EXHIBIT 10.18
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STOCKHOLDERS' AGREEMENT
dated as of February 27, 2004
among
VESTAR CAPITAL PARTNERS IV, L.P.,
VESTAR CUP INVESTMENT, LLC,
VESTAR CUP INVESTMENT II, LLC,
SCC HOLDING COMPANY LLC,
SOLO CUP COMPANY,
SOLO CUP INVESTMENT CORPORATION,
and
THE MANAGEMENT INVESTORS
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TABLE OF CONTENTS
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SECTION 1. DEFINITIONS......................................................................1
1.1. Defined Terms.....................................................................1
1.2. Other Definitional Provisions; Interpretation....................................12
SECTION 2. VOTING AGREEMENTS...............................................................12
2.1. Election of Directors............................................................12
2.2. Committees.......................................................................14
2.3. Consent Rights...................................................................14
2.4. Available Financial Information; Access..........................................20
2.5. Board Procedures.................................................................20
SECTION 3. TRANSFERS AND ISSUANCES.........................................................21
3.1. Limitations on Transfer..........................................................21
3.2. Permitted Transfers..............................................................23
3.3. Effect of Void Transfers.........................................................24
3.4. Legend on Equity Securities......................................................24
3.5. Tag-Along Rights.................................................................24
3.6. Public Offerings, etc............................................................29
3.7. Drag-Along Rights................................................................29
3.8. Participation Rights.............................................................30
3.9. Company Call Right...............................................................31
3.10. Non-Competition.................................................................33
SECTION 4. MISCELLANEOUS...................................................................33
4.1. Additional Securities Subject to Agreement.......................................33
4.2. Termination......................................................................33
4.3. Representations and Warranties of Stockholders...................................33
4.4. Holdings LLC Indemnity...........................................................34
4.5. Representations and Warranties of the Company....................................35
4.6. Other Stockholders' Agreements...................................................36
4.7. Amendments.......................................................................36
4.8. Successors, Assigns and Transferees..............................................37
4.9. Notices..........................................................................37
4.10. Integration.....................................................................38
4.11. Further Assurances..............................................................38
4.12. Entire Agreement................................................................38
4.13. Delays or Omissions.............................................................39
4.14. Severability....................................................................39
4.15. Effective Date..................................................................39
4.16. Enforcement.....................................................................39
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4.17. Titles and Subtitles............................................................39
4.18. No Recourse.....................................................................39
4.19. Counterparts....................................................................40
4.20. Governing Law...................................................................40
4.21. Additional Management Investors.................................................40
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STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of February 27,
2004, among Vestar Capital Partners IV, L.P. ("VCP"), Vestar Cup Investment, LLC
("VESTAR INVESTMENT"), Vestar Cup Investment II, LLC ("VESTAR INVESTMENT II"),
SCC Holding Company LLC ("HOLDINGS LLC"), Solo Cup Investment Corporation (the
"COMPANY"), Solo Cup Company, a
Delaware corporation and a wholly owned
subsidiary of the Company ("NEW SOLO"), the parties identified on the signature
pages hereto or to the supplementary agreements referred to in Section 4.20 as
Management Investors (the "MANAGEMENT INVESTORS") and the other signatories
hereto (collectively, the "STOCKHOLDERS").
W I T N E S S E T H :
WHEREAS, as of the Closing Date, VCP, Vestar Investment, Vestar
Investment II, Holdings LLC and the Management Investors are the holders of all
of the outstanding shares of voting stock of the Company and other outstanding
securities exercisable or exchangeable for or convertible into voting stock of
the Company; and
WHEREAS, the parties hereto wish to enter into certain agreements in
connection with the Equity Securities (as defined below) acquired by the parties
hereto;
NOW, THEREFORE, in consideration of the mutual covenants and
agreements herein contained, the parties hereto agree as follows:
SECTION 1. DEFINITIONS
1.1. DEFINED TERMS. As used in this Agreement, terms defined in the
heading and the recitals shall have their respective assigned meanings, and the
following capitalized terms shall have the meanings ascribed to them below:
"ACCOUNTING CHANGE" shall have the meaning set forth in the Credit
Agreement.
"ACCREDITED INVESTOR" shall mean an "Accredited Investor," as defined
in Regulation D promulgated under the Securities Act, or any successor rule
then in effect.
"ADDITIONAL RIGHT" shall have the meaning set forth in Section 3.8(b)
hereof.
"ADDITIONAL VCP DIRECTORS" shall have the meaning set forth in Section
2.1(f) hereof.
"AFFILIATE" shall mean, with respect to any Person, (i) any Person
that directly or indirectly controls, is controlled by or is under common
control with such Person or (ii) any Person directly or indirectly owning
or controlling ten percent (10%) or more of any class of outstanding equity
interests of such Person after giving effect to the exercise, exchange or
conversion of options, warrants or other securities owned or controlled by
such Person which are exercisable, exchangeable or convertible into such
equity interests or (iii) any director, officer, partner, trustee, or
member of such Person or any Person specified in clause (i) or (ii) above
or (iv) in the case of any Person specified in clause (i), (ii) or (iii)
above who is an individual, Family Members of such Person.
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"AGREEMENT" shall mean this Stockholders' Agreement, as the same may
be amended, supplemented or otherwise modified from time to time.
"BENEFICIAL OWNER" or "BENEFICIALLY OWN" shall have the meaning given
such term in Rule 13d-3 under the Exchange Act, and a Person's beneficial
ownership of securities will be calculated in accordance with the
provisions of such Rule; PROVIDED, HOWEVER, that a Person will be deemed to
be the beneficial owner of any security which may be acquired by such
Person, whether within sixty (60) days or thereafter, upon the conversion,
exchange or exercise of any rights, options, warrants or similar securities
to subscribe for, purchase or otherwise acquire (x) capital stock of any
Person or (y) debt or other evidences of indebtedness, capital stock or
other securities directly or indirectly convertible into or exercisable or
exchangeable for such capital stock of such Person.
"BOARD" shall mean, unless otherwise specified hereunder, the Board of
Directors of the Company.
"BUSINESS DAY" shall mean a day other than a Saturday, Sunday, federal
or New York State holiday or other day on which commercial banks in New
York City are authorized or required by law to close.
"BYLAWS" shall mean the Bylaws of the Company as in effect on the date
hereof, as the same may be amended from time to time in accordance with the
terms thereof and hereof.
"CALL EVENT" shall have the meaning assigned to such term in Section
3.9 hereof.
"CALL NOTICE" shall have the meaning assigned to such term in Section
3.9 hereof.
"CAUSE" shall (i) with respect to any director, mean (a) willful
malfeasance or willful misconduct by a director in connection with the
performance of his duties as such, (b) the commission by a director of (I)
any felony or (II) a misdemeanor involving moral turpitude or (c) a
determination by a court of competent jurisdiction in the United States
that such director, as such or in any other capacity (whether or not
relating to the Company), breached a fiduciary duty owed by him or her to
another Person, and (ii) with respect to any Management Investor, have the
meaning assigned to such term in the Management Investor's employment
agreement or, if not defined therein or if there is no such agreement,
"Cause" shall mean (a) the Management Investor's willful failure to perform
the Management Investor's duties (other than as a result of total or
partial incapacity due to physical or mental illness) which is not cured
following written notice, (b) the Management Investor's conviction of, or
plea of NOLO CONTENDERE to, a crime constituting (I) a felony under the
laws of the United States or any state thereof or (II) a misdemeanor
involving moral turpitude, (c) the Management Investor's willful
malfeasance or willful misconduct in connection with the Management
Investor's duties which is materially injurious to the financial condition
or business reputation of the Company or any of its Affiliates, (d) the
Management Investor's breach of any non-competition, non-solicitation or
confidentiality provisions to which the Management
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Investor is subject (other than disclosure of confidential information made
by the Management Investor in the ordinary course of business so long as
the Management Investor reasonably believes that such disclosure is in
furtherance of the Company's business), or (v) any material breach by the
Management Investor of the Management Investor's employment agreement;
PROVIDED that the Company provides written notice to the Management
Investor within sixty (60) days of its knowledge that such a breach has
occurred; and PROVIDED FURTHER that the Management Investor shall have ten
(10) business days following the actual receipt of such notice to cure such
breach.
"CERTIFICATE OF DESIGNATIONS" shall mean the Certificate of
Designations of the Company relating to the Convertible Participating
Preferred Stock.
"CERTIFICATE OF INCORPORATION" shall mean the Certificate of
Incorporation of the Company as in effect on the date hereof, as the same
may be amended from time to time in accordance with the terms thereof and
hereof.
"CHANGE OF CONTROL" means (i) any merger, consolidation or other
business combination of the Company or Holdings LLC with or into any other
entity, recapitalization, spin-off, distribution or any other similar
transaction, whether in a single transaction or series of related
transactions, where VCP, Vestar Investment, Vestar Investment II and the
beneficial owners of units of Holdings LLC on the Closing Date, and their
respective Permitted Transferees, collectively, cease to beneficially own
at least 50% of the voting power of the voting securities of the entity
surviving or resulting from such transaction (or the ultimate sole parent
thereof) (such ownership being based solely on the Voting Securities
beneficially owned by such Persons immediately prior to such event), (ii)
any transaction or series of related transactions as a result of which VCP,
Vestar Investment, Vestar Investment II and the beneficial owners of units
of Holdings LLC on the Closing Date, and their respective Permitted
Transferees, collectively, cease to beneficially own at least 50% of the
voting power of the Voting Securities of the Company (or the ultimate sole
parent thereof) or (iii) any sale, transfer, lease, assignment, conveyance,
exchange, mortgage or other disposition of all or substantially all of the
assets, property or business of the Company and its Subsidiaries.
"CHANGE OF CONTROL REDEMPTION" shall have the meaning assigned to such
term in the Certificate of Designations.
"CLOSING DATE" shall mean the date of the sale of Convertible
Participating Preferred Stock pursuant to the Preferred Stock Purchase
Agreement.
"COMMON STOCK" shall mean the common stock, par value $.01 per share,
of the Company.
"COMMON STOCK EQUIVALENTS" shall mean any warrants, rights, calls,
options or other securities exchangeable or exercisable for or convertible
into Common Stock, including without limitation CPUs and shares of
Convertible Participating Preferred Stock.
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"COMPANY" shall have the meaning set forth in the Preamble.
"COMPANY COMPETITOR" shall mean any Person that derives either (i) 35%
or more or (ii) $250,000,000 or more of its annual revenue from the sale of
products that compete directly with products sold by the Company.
"CONSOLIDATED EBITDA" shall have the meaning set forth in the Credit
Agreement.
"CONSOLIDATED LEVERAGE RATIO" shall have the meaning set forth in the
Credit Agreement.
"CONVERTIBLE PARTICIPATING PREFERRED STOCK" shall mean the Convertible
Participating Preferred Stock, par value $.01 per share, of the Company.
"CPUs" shall have the meaning set forth in the Management Incentive
Plan.
"CREDIT AGREEMENT" shall mean that certain Credit Agreement, dated as
of February 27, 2004 among New Solo, as the Borrower, the Company, Bank of
America, N.A., and the other lenders party thereto, and any amendments
thereto approved in accordance with the terms hereof; PROVIDED, that for
purposes of Section 2.3 hereof no effect shall be given to any amendments
thereto or waivers of the terms thereof after the date hereof.
"CUMULATIVE CONSOLIDATED EBITDA" shall mean for (i) the fiscal year
ended December 31, 2006, Consolidated EBITDA for such period; (ii) the
fiscal year ended December 31, 2007, the sum of Consolidated EBITDA for the
prior fiscal year plus Consolidated EBITDA for the fiscal year ended
December 31, 2007; (iii) the fiscal year ended December 31, 2008, the sum
of Consolidated EBITDA for the prior two fiscal years plus Consolidated
EBITDA for the fiscal year ended December 31, 2008; (iv) the fiscal year
ended December 31, 2009, the sum of Consolidated EBITDA for the prior three
fiscal years plus Consolidated EBITDA for the fiscal year ended December
31, 2009; and (v) the fiscal year ended December 31, 2010, the sum of
Consolidated EBITDA for the prior four fiscal years plus Consolidated
EBITDA for the fiscal year ended December 31, 2010.
"DEBT INSTRUMENTS" shall mean each of the Credit Agreement, the Senior
Subordinated Notes and the Senior Subordinated Notes Indenture and any
amendments thereto approved in accordance with the terms hereof; PROVIDED,
that for purposes of Section 2.3 hereof no effect shall be given to any
amendments thereto or waivers of the terms thereof after the date hereof.
"DISABILITY" means "Disability" as such term may be defined in any
employment agreement between the Management Investor and the Company or any
of its Subsidiaries or Affiliates or, if there is no such employment
agreement, "Disability" shall mean the Management Investor becomes
physically or mentally incapacitated and is therefore unable for a period
of six (6) consecutive months or for an aggregate of eight (8) months
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in any twelve (12) consecutive month period, to perform the Management
Investor's duties with the Company or any Subsidiary or Affiliate thereof.
Any question as to the existence of the Disability of the Management
Investor as to which the Management Investor and the Company cannot agree
shall be determined in writing by a qualified independent physician
mutually acceptable to the Management Investor and the Company. If the
Management Investor and the Company cannot agree as to a qualified
independent physician, each shall appoint such a physician and those two
physicians shall select a third who shall make such determination in
writing. The determination of Disability made in writing to the Company and
the Management Investor shall be final and conclusive for all purposes of
this Agreement (such inability is hereinafter referred to as "Disability"
or being "Disabled").
"DIVIDEND COMMON STOCK" shall have the meaning set forth in Section
3.1(a) hereof.
"DGCL" shall have the meaning set forth in Section 4.20 hereof.
"ELECTION NOTICE" shall have the meaning set forth in Section 3.5(c)
hereof.
"ELECTION PERIOD" shall have the meaning set forth in Section 3.5(c)
hereof.
"EQUITY SECURITIES" shall mean any and all shares of Common Stock and
Common Stock Equivalents and Redeemable Preferred Stock.
"EVENT OF DEFAULT" shall have the meanings assigned to such term in
the applicable Debt Instrument.
"EXCHANGE ACT" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder, as the same
may be amended from time to time.
"EXCLUDED SECURITIES" means (i) Equity Securities issued to the
Initial Investors on the Closing Date, (ii) Common Stock issued upon
conversion of Convertible Participating Preferred Stock (iii) Equity
Securities issued as dividends or distributions to holders of Convertible
Participating Preferred Stock or Common Stock, as the case may be,
generally, on a pro rata basis, (iv) Equity Securities issued pursuant to,
or in connection with, the acquisition of any business, products,
technologies or other assets from any Persons pursuant to any transaction
approved by the Board, (v) Equity Securities issued pursuant to, or in
connection with, any strategic partnership, joint venture, licensing
arrangement or similar transaction approved by the Board, (vi) Equity
Securities issued to the parties providing credit arrangements or similar
strategic transactions with financing institutions or lessors approved by
the Board, (vii) Equity Securities issued in accordance with the terms of
the Management Incentive Plan or stock option plans of the Company approved
by the Board in accordance with the Certificate of Incorporation and the
Bylaws (A) prior to the date hereof or (B) after the date hereof and in
accordance with the terms of this Agreement, and, in each case, the shares
of Convertible Participating Preferred Stock or Common Stock issued upon
the exercise,
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conversion or exchange of such Equity Securities, (viii) Other Capital
Stock Equivalents issued as dividends or distributions to all holders of
Other Capital Stock, generally, on a pro rata basis and (ix) Common Stock
issued pursuant to a Public Offering.
"FAIR MARKET VALUE" shall have the meaning assigned to such term in
the Certificate of Designations.
"FAMILY MEMBER" means with respect to any individual (i) any member of
the immediate family of such individual (which shall mean any parent,
spouse, child or other lineal descendants (including by adoption), brother
or sister thereof or any spouse of any of the foregoing), (ii) each trust
created for the benefit of such individual or in which one or more members
of such individual's immediate family has a beneficial interest and (iii)
any Person who is controlled by any such immediate family member or trust
(including each custodian of property for one or more such Persons).
"GAAP" shall have the meaning set forth in the Credit Agreement.
"GOOD REASON" shall mean "Good Reason" as defined in the Management
Investor's employment agreement or, if not defined therein or if there is
no such agreement, "Good Reason" shall mean (i) a substantial diminution in
the Management Investor's position or duties or assignment of duties
materially inconsistent with his or her position, (ii) any reduction in the
Management Investor's base salary, except if such reduction is part of an
across-the-board reduction similarly affecting other executives, or (iii)
any material breach by the Company of the Management Investor's employment
agreement; PROVIDED that the Company shall have 30 business days following
receipt of written notice of the existence of "Good Reason" to cure such
breach; PROVIDED FURTHER that in each case, "Good Reason" will cease to
exist for an event on the 60th day following the later of its occurrence or
the Management Investor's knowledge thereof, unless the Management Investor
has given the Company written notice thereof prior to such date.
"GOVERNMENTAL AUTHORITY" shall mean any nation or government, any
state or other political subdivision thereof, and any entity exercising
executive, legislative, judicial, regulatory or administrative functions of
or pertaining to government.
"HOLDINGS LLC" shall mean SCC Holding Company LLC, a
Delaware limited
liability company.
"HOLDINGS LLC AGREEMENT" shall mean the SCC Holding Company LLC
Limited Liability Company Agreement in the form PROVIDED to VCP prior to
the date hereof without giving effect to any amendment thereto (or waiver
of any provision thereof) not approved by VCP in writing if required to be
so approved pursuant to Section 3.1(b) hereof.
"HOLDINGS LLC DIRECTORS" shall have the meaning set forth in Section
2.1(a)(ii) hereof.
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"INITIAL INVESTORS" shall mean VCP, Vestar Investment, Vestar
Investment II, Holdings LLC and the Management Investors.
"INVESTMENTS" shall have the meaning set forth in Section 2.3(a)(xv)
hereof.
"IPO" shall mean the initial Public Offering of Common Stock.
"IPO DATE" shall mean the first date of the issuance of Common Stock
in an IPO.
"ISSUANCE" shall have the meaning set forth in Section 3.8(a) hereof.
"JUNIOR SECURITIES" shall have the meaning assigned to such term in
the Certificate of Designations.
"LAPSE DATE" shall have the meaning assigned to such term in Section
3.1 hereof.
"LIEN" shall mean any mortgage, pledge, hypothecation, assignment,
deposit arrangement, encumbrance, lien (statutory or other), charge, or
preference, priority or other security interest or preferential arrangement
in the nature of a security interest of any kind or nature whatsoever
(including any conditional sale or other title retention agreement and any
financing lease having substantially the same economic effect as any of the
foregoing).
"LIQUIDATION PREFERENCE" shall have the meaning assigned to such term
in the Certificate of Designations.
"LIQUIDITY EVENT" shall mean (i) a Change of Control or (ii) any
Transfer to a Third Party by (A) Holdings LLC of 20% or more of the
aggregate equity interest in the Company on the Closing Date or (B)
beneficial owners of units of Holdings LLC on the Closing Date which would
result in such Third Parties owning, directly or indirectly, 28.5% or more
of the units in Holdings LLC on the Closing Date.
"LLC TAGGING STOCKHOLDER" shall have the meaning set forth in Section
3.5(b) hereof.
"MANAGEMENT AGREEMENT" shall have the meaning assigned to such term in
the Preferred Stock Purchase Agreement.
"MANAGEMENT INCENTIVE PLAN" shall mean the Company's 2004 Management
Investment and Compensation Plan, without giving effect to any amendment or
waiver thereof not approved in writing by VCP.
"MANAGEMENT INVESTORS" shall mean the persons designated as such on
the signature pages hereto.
"MERGER" shall have the meaning set forth in the Preferred Stock
Purchase Agreement.
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"NEW EQUITY INTEREST" shall have the meaning set forth in Section
3.8(a) hereof.
"NEW SOLO" shall mean Solo Cup Company, a
Delaware corporation.
"NEW SOLO BOARD" shall mean the board of directors of New Solo.
"OFFERING MEMORANDUM" shall have the meaning set forth in the
Preferred Stock Purchase Agreement.
"OPTIONS" shall have the meaning assigned to such term in the
Management Incentive Plan.
"OPTION CALL PRICE" shall have the meaning set forth in Section
3.9(a).
"OPTION STOCK" shall mean all shares of Common Stock of the Company
received or to be received by a Management Investor upon the exercise or
other settlement of an Option.
"ORIGINAL ISSUANCE DATE" means the date on which the first share of
Convertible Participating Preferred Stock was issued.
"ORIGINAL VCP DIRECTORS" shall have the meaning set forth in Section
2.1(a)(i) hereof.
"OTHER CAPITAL STOCK" shall have the meaning set forth in Section
3.8(a)(ii) hereof.
"OTHER CAPITAL STOCK EQUIVALENTS" shall have the meaning set forth in
Section 3.8(a)(ii) hereof.
"PARTICIPATING DIVIDEND" shall have the meaning set forth in the
Certificate of Designations.
"PERMITTED INDEBTEDNESS" means (i) intercompany debt, (ii)
indebtedness for borrowed money incurred under the Debt Instruments, (iii)
indebtedness outstanding on the date hereof listed on Schedule 7.02 of the
Credit Agreement and (iv) other indebtedness for borrowed money permitted
by the Debt Instruments.
"PERMITTED TRANSFER" shall have the meaning set forth in Section 3.2
hereof.
"PERMITTED TRANSFEREE" shall mean any Stockholder who acquired Equity
Securities pursuant to a Permitted Transfer.
"PERSON" shall mean any individual, corporation, limited liability
company, partnership, trust, association, trust or business trust,
unincorporated organization or joint venture, Governmental Authority or
other entity of any nature whatsoever.
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"PREFERRED STOCK PURCHASE AGREEMENT" shall mean the Preferred Stock
Purchase Agreement dated as of the Closing Date, among the Company, VCP,
Vestar Investment, and Vestar Investment II.
"PUBLIC OFFERING" shall mean the sale of Equity Securities to the
public pursuant to an effective registration statement filed under the
Securities Act, which results in an active trading market in such Equity
Securities (it being understood that such an active trading market shall be
deemed to exist if, among other things, such Equity Securities are listed
on a national securities exchange or on the NASDAQ National Market).
"PURCHASED EQUITY SHARES" shall mean the Convertible Participating
Preferred Stock of the Company purchased by Management Investors.
"REDEEMABLE PREFERRED STOCK" shall have the meaning set forth in the
Certificate of Designations.
"REDEEMABLE PREFERRED STOCK CERTIFICATE OF DESIGNATIONS" shall have
the meaning set forth in the Certificate of Designations.
"REDEMPTION DATE" shall have the meaning set forth in the Certificate
of Designations.
"REDEMPTION SECURITIES" shall have the meaning set forth in the
Certificate of Designations.
"REDEMPTION SECURITIES HOLDER" shall have the meaning set forth in the
Certificate of Designations.
"REGISTRATION RIGHTS AGREEMENT" shall mean the Registration Rights
Agreement dated as of the Closing Date among the parties hereto.
"RESPONSIBLE OFFICER" means the chief executive officer, president,
chief operating officer, chief financial officer, treasurer or assistant
treasurer of the Company or a Subsidiary of the Company.
"RIGHT" shall have the meaning set forth in Section 3.8(a) hereof.
"RULE 144" shall mean Rule 144 or successor rule, as amended, under
the Securities Act.
"SECTION 3.9(a) CALL EVENT" shall have the meaning assigned to such
term in Section 3.9 hereof.
"SECTION 3.9(b) CALL EVENT" shall have the meaning assigned to such
term in Section 3.9 hereof.
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"SECURITIES ACT" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder, as the same may be
amended from time to time.
"SENIOR EXECUTIVE" shall mean ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇.
"SENIOR SUBORDINATED NOTES" means the 8 1/2% unsecured subordinated
notes of New Solo due February 15, 2014 in an aggregate principal amount of
$325,000,000 issued and sold on February 27, 2004 pursuant to the Senior
Subordinated Notes Indenture, and any amendments thereto approved in
accordance with the terms hereof.
"SENIOR SUBORDINATED NOTES INDENTURE" means the Indenture, dated as of
February 27, 2004, by and among U.S. Bank National Association, as trustee,
New Solo and the Subsidiary Guarantors (as defined in the Credit
Agreement), and any amendments thereto approved in accordance with the
terms hereof.
"SOLO" shall mean Solo Cup Company, an Illinois corporation.
"SOLO FAMILY MEMBER" means any individual holding beneficial interests
in units of Holdings LLC on the Closing Date and any Family Member thereof.
"STOCKHOLDERS" shall mean VCP, Vestar Investment, Vestar Investment
II, Holdings LLC, the Management Investors and the other signatories hereto
other than the Company and New Solo.
"SUBSIDIARY" means, with respect to any Person, any corporation,
partnership, association or other business entity of which fifty percent
(50%) or more of the total voting power of shares of capital stock entitled
(without regard to the occurrence of any contingency) to vote in the
election of directors, managers or trustees thereof, or fifty percent (50%)
or more of the equity interest therein, is at the time owned or controlled,
directly or indirectly, by any Person or one or more of the other
Subsidiaries of such Person or a combination thereof.
"SUBSTANTIALLY UNDERPERFORMS" shall mean either (A) for (i) the fiscal
year ended December 31, 2006, either a Cumulative Consolidated EBITDA of
less than $185 million or a Consolidated Leverage Ratio of greater than
6.25; (ii) the fiscal year ended December 31, 2007, either a Cumulative
Consolidated EBITDA of less than $395 million or a Consolidated Leverage
Ratio of greater than 6.00; (iii) the fiscal year ended December 31, 2008,
either a Cumulative Consolidated EBITDA of less than $625 million or a
Consolidated Leverage Ratio of greater than 5.75; (iv) the fiscal year
ended December 31, 2009, either a Cumulative Consolidated EBITDA of less
than $855 million or a Consolidated Leverage Ratio of greater than 5.50;
and (v) the fiscal year ended December 31, 2010, either a Cumulative
Consolidated EBITDA of less than $1.085 billion or a Consolidated Leverage
Ratio of greater than 5.25; or (B) beginning with the first quarter of 2006
and each fiscal quarter subsequent thereto (such fiscal quarter, for
purposes hereof, the "MEASUREMENT QUARTER"), an Event of Default occurs
with respect to the failure to comply with any of the financial covenants
set forth in Section 7.10(a) or 7.10(b) of the Credit Agreement, for (a)
the five consecutive fiscal quarters prior to and
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including the Measurement Quarter, or (b) any six fiscal quarters during a
period of ten consecutive fiscal quarters prior to and including the
Measurement Quarter; PROVIDED that for purposes of this clause (B) (i) the
performance of the Company in the fiscal quarters ended June 30, 2004,
September 30, 2004 and December 31, 2004 shall be disregarded and (ii)
anything to the contrary herein notwithstanding, the computation of the
financial covenants set forth in Section 7.10(a) or 7.10(b) of the Credit
Agreement shall give effect to any amendments thereto in connection with an
Accounting Change in accordance with Section 1.03 of the Credit Agreement.
"THIRD PARTY" shall mean any Person (including, solely for purposes of
the determination of a Third Party, any "group" as defined in Section
13(d)(3) of the Exchange Act) other than the Stockholders, the Solo Family
Members and their Affiliates.
"TRANSFER" shall mean any direct or indirect transfer, sale,
assignment, pledge, mortgage, hypothecation or other disposition of any
Equity Securities or any interest therein (including whether by operation
of law, merger, sale of beneficial ownership interests in any Stockholder
or otherwise). For the avoidance of doubt, a Transfer shall include an
indirect Transfer by a transfer of units of Holdings LLC or equity
interests in any successor entity of Holdings LLC (including without
limitation any entity which is required to assume the obligations of
Holdings LLC hereunder).
"TRANSFER NOTICE" shall have the meaning set forth in Section 3.5(c)
hereof.
"TRANSFERRING LLC STOCKHOLDER" shall have the meaning set forth in
Section 3.5(b) hereof.
"TRANSFERRING VCP STOCKHOLDER" shall have the meaning set forth in
Section 3.5(a) hereof.
"VCP" shall mean Vestar Capital Partners IV, L.P., a
Delaware limited
partnership.
"VCP DIRECTORS" shall have the meaning set forth in Section 2.1(f)
hereof.
"VCP TAGGING STOCKHOLDER" shall have the meaning set forth in Section
3.5(a) hereof.
"VESTAR INVESTMENT" shall mean Vestar Cup Investment, LLC, a
Delaware
limited liability company and an Affiliate of VCP.
"VESTAR INVESTMENT II" shall mean Vestar Cup Investment II, LLC, a
Delaware limited liability company.
"VOTING SECURITIES" shall mean, at any time, shares of any class of
Equity Securities of the Company which are then entitled to vote generally
in the election of Directors or on any other matter.
12
1.2. OTHER DEFINITIONAL PROVISIONS; INTERPRETATION. (a) The words
"hereof", "herein", and "hereunder" and words of similar import when used in
this Agreement shall refer to this Agreement as a whole and not to any
particular provision of this Agreement, and Section, Subsection, Schedule and
Exhibit references are to this Agreement unless otherwise specified.
(b) The headings in this Agreement are included for convenience of
reference only and shall not limit or otherwise affect the meaning or
interpretation of this Agreement.
(c) The meanings given to terms defined herein shall be equally
applicable to both the singular and plural forms of such terms.
(d) For purposes of comparing the beneficial ownership of any Person
on the date of execution and delivery of this Agreement to the level of such
ownership at any later time, the level of ownership on such later date shall be
adjusted to eliminate the effect of any subdivision of the Common Stock, any
combination of the Common Stock, any issuance of Common Stock or Common Stock
Equivalents by reason of any reclassification (including, without limitation,
any reclassification in connection with a merger or consolidation), or any
dividend payable in Common Stock or Common Stock Equivalents.
SECTION 2. VOTING AGREEMENTS
2.1. ELECTION OF DIRECTORS. (a) Effective as of the Closing Date and
except as otherwise PROVIDED in Section 2.1(f), each of the Board and the New
Solo Board shall be comprised of seven (7) Directors. Each Stockholder hereby
agrees that so long as this Agreement shall remain in effect, such Stockholder
will vote all of the Voting Securities beneficially owned or held of record by
such Stockholder so as to elect and, during such period, to continue in office a
Board and a New Solo Board each consisting solely of the following:
(i) 2 designees of VCP (the "ORIGINAL VCP DIRECTORS") (which VCP
proposes to be, initially, ▇▇▇▇▇▇ ▇. ▇'▇▇▇▇▇▇▇ and ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇) and
(ii) 5 designees of Holdings LLC, one of whom shall initially be
the Chairman of each of the Board and the New Solo Board and one of whom
shall initially be the Chief Operating Officer of each of the Company and
New Solo (the "Holdings LLC Directors").
(b) Each of the Company and New Solo agrees to include in the slate of
nominees recommended by the Board and the New Solo Board such designees as VCP
and Holdings LLC shall request and to use its best efforts to cause the election
of each such designee to each of the Board and the New Solo Board, including
nominating such individuals to be elected as Directors as PROVIDED herein.
(c) If at any time VCP or Holdings LLC shall notify the other parties
of its desire to remove, with or without Cause, any director of the Company or
New Solo previously designated by it, each Stockholder shall vote all of the
Voting Securities beneficially owned or held of record by it so as to remove, or
to cause the Company and its Subsidiaries to remove, such director.
13
(d) If any VCP Director or Holdings LLC Director ceases to serve on
the Board or the New Solo Board (whether by reason of death, resignation,
removal or otherwise), VCP or Holdings LLC, as the case may be, shall be
entitled to designate a successor director to fill the vacancy created thereby.
Each Stockholder agrees that such Stockholder will vote all of the Voting
Securities owned or held of record by such Stockholder so as to elect, or to
cause the Company to elect, any such successor director.
(e) The parties hereto hereby agree that any individual designated as
a director of the Company may be removed for Cause with or without the consent
of the Stockholder which designated such individual. No such removal of an
individual designated pursuant to this Section 2.1 shall affect any
Stockholder's right to designate a successor director pursuant to Section
2.1(d).
(f) Notwithstanding anything in this Agreement to the contrary, upon
the occurrence of any of the following events, VCP shall be entitled to
designate such number of additional members of each of the Board and the New
Solo Board (the "ADDITIONAL VCP DIRECTORS" and, together with the Original VCP
Directors, the "VCP DIRECTORS") so that after giving effect to the election of
such Additional VCP Directors, the VCP Directors shall constitute a majority of
each of the Board and the New Solo Board, one of whom shall be the Chairman of
each of the Board and the New Solo Board (and the number of directors
constituting the entire Board and New Solo Board shall be increased immediately
to accommodate such right):
(i) an Event of Default occurs and the lenders accelerate the
indebtedness under the applicable Debt Instrument;
(ii) all outstanding shares of Convertible Participating
Preferred Stock are not legally permitted to be redeemed or repurchased on
the applicable Redemption Date as required by Section 6(a), 6(b) or 6(f) of
the Certificate of Designations;
(iii) the Company does not perform its payment obligations under
Section 6(a), 6(b) or 6(f) of the Certificate of Designations or does not
pay dividends declared by the Board or otherwise payable as PROVIDED in the
Certificate of Incorporation, as amended by the Certificate of
Designations;
(iv) the Company Substantially Underperforms;
(v) the Company does not redeem all outstanding Redemption
Securities owned by VCP and its Affiliates pursuant to Section 6(c) of the
Certificate of Designations prior to the last date on which it may do so
pursuant to Section 6(c)(iv) of the Certificate of Designations; or
(g) Anything to the contrary herein notwithstanding, the parties
hereto hereby agree that in the event the VCP Directors constitute a majority of
each of the Board and the New Solo Board, (i) the consent in writing of Holdings
LLC shall be necessary to authorize or effect any transaction entered into by
the Company or any of its Subsidiaries with VCP or an Affiliate
14
of VCP (including, without limitation, the purchase, sale, lease or exchange of
any property, or rendering of any service or modification or amendment of any
existing agreement or arrangement, including the Management Agreement, as it may
be amended prior thereto) and (ii) if any Holdings LLC Director proposes in good
faith a redemption of all (but not less than all) outstanding Redemption
Securities owned by VCP and its Affiliates pursuant to Section 6(c) or 6(d) of
the Certificate of Designations and this Agreement, then the Holdings LLC
Directors shall be permitted to create a special committee of the Board,
comprised solely of Holdings LLC Directors, with full authority of the Board to
cause the Company to effect such redemption in compliance with applicable law;
PROVIDED, that if the VCP Directors provide written notice to the Holdings LLC
Directors of the intention to pursue a merger or consolidation involving the
Company, sale of 80% or more of the Common Stock outstanding on a fully diluted
basis, sale of a substantial portion of the assets of the Company, a Public
Offering, or a recapitalization of the Company, any redemption pursuant to
Section 6(c) of the Certificate of Designations proposed by any Holdings LLC
Director must be consummated within ninety (90) days of receipt of such notice;
and PROVIDED FURTHER, that if such a redemption is not consummated within ninety
(90) days of such notice, no Holdings LLC Director may propose a redemption
pursuant to Section 6(c) of the Certificate of Designations until one hundred
eighty (180) days following such notice.
(h) Anything to the contrary herein notwithstanding, so long as
Convertible Participating Preferred Stock shall be outstanding, each of the VCP
Directors and Additional VCP Directors, respectively, shall be considered
Convertible Participating Preferred Stock Directors and Additional Convertible
Participating Preferred Stock Directors (as such terms are defined in the
Certificate of Designations) and nothing herein shall permit the number of VCP
Directors or Additional VCP Directors, respectively, to exceed the maximum
number of Convertible Participating Preferred Stock Directors or Additional
Convertible Participating Preferred Stock Directors.
(i) All matters concerning any of the Company and its Subsidiaries
that are material to the Company and its Subsidiaries taken as a whole shall be
reviewed and, if approval of any such matter by the board of directors or
stockholders of any of the Company and its Subsidiaries is required by
applicable law or any of their respective charters, bylaws or other governing
documents, approved by the Board or the New Solo Board.
2.2. COMMITTEES. Each of the Company and New Solo shall cause each
committee of each of the Board and the New Solo Board (excluding any special
committee created pursuant to Section 2.1(g)(ii) hereof) to include a number of
VCP Directors such that the VCP Directors constitute a percentage of the
membership of such committee at least equal to the VCP Directors' percentage
representation on the entire Board or New Solo Board, as the case may be.
2.3. CONSENT RIGHTS.
(a) In addition to any vote or consent of the Board or the New Solo
Board or the stockholders of the Company or New Solo required by law, the
Certificate of Incorporation, the Certificate of Designations or the certificate
of incorporation of New Solo, the vote at a duly convened meeting of the Board
and/or the New Solo Board, as applicable, of, or the consent in
15
writing of, at least one VCP Director shall be necessary for authorizing,
effecting or validating the following actions by the Company or any of its
Subsidiaries:
(i) any material change in the business conducted by the Company
or any of its Subsidiaries, in the aggregate;
(ii) any authorization, creation (by way of reclassification or
otherwise) or issuance of any capital stock or Equity Securities of the
Company or any of its Subsidiaries other than (a) in accordance with the
terms of stock option plans of the Company approved by the Board in
accordance with the Certificate of Incorporation and the Bylaws (1) prior
to the date hereof or (2) after the date hereof (but prior to the
utilization of the exception set forth in the proviso to this clause (ii))
and in accordance with this clause (ii), (b) the shares of Common Stock
issued upon the exercise, conversion or exchange of such Equity Securities
and (c) dividends payable in shares of Common Stock or Redeemable Preferred
Stock upon conversion of all or a portion of the Convertible Participating
Preferred Stock in accordance with the terms of the Certificate of
Designations; PROVIDED HOWEVER, that the affirmative vote of at least one
VCP Director shall not be required in connection with any such actions
reasonably taken by the Company solely to satisfy its obligations under
Section 3.6 hereof in connection with an IPO requested by VCP pursuant to
Section 3.6 hereof (or actions reasonably necessary to facilitate such IPO
or reasonably required as a result of such IPO or such other actions);
(iii) the consummation of a Liquidity Event;
(iv) the hiring or termination of employment of the chief executive
officer, the chief financial officer or the chief operating officer of the
Company or any of its Subsidiaries;
(v) determining the remuneration (including perquisites and
benefits) of any kind payable or due to (1) any employee of the Company or
(2) any employee of any Subsidiary of the Company, in each case, whose
aggregate annual remuneration exceeds $175,000; PROVIDED that such approval
shall not be required if the remuneration is not prohibited by Section 6.10
of the Preferred Stock Purchase Agreement and is being paid pursuant to a
compensation plan, policy or arrangement that (x) establishes the means by
which the amount of actual remuneration is to be objectively calculated,
whether by formula or otherwise, (y) was approved by the Company or any of
its Subsidiaries prior to the date hereof and (z) was disclosed to VCP
prior to the date hereof in writing; PROVIDED FURTHER, that such approval
shall not be required if the remuneration is not prohibited by Section 6.10
of the Preferred Stock Purchase Agreement and is being paid pursuant to a
compensation plan, policy or arrangement that (A) establishes the means by
which the amount of actual remuneration is to be objectively calculated,
whether by formula or otherwise, and (B) was approved in accordance with
this clause (v) (without utilization of the exception set forth in this
proviso); PROVIDED FURTHER, however, that this provision shall not apply to
the payment to Solo Family Members of compensation (whether in the form of
salary, bonus, reimbursement of expenses, or otherwise) in accordance with
Section 6.10 of the Preferred Stock Purchase Agreement;
16
(vi) commencing any case, proceeding or other action (A) under any
existing or future law of any jurisdiction, domestic or foreign, relating
to bankruptcy, insolvency, reorganization or relief of debtors, seeking to
have an order for relief entered with respect to it, or seeking to
adjudicate it a bankrupt or insolvent, or seeking reorganization,
arrangement, adjustment, winding-up, liquidation, dissolution, composition
or other relief with respect to it or its debts, or (B) seeking appointment
of a receiver, trustee, custodian or other similar official for it or for
all or any substantial part of its assets, or the making by any of the
Company and its Subsidiaries of a general assignment for the benefit of its
creditors;
(vii) selecting or replacing the independent public accountants of
the Company or any of its Subsidiaries;
(viii) any acquisition or disposition (by sale, lease assignment,
merger, purchase, transfer, spin-off, dividend or distribution or
otherwise) of any property, entity, business, securities or assets, whether
now owned or hereafter acquired by the Company or any of its Subsidiaries,
in an amount exceeding $40 million in the aggregate (excluding purchases or
sales of inventory, raw materials, or plant, property and equipment in the
ordinary course of business);
(ix) the incurrence of indebtedness for borrowed money (including
through the issuance of debt securities or the guarantee of indebtedness of
another Person and including the refinancing of such indebtedness), other
than Permitted Indebtedness, in excess of $30 million in the aggregate
since the date of hereof;
(x) other than under the Debt Instruments and as permitted under
the Debt Instruments, creating, incurring, assuming or suffering to exist
any Lien upon any of the property of any of the Company and its
Subsidiaries, whether now owned or hereafter acquired, except for (a) Liens
incurred under the Debt Instruments and Liens in existence on the date
hereof listed on Schedule 5.08(b) to the Credit Agreement and any renewals,
modifications, replacements or extensions thereof, PROVIDED that such Liens
do not extend to any additional property and the renewal, refinancing,
refunding or extension of the obligations secured or benefited by such
Liens is permitted by the Debt Instruments, (b) easements (including,
without limitation, reciprocal easement agreements and utility easements),
rights-of-way, restrictions (including zoning restrictions), covenants,
conditions, encroachments, variations, subdivisions, minor defects or
irregularities in title and other similar encumbrances incurred in the
ordinary course of business that, in the aggregate, are not substantial in
amount and that do not in any case materially detract from the value of the
property subject thereto or materially interfere with the ordinary conduct
of the business of the Company or any of its Subsidiaries, (c) (i)
carrier's, warehousemen's, processor's, landlord's, suppliers', mechanics',
materialmen's, repairmen's or other like Liens arising in the ordinary
course of business which are not overdue for a period of more than 60 days
or (ii) Liens for taxes, assessments or governmental charges or levies not
yet due or, in each case, that are being contested in good faith by
appropriate proceedings, PROVIDED, that adequate reserves with respect
thereto are maintained on the books of the Company or its Subsidiaries, as
the case may
17
be, in conformity with GAAP, and (d) Liens not otherwise permitted by this
Agreement so long as neither (i) the aggregate outstanding principal amount
of the obligations secured thereby nor (ii) the aggregate fair market value
(determined as of the date such Lien is incurred) of the assets subject
thereto exceeds (as to the Company and all Subsidiaries) $30 million at any
one time;
(xi) entering into or suffering to exist any agreement that
prohibits or limits the ability of the Company or any of its Subsidiaries
to create, incur, assume or suffer to exist any Lien upon any of its
property, whether now owned or hereafter acquired other than under the Debt
Instruments and as permitted under the Debt Instruments;
(xii) amending any Debt Instrument;
(xiii) entering into any transaction with an Affiliate of the Company
(including, without limitation, the purchase, sale, lease or exchange of
any property, or rendering of any service or modification or amendment of
any existing agreement or arrangement); PROVIDED, HOWEVER, that this
provision shall not prohibit any employment and benefit arrangements in
effect on the date hereof that are not in violation of Section 6.10 of the
Preferred Stock Purchase Agreement and were disclosed to VCP in writing
prior to the date hereof, together with such future increases as are in the
ordinary course and (1)(A) consistent with arrangements with employees
generally, who are not Affiliates and otherwise are similarly situated or
(B) approved by the Board, including at least one VCP Director, or (2) not
in violation of Section 6.10 of the Preferred Stock Purchase Agreement;
PROVIDED FURTHER, however, that this provision shall not apply to the
payment to Solo Family Members of compensation (whether in the form of
salary, bonus, reimbursement of personal expenses, or otherwise) in
accordance with Section 6.10 of the Preferred Stock Purchase Agreement;
PROVIDED, HOWEVER, that no Affiliate shall be appointed an officer of the
Company after the date hereof unless such appointment shall have been
approved by the Board, including at least one VCP Director (other than any
reappointment of an officer serving in such capacity prior to the date
hereof and disclosed to VCP in writing prior to the date hereof);
(xiv) declaring or paying any dividend or other distribution (other
than (i) dividends payable solely in the form of Common Stock to all
holders of Common Stock and Participating Dividends solely in the form of
Common Stock to all holders of Convertible Participating Preferred Stock
generally and (ii) dividends payable upon conversion of all or a portion of
the Convertible Participating Preferred Stock in accordance with the terms
of the Certificate of Designations) on, or make any payment on account of,
or setting apart assets for a sinking or other analogous fund for, the
purchase, redemption, defeasance, retirement or other acquisition of, any
Equity Securities (other than in connection with a redemption of all or a
portion of the Redemption Securities in accordance with the terms of the
Certificate of Designations, this Agreement and applicable law), whether
now or hereafter outstanding, other than the redemption, repurchase or
acquisition for value of Junior Securities from employees or former
employees of the Company or its Subsidiaries in connection with a
termination of such employee's employment with the Company or its
Subsidiaries (whether by reason of
18
death, disability, retirement or otherwise) so long as all such
redemptions, repurchases and acquisitions do not exceed $3,000,000 in the
aggregate in any fiscal year; PROVIDED FURTHER that the Company or its
Subsidiaries may carry over and so utilize in subsequent fiscal years (i)
the portion of such $3,000,000 not utilized in any prior year and (ii) the
aggregate cash purchase price paid for any Junior Securities that are sold,
transferred or reissued for value by the Company or its Subsidiaries to
another employee thereof within the prior fiscal year, so long as the
aggregate amount so utilized in any fiscal year, including the $3,000,000
otherwise available during such year, does not exceed $10,000,000;
(xv) making any advance, loan, extension of credit (by way of
guaranty or otherwise) or capital contribution to, or purchasing any equity
securities, bonds, notes, debentures or other debt securities of, or making
any other investment in, any Person (all of the foregoing, "INVESTMENTS"),
other than as permitted under the Debt Instruments;
(xvi) entering into any merger, consolidation or amalgamation, or
liquidating, winding up or dissolving itself (or suffering any liquidation
or dissolution), or disposing of all or substantially all of its property
or business, other than as permitted under the Debt Instruments and except
that any Investment permitted by clause (xv) above may be structured as a
merger, consolidation or amalgamation;
(xvii) making or declaring any payment or distribution (other than in
connection with a redemption or conversion of all or a portion of the
Convertible Participating Preferred Stock in accordance with the terms of
the Certificate of Designations, this Agreement and applicable law) to any
holder of Convertible Participating Preferred Stock other than a
Participating Dividend in the form of Common Stock;
(xviii) any amendment, repeal or alteration of the Company's
Certificate of Incorporation or Bylaws if such amendment, repeal or
alteration would adversely alter or change the rights, preferences or
privileges of the Convertible Participating Preferred Stock or the Common
Stock;
(xix) any amendment, alteration or change to the powers,
designations, preferences, rights, privileges, qualifications, limitations
or restrictions of the Convertible Participating Preferred Stock (including
by way of merger, consolidation or otherwise); or
(xx) any reclassification of Common Stock.
PROVIDED, that the affirmative vote of at least one VCP Director will not
be required (i) for any actions taken to finance a redemption of all of the
Redemption Securities pursuant to Section 6 of the Certificate of
Designations so long as the Board receives a solvency opinion of a
nationally recognized investment banking or appraisal firm in form and
substance reasonably satisfactory to the Board (a copy of which shall be
PROVIDED to VCP) or (ii) for the actions taken in clauses (ix), (x), (xi)
and (xiv) above and amendments to Debt Instruments reasonably necessary in
connection therewith; PROVIDED,
19
HOWEVER, that solely with respect to this clause (ii), (x) such actions are
on commercially customary terms, (y) such actions solely are taken to
finance a redemption (or are reasonably necessary to facilitate a
redemption or are reasonably required as a result of the redemption or such
other actions) of a portion of the Redemption Securities in accordance with
the Company's redemption of such Redemption Securities pursuant to Section
6(b), 6(d) or 6(f) of the Certificate of Designations and this Section
2.3(a) and (z) the Consolidated Leverage Ratio of the Company and its
Subsidiaries after giving effect to such actions shall be no more than (1)
4.0 to 1, if Redemption Securities attributable to 25% of the Convertible
Participating Preferred Stock outstanding on the Original Issuance Date are
being redeemed, (2) 4 1/3 to 1, if Redemption Securities attributable to
50% of the Convertible Participating Preferred Stock outstanding on the
Original Issuance Date (after taking into account prior redemptions of
Redemption Securities) are being redeemed and (3) 4 2/3 to 1, if Redemption
Securities attributable to 75% of the Convertible Participating Preferred
Stock outstanding on the Original Issuance Date (after taking into account
prior redemptions of Redemption Securities) are being redeemed, PROVIDED,
that if the percentage being redeemed (after taking into account any prior
redemptions of Redemption Securities) is greater than 25% and less than
50%, greater than 50% and less than 75% or greater than 75% and less than
100%, then the maximum Consolidated Leverage Ratio for purposes of this
clause (z) shall be the corresponding number between 4.0 and 4 1/3, 4 1/3
and 4 2/3 and 4 2/3 and 5.0, respectively. Each Redemption Securities
Holder hereby agrees that notwithstanding that no shares of Convertible
Participating Preferred Stock or Redeemable Preferred Stock are outstanding
the Company may redeem, in accordance with Section 6(c) or 6(d) of the
Certificate of Designations and Section 5(c) or 5(d) of the Redeemable
Preferred Stock Certificate of Designations, any other Redemption
Securities owned by them on the terms set forth in Section 6(c) or 6(d) of
the Certificate of Designations (including any defined terms used therein)
as if such terms were set forth herein MUTATIS MUTANDIS.
(b) In connection with any vote or action by written consent of the
Stockholders of the Company relating to any matter requiring consent as
specified in Section 2.3(a), each Stockholder agrees to vote all Voting
Securities beneficially owned or held of record by such Stockholder against (and
not act by written consent to approve) such matter if such matter has not been
consented to by a VCP Director in accordance with Section 2.3(a). Each
Stockholder also agrees to vote all Voting Securities beneficially owned or held
of record by such Stockholder to ratify, approve and/or adopt any and all
actions (1) ratified, approved and/or adopted by the Board as necessary or
reasonably desirable in connection with the Company performing its obligations
under any of this Agreement, the Certificate of Designations, the Redeemable
Preferred Stock Certificate of Designations, the Management Agreement, the
Registration Rights Agreement and the Preferred Stock Purchase Agreement and (2)
required to be ratified, approved and/or adopted by the Stockholders.
(c) Sections 2 through 7 inclusive and 9 through 11 inclusive of
Article II, Sections 1, 2, 4 and 6 through 10 inclusive of Article III and
Article VIII of the Company's Bylaws (and any defined terms used herein) as in
effect on the date hereof are hereby incorporated herein by this reference.
20
2.4. AVAILABLE FINANCIAL INFORMATION; ACCESS. (a) The Company will
deliver, or will cause to be delivered, the following to each Director:
(i) as soon as available, but in any event within forty-five (45)
days after the end of each month (excluding each month that is also the end
of a fiscal quarter) through and including February 28, 2005 and 30 days
after the end of each month occurring thereafter (excluding each month that
is also the end of a fiscal quarter), a consolidated balance sheet of New
Solo and its Subsidiaries as of the end of such month and a consolidated
statements of income and a consolidated statement of cash flows of New Solo
and its Subsidiaries for the period commencing at the end of the previous
month and ending with the end of such month and a consolidated statement of
income and a consolidated statement of cash flows of New Solo and its
Subsidiaries for the period commencing at the end of the previous fiscal
year and ending with the end of such month, setting forth in each case in
comparative form the corresponding figures for the immediately preceding
month and the Company's business plan then in effect and approved by the
Board, all in reasonable detail and duly certified by a Responsible Officer
of New Solo; and
(ii) (A) no later than thirty (30) days after the end of the 2004
fiscal year of the Company with regards to the 2005 fiscal year of the
Company and (B) no later than thirty (30) days before the beginning of the
2006 fiscal year of the Company and each subsequent fiscal year,
respectively, with regards to the 2006 fiscal year and each subsequent
fiscal year of the Company; in each case, an annual budget, a business plan
and financial forecasts for the Company, in such manner and form as
approved by the Board, which shall include at least a projection of income
and a projected cash flow statement for each fiscal month in such fiscal
year and a projected balance sheet as of the end of each fiscal month in
such fiscal year, in each case prepared in reasonable detail, with
appropriate presentation and discussion of the principal assumptions upon
which such budgets and projections are based.
(b) The Company shall, and shall cause its Subsidiaries, officers,
directors, employees, auditors and other agents to, afford the Directors and
their representatives (a) during normal business hours and upon reasonable
notice reasonable access at all reasonable times to its officers, employees,
auditors, legal counsel, properties, offices, facilities and books and records,
and (b) the opportunity to discuss the Company's affairs, finances and accounts
with the Company's officers from time to time as each such Directors may
reasonably request.
2.5. BOARD PROCEDURES. Each of the Board and the New Solo Board shall
follow the following procedures:
(a) MEETINGS. Each of the Board and the New Solo Board shall meet not
less often than once per quarter. Special Meetings of the Board and the New Solo
Board may be held at any time permitted pursuant to the Bylaws and the bylaws of
New Solo. Reasonable efforts shall be made to ensure that each Director actually
receives timely notice of any meeting.
21
(b) REPORTS BY COO. The chief operating officer of the Company and New
Solo shall make reports to the Board and the New Solo Board at each regular
meeting thereof or as otherwise requested by the Board and the New Solo Board.
(c) AGENDA. A reasonably detailed agenda shall be supplied to each
Director reasonably in advance of each meeting of the Board and the New Solo
Board, together with other appropriate documentation with respect to agenda
items, to inform adequately Directors regarding matters to come before the Board
and the New Solo Board. Any Director wishing to place a matter on the agenda for
any meeting of the Board or the New Solo Board may do so by communicating with
the Chairman of the Board or the New Solo Board sufficiently in advance of the
meeting of the Board or the New Solo Board so as to permit timely dissemination
to all directors of information with respect to the agenda.
(d) FEES. No fees shall be paid to any Director serving on the Board,
the New Solo Board or the board of directors of any Subsidiary of the Company or
New Solo; PROVIDED that this provision shall not prohibit reimbursement of
reasonable out-of-pocket expenses incurred by any Director in connection with
attendance at each meeting of the Board and the New Solo Board.
SECTION 3. TRANSFERS AND ISSUANCES
3.1. LIMITATIONS ON TRANSFER.
(a) Each Stockholder hereby agrees that except for Transfers effected
pursuant to an effective registration statement filed under the Securities Act,
no Transfer shall occur unless the Company has been furnished with an opinion in
form and substance reasonably satisfactory to the Company of counsel reasonably
satisfactory to the Company that such Transfer is exempt from the provisions of
Section 5 under the Securities Act. Each Stockholder (other than Holdings LLC
and its Permitted Transferees) hereby agrees that except for Transfers governed
by Sections 3.2, 3.5, 3.6, 3.7 or 3.9 below, no Transfers of Equity Securities
shall be permitted; PROVIDED that (i) each of VCP, Vestar Investment and Vestar
Investment II may Transfer Equity Securities beneficially owned by it on and
after the earliest to occur of (x) the 7th anniversary of the Closing Date, (y)
the IPO Date or (z) the date on which the VCP Directors constitute a majority of
the Board and the New Solo Board and (ii) each Management Investor may Transfer
(1) Convertible Participating Preferred Stock (or underlying Common Stock, as
applicable) issued upon conversion of CPUs and (2) Purchased Equity Shares, in
each case, beneficially owned by the Management Investor, after the IPO Date;
and PROVIDED FURTHER, that prior to the date on which the VCP Directors
constitute a majority of the Board and the New Solo Board, (A) none of VCP,
Vestar Investment, Vestar Investment II and their respective Permitted
Transferees may Transfer any Equity Securities beneficially owned by any of them
unless (I) prior to the IPO Date, such Transfer is of all of the Equity
Securities owned beneficially by VCP, Vestar Investment, Vestar Investment II
and their Permitted Transferees and (II) such Transfer is not to any Company
Competitor or its Subsidiaries (unless such Transfer is made after the IPO Date
in a brokers' transaction (as defined in Rule 144(g) under the Securities Act)
without actual knowledge by the Transferor that the Transfer is to a Company
Competitor or its Subsidiary) and (B) no Management Investor nor any of his or
her Permitted Transferees may Transfer any (1)
22
Convertible Participating Preferred Stock (or underlying Common Stock, as
applicable) issued upon conversion of CPUs or (2) Purchased Equity Shares, in
each case, beneficially owned by the applicable Management Investor or his or
her Permitted Transferees, unless (I) prior to the IPO Date, such Transfer is of
all the Equity Securities owned beneficially by the applicable Management
Investor and his or her Permitted Transferees and (II) such Transfer is not to
any Company Competitor or its Subsidiaries (unless such Transfer is made after
the IPO Date in a brokers' transaction (as defined in Rule 144(g) under the
Securities Act) without actual knowledge by the Transferor that the Transfer is
to a Company Competitor or its Subsidiary); and PROVIDED FURTHER, that each
Management Investor and his or her Permitted Transferees (subject to the
restrictions and conditions set forth in the agreements pursuant to which he or
she received such securities) may Transfer Option Stock beneficially owned by
him or her after the later to occur of (i) the 7th anniversary of the initial
grant of the Options upon the exercise of which such Option Stock was issued and
(ii) the IPO Date (such later date, the "LAPSE DATE"). Any Transfer by VCP,
Vestar Investment, Vestar Investment II or any of their Permitted Transferees or
by the Management Investors or any of their Permitted Transferees of Common
Stock or Redeemable Preferred Stock issued upon conversion of Convertible
Participating Preferred Stock, other than in connection with a Public Offering
or a disposition in accordance with Rule 144, must include the Common Stock (the
"DIVIDEND COMMON STOCK") or Redeemable Preferred Stock, if any, received upon
the issuance thereof pursuant to Section 5(a)(ii) of the Certificate of
Designations; PROVIDED FURTHER, that in connection with any Transfer of Common
Stock issued upon conversion of Convertible Participating Preferred Stock by
VCP, Vestar Investment, Vestar Investment II, the Management Investors or any of
their respective Permitted Transferees, such Transferor shall be deemed to have
Transferred a number of shares of Dividend Common Stock equal to the product
(rounded down to the nearest whole number) of (A) the aggregate number of shares
of Common Stock included in such Transfer and (B) the quotient determined by
dividing (x) the aggregate number of shares of Dividend Common Stock
beneficially owned by such Transferor by (y) the aggregate number of shares of
Common Stock (including Dividend Common Stock) beneficially owned by such
Transferor.
(b) Holdings LLC hereby agrees that it shall not permit any direct or
indirect Transfer of any of its units, or any beneficial or economic interest
therein, by any holder thereof unless such Transfer satisfies the provisions of
this Agreement applicable to Transfers of such units and indirect Transfers of
Equity Securities by Holdings LLC and its members. Holdings LLC agrees that it
shall not amend or waive any term of Sections 3.11(a), 9.1(b), 9.2(a)(i),
11.4(a), 11.5 and 11.16 of the Holdings LLC Agreement in whole or in part
without the prior written consent of VCP. In the event that Holdings LLC or one
or more holders of units of Holdings LLC consummates a Transfer which does not
satisfy the terms of this Agreement, (i) VCP and its Affiliates and (ii) the
Management Investors and their Permitted Transferees, in each case who are
Stockholders hereunder shall have the right to require Holdings LLC immediately
to purchase for cash (i) Equity Securities owned by them in the quantity and for
the amount of consideration provided for in Section 3.5 hereof or (ii) if such
Transfer does not satisfy the terms of Section 3.1(d), all Equity Securities
owned by them at the price specified in Section 5(b) of the Redeemable Preferred
Stock Certificate of Designations, in the case of Redeemable Preferred Stock,
and Section 6(b) of the Certificate of Designations, in the case of all other
Equity Securities.
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(c) Each Stockholder hereby agrees that, except for Transfers in
connection with a Public Offering or in accordance with Rule 144, and Transfers
pursuant to Section 3.7 hereof, no Transfer shall occur unless the Transferee
shall agree in writing to become a party to, and be bound to the same extent as
its Transferor by the terms of, this Agreement; whereupon such Transferee shall
become a "Stockholder" hereunder.
(d) No Equity Securities shall be Transferred directly or indirectly
(such as through a Transfer of equity interest in Holdings LLC) in connection
with a Change of Control unless all securities tendered for purchase pursuant to
a Change of Control Redemption have been redeemed in accordance with the
Certificate of Designations and the Redeemable Preferred Stock Certificate of
Designations.
3.2. PERMITTED TRANSFERS. Notwithstanding any other provision of this
Agreement to the contrary, the Transfers set forth in this Section 3.2 shall be
"PERMITTED TRANSFERS" and shall not be subject to any of the procedures
specified in Section 3.5 hereof. VCP, Vestar Investment, Vestar Investment II
and their respective Affiliates shall be entitled, from time to time, to
Transfer any or all of the Equity Securities beneficially owned by them among
each other and to any of their Affiliates who agree in writing to become a party
to, and be bound to the same extent as its transferor by the terms of, this
Agreement; whereupon such Transferees shall become "Stockholders" hereunder;
PROVIDED, that in no event shall a Transfer be made to a Company Competitor at
any time prior to the date when VCP Directors constitute a majority of the
Board. Holdings LLC and its Affiliates shall be entitled, from time to time, to
Transfer any or all of the Equity Securities beneficially owned by them among
each other and to any of their Affiliates who agree in writing to become a party
to, and be bound to the same extent as its transferor by the terms of, this
Agreement; whereupon such Transferees shall become "Stockholders" hereunder. The
Solo Family Members and their Affiliates shall be entitled, from time to time,
to Transfer any or all of the (i) interests in Holdings LLC (including any
indirect interests in the Equity Securities represented by such interests in
Holdings LLC) and (ii) Equity Securities, in each case, beneficially owned by
them among each other and Holdings LLC, PROVIDED such Transferee is bound in
writing by the Holdings LLC Agreement. A Management Investor shall be entitled
to Transfer Equity Securities (other than CPUs) beneficially owned by him or her
at any time to any Family Member of such Management Investor who or which, in
each case, agrees in writing to become a party to, and be bound to the same
extent as its Transferor by the terms of, this Agreement whereupon such
Transferee shall become a "Stockholder" hereunder; PROVIDED, HOWEVER, that any
such Family Member which is a trust or other entity must have been established
and maintained for estate planning purposes and must conduct no business other
than holding passive investments; and PROVIDED FURTHER, that any Transfer of
Options by a Management Investor are subject to the restrictions and conditions
set forth in the agreements pursuant to which he or she received such securities
in addition to the restrictions on Transfer thereof hereunder. Any Transfer by
any of VCP, Vestar Investment and Vestar Investment II of any or all of the
Equity Securities beneficially owned by it (including a distribution of such
Equity Securities to VCP's partners, Vestar Investment's or Vestar Investment
II's members upon a liquidation of VCP, Vestar Investment or Vestar Investment
II or otherwise) to any of its partners or members, who agree in writing to
become a party to, and be bound to the same extent as VCP, Vestar Investment and
Vestar Investment II by the terms of,
24
this Agreement (whereupon such Transferees shall become "Stockholders"
hereunder), shall be deemed to be a Permitted Transfer hereunder.
3.3. EFFECT OF VOID TRANSFERS. In the event of any purported Transfer
of any Equity Securities in violation of the provisions of this Agreement, such
purported Transfer shall be void and of no effect and the Company shall not give
effect to such Transfer.
3.4. LEGEND ON EQUITY SECURITIES. Each certificate representing
Equity Securities issued to any Stockholder shall bear the following legend on
the face thereof:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO A
STOCKHOLDERS' AGREEMENT AMONG VESTAR CAPITAL PARTNERS IV, L.P., VESTAR CUP
INVESTMENT LLC, VESTAR CUP INVESTMENT II, LLC, SCC HOLDING COMPANY LLC, THE
COMPANY, SOLO CUP COMPANY, MANAGEMENT INVESTORS PARTIES THERETO AND THE
OTHER SIGNATORIES TO THE STOCKHOLDERS AGREEMENT, A COPY OF WHICH IS ON FILE
WITH THE SECRETARY OF THE COMPANY. NO TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE MAY BE MADE EXCEPT IN ACCORDANCE WITH THE PROVISIONS OF SUCH
STOCKHOLDERS' AGREEMENT AND (A) PURSUANT TO A REGISTRATION STATEMENT
EFFECTIVE UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR (B) IF THE
COMPANY HAS BEEN FURNISHED WITH AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH TRANSFER, SALE, ASSIGNMENT, PLEDGE,
HYPOTHECATION OR OTHER DISPOSITION IS EXEMPT FROM THE PROVISIONS OF SECTION
5 OF THE SECURITIES ACT OF 1933, AS AMENDED, AND THE RULES AND REGULATIONS
THEREUNDER. THE HOLDER OF THIS CERTIFICATE, BY ACCEPTANCE OF THIS
CERTIFICATE, AGREES TO BE BOUND BY ALL OF THE PROVISIONS OF SUCH
STOCKHOLDERS' AGREEMENT, INCLUDING RESTRICTIONS RELATING TO THE EXERCISE OF
ANY VOTING RIGHTS GRANTED BY THE SECURITIES."
3.5. TAG-ALONG RIGHTS. (a) So long as the VCP Directors constitute a
majority of the Board and the New Solo Board or VCP shall be entitled to
designate a number of VCP Directors that would constitute a majority of the
Board and the New Solo Board, with respect to any proposed Transfer by any of
VCP and its Permitted Transferees (in such capacity, a "TRANSFERRING VCP
STOCKHOLDER") to a bona fide purchaser of Common Stock, Convertible
Participating Preferred Stock or Redeemable Preferred Stock permitted hereunder,
other than as PROVIDED in Section 3.2 hereof and Transfers in connection with a
Public Offering (as permitted by the terms of this Agreement), the Transferring
VCP Stockholder shall have the obligation, and each of Holdings LLC and the
Management Investors and their respective Permitted Transferees which are
beneficial owners of Convertible Participating Preferred Stock (including
Convertible Participating Preferred Stock issuable upon conversion of any CPUs),
Common Stock or
25
Redeemable Preferred Stock shall have the right, to require the proposed
Transferee to purchase from each such Stockholder having and exercising such
right (a "VCP TAGGING STOCKHOLDER") (1) a number of shares of Convertible
Participating Preferred Stock or Common Stock equal to the lesser of (A) the
number of shares of Common Stock (either directly or indirectly by the inclusion
of Convertible Participating Preferred Stock) specified by such VCP Tagging
Stockholder in its Election Notice (as defined below) and (B) the product
(rounded up to the nearest whole number) of (i) the quotient determined by
dividing (x) the aggregate number of shares of Common Stock beneficially owned
on a fully diluted basis by such VCP Tagging Stockholder and sought by the VCP
Tagging Stockholder to be included (either directly or indirectly by the
inclusion of Convertible Participating Preferred Stock) in the contemplated
Transfer by (y) the aggregate number of shares of Common Stock beneficially
owned on a fully diluted basis by all VCP Tagging Stockholders and the
Transferring VCP Stockholder and sought by the Transferring VCP Stockholder and
all VCP Tagging Stockholders to be included in the contemplated Transfer (either
directly or indirectly by the inclusion of Convertible Participating Preferred
Stock) and (ii) the aggregate number of shares of Common Stock originally
proposed to be Transferred (either directly or indirectly by the inclusion of
Convertible Participating Preferred Stock) by the Transferring VCP Stockholder
to the proposed Transferee as set forth in the Transfer Notice (as defined
below) and (2) a number of shares of Redeemable Preferred Stock equal to the
lesser of (A) the number of shares of Redeemable Preferred Stock specified by
such VCP Tagging Stockholder in its Election Notice and (B) the product (rounded
up to the nearest whole number) of (i) the quotient determined by dividing (x)
the aggregate number of shares of Redeemable Preferred Stock beneficially owned
on a fully diluted basis by such Tagging Stockholder and sought by the VCP
Tagging Stockholder to be included in the contemplated Transfer by (y) the
aggregate number of shares of Redeemable Preferred Stock beneficially owned on a
fully diluted basis by all VCP Tagging Stockholders and the Transferring VCP
Stockholder and sought by the Transferring VCP Stockholder and all VCP Tagging
Stockholders to be included in the contemplated Transfer, and (ii) the aggregate
number of shares of Redeemable Preferred Stock originally proposed to be
Transferred by the Transferring VCP Stockholder to the proposed Transferee as
set forth in the Transfer Notice, in each case, upon the same terms and
conditions (including, without limitation, time of payment and form of
consideration) applicable to the Transferring VCP Stockholder, PROVIDED, that in
order to be entitled to exercise its right to sell shares of Convertible
Participating Preferred Stock, Redeemable Preferred Stock or Common Stock to the
proposed Transferee pursuant to this Section 3.5(a), a VCP Tagging Stockholder
must agree to make to the proposed Transferee the same representations,
warranties, covenants, indemnities and agreements as the Transferring VCP
Stockholder agrees to make in connection with the proposed Transfer of
Convertible Participating Preferred Stock, Redeemable Preferred Stock or Common
Stock of the Transferring VCP Stockholder (except that (i) in the case of
representations and warranties pertaining specifically to the Transferring VCP
Stockholder, a VCP Tagging Stockholder shall make the comparable representations
and warranties pertaining specifically to itself and (ii) in the case of
representations and warranties pertaining specifically to a class of stock, a
VCP Tagging Stockholder proposing to Transfer another class of stock not being
Transferred by the VCP Transferring Stockholder shall make comparable
representations and warranties pertaining to such other class of stock) and
PROVIDED FURTHER that all representations and warranties shall be made by VCP
Tagging Stockholders severally and not jointly and that the liability of the
26
Transferring VCP Stockholder and the VCP Tagging Stockholders (whether pursuant
to a representation, warranty, covenant, indemnification provision or agreement)
for liabilities in respect of the Company shall be evidenced in writings
executed by them and the proposed Transferee and shall be borne by each of them
on a several basis in proportion to the amount of consideration to be received.
Any VCP Tagging Stockholder that is a beneficial owner of Common Stock
Equivalents (other than Convertible Participating Preferred Stock) and wishes to
participate in a sale of Common Stock or Convertible Participating Preferred
Stock pursuant to this Section 3.5(a) shall convert, exercise or exchange such
number of Common Stock Equivalents into or for, respectively, Convertible
Participating Preferred Stock or Common Stock on or prior to the closing date of
such Transfer. Notwithstanding anything to the contrary in the foregoing, (i) a
VCP Tagging Stockholder may not require the proposed Transferee to purchase
Common Stock hereunder if the VCP Transferring Stockholder is selling
Convertible Participating Preferred Stock, is not selling Common Stock and the
purchase price per share of Convertible Participating Preferred Stock to be paid
by the proposed Transferee is less than or equal to clause (i) of the
Liquidation Preference of the Convertible Participating Preferred Stock, (ii) a
VCP Tagging Stockholder may not require the proposed Transferee to purchase
Redeemable Preferred Stock hereunder if the VCP Transferring Stockholder is not
selling Redeemable Preferred Stock and (iii) the purchase price per share to be
received by a VCP Tagging Stockholder shall be the same purchase price per share
to be received by the VCP Transferring Stockholder for stock of the same class;
PROVIDED that if the VCP Transferring Stockholder is selling Convertible
Participating Preferred Stock and is not selling Common Stock, a VCP Tagging
Stockholder selling Common Stock shall receive the deemed per share purchase
price of the underlying Common Stock.
(b) With respect to any proposed Transfer by any of Holdings LLC, the
members of Holdings LLC, and their respective Permitted Transferees (in such
capacity, a "TRANSFERRING LLC STOCKHOLDER") to a bona fide purchaser of Common
Stock permitted hereunder (directly or indirectly, such as through a Transfer of
equity interests in Holdings LLC), other than as PROVIDED in Section 3.2 and
Transfers in connection with a Public Offering (as permitted by the terms of
this Agreement), the Transferring LLC Stockholder shall have the obligation, and
each of VCP, Vestar Investment, Vestar Investment II and the Management
Investors and their respective Permitted Transferees which is a beneficial owner
of Convertible Participating Preferred Stock or Common Stock shall have the
right, to require the proposed Transferee to purchase from each such Stockholder
having and exercising such right (a "LLC TAGGING STOCKHOLDER") a number of
shares of Convertible Participating Preferred Stock or Common Stock equal to the
lesser of (A) the number of shares of Common Stock (either directly or
indirectly by the inclusion of Convertible Participating Preferred Stock)
specified by such LLC Tagging Stockholder in its Election Notice and (B) the
product (rounded up to the nearest whole number) of (i) the quotient determined
by dividing (x) the aggregate number of shares of Common Stock beneficially
owned on a fully diluted basis by such LLC Tagging Stockholder and sought by the
LLC Tagging Stockholder to be included (either directly or indirectly by the
inclusion of Convertible Participating Preferred Stock) in the contemplated
Transfer by (y) the aggregate number of shares of Common Stock beneficially
owned on a fully diluted basis by all LLC Tagging Stockholders and the
Transferring LLC Stockholder and sought by the Transferring LLC Stockholder and
all LLC Tagging Stockholders to be included in the contemplated Transfer (either
directly or indirectly by the inclusion of Convertible Participating Preferred
Stock) and
27
(ii) the aggregate number of shares of Common Stock originally proposed to be
Transferred (either directly or indirectly by the inclusion of Convertible
Participating Preferred Stock) by the Transferring LLC Stockholder to the
proposed Transferee, at the same price or deemed price per share of Common Stock
and upon the same terms and conditions (including without limitation time of
payment and form of consideration) applicable to the Transferring LLC
Stockholder; PROVIDED, that, if a Transferring LLC Stockholder is not
Transferring Common Stock directly (as opposed to, for example, transferring
equity interests in Holdings LLC) each LLC Tagging Stockholder shall receive an
aggregate amount of consideration for its Transferred Common Stock or
Convertible Participating Preferred Stock, as the case may be, equal to the
product of (A) the price per share of Common Stock deemed paid to the
Transferring LLC Stockholder based on the number of shares of Common Stock being
indirectly Transferred (any Convertible Participating Preferred Stock being
Transferred by a LLC Tagging Stockholder shall receive the deemed per share
purchase price of the underlying Common Stock) and (B) the number of shares of
Common Stock being sold (either directly or indirectly by the inclusion of
Convertible Participating Preferred Stock) by the LLC Tagging Stockholder;
PROVIDED FURTHER, that in order to be entitled to exercise its right to sell
shares of Common Stock or Convertible Participating Preferred Stock to the
proposed Transferee pursuant to this Section 3.5(b), a LLC Tagging Stockholder
must agree to make to the Transferee the same representations, warranties,
covenants, indemnities and agreements as the Transferring LLC Stockholder agrees
to make in connection with the proposed Transfer of Common Stock of the
Transferring LLC Stockholder (except that (i) in the case of representations and
warranties pertaining specifically to the Transferring LLC Stockholder a LLC
Tagging Stockholder shall make the comparable representations and warranties
pertaining specifically to itself (ii) in the case of representations and
warranties pertaining specifically to Common Stock, a LLC Tagging Stockholder
proposing to Transfer Convertible Participating Preferred Stock shall make
comparable representations and warranties pertaining to such Convertible
Participating Preferred Stock and (iii) no LLC Tagging Stockholder shall be
required to make any representation, warranty, covenant or agreement, or provide
any indemnity, pertaining to Holdings LLC) and PROVIDED FURTHER, that all
representations and warranties shall be made by LLC Tagging Stockholders
severally and not jointly and that the liability of the Transferring LLC
Stockholder and the LLC Tagging Stockholders (whether pursuant to a
representation, warranty, covenant, indemnification provision or agreement) for
liabilities in respect of the Company shall be evidenced in writings executed by
them and the proposed Transferee and shall be borne by each of them on a several
basis in proportion to the amount of consideration to be received. Any LLC
Tagging Stockholder that is a beneficial owner of Common Stock Equivalents
(other than Convertible Participating Preferred Stock) and wishes to participate
in a sale of Common Stock pursuant to this Section 3.5(b) shall convert,
exercise or exchange such number of Common Stock Equivalents into or for,
respectively, Convertible Participating Preferred Stock or Common Stock prior to
the closing date of such Transfer.
(c) The Transferring VCP Stockholder or Transferring LLC Stockholder,
as the case may be, shall give notice (the "TRANSFER NOTICE") to all relevant
Stockholders of each proposed Transfer giving rise to the rights of the VCP
Tagging Stockholders and LLC Tagging Stockholders set forth in the first
sentence of Section 3.5(a) or Section 3.5(b) hereof, as the case may be, at
least forty-five (45) days prior to the proposed consummation of such Transfer,
setting forth the name of the Transferring VCP Stockholder or Transferring LLC
Stockholder,
28
the number of shares of each class of securities proposed to be so Transferred
(either directly or indirectly, such as through a transfer of equity interests
in Holdings LLC), the name and address of the proposed Transferee, the proposed
amount and form of consideration and other terms and conditions of payment
offered by the proposed Transferee, and a representation that the proposed
Transferee has been informed of the tag-along rights provided for in this
Section 3.5 and has agreed to purchase such securities in accordance with the
terms hereof. The tag-along rights PROVIDED by this Section 3.5 must be
exercised by each VCP Tagging Stockholder and LLC Tagging Stockholder, as the
case may be, within thirty (30) days following receipt of the Transfer Notice
(the "ELECTION PERIOD"), by delivery of a written notice (the "ELECTION NOTICE")
to the Transferring VCP Stockholder or Transferring LLC Stockholder, as the case
may be, indicating the desire to exercise its rights and specifying the number
of shares of each class of securities it desires to sell. The Transferring VCP
Stockholder or Transferring LLC Stockholder, as the case may be, shall be
entitled under this Section 3.5 to Transfer to the proposed Transferee the
number of shares of each class of securities (either directly or indirectly,
such as through a transfer of equity interests in Holdings LLC) equal to the
difference between (A) the aggregate number of such securities set forth in the
Transfer Notice and (B) the aggregate number of such securities that the VCP
Tagging Stockholders and LLC Tagging Stockholders, as the case may be, properly
exercising their rights pursuant to the preceding sentence are permitted to
include in such Transfer pursuant to Section 3.5(a) or Section 3.5 (b) hereof,
as applicable. If the proposed Transferee fails to purchase securities from any
VCP Tagging Stockholders and LLC Tagging Stockholders, as the case may be, that
have properly exercised their tag-along rights, then the Transferring VCP
Stockholder or Transferring LLC Stockholder, as the case may be, shall not be
permitted to make the proposed Transfer, and any such attempted Transfer shall
be void and of no effect, as PROVIDED in Section 3.3 hereof.
(d) If any of the VCP Tagging Stockholders and LLC Tagging
Stockholders, as the case may be, properly exercise their rights under Section
3.5(a) or Section 3.5(b) hereof, in each case, pursuant to Section 3.5(c)
hereof, the closing of the purchase of the securities with respect to which such
rights have been exercised shall take place concurrently with the closing of the
sale of the securities of the Transferring VCP Stockholder or Transferring LLC
Stockholder (including an indirect Transfer by a transfer of equity interests in
Holdings LLC), as the case may be. If none of the VCP Tagging Stockholders and
LLC Tagging Stockholders, as the case may be, properly exercise their rights
under Section 3.5(a) or Section 3.5(b) hereof, in each case, pursuant to Section
3.5(c) hereof, then the Transferring VCP Stockholder or Transferring LLC
Stockholder, as the case may be, will have (x) sixty (60) days after the
expiration of the Election Period to draft, execute and deliver definitive
documentation to Transfer the securities (including an indirect Transfer by a
transfer of equity interests in Holdings LLC) on terms and conditions no more
favorable to the proposed Transferee than those proposed in the Transfer Notice
for such proposed Transfer and (y) if such documentation is so drafted, executed
and delivered, thirty (30) days thereafter to consummate the Transfer. Any such
securities (including an indirect Transfer by a transfer of equity interests in
Holdings LLC) not so Transferred by the Transferring VCP Stockholder or
Transferring LLC Stockholder, as the case may be, during such ninety (90) day
period will again be subject to the provisions of this Section 3.5 upon a
subsequent Transfer. No Transfer shall occur pursuant to this Section 3.5 unless
the proposed Transferee shall agree to become a party to, and be bound to the
same extent as its transferor by the terms of, this Agreement pursuant to the
provisions of Section 4.8 hereof.
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3.6. PUBLIC OFFERINGS, ETC. So long as VCP and its Affiliates
beneficially own on a fully diluted basis at least 35% of the Common Stock
originally beneficially owned by it on a fully diluted basis on the Closing
Date, at any time after the 5th Anniversary of the Closing Date, VCP may provide
notice to the Company (or any successor corporation resulting from a
reorganization of the Company) of its desire that an underwritten IPO be
effected. Upon receipt of such notice, the Company shall promptly use its
reasonable best efforts to take all action required to cause such underwritten
IPO to occur within one hundred eighty (180) days of such notice; PROVIDED, that
in connection with such underwritten IPO each party hereto hereby agrees to take
any action reasonably necessary to comply with the rules or regulations of any
securities exchange or securities market on which the Common Stock is to be
listed or any law applicable generally to public companies whose securities are
publicly held, including amending Section 2 hereof to provide for increasing the
number of Directors to the extent necessary to elect independent Directors as
required by such rules or regulations and to change the composition of
committees of the Board so as to comply with such rules and regulations. If VCP
exercises its right hereunder, the terms of the Registration Rights Agreement
shall apply; PROVIDED that (i) the proviso at the end of Section 2.1(b) of the
Registration Rights Agreement shall not apply to a request pursuant to this
Section 3.6, (ii) a request pursuant to this Section 3.6 shall not be included
in the total number of requests granted pursuant to Section 2.2(f)(ii) of the
Registration Rights Agreement and (iii) the priority provisions set forth in
Section 2.2(b) of the Registration Rights Agreement shall apply except that (1)
shares of Common Stock owned by VCP, Vestar Investment and Vestar Investment II
and the Management Investors and their respective permitted transferees under
the Registration Rights Agreement shall have second priority, (2) shares of
Common Stock owned by other parties to the Registration Rights Agreement
(including Holdings LLC) shall have third priority and (3) all other shares of
Common Stock shall have fourth priority.
(b) The provisions of Sections 3.5 and 3.7 shall not be applicable to
offers and sales of Equity Securities in a Public Offering or, following the IPO
Date, in accordance with Rule 144.
3.7. DRAG-ALONG RIGHTS. So long as the VCP Directors constitute a
majority of the Board of the Company, if any of VCP and its Affiliates receives
a bona fide offer from a Third Party to purchase (whether by stock purchase,
merger or otherwise) at least 80% of the Common Stock then outstanding on a
fully diluted basis, then each other Stockholder and its Permitted Transferees
hereby agrees that it will (i) if requested by VCP, vote all Voting Securities
beneficially owned or held of record by such Stockholder in favor of such
Transfer and the ratification, approval and/or adoption of any and all actions
and agreements approved by the Board in connection with such Transfer and (ii)
Transfer a percentage of the Equity Securities owned by it (including
Convertible Participating Preferred Stock underlying CPUs and Option Stock
underlying Options) equal to the percentage of the Equity Securities owned by
VCP and its Affiliates being sold by VCP and its Affiliates to such Third Party
on the terms of the offer so accepted by VCP; PROVIDED that the terms of such
offer applicable to any securities owned by such Stockholder and its Permitted
Transferees are no less favorable than the terms of such offer applicable to the
securities of the same class owned by VCP and its Affiliates (including with
respect to the amount and nature of consideration and time of receipt thereof);
PROVIDED FURTHER that any Common Stock Equivalents required to be Transferred
pursuant to this
30
Section 3.7 shall be deemed converted into Common Stock in accordance with the
terms thereof and the number of shares of Common Stock issued in respect thereof
shall be reduced by the number of shares having a value as determined in
accordance with the terms thereof equal to any exercise price payable by the
holders thereof in connection with such conversion; and PROVIDED FURTHER that if
VCP and its Affiliates are Transferring shares of Convertible Participating
Preferred Stock for a price less than or equal to clause (i) of the Liquidation
Preference thereof, each other Stockholder and its Permitted Transferees
Transferring securities other than Convertible Participating Preferred Stock
shall receive an amount of consideration therefor equal to the Fair Market Value
thereof.
3.8. PARTICIPATION RIGHTS. (a) The Company shall not issue (an
"ISSUANCE"), other than Excluded Securities, any Equity Securities, Other
Capital Stock (as defined below) or Other Capital Stock Equivalents (as defined
below) (any Equity Securities, Other Capital Stock and Other Capital Stock
Equivalents, collectively, which are subject to an Issuance, the "NEW EQUITY
INTERESTS"), unless, prior to such Issuance, the Company notifies VCP, Holdings
LLC and the Management Investors in writing of the proposed Issuance and grants
to VCP, Holdings LLC and the Management Investors and/or, at such party's
election, one or more of its Affiliates, the right (the "RIGHT") to subscribe
for and purchase a portion of such New Equity Interests proposed to be issued in
the Issuance at the same price and upon the same terms and conditions
(including, in the event such New Equity Interests are issued as a unit together
with other securities, the purchase of such unit, but the Right shall not apply
separately to any component of such unit) as set forth in the notice of such
Issuance such that:
(i) immediately after giving effect to the Issuance and exercise
of the Right (including, for purposes of this calculation, the issuance of
shares of Common Stock upon conversion, exchange or exercise of any Common
Stock Equivalent issued in the Issuance or subject to the Right), the
shares of Common Stock beneficially owned by VCP, Holdings LLC, the
applicable Management Investors and their respective Affiliates on a fully
diluted basis (rounded to the nearest whole share) shall represent the same
percentage of the aggregate number of shares of Common Stock outstanding on
a fully diluted basis as was beneficially owned by VCP, Holdings LLC, the
applicable Management Investors and their respective Affiliates immediately
prior to the Issuance; and
(ii) in the case of an Issuance in which (A) shares of capital
stock other than Common Stock or Common Stock Equivalents ("OTHER CAPITAL
STOCK") or (B) any warrants, rights, calls, options or other securities
exchangeable for or exercisable or convertible into Other Capital Stock or
any other security other than Common Stock, Common Stock Equivalents or
Other Capital Stock entitled to participate in the Company's profits
(collectively, "OTHER CAPITAL STOCK EQUIVALENTS") are to be issued, each of
VCP, Holdings LLC, the Management Investors and their respective Affiliates
shall have the Right to acquire a percentage of the Other Capital Stock or
Other Capital Stock Equivalents to be issued in the Issuance equal to the
percentage of shares of Common Stock on a fully diluted basis that was
beneficially owned on a fully diluted basis by VCP, Holdings LLC, the
applicable Management Investors and their respective Affiliates immediately
prior to the Issuance.
31
(b) The Right may be exercised by VCP, Holdings LLC, the applicable
Management Investors and/or, at such party's election, one or more of its
Affiliates, as the case may be, PROVIDED, that the Person exercising the Right
must (i) be an Accredited Investor and (ii) deliver written notice to the
Company of such exercise of the Right which is received by the Company within
twenty (20) Business Days after the date on which VCP, Holdings LLC or such
Management Investor receives notice from the Company of the proposed Issuance.
If any of VCP, Holdings LLC or a Management Investor (either directly or through
one or more of its Affiliates), but not all of them, fails to exercise the Right
so as to purchase the maximum amount of New Equity Interests to which it is
entitled in connection with any Issuance, then with respect to such Issuance,
each party exercising its Right in full shall have the further Right (the
"ADDITIONAL RIGHT") to purchase such New Equity Interests that each
non-purchasing party would have been entitled to purchase, subject to allocation
among them on a pro rata basis based on the number of shares of Common Stock
outstanding on a fully diluted basis beneficially owned by such party. The
requirements of the first sentence of this Section 3.8(b) shall apply to the
exercise of any such Additional Right, PROVIDED, HOWEVER, that the notice
required in clause (ii) thereof shall be required within ten (10) Business Days
after the date on which VCP, Holdings LLC or the relevant Management Investor,
as applicable, receives notice from the Company of the availability to such
party of the Additional Right. The closing of the purchase and sale pursuant to
the exercise of the Right shall occur (x) at least ten (10) Business Days (but
not later than one hundred eighty (180) days) after the Company receives notice
of the exercise of the Right or, if applicable, the Additional Right and (y)
prior to or concurrently with the closing of the Issuance.
(c) In the event that VCP, Holdings LLC or a Management Investor
and/or their Affiliates fail to exercise any Right (or Additional Right, if
applicable) within the applicable time period, the Company shall have one
hundred twenty (120) days thereafter to sell the New Equity Interests for which
any such Right (or Additional Right, if any) was not exercised, at a cash or
cash equivalent price (as determined in good faith by the Board) and upon
general terms no more favorable to the purchasers thereof than as specified in
the Company's notice of such Issuance to VCP, Holdings LLC and the Management
Investors. In the event the Company has not sold the New Equity Interests within
said one hundred twenty (120) day period, the Company shall not thereafter issue
or sell any New Equity Interests without first offering such securities to VCP,
Holdings LLC and the Management Investors, their successors and Affiliates as
PROVIDED above.
3.9. COMPANY CALL RIGHT. (a) If prior to the Lapse Date, (i) a
Management Investor's employment with the Company (and/or, if applicable, its
Subsidiaries) is terminated (x) by the Company for Cause or (y) by such
Management Investor other than for Good Reason, in each case, other than as
result of the Management Investor's death or Disability or (ii) a Management
Stockholder shall effect (or purport to effect) a Transfer of any Equity
Securities other than as permitted by this Agreement (any of the foregoing a
"SECTION 3.9(a) CALL EVENT"), then the Company shall have the right to purchase
from the applicable Management Investor, and the applicable Management Investor
agrees to sell and transfer to the Company, (I) all of the vested Options then
held by such Management Investor (other than upon a termination for Cause, in
which case Options terminate) at an aggregate purchase price equal to (A) the
Fair Market Value of the Common Stock underlying such vested Options on the date
such vested Options are called by the Company minus (B) the exercise price of
any such vested Options (the
32
"OPTION CALL PRICE") and (II) all Option Stock then held by such Management
Investor at an aggregate purchase price equal to Fair Market Value thereof on
the date such Option Stock is called by the Company. Notwithstanding the 181 day
period specified in Section 3.9(c), in the event of a termination of the
Management Investor's employment by such Management Investor other than for Good
Reason, the Company shall provide such Management Investor with a binding
written notice within 20 days following such termination of employment that
indicates whether it will exercise its call right hereunder with respect to
vested Options; provided that if it delivers such notice it may exercise such
call right within such 181 day period. Notwithstanding the occurrence of a
Section 3.9(a) Call Event, the Company shall not have the right to purchase (1)
Convertible Participating Preferred Stock (or Common Stock, as applicable)
issued upon the conversion of CPUs and (2) Purchased Equity Shares, from the
applicable Management Investor;
(b) If, prior to the Lapse Date, a Management Investor's employment
with the Company (and/or, if applicable, its Subsidiaries) is terminated (i) by
the Company other than for Cause (including the Company's notice of non-renewal
of the employment term of a Management Investor under such Management Investor's
employment agreement), (ii) by such Management Investor for Good Reason or (iii)
as a result of such Management Stockholder's death or Disability (each a
"SECTION 3.9(b) CALL EVENT" and together with a Section 3.9(a) Call Event, a
"CALL EVENT"), then the Company shall have the right to purchase from such
Management Investor, and such Management Investor agrees to sell and transfer to
the Company (x) all of the vested Options then held by such Management Investor
at an aggregate purchase price equal to (A) the Option Call Price, and (y) all
Option Stock then held by such Management Investor at an aggregate purchase
price equal to the Fair Market Value thereof on the date such Option Stock is
called by the Company. Notwithstanding the occurrence of a Section 3.9(b) Call
Event, the Company shall not have the right to purchase (1) Convertible
Participating Preferred Stock (or Common Stock, as applicable) issued upon
conversion of CPUs and (2) Purchased Equity Shares, from the applicable
Management Investor; and
(c) The Company shall have a period of one hundred eighty one (181)
days following the later of (A) the date of a Call Event, (B) the last date of
the applicable Management Investor's exercise of his or her Options and (C) the
date of discovery of an impermissible Transfer constituting a Section 3.9(a)
Call Event, in which to give notice in writing to the applicable Management
Investor of the Company's election to exercise its rights pursuant to Section
3.9(a) or 3.9(b), as applicable (a "CALL NOTICE"). The completion of the
purchases pursuant to the foregoing shall take place at the principal office of
the Company within the later of (A) the tenth business day after the giving of
the Call Notice or (B) ten (10) business days after the receipt of all necessary
regulatory approvals (including but not limited to the expiration or termination
of the waiting periods under the ▇▇▇▇-▇▇▇▇▇-▇▇▇▇▇▇ Antitrust Improvements Act of
1976, as amended, if applicable). The price, if any, payable as described in
this Section 3.9 shall be paid by delivery to the applicable Management Investor
of a certified bank check or checks in the appropriate amount payable to the
order of the applicable Management Investor against delivery of certificates or
other instruments representing the Equity Securities so purchased, appropriately
endorsed or executed by the applicable Management Investor or its authorized
representative. The Company may choose to have a designee purchase any Equity
Securities elected by it to be purchased hereunder so long as the Company shall
bear any reasonable costs and expenses of the applicable Management Investor in
connection with the
33
sale to such designee that such Management Investor would not have otherwise
incurred in connection with a sale to the Company. All references to the Company
in this Section 3.9 shall refer to such designee as the context requires.
3.10. NON-COMPETITION. Each Management Investor agrees that it shall
not, directly or indirectly, compete with the Company or any of its Subsidiaries
for a period of two (2) years from the date such Management Investor's
employment with the Company (and/or, if applicable, its Subsidiaries) is
terminated; provided that this Section 3.10 shall not apply to any Management
Investor that is a party to any existing or future contractual obligation with
the Company that contains a provision restricting such Management Investor's
ability to compete with the Company; PROVIDED, however, that the foregoing shall
not prevent any Management Investor from owning any securities of the Company or
any of its Affiliates.
SECTION 4. MISCELLANEOUS
4.1. ADDITIONAL SECURITIES SUBJECT TO AGREEMENT. Each Stockholder
agrees that any other Equity Securities which it shall hereafter acquire by
means of a stock split, stock dividend, distribution or otherwise (other than
Equity Securities purchased in a Public Offering or in a brokers' transaction
(as defined in Rule 144(g) under the Securities Act) after the IPO Date) shall
be subject to the provisions of this Agreement to the same extent as if held on
the date hereof.
4.2. TERMINATION. This Agreement shall terminate, and thereby become
null and void and shall have no further force and effect, (A) in its entirety,
on the date on which (i) VCP and its respective Affiliates do not beneficially
own any Redemption Securities and (ii) the Management Investors do not
beneficially own any Equity Securities, (B) as to Article II only, on the date
on which VCP and its respective Affiliates do not beneficially own any
Redemption Securities and (C) as to any particular Equity Securities, on the
date on which they are sold in a Public Offering or in accordance with Rule 144.
4.3. REPRESENTATIONS AND WARRANTIES OF STOCKHOLDERS.
(a) Each of the Stockholders hereby represents and warrants to the
Company and the other Stockholders as follows:
(i) Such Stockholder has all requisite power and authority (and if
a natural person, legal capacity) to execute and deliver this Agreement and
the Registration Rights Agreement, to consummate the transactions
contemplated hereby and thereby and to perform its obligations hereunder
and thereunder. All action on the part of such Stockholder necessary for
the execution and delivery of this Agreement and the Registration Rights
Agreement, the consummation of the transactions contemplated hereby and
thereby and the performance of all obligations of such Stockholder
hereunder and thereunder has been taken prior to the date hereof. Each of
this Agreement and the Registration Rights Agreement has been duly executed
and delivered by such Stockholder. Each of this Agreement and the
Registration Rights Agreement (assuming due execution and delivery by the
Company and the other Stockholders) will be the legal,
34
valid and binding obligation of such Stockholder, enforceable against it in
accordance with their terms, subject to the effects of bankruptcy,
insolvency, fraudulent conveyance, reorganization, moratorium and other
similar laws relating to or affecting creditors' rights generally, general
equitable principles (whether considered in a proceeding in equity or at
law) and an implied covenant of good faith and fair dealing.
(ii) The execution, delivery and performance of this Agreement and
the Registration Rights Agreement, and the consummation of the transactions
contemplated hereby and thereby, will not result in (A) (1) any violation
of, or be in conflict with or constitute a default (with or without notice
or lapse of time or both) under, the organizational documents of such
Stockholder (unless a natural person), (2) any violation of, or be in
conflict with or constitute a default (with or without notice or lapse of
time or both) under, any term or provision of, or any right of termination,
cancellation or acceleration arising under, any indentures, leases,
licenses, contracts, agreements, instruments or undertakings to which such
Stockholder is a party or by which any of its assets or properties are
bound or (3) any violation under any judicial or administrative judgment,
decision, decree, order, settlement, injunction, writ, stipulation,
determination or award or any statute, law, ordinance, rule or regulation
to which such Stockholder is subject or by which any of its assets or
properties are bound or (B) result in the imposition of any Lien on the
business or material properties or assets of such Stockholder. No consent,
approval, order or authorization of, notice to, or declaration, filing or
registration with any governmental authority, or consent, approval or
waiver of any other Person, is required to be made or obtained by such
Stockholder in connection with the execution, delivery and performance of
this Agreement or the Registration Rights Agreement and the consummation of
the transactions contemplated hereby except those that have been made or
obtained prior to the date hereof.
(b) Holdings LLC represents and warrants to the Company and the other
Stockholders that Sections 3.11(a), 9.1(b), 9.2(a)(i) 11.4(a), 11.5 and 11.16 of
the Holdings LLC Agreement are legal, valid and binding obligations of Holdings
LLC and its members, as applicable, enforceable against them in accordance with
their terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
4.4. HOLDINGS LLC INDEMNITY.
(a) Holdings LLC agrees to indemnify and hold harmless VCP and its
Affiliates and their respective directors, members, partners, managers,
officers, employees and agents (each, an "Indemnitee") from and against any and
all liability, including, without limitation, all obligations, costs, fines,
claims, actions, injuries, demands, suits, judgments, proceedings,
investigations, arbitrations (including stockholder claims, actions, injuries,
demands, suits, judgments, proceedings, investigations or arbitrations) and
reasonable expenses, including, without limitation, reasonable accountants' and
reasonable attorney's fees and expenses (together the "Losses"), incurred by
such Indemnitee or any of the Company and its Subsidiaries
35
prior to or after the Closing Date and arising out of, resulting from, or
relating to any claims by Holdings LLC or any of its members or any of their
respective Affiliates or any Family Member, director, employee, member, partner,
manager, trustee, officer or agent thereof in respect of the Merger, the
formation of Holdings LLC, the Offering Memorandum, Solo's conversion from S
corporation status to C corporation status, the Management Agreement, the
Preferred Stock Purchase Agreement, the Registration Rights Agreement or this
Agreement or any other action contemplated thereby, including without
limitation, related tax advice; PROVIDED that the foregoing indemnification
rights in this Section 4.4 shall not be available to the extent that any such
Losses are incurred as a result of such Indemnitee's bad faith, willful
misconduct or gross negligence. With respect to any Losses incurred by any of
the Company and its Subsidiaries, any such Indemnitee shall be entitled to
recover such Indemnitee's proportional share of such Losses based on its
percentage ownership of the aggregate equity interest in the Company on a fully
diluted basis. For purposes of this Section 4.4, none of the circumstances
described in the limitations contained in the proviso in the second preceding
sentence shall be deemed to apply absent an order of a court of competent
jurisdiction to such effect, in which case to the extent any such limitation is
so determined to apply to any Indemnitee, then any previously advanced indemnity
payments shall be promptly repaid by such Indemnitee to Holdings LLC. Holdings
LLC shall pay or reimburse each Indemnitee upon demand for any reasonable legal
or other out-of-pocket expenses incurred by such Indemnitee in connection with
investigating, defending, or preparing to defend any such claim or proceeding;
PROVIDED, however, that (i) such Indemnitee shall be required to promptly refund
any such amounts to Holdings LLC in the event that it is determined by a court
of competent jurisdiction that such Indemnitee is not entitled to
indemnification hereunder and (ii) in no event shall Holdings LLC be required to
pay fees and expenses under this Section 4.4 for more than one firm of attorneys
in any jurisdiction in any one legal action or group of related actions. In the
event of any payment of indemnification pursuant to this Section 4.4, so long as
any Indemnitee is fully indemnified for all Losses, Holdings LLC will be
subrogated to the extent of such payment to all of the related rights of
recovery of the Indemnitee to which such payment is made against all other
Persons. Such Indemnitee shall execute all papers reasonably required to
evidence such subrogation. Holdings LLC shall not be liable for any settlement
of any claim, action or proceeding effected against an Indemnitee without its
written consent, which consent shall not be unreasonably withheld or delayed.
Anything to the contrary in this Section 4.4 notwithstanding, no indemnification
rights in this Section 4.4 shall be available to the extent that any such Losses
are incurred as a result of a breach by VCP and its Affiliates of their
obligations under any of the Management Agreement, the Preferred Stock Purchase
Agreement, the Registration Rights Agreement or this Agreement.
(b) If for any reason the indemnification provided for herein is
unavailable to an Indemnitee or is insufficient to hold it harmless as
contemplated hereby, then Holdings LLC shall contribute to the amount paid or
payable by the Indemnitee as a result of such loss, claim, damage or liability
in such proportion as is appropriate to reflect not only the relative benefits
received by the Indemnitee and Holdings LLC, but also the relative fault of
Holdings LLC and the Indemnitee, as well as any other relevant equitable
considerations.
4.5. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
36
(a) The Company has all requisite power and authority to execute and
deliver this Agreement and the Registration Rights Agreement, to consummate the
transactions contemplated hereby and thereby and to perform its obligations
hereunder and thereunder. All action on the part of the Company necessary for
the execution and delivery of this Agreement and the Registration Rights
Agreement, the consummation of the transactions contemplated hereby and thereby
and the performance of all obligations of the Company hereunder and thereunder
has been taken prior to the date hereof. Each of this Agreement and the
Registration Rights Agreement has been duly executed and delivered by the
Company. Each of this Agreement and the Registration Rights Agreement (assuming
due execution and delivery by each Stockholder) will be the legal, valid and
binding obligation of the Company, enforceable against it in accordance with
their terms, subject to the effects of bankruptcy, insolvency, fraudulent
conveyance, reorganization, moratorium and other similar laws relating to or
affecting creditors' rights generally, general equitable principles (whether
considered in a proceeding in equity or at law) and an implied covenant of good
faith and fair dealing.
(b) The execution, delivery and performance of this Agreement and the
Registration Rights Agreement, and the consummation of the transactions
contemplated hereby and thereby, will not result in (a) (i) any violation of, or
be in conflict with or constitute a default (with or without notice or lapse of
time or both) under, the organizational documents of the Company, (ii) any
violation of, or be in conflict with or constitute a default (with or without
notice or lapse of time or both) under, any term or provision of, or any right
of termination, cancellation or acceleration arising under, any indentures,
leases, licenses, contracts, agreements, instruments or undertakings to which
the Company is a party or by which any of its assets or properties are bound or
(iii) any violation under any judicial or administrative judgment, decision,
decree, order, settlement, injunction, writ, stipulation, determination or award
or any statute, law, ordinance, rule or regulation to which the Company is
subject or by which any of its assets or properties are bound or (b) result in
the imposition of any Lien on the business or material properties or assets of
the Company. No consent, approval, order or authorization of, notice to, or
declaration, filing or registration with any governmental authority, or consent,
approval or waiver of any other Person, is required to be made or obtained by
the Company in connection with the execution, delivery and performance of this
Agreement or the Registration Rights Agreement and the consummation of the
transactions contemplated hereby except those that (x) in regards to this
Agreement, have been made or obtained prior to the date hereof and (y) in
regards to the Registration Rights Agreement, have been made or obtained as
contemplated therein.
4.6. OTHER STOCKHOLDERS' AGREEMENTS. None of the Stockholders shall
enter into any stockholder agreement or other arrangement of any kind with any
Person with respect to Equity Securities which is inconsistent with the
provisions of this Agreement or which may impair its ability to comply with this
Agreement.
4.7. AMENDMENTS. This Agreement may be amended only by a written
instrument signed (a) by VCP, so long as it (or its Affiliates) owns any Equity
Securities, (b) by Holdings LLC, so long as it (or its Affiliates) owns any
Equity Securities and (c) by Stockholders which own on a fully diluted basis
Equity Securities representing at least a majority of the voting power
represented by all Equity Securities outstanding on a fully diluted basis and
37
owned by all Stockholders; PROVIDED, HOWEVER, that if any amendment is not
unanimously approved by all affected Stockholders, any changes set forth in such
amendment must not materially adversely affect any Stockholder in a manner
different from other Stockholders; and PROVIDED FURTHER, that any amendment
which adversely effects the Company or imposes an additional obligation thereon
must be approved in writing by the Company; and PROVIDED FURTHER, that any
amendment which has an adverse effect on any rights of the Senior Executive
under this Agreement to an extent that is disproportionately different from the
effect of such amendment generally on the other Stockholders holding the same
class or classes of Equity Securities held by the Senior Executive must be
approved in writing by the Senior Executive.
4.8. SUCCESSORS, ASSIGNS AND TRANSFEREES. The provisions of this
Agreement shall be binding upon and shall inure to the benefit of the parties
hereto (including Stockholders who become a party hereto after the date hereof)
and their respective successors, PROVIDED, that no rights granted hereunder
specifically to Holdings LLC and its Affiliates, or VCP, Vestar Investment or
Vestar Investment II and any of their Affiliates, may be assigned, except to a
Permitted Transferee thereof in connection with a Transfer in accordance with
the provisions of this Agreement or as otherwise expressly set forth herein, and
no Stockholder may assign to a Permitted Transferee any of its rights hereunder
other than to a Permitted Transferee in connection with a Transfer of all of the
Equity Securities beneficially owned by such Stockholder in accordance with the
provisions of this Agreement.
4.9. NOTICES. All notices, requests and demands to or upon the
respective parties hereto to be effective shall be in writing (including by
telecopy), and, unless otherwise expressly PROVIDED herein, shall be deemed to
have been duly given or made when delivered by hand, or three days after being
delivered to a recognized courier (whose stated terms of delivery are three days
or less to the destination of such notice) or, in the case of telecopy notice,
when received, addressed as follows to the parties hereto, or to such other
address as may be hereafter notified by the respective parties hereto:
if to VCP, Vestar Investment or Vestar Investment II, to:
Vestar Capital Partners IV, L.P.
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ LLP
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
38
if to the Company, to:
Solo Cup Investment Corporation
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
if to Holdings LLC or any beneficial owner of units thereof, to:
SCC Holding Company LLC
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
in each case, with a copy to:
Skadden, Arps, Slate, ▇▇▇▇▇▇▇ & ▇▇▇▇ LLP
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
if to the Management Investors, to
them at the addresses or telecopy
numbers set forth in the books and records of the Company
4.10. INTEGRATION. This Agreement and the documents referred to herein
or delivered pursuant hereto contain the entire understanding of the parties
with respect to the subject matter hereof and thereof. There are no agreements,
representations, warranties, covenants or undertakings with respect to the
subject matter hereof and thereof other than those expressly set forth herein
and therein. This Agreement supersedes all prior agreements and understandings
between the parties with respect to such subject matter.
4.11. FURTHER ASSURANCES. At any time or from time to time after the
date hereof, the parties agree to cooperate with each other, and at the request
of any other party, to execute and deliver any further instruments or documents
and to take all such further action as the other party may reasonably request in
order to evidence or effectuate the consummation of the transactions
contemplated hereby and to otherwise carry out the intent of the parties
hereunder. In particular, in connection with any Liquidity Event, the parties
agree to cooperate with each other to structure the transaction to be as
mutually tax efficient as possible.
4.12. ENTIRE AGREEMENT. Except as otherwise expressly set forth
herein, this Agreement embodies the complete agreement and understanding among
the parties hereto with respect to the subject matter hereof and supersedes and
preempts any prior understandings,
39
agreements or representations by or among the parties, written or oral, that may
have related to the subject matter hereof in any way; PROVIDED that the parties
to this Agreement acknowledge and agree that the rights and restrictions set
forth in this Agreement are in addition to, and not in replacement of, the
rights, restrictions and obligations set forth in the Preferred Stock Purchase
Agreement and the Registration Rights Agreement.
4.13. DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, shall impair any
such right, power or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
the part of any party hereto of any breach, default or noncompliance under this
Agreement or any waiver on such party's part of any provisions or conditions of
this Agreement, must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to any party, shall be cumulative and
not alternative.
4.14. SEVERABILITY. Whenever possible, each provision of this
Agreement shall be interpreted in such manner as to be effective and valid under
applicable law, but if any provision of this Agreement is held to be invalid,
illegal or unenforceable in any respect under any applicable law or rule in any
jurisdiction, such invalidity, illegality or unenforceability shall not affect
any other provision or any other jurisdiction, but this Agreement shall be
reformed, construed and enforced in such jurisdiction as if such invalid,
illegal or unenforceable provision had never been contained herein.
4.15. EFFECTIVE DATE. This Agreement shall become effective
immediately upon the Closing Date.
4.16. ENFORCEMENT. Each party hereto acknowledges that money damages
would not be an adequate remedy in the event that any of the covenants or
agreements in this Agreement are not performed in accordance with its terms, and
it is therefore agreed that in addition to and without limiting any other remedy
or right it may have, the non-breaching party will have the right to an
injunction, temporary restraining order or other equitable relief in any court
of competent jurisdiction enjoining any such breach and enforcing specifically
the terms and provisions hereof.
4.17. TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
4.18. NO RECOURSE. Notwithstanding anything that may be expressed or
implied in this Agreement, the Company and each Stockholder covenants, agrees
and acknowledges that no recourse under this Agreement or any documents or
instruments delivered in connection with this Agreement shall be had against any
current or future director, officer, employee, general or limited partner or
member of any Stockholder or the Company or of any Affiliate or assignee
40
thereof, whether by the enforcement of any assessment or by any legal or
equitable proceeding, or by virtue of any statute, regulation or other
applicable law, it being expressly agreed and acknowledged that no personal
liability whatsoever shall attach to, be imposed on or otherwise be incurred by
any current or future officer, agent or employee of any Stockholder or the
Company or any current or future member of any Stockholder or the Company or any
current or future director, officer, employee, partner or member of any
Stockholder or the Company or of any Affiliate or assignee thereof, as such for
any obligation of any Stockholder or the Company under this Agreement or any
documents or instruments delivered in connection with this Agreement for any
claim based on, in respect of or by reason of such obligations or their
creation.
4.19. COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument. This Agreement may be executed by facsimile
signature.
4.20. GOVERNING LAW. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of New York applicable to
contracts made and to be performed therein, except for matters directly within
the purview of the General Corporation Law of the State of
Delaware (the
"DGCL"), which shall be governed by the DGCL. The parties executing this
Agreement hereby agree to submit to the non-exclusive jurisdiction of the
federal and state courts located in State of New York in any action or
proceeding arising out of or relating to this Agreement.
4.21. ADDITIONAL MANAGEMENT INVESTORS. Any employee or director of any
of the Company and its Subsidiaries who becomes party after the date hereof to
an agreement pursuant to which he or she receives Equity Securities may become a
party hereto and may become bound hereby by entering into a supplementary
agreement with the Company agreeing to be bound by the terms hereof in the same
manner as the Management Investors. Each such supplementary agreement shall
become effective upon its execution by the Company and such employee or
director, and it shall not require the signature or consent of any other party
hereto. Such supplementary agreement may modify some of the terms hereof as they
affect such employee or director.
IN WITNESS WHEREOF, each of the undersigned has executed this
Agreement or caused this Agreement to be executed on its behalf as of the date
first written above.
SOLO CUP INVESTMENT CORPORATION
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Operating
Officer
SCC HOLDING COMPANY LLC
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
SOLO CUP COMPANY
By:/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: President and Chief Operating
Officer
[Signature Page to Stockholders' Agreement]
VESTAR CAPITAL PARTNERS IV, L.P.
By: Vestar Associates IV, L.P.,
its general partner
By: Vestar Associates Corporation IV,
its general partner
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director
VESTAR CUP INVESTMENT, LLC
By: Vestar Capital Partners IV, L.P.,
its managing member
By: Vestar Associates IV, L.P.,
its general partner
By: Vestar Associates Corporation IV,
its general partner
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director
VESTAR CUP INVESTMENT II, LLC
By: Vestar Capital Partners IV, L.P.,
its managing member
By: Vestar Associates IV, L.P.,
its general partner
By: Vestar Associates Corporation IV,
its general partner
By:/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------------
Name: ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Title: Managing Director
[Signature Page to Stockholders' Agreement]
MANAGEMENT INVESTORS:
/s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
--------------------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
[Signature Page to Stockholders' Agreement]