or
when asserted. Prior to the Closing the Stockholders shall cause Holdings to
execute an acknowledgement of its obligations under this Section 6.07(b). Buyer
hereby agrees that it will permit and, if and to the extent required from time
to time, authorize Holdings to comply with its obligations under this Section
6.07(b) and that neither Buyer nor its Affiliates will take any action
inconsistent with the intention of this Section 6.07(b) or the fulfillment of
Holdings' obligations under this Section 6.07(b).
6.08. No Solicitation. Each Stockholder agrees that during
the period from the date hereof through the Closing Date, it will not, will use
its best efforts to cause Holdings and Holdings' directors and executive
officers not to, and will use its best efforts to cause Holdings' other
officers, employees and representatives not to, directly or indirectly, (a)
solicit, initiate or encourage the submission of any inquiries, proposals or
offers from any person relating to any acquisition or purchase of any assets
of, or any equity interest in, or any merger, consolidation, liquidation or
similar transaction involving Holdings or any Holdings Subsidiary, (b) enter
into or participate in any discussions or negotiations regarding any of the
foregoing, enter into any agreements or understandings regarding any of the
foregoing or furnish to any person any non-public information with respect to
Holdings or any Holdings Subsidiary, or (c) otherwise
-27-
cooperate in any way with, or assist or participate in, facilitate or
encourage, any effort or attempt by any person to do or seek any of the
foregoing.
6.09. Certain Access. (a) The Stockholders will use
reasonable best efforts to cause (i) the officers of Holdings and the Holdings
Subsidiaries generally to assist Buyer in connection with the financing
required to consummate the transactions contemplated hereby, including, but not
limited to, providing historical financial statements and monthly financial
reports and by assisting in the preparation of pro forma financial statements
and (ii) the auditors of Holdings' audited financial statements (w) to give
Buyer and Buyer's representative reasonable access to their work papers with
respect to such audits, (x) to give their consent to Buyer's use of the audited
Financial Statements in offering materials prepared in connection with the
financing of the transactions contemplated by this Agreement, including any
filings made with the SEC in connection therewith (including, without
limitation, any such filing with respect to a registered exchange offer for
debt securities which were issued in a private placement), (y) generally to
assist Buyer in connection with the financing of the transactions contemplated
hereby, including, but not limited to, assisting in the preparation of pro
forma financial statements which include periods covered by their audit
reports, and (z) generally to assist Buyer in connection with any filings with
the SEC.
(b) CEG and Buyer will keep AIP fully and contemporaneously
informed of all material developments in the sale and/or recapitalization of
CEG and the High Yield Offering.
6.10. Certain Management Changes. Immediately prior to the Closing,
effective as of the Closing, Holdings will effect the management changes
described on Schedule 6.10; provided, however, that assurance satisfactory to
the Stockholders shall be given with respect to Holdings' fulfillment of the
obligations to these individuals set forth on Schedule 6.10. Buyer agrees to
permit and, if and to the extent required from time to time, authorize Holdings
to comply with the obligations set forth on Schedule 6.10 and not to take any
action inconsistent with the intention of this Section 6.10 and the performance
by Holdings of its obligations set forth on Schedule 6.10.
6.11. Execution. AIP agrees to obtain executed signature pages from
the other Stockholders on or before January 15, 1997 failing which AIP agrees
to exercise its drag-along rights under the Existing Stockholders Agreement.
-28-
ARTICLE VII
EMPLOYEES AND EMPLOYEE BENEFITS
7.01. [Intentionally omitted.]
7.02. Employee Benefit Plan. Buyer presently intends to
maintain and cause Holdings and the Holdings Subsidiaries to maintain for a
period of at least one year from the Closing Date the Plans or to substitute
for such Plans other plans and policies which shall provide benefits and
coverage to current and retired employees of the Holdings Subsidiaries that are
in the aggregate no less favorable than the benefits and coverage afforded by
the Plans.
7.03. Indemnification and Insurance. (a) Buyer agrees that
all rights to indemnification or exculpation now existing in favor of the
employees, agents, directors or officers of Holdings and the Holdings
Subsidiaries (the "Holdings Indemnified Parties") (i) as provided in their
respective Certificates of Incorporation or By-Laws (or other comparable
governing documents) or (ii) as provided in an agreement between a Holdings
Indemnified Party and Holdings or any of the Holdings Subsidiaries (the
"Indemnification Agreements") or otherwise in effect on the date hereof, all of
which are set forth in Section 7.03 of the Stockholders Disclosure Schedule,
shall, with respect to matters occurring on or prior to the Closing Date,
continue in full force and effect for a period of not less than seven years
from the Closing Date; provided, however, that, in the event any claim or
claims are asserted or made within such seven-year period, all rights to
indemnification in respect of any such claim or claims shall continue until
disposition of any and all such claims. Any determination required to be made
with respect to whether a Holdings Indemnified Party's conduct complies with
the standards set forth in the Certificate of Incorporation or By-Laws (or
other comparable governing documents) of Holdings or any of the Holdings
Subsidiaries or under the Indemnification Agreements or otherwise shall be made
by independent counsel selected by Holdings reasonably satisfactory to the
Holdings Indemnified Party (whose fees and expenses shall be paid by Holdings).
(b) Buyer agrees to cause Holdings to maintain in effect for
not less than six years from the Closing Date the current policy of the
directors' and officers' liability insurance (the "D&O" Policy") maintained for
Holdings directors and officers as described in Section 7.03 of the
Stockholders Disclosure Schedule; provided, however, that Buyer or Holdings may
substitute therefor policies of at least substantially similar coverage so long
as such substitution shall not result in any gaps or lapse of coverage with
respect to matters occurring prior to the Closing Date to the extent currently
available; and
-29-
provided, further, that in no event will Holdings or Buyer be required to pay
an annual premium that is more than 150% of the annual premium (the "Maximum
Premium") for the D&O Policy in effect on the Closing Date; and provided,
further, that if Holdings or Buyer is unable to obtain insurance at an annual
premium which is equal to or less than the Maximum Premium, then Holdings or
Buyer will obtain as much comparable insurance as is available for the Maximum
Premium.
7.04. Binding on Successors. In the event Holdings or any of
its successors or assigns (a) consolidates with or merges into any other person
and shall not be the continuing or surviving corporation or entity of such
consolidation or merger or (b) transfers all or substantially all of its or
Cup's properties and assets or Cup Common Stock to any person, then and in each
such case, proper provision shall be made so that the successors and assigns of
Holdings (or their successors and assigns) shall assume the obligations set
forth in this Article VII.
ARTICLE VIII
CONDITIONS TO THE STOCKHOLDERS' OBLIGATIONS
The obligations of the Stockholders to effect the transactions
contemplated hereby shall be subject to the fulfillment, or written waiver by
AIP, at or prior to the Closing of each of the following conditions:
8.01. Representations and Warranties True. The representations
and warranties of Buyer contained herein shall be true and correct in all
material respects as of the date hereof and at and as of the Closing Date as
though such representations and warranties were made at and as of such date
(except as otherwise contemplated by this Agreement).
8.02. Performance. Buyer shall have performed and complied in
all material respects with all agreements, obligations, covenants and
conditions required by this Agreement to be performed or complied with by it on
or prior to the Closing.
8.03. No Injunction or Proceeding. No Order shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits or restricts the consummation of the transactions contemplated
hereby. No action or proceeding by any Governmental Entity shall have been
commenced (and be pending) against Buyer, any Stockholder, Holdings, Cup or any
of their respective Affiliates, associates, officers or directors seeking to
prevent or delay the transactions contemplated hereby or challenging any of the
terms or provisions of this Agreement or seeking material damages in connection
therewith.
-30-
8.04. Consents. All consents and approvals of Governmental
Entities necessary for consummation of the transactions contemplated hereby
shall have been obtained, other than those which, if not obtained, would not
have a Holdings Material Adverse Effect or a Buyer Material Adverse Effect. A
consent or waiver of Section 11.1(q) of the Amended and Restated Loan and
Security Agreement dated as of October 24, 1997 among the lenders named
therein, BankAmerica Business Credit, Inc., Cup and Holdings (the "Loan
Agreement") shall have been obtained.
8.05. HSR Act. All required waiting periods applicable to
this Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or been terminated.
8.06. Related Matters. The Xxxxx Acquisition shall have
occurred at or immediately prior to the Closing. The payments required by
Sections 2.04 and 2.06 shall have been made by Holdings at or prior to the
Closing.
8.07. Certificates. Buyer shall have furnished the
Stockholders with a certificate to evidence its compliance with the conditions
set forth in this Article VIII.
8.08. Opinion of Counsel. The Stockholders shall have received
an opinion (subject to customary qualifications) as to the matters set forth in
Sections 5.01, 5.02 (with respect to the last sentence) and 5.03 from Buyer's
counsel.
8.09. No Buyer Material Adverse Effect. Since July 27, 1997,
there shall not have been a Buyer Material Adverse Effect.
ARTICLE IX
CONDITIONS TO BUYER'S OBLIGATIONS
The obligation of Buyer to effect the transactions
contemplated hereby shall be subject to the fulfillment, or written waiver by
Buyer, at or prior to the Closing of each of the following conditions:
9.01. Representations and Warranties True. The
representations and warranties of the Stockholders contained herein shall be
true and correct as of the date hereof and at and as of the Closing Date as
though such representations and warranties were made at and as of such date.
For purposes of determining the satisfaction of the condition set forth in this
Section 9.01, (a) no supplement or amendment to the Stockholders Disclosure
Schedule made after the date of this Agreement pursuant to Section 6.03 shall
be given effect and (b) the condition set forth in this Section
-31-
9.01 shall be deemed satisfied unless the effect of all breaches of
representations and warranties in the aggregate (the existence of a breach to
be determined, for this purpose, without regard to any qualification as to
materiality, including any requirement that it have "a Holdings Material
Adverse Effect" or similar qualification) is reasonably likely to result in a
Holdings Material Adverse Effect.
9.02. Performance. The Stockholders shall have performed and
complied in all material respects with all agreements, obligations, covenants
and conditions required by this Agreement to be performed or complied with by
them on or prior to the Closing.
9.03. No Injunction or Proceeding. No Order shall have been
enacted, entered, promulgated or enforced by any Governmental Entity which
prohibits or restricts the consummation of the transactions contemplated
hereby. No action or proceeding by any Governmental Entity shall have been
commenced (and be pending) against Buyer, any Stockholder, Holdings, Cup or any
of their respective affiliates, associates, officers or directors seeking to
prevent or delay the transactions contemplated hereby or challenging any of the
terms or provisions of this Agreement or seeking material damages in connection
therewith.
9.04. Consents. All consents and approvals of Governmental
Entities necessary for consummation of the transactions contemplated hereby
shall have been obtained, other than those which, if not obtained, would not
have a Holdings Material Adverse Effect or a Buyer Material Adverse Effect. A
consent or waiver of Section 11.1(q) of the Loan Agreement shall have been
obtained.
9.05. HSR Act. All required waiting periods applicable to
this Agreement and the transactions contemplated hereby under the HSR Act shall
have expired or been terminated.
9.06. Conduct of Business of Holdings. Holdings, Cup and the
other Holdings Subsidiaries shall not, without the prior written consent of
Buyer, have taken any of the actions set forth in Section 6.01(a)-(j) hereof.
9.07. Certificates. AIP, as representative of the
Stockholders, shall have furnished Buyer with a certificate to evidence
compliance by the Stockholders with the conditions set forth in this Article
IX.
9.08. Opinion of Counsel. Buyer shall have received an opinion
(subject to customary qualifications) from Holdings' and the Stockholders'
counsel with respect to the matters set forth in Sections 4.02 (last sentence)
and 4.04 including, where appropriate, reliance letters to
-32-
Buyer's financing institutions. Buyer shall also have received an opinion from
Holdings' general counsel reasonably satisfactory to Buyer.
9.09. Foreign Person Certificate. Buyer shall have received a
certificate from each Stockholder substantially in the form of Exhibit H
certifying that such Stockholder is not a "foreign person" within the meaning
of Section 1445 (b)(2) of the Code.
9.10. No Holding Material Adverse Effect. Since the date of
the Balance Sheet, there has not been a Holdings Material Adverse Effect.
9.11. Assurance Regarding Repayment of Note. Buyer shall have
reasonable assurance that the note described in Section 9.11 of the
Stockholders Disclosure Schedule shall be repaid as described therein.
ARTICLE X
TERMINATION AND ABANDONMENT
10.01. Termination. This Agreement may be terminated at any
time prior to the Closing Date
(a) by mutual consent of AIP and Buyer;
(b) by either AIP or Buyer at any time after March 31, 1998
if, through no fault of the party seeking termination, the Closing shall not
have occurred; provided that such date may be extended until any date up to and
including April 30, 1998 at the option of either party;
(c) by Buyer, if there has been a violation or breach by a
Stockholder of any agreement, representation or warranty contained in this
Agreement which has rendered the satisfaction of any condition to the
obligations of Buyer impossible and such violation or breach has not been cured
in all material respects after 10 days' written notice or waived by Buyer;
(d) by AIP, if there has been a violation or breach by CEG or
Buyer of any agreement, representation or warranty contained in this Agreement
which has rendered the satisfaction of any condition to the obligations of the
Stockholders impossible and such violation or breach has not been cured in all
material respects after 10 days' written notice or waived by AIP;
(e) by Buyer, if the existence of any fact or circumstance
renders the satisfaction of the condition set forth in Section 9.01 impossible;
or
-33-
(f) by Buyer, if a consent or waiver of Section 11.1(q) of
the Loan Agreement shall not have been received on or before January 15, 1997.
10.02. Procedure and Effect of Termination. In the event of
termination of this Agreement and abandonment of the transactions contemplated
hereby by any or all of the parties pursuant to Section 10.01 hereof, written
notice thereof shall forthwith be given to the other party or parties hereto
and this Agreement shall terminate and the transactions contemplated hereby
shall be abandoned, without further action by any of the parties hereto. If
this Agreement is terminated as provided herein:
(a) upon request therefor, each party will redeliver all
documents, work papers and other material of any other party or of Holdings or
any Holdings Subsidiary relating to the transactions contemplated hereby,
whether obtained before or after the execution hereof, to the party furnishing
or causing to be furnished the same;
(b) all information received by Buyer with respect to the
business of Holdings or any Holdings Subsidiary shall be held subject to and in
accordance with the terms of the Confidentiality Agreement, which agreement
shall continue notwithstanding the termination of this Agreement;
(c) Any termination pursuant to Section 10.01(d) as a result
of the failure for any reason of Buyer to be capitalized in accordance with the
terms of Exhibit A hereto shall entitle the Stockholders to receipt of payment
on demand of $2,500,000, as liquidated damages and not as a penalty, by CEG as
the Stockholders' sole remedy for such failure.
(d) Except as otherwise provided in clause (c) above, in the
event that (i) the Closing, through no fault of AIP, fails to occur on or
before March 31, 1998 (subject to extension as provided in Section 10.01(b)) or
(ii) if there has been a violation or breach by Buyer of any agreement,
representation or warranty contained in this Agreement which has rendered the
satisfaction of any condition to the obligations of the Stockholders impossible
and such violation or breach has not been cured in all material respects after
10 days' written notice or waived by AIP, the Stockholders' sole and exclusive
remedy under this Agreement, at law, in equity or otherwise, shall be to
terminate this Agreement pursuant to Section 10.01(b) or Section 10.01(d)
hereof and to receive from CEG payment of such damages as may have been
suffered or incurred in connection therewith; provided, however, that in no
event shall such recovery be in excess of $7,500,000 (plus interest on the
recovery from the date of termination).
-34-
(e) any termination by Buyer pursuant to Sections 10.01(b),
(c) or (e) shall not be deemed a waiver of any rights or remedies otherwise
available under this Agreement, by operation of law or otherwise, to the party
who so terminates; and
(f) all filings, applications and other submissions made
pursuant to Section 6.05 hereof shall, to the extent practicable, be withdrawn
from the agency or other person to which made.
ARTICLE XI
MISCELLANEOUS PROVISIONS
11.01. Amendment and Modification. This Agreement may be
amended, modified or supplemented at any time by the parties hereto. This
Agreement may be amended only by an instrument in writing signed on behalf of
both parties.
11.02. Extension; Waiver. At any time prior to the Closing
Date, the parties entitled to the benefits of the respective term or provision
may (a) extend the time for the performance of any of the obligations or other
acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document, certificate
or writing delivered pursuant hereto or (c) waive compliance with any
obligation, covenant, agreement or condition contained herein. Any agreement on
the part of any party to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of the parties entitled
to the benefits of such extended or waived term or provision.
11.03. Non-Survival of Representations and Warranties. The
representations and warranties made in this Agreement shall not survive beyond
the Closing Date.
11.04. Entire Agreement; Assignment. This Agreement (a)
constitutes the entire agreement among the parties with respect to the subject
matter hereof and supersedes all other prior agreements and understandings,
both written and oral, among the parties or any of them with respect to the
subject matter hereof (other than the Confidentiality Agreement) and (b) shall
not be assigned by operation of law or otherwise; provided, however, that
effective as of the Closing CEG may assign its rights and obligations to Buyer.
11.05. Validity. The invalidity or unenforceability of any
provision of this Agreement shall not affect the validity or enforceability of
any other provisions of this Agreement, each of which shall remain in full
force and effect.
-35-
11.06. Notices. All notices, requests, claims, demands and
other communications hereunder shall be in writing and shall be deemed given if
delivered personally or by facsimile transmission or telexed or three days
after being mailed by registered or certified mail (return receipt requested),
postage prepaid, to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice; provided, that
notices of a change of address shall be effective only upon receipt thereof):
(a) if to a Stockholder, to:
c/o American Industrial Partners
Management Company, Inc.
Xxx Xxxxxxxx Xxxxx
Xxxxx 0000
Xxx Xxxxxxxxx, Xxxxxxxxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxxx X. Xxxx, Xx.
with a copy to:
Weil, Gotshal & Xxxxxx LLP
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxx X. Xxxxxx, Esq.
(b) if to Buyer or CEG, to:
c/o Creative Expressions Group, Inc.
000 Xxxxxxx Xxxxxx
Xxxxxxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
with a copy to:
Kramer, Levin, Naftalis & Xxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Telephone: (000) 000-0000
Telecopy: (000) 000-0000
Attention: Xxxxxxx X. Xxxxxx, Esq.
11.07. Governing Law. This Agreement shall be governed by
and construed in accordance with the laws of the State of New York, regardless
of the laws that might otherwise govern under applicable principles of
conflicts of laws thereof.
-36-
11.08. Specific Performance. Except as otherwise provided in
Section 10.02, the parties hereto agree that if any of the provisions of this
Agreement were not performed in accordance with their specific terms or were
otherwise breached, irreparable damage would occur, no adequate remedy at law
would exist and damages would be difficult to determine, and that the parties
shall be entitled to specific performance of the terms hereof, in addition to
any other remedy at law or equity.
11.09. Publicity. Except as otherwise required by law, for so
long as this Agreement is in effect, neither Buyer nor any Stockholder shall
issue or cause the publication of any press release or other public
announcement with respect to the transactions contemplated by this Agreement
without the express prior written approval of the other party.
11.10. Descriptive Headings. The descriptive headings herein
are inserted for convenience of reference only and are not intended to be part
of or to affect the meaning or interpretation of this Agreement.
11.11. Counterparts. This Agreement may be executed in any
number of counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
11.12. Fees and Expenses. Whether or not the transactions
contemplated by this Agreement are consummated, and except as set forth in
Sections 2.04 and 2.06 or as otherwise expressly set forth herein, all legal
and other costs and expenses incurred in connection with the transactions
contemplated by this Agreement shall be paid by the party incurring such
expenses.
11.13. Parties in Interest. This Agreement shall be binding
upon and inure solely to the benefit of each party hereto and, except as set
forth in Section 6.10 or Article VII hereof, nothing in this Agreement, express
or implied, is intended by or shall confer upon any other person or persons any
rights, benefits or remedies of any nature whatsoever under or by reason of
this Agreement. Any person who is a beneficiary of any of Section 6.10 or
Article VII shall be entitled to enforce his rights thereunder; provided,
however, that, prior to the Closing, no action to enforce such rights may be
commenced by any such person without the prior written consent of AIP.
11.14. Definitions. As used in this Agreement:
"Affiliate" shall have the meaning set forth in Rule 12b-2 of
the regulations promulgated under the Securities and Exchange Act of 1934, as
amended.
-37-
"Business Day" shall mean any day in which banks are open for
business in New York City.
"Person" shall mean any individual, corporation,
partnership, trust or other entity.
"Subsidiary" shall mean, with respect to any Person, any
corporation, association or other business entity of which more than 50% of the
total voting power of stock entitled to vote in the election of directors or
managers thereof is at the time owned or controlled, directly or indirectly, by
such Person.
-38-
IN WITNESS WHEREOF, the undersigned has caused this Agreement
to be signed by its duly authorized officers as of the date first above
written.
AMERICAN INDUSTRIAL PARTNERS CAPITAL
FUND, L.P.
By: American Industrial Partners, L.P.,
General Partner
By: American Industrial Partners
Management Company, Inc., General
Partner
By: /s/ Xxxxxxxx X. Xxxxx
----------------------------------------
Name: Xxxxxxxx X. Xxxxx
Title: Chairman
CREATIVE EXPRESSIONS GROUP, INC.
By: /s/ Xxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chairman
S. F. HOLDINGS GROUP, INC.
By: /s/ Xxxxxx Xxxxxx
----------------------------------------
Name: Xxxxxx Xxxxxx
Title: Chairman
MELLON BANK, N.A., AS TRUSTEE FOR
FIRST PLAZA GROUP TRUST (as directed
by General Motors Investment
Management Corporation)
By: /s/ Xxxxxxxxxx Risk
----------------------------------------
Name: Xxxxxxxxxx Risk
Title: Authorized signatory
-39-
LEEWAY & CO.
By: State Street Bank and Trust
Company, a General Partner
By: /s/ Xxxxxxxx Xxxxxxxx
----------------------------------------
Name: Xxxxxxxx Xxxxxxxx
Title: Assistant Secretary
/s/ Xxxxxx X. Xxxxx
-------------------------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxx
-------------------------------------------
Xxxxxx X. Xxxxx
/s/ Xxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxx X. Xxxxxxx
/s/ Xxxxxxx X. Xxxxxxx
-------------------------------------------
Xxxxxxx X. Xxxxxxx
/s/ Xxxxxxxx X. Xxxx, Xx.
-------------------------------------------
Xxxxxxxx X. Xxxx, Xx.
/s/ Xxxxxxx X. XxXxxxxxxx
-------------------------------------------
Xxxxxxx X. XxXxxxxxxx
-40-
AMERICAN INDUSTRIAL PARTNERS MANAGEMENT
COMPANY INC.
for purposes of Section 2.05 hereof
By: /s/ W. Xxxxxxx Xxxxxxx
----------------------------------------
Name: W. Xxxxxxx Xxxxxxx
Title: Partner
-41-
ANNEX A
===================================================================================================================================
Name Holdings Common Holdings Common Holdings Non-Voting
Stock Owned Stock to be Sold Common Stock to be
Owned and Sold
-----------------------------------------------------------------------------------------------------------------------------------
American Industrial Partners Capital 538,825 258,636 2,263,065
Fund, L.P.
-----------------------------------------------------------------------------------------------------------------------------------
First Plaza Group Trust 350,000 168,000 1,470,000
-----------------------------------------------------------------------------------------------------------------------------------
Leeway & Co. 150,000 72,000 630,000
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxx 500 240 2,100
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxx 100 48 420
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxx X. Xxxxxxx 500 240 2,100
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. Xxxxxxx 25 12 105
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxxx X. Xxxx, Xx. 50 24 210
-----------------------------------------------------------------------------------------------------------------------------------
Xxxxxxx X. XxXxxxxxxx 6,000 2,880 25,200
===================================================================================================================================
A-1
-42-
===============================================================================
INVESTMENT AGREEMENT
AMONG
THE STOCKHOLDERS OF
SWEETHEART HOLDINGS INC.,
CREATIVE EXPRESSIONS GROUP, INC.
AND
SF HOLDINGS GROUP, INC.
Dated as of December 29, 1997
===============================================================================
B-1
-43-
TABLE OF CONTENTS
PAGE
----
ARTICLE I - INVESTMENT................................................................................. 2
1.01. Preliminary Corporate Actions.................................................... 2
1.02. The Investment................................................................... 2
1.03. Consideration.................................................................... 2
ARTICLE II - RELATED MATTERS........................................................................... 3
2.01. Xxxxx Acquisition................................................................ 3
2.02. Capitalization of Buyer.......................................................... 3
2.03. Buyer Financing.................................................................. 3
2.04. Options.......................................................................... 3
2.05. Management Services Agreement.................................................... 3
2.06. Certain Expenses................................................................. 4
2.07. Certain Agreements............................................................... 4
ARTICLE III - THE CLOSING.............................................................................. 4
3.01. Time and Place of Closing........................................................ 4
3.02. Deliveries by AIP................................................................ 5
3.03. Deliveries by Buyer.............................................................. 5
ARTICLE IV - REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS.............................................................. 6
4.01. Corporate Organization; Etc...................................................... 6
4.02. Capitalization of Holdings and Cup............................................... 7
4.03. Holdings Subsidiaries............................................................ 8
4.04. Authority Relative to this Agreement............................................. 8
4.05. Consents and Approvals; No Violations............................................ 9
4.06. Financial Statements............................................................. 10
4.07. Absence of Certain Changes....................................................... 10
4.08. Compliance with Law.............................................................. 11
4.09. Contracts and Commitments........................................................ 11
4.10. No Undisclosed Liabilities....................................................... 13
4.11. No Default....................................................................... 13
4.12. Litigation....................................................................... 13
4.13. Taxes............................................................................ 13
4.14. Employee Benefit Plans; ERISA.................................................... 15
4.15. Properties....................................................................... 17
4.16. Patents, Trademarks, Etc......................................................... 18
4.17. Insurance........................................................................ 19
4.18. Environmental Matters............................................................ 19
4.19. Labor Relations.................................................................. 20
4.20. Brokers and Finders.............................................................. 21
B-1
-44-
PAGE
----
4.21. SEC Documents.................................................................... 21
4.22. Acquisition of Buyer Securities for
Investment....................................................................... 21
4.23. Canadian Subsidiary.............................................................. 22
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF CEG AND
BUYER............................................................................ 22
5.01. Corporate Organization; Etc...................................................... 22
5.02. Capitalization of Buyer and Xxxxx................................................ 22
5.03. Authority Relative to this Agreement............................................. 23
5.04. Consents and Approvals; No Violations............................................ 24
5.05. SEC Documents.................................................................... 25
5.06. Acquisition of Stock for Investment.............................................. 25
5.07. Financial Capability............................................................. 25
5.08. Brokers and Finders.............................................................. 25
5.09. Buyer's Sophistication........................................................... 26
ARTICLE VI - COVENANTS OF THE PARTIES.................................................................. 26
6.01. Conduct of Business of Holdings.................................................. 26
6.02. Access to Information............................................................ 28
6.03. Disclosure Supplements........................................................... 29
6.04. Consents and Approvals........................................................... 29
6.05. Filings.......................................................................... 29
6.06. Covenant to Satisfy Conditions................................................... 30
6.07. Further Assurances............................................................... 30
6.08. No Solicitation.................................................................. 31
6.09. Certain Access................................................................... 31
6.10. Certain Management Changes....................................................... 32
6.11. Execution........................................................................ 32
ARTICLE VII - EMPLOYEES AND EMPLOYEE BENEFITS.......................................................... 32
7.01. [Intentionally omitted.]......................................................... 32
7.02. Employee Benefit Plan............................................................ 33
7.03. Indemnification and Insurance.................................................... 33
7.04. Binding on Successors............................................................ 34
ARTICLE VIII - CONDITIONS TO THE STOCKHOLDERS'
OBLIGATIONS...................................................................... 34
8.01. Representations and Warranties True.............................................. 34
8.02. Performance...................................................................... 34
8.03. No Injunction or Proceeding...................................................... 34
8.04. Consents......................................................................... 35
8.05. HSR Act.......................................................................... 35
8.06. Related Matters.................................................................. 35
8.07. Certificates..................................................................... 35
B-1
-45-
PAGE
----
8.08. Opinion of Counsel............................................................... 35
8.09. No Buyer Material Adverse Effect................................................. 35
ARTICLE IX - CONDITIONS TO BUYER'S OBLIGATIONS......................................................... 36
9.01. Representations and Warranties True.............................................. 36
9.02. Performance...................................................................... 36
9.03. No Injunction or Proceeding...................................................... 36
9.04. Consents......................................................................... 36
9.05. HSR Act.......................................................................... 37
9.06. Conduct of Business of Holdings.................................................. 37
9.07. Certificates..................................................................... 37
9.08. Opinion of Counsel............................................................... 37
9.09. Foreign Person Certificate....................................................... 37
9.10. No Holding Material Adverse Effect............................................... 37
9.11. Assurance Regarding Repayment of Note............................................ 37
ARTICLE X - TERMINATION AND ABANDONMENT................................................................ 38
10.01. Termination...................................................................... 38
10.02. Procedure and Effect of Termination.............................................. 38
ARTICLE XI - MISCELLANEOUS PROVISIONS.................................................................. 40
11.01. Amendment and Modification....................................................... 40
11.02. Extension; Waiver................................................................ 40
11.03. Non-Survival of Representations and
Warranties....................................................................... 40
11.04. Entire Agreement; Assignment..................................................... 40
11.05. Validity......................................................................... 40
11.06. Notices.......................................................................... 41
11.07. Governing Law.................................................................... 42
11.08. Specific Performance............................................................. 42
11.09. Publicity........................................................................ 42
11.10. Descriptive Headings............................................................. 42
11.11. Counterparts..................................................................... 42
11.12. Fees and Expenses................................................................ 42
11.13. Parties in Interest.............................................................. 43
11.14. Definitions...................................................................... 43
B-1
-46-
PAGE
----
ANNEXES AND EXHIBITS
Annex A - Stockholders and Shares
Exhibit A - Form of Mehiel Agreement
Exhibit B - Terms of Holdings Amendments
Exhibit C - Terms of Buyer Preferred Stock
Exhibit 2.05 - Terms of Management Agreement
Assignment
Exhibit D - Terms of Holdings Stockholders'
Agreement
Exhibit E - Terms of Buyer Stockholders'
Agreement
Exhibit H - Form of Foreign Person Certificate
B-1
-47-
