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EXHIBIT 99.1
AMENDED AND RESTATED
LIMITED LIABILITY COMPANY AGREEMENT
OF
CONSOLIDATED CONTAINER HOLDINGS LLC
2
LIMITED LIABILITY COMPANY AGREEMENT
OF
CONSOLIDATED CONTAINER HOLDINGS LLC
TABLE OF CONTENTS
PAGE
ARTICLE I ORGANIZATIONAL MATTERS......................................................................1
1.1 Formation...................................................................................1
1.2 Name........................................................................................1
1.3 Registered Office and Principal Office of Company; Addresses of Members.....................1
1.4 Term........................................................................................2
1.5 Assumed Name Certificate....................................................................2
1.6 Ownership...................................................................................2
1.7 No Individual Authority.....................................................................2
1.8 Title to Company Property...................................................................2
1.9 Limits of Company...........................................................................2
ARTICLE II DEFINITIONS.................................................................................2
ARTICLE III PURPOSE.....................................................................................9
3.1 Purposes and Scope..........................................................................9
ARTICLE IV CAPITAL CONTRIBUTIONS......................................................................10
4.1 Initial Capital Contributions..............................................................10
4.2 Non-Contemplated Contributions.............................................................10
4.3 Capital Accounts...........................................................................11
4.4 Interest...................................................................................14
4.5 No Withdrawal..............................................................................14
4.6 Limitation on Capital Contributions and Loans..............................................14
ARTICLE V ALLOCATIONS................................................................................15
5.1 Allocation of Profits and Losses...........................................................15
5.2 Special Allocations........................................................................16
5.3 Curative Allocations.......................................................................17
5.4 Tax Allocations: Code Section 704(c).......................................................18
5.5 Allocations Upon Option Exercise...........................................................18
5.6 Other Allocation Rules.....................................................................19
ARTICLE VI DISTRIBUTIONS..............................................................................19
6.1 Distributions of Available Cash............................................................19
6.2 Amounts Withheld...........................................................................20
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6.3 Excess Distributions.......................................................................20
6.4 Tax Distributions..........................................................................21
ARTICLE VII MANAGEMENT OF THE COMPANY..................................................................22
7.1 Management Committee.......................................................................22
7.2 Major Decisions............................................................................24
7.3 Approval of Major Decisions................................................................26
7.4 Officers...................................................................................26
7.5 Certificate of Formation...................................................................26
7.6 Compensation and Reimbursement of Member Expenses..........................................26
7.7 Outside Activities; Noncompetition.........................................................27
7.8 Transactions with Affiliates...............................................................29
7.9 Indemnification of Members.................................................................30
7.10 Liability of the Members...................................................................32
7.11 Preemptive Rights..........................................................................32
7.12 Certain Anti-dilutive Rights...............................................................33
7.13 Exercise of Certain Options................................................................35
ARTICLE VIII RIGHTS AND OBLIGATIONS OF MEMBERS..........................................................35
8.1 Limitation of Liability....................................................................35
8.2 Return of Capital..........................................................................35
ARTICLE IX BOOKS, RECORDS, ACCOUNTING AND REPORTS.....................................................36
9.1 Records and Accounting.....................................................................36
9.2 Fiscal Year................................................................................36
9.3 Reports....................................................................................36
9.4 Documents..................................................................................37
9.5 Certain Administrative Expenses of RPH.....................................................37
ARTICLE X TAX MATTERS................................................................................37
10.1 Tax Matters Partner........................................................................37
10.2 Annual Tax Returns.........................................................................37
10.3 Notice and Limitations on Authority........................................................38
10.4 Tax Elections..............................................................................38
10.5 Actions in Event of Audit..................................................................39
10.6 Organizational Expenses....................................................................39
10.7 Taxation as a Partnership..................................................................39
ARTICLE XI TRANSFERS OF UNITS; NEW MEMBERS............................................................39
11.1 Transfer Restrictions......................................................................39
11.3 Transfer to Affiliates and Pledgees........................................................39
11.3 [Reserved].................................................................................40
11.4 Registration...............................................................................40
11.5 Right of First Refusal; Tag-Along Rights...................................................40
11.6 Drag-Along Rights..........................................................................44
11.7 Put Rights.................................................................................44
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11.8 Prohibited Transfers.......................................................................46
11.9 Rights of Assignee.........................................................................46
11.10 Admission as a New Member..................................................................47
11.11 Distributions and Allocations in Respect of Transferred Units..............................48
11.12 Conversion to Corporate Form...............................................................48
ARTICLE XII PREFERRED UNITS............................................................................49
12.1 Issuance of Preferred Units................................................................49
12.2 Terms of Preferred Units...................................................................49
ARTICLE XIII DISSOLUTION AND LIQUIDATION................................................................51
13.1 Dissolution................................................................................51
13.2 Continuation of the Company................................................................51
13.3 Liquidation................................................................................52
13.4 Reserves...................................................................................53
13.5 Distribution in Kind.......................................................................53
13.6 Disposition of Documents and Records.......................................................53
13.7 Negative Capital Accounts..................................................................54
13.8 Filing of Certificate of Cancellation......................................................54
13.9 Return of Capital..........................................................................54
13.10 Waiver of Partition........................................................................54
ARTICLE XIV AMENDMENT OF AGREEMENT.....................................................................54
14.1 Amendment Procedures.......................................................................54
ARTICLE XV GENERAL PROVISIONS.........................................................................55
15.1 Addresses and Notices......................................................................55
15.2 Titles and Captions........................................................................56
15.3 Pronouns and Plurals.......................................................................56
15.4 Further Action.............................................................................56
15.5 Binding Effect.............................................................................56
15.6 Integration................................................................................56
15.7 No Third Party Beneficiary.................................................................56
15.8 Waiver.....................................................................................56
15.9 Counterparts...............................................................................57
15.10 Applicable Law.............................................................................57
15.11 Invalidity of Provisions...................................................................57
15.12 Confidentiality............................................................................57
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LIMITED LIABILITY COMPANY AGREEMENT
OF
CONSOLIDATED CONTAINER HOLDINGS LLC
This LIMITED LIABILITY COMPANY AGREEMENT of CONSOLIDATED CONTAINER HOLDINGS LLC
(the "Agreement") is entered into as of July 1, 1999, by and among Franklin
Plastics, Inc., a Delaware corporation ("Franklin"), Xxxx Plastics Holdings,
Inc. ("RPH"), and Vestar Packaging LLC, a Delaware limited liability company
("Vestar"), together with any Person who becomes a Member as provided herein.
ARTICLE I
ORGANIZATIONAL MATTERS
1.1 Formation. The Company was formed as a limited liability
company by the filing of the Certificate in accordance with the Delaware Act on
April 20, 1999. The Members hereby enter into this Agreement in order to set
forth the rights and obligations of the Members and certain matters related
thereto. Except as expressly provided and permitted herein to the contrary, the
rights and obligations of the Members and the administration and termination of
the Company shall be governed by the Delaware Act.
1.2 Name. The name of the Company shall be, and the business of
the Company shall be conducted under the name of, "Consolidated Container
Holdings LLC." The Company's business may be conducted under any other name or
names approved by the Management Committee.
1.3 Registered Office and Principal Office of Company; Addresses
of Members.
(a) The registered office of the Company in the State of
Delaware shall be 0000 Xxxxxx Xxxxxx, Xxxxxxxxxx, Xxxxxxxx 00000, and
the registered agent for service of process on the Company at such
registered office shall be Corporation Service Company, 0000 Xxxxxx
Xxxx, Xxxxxxxxxx, XX 00000. The principal place of business of the
Company shall be at 0000 XxXxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000, or
such other location as determined by the Management Committee. The
Company may maintain offices at such other locations as the Management
Committee deems advisable.
(b) The addresses of the Members as of the Closing Date are
set forth in Section 15.1. The address of a Member may be changed in
accordance with the requirements set forth in Section 15.1.
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1.4 Term. The existence of the Company commenced on the
Commencement Date, and the Company shall continue in existence until the
dissolution of the Company pursuant to the express provisions of Article XIII
hereof (other than a dissolution that is followed by the reconstitution of the
Company pursuant to Section 13.2).
1.5 Assumed Name Certificate. The Members shall execute and file
any assumed or fictitious name certificate or certificates or any similar
documents required by law to be filed in connection with the formation and
operation of the Company.
1.6 Ownership. The interest of each Member in the Company shall be
personal property for all purposes. All property and interests in property, real
or personal, owned by the Company shall be deemed owned by the Company as an
entity, and no Member, individually, shall have any ownership of such property
or interest except by having an ownership interest in the Company as a Member.
Each of the Members irrevocably waives, during the term of the Company and
during any period of its liquidation following any dissolution, any right that
it may have to maintain any action for partition with respect to any of the
assets of the Company.
1.7 No Individual Authority. No Member shall have any authority to
act for, or to undertake or assume, any obligation, debt, duty or responsibility
on behalf of any other Member or the Company except as otherwise expressly
provided in this Agreement.
1.8 Title to Company Property. It is the desire and intention of
the Members that legal title to all property of the Company shall be held and
conveyed in the name of the Company.
1.9 Limits of Company. The relationship between the parties hereto
shall be limited to the carrying on of the business of the Company in accordance
with the terms of this Agreement. Such relationship shall be construed and
deemed to be a limited liability company for the sole and limited purpose of
carrying on such business. Except as otherwise provided for or contemplated in
this Agreement, nothing herein shall be construed to create a partnership
between the Members or to authorize any Member to act as general agent for any
other Member.
ARTICLE II
DEFINITIONS
The following definitions shall for all purposes, unless otherwise
clearly indicated to the contrary, apply to the terms used in this Agreement.
"Adjusted Capital Account" means, with respect to any Member, a special
account maintained for such Member, the balance of which shall equal such
Member's Capital Account balance, increased by the amount (if any) of such
Member's share of the Company Minimum Gain and Member Minimum Gain of the
Company.
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"Adjusted Capital Account Deficit" means, with respect to any Member,
the deficit balance, if any, in such Member's Capital Account as of the end of
the relevant Fiscal Year, after giving effect to the following adjustments:
(a) Credit to such Capital Account any amounts which such
Member is obligated to restore pursuant to any provision of this
Agreement or is deemed to be obligated to restore pursuant to
Regulations Section 1.704-1(b)(2)(iv)(c), the penultimate sentence of
Regulations Section 1.704-2(g)(1), or the penultimate sentence of
Regulations Section 1.704-2(i)(5); and
(b) Debit to such Capital Account the items described in
Regulations Section 1.704-1(b)(2)(ii)(d)(4), (5), and (6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with Regulations Section 1.704-1(b)(2)(ii)(d) and shall be interpreted
consistently therewith.
"Affiliate" means, with respect to a particular Person, any other
Person directly or indirectly Controlling, Controlled by, or under common
Control with such Person.
"Agreement" means this Limited Liability Company Agreement of
Consolidated Container Holdings LLC, as it may be further amended, supplemented
or restated from time to time in accordance with the terms of this Agreement.
"As-Converted Units" shall mean, with respect to any Member that shall
own Preferred Units at the time the Suiza Member, in the case of any Xxxx
Member, or the Xxxx Members, in the case of the Suiza Member, propose to effect
a sale of its Units in accordance with the terms hereof, a number of Units equal
to the aggregate Liquidation Preference of the number of Preferred Units owned
by such Member divided by the price per Unit proposed to be paid for each Unit
proposed to be sold by such Suiza Member or Xxxx Member, as the case may be.
"Available Cash" of the Company as of any date means all cash funds of
the Company on hand as of such date after: (a) payment of all expenditures of
any kind, including operating expenses and capital expenditures, that are due
and payable as of such date or that are expected to become due and payable in
the next 30 days; and (b) provision for adequate reserves (working capital and
capital), with the amount of such reserves to be determined by the Management
Committee (acting reasonably and in good faith).
"Blocked Affiliate Transfer" has the meaning set forth in Section 11.2.
"Book Depreciation" has the meaning set forth in Section 4.3(b)(v).
"Book Value" has the meaning set forth in Section 4.3(c).
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"Business Day" means Monday through Friday of each week, except that a
legal holiday recognized as such by the Government of the United States shall
not be regarded as a Business Day.
"Capital Account" means the capital account maintained for a Member
pursuant to Section 4.3 with respect to Units held by such Member.
"Capital Contribution" means, with respect to any Member, the amount of
money and the initial Book Value of any property (other than money) contributed
to the Company with respect to the interest in the Company held by such Member,
reduced by the amount of any liabilities of the Member assumed by the Company or
which are secured by any property contributed by such Member to the Company.
"Certificate" means the Certificate of Formation of the Company filed
with the Secretary of State of Delaware, as it may be amended or restated from
time to time.
"Change in Control" means the first to occur of the following events:
(i) any sale, lease, exchange or other transfer (in one transaction or a series
of related transactions) of all or substantially all of the assets of Suiza
Foods, RPH or Vestar, as the case may be, to any person, or "group" of related
persons, as defined in Rule 13d-5 under the Securities Exchange Act of 1934 (a
"Group"); (ii) a majority of the board of directors of Suiza Foods, RPH or
Vestar, as the case may be, shall consist of persons who are not Continuing
Directors; or (iii) the acquisition by any person or Group of the power,
directly or indirectly, to vote or direct the voting of securities having more
than 50% of the ordinary voting power for the election of directors of Suiza
Foods, RPH or Vestar, as the case may be, or to designate a majority of the
directors of Suiza Foods, RPH or Vestar, as the case may be, or (iv) a merger of
Suiza Foods, RPH or Vestar, as the case may be, with another entity in which the
previous shareholders or members of the merging entity do not continue to own at
least a majority of the voting equity securities of the surviving entity.
"Closing Date" means the date of this Agreement.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time. All references herein to the Code shall include any
corresponding provision or provisions of succeeding law.
"Commencement Date" means the date that the Certificate of Formation
was filed with the Secretary of State of Delaware.
"Company" means Consolidated Container Holdings LLC, a Delaware limited
liability company established by filing of the Certificate with the Secretary of
State of Delaware.
"Company Estimated Net Taxable Income" has the meaning set forth in
Section 6.4(a).
"Company Minimum Gain" has the meaning set forth in Regulations
Section 1.704-2(d).
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"Company Option" has the meaning set forth in Section 5.5(b).
"Competing Business" has the meaning set forth in Section 7.7(b).
"Continuing Director" means, as of the date of determination, any
person who (i) was a member of the board of directors or management committee of
Suiza Foods, RPH or Vestar, as the case may be, on the date of this Agreement,
or (ii) was nominated for election or elected to the board of directors or
management committee of Suiza Foods, RPH or Vestar, as the case may be, with the
affirmative vote of a majority of the Continuing Directors who were members of
such board of directors at the time of such nomination or election.
"Contributions" means the contribution by Franklin of the member
interests of PCI to Consolidated Container Company LLC and the contribution by
Vestar of $60,800,000 to the Company, both pursuant to the Merger Agreement.
"Control" (and derivations thereof) means, with respect to a particular
Person, (a) the ownership, directly or indirectly, of more than 50% of the
equity or voting interests in such Person or (b) the right to elect or appoint,
together with others who are required to act in concert with such Person, more
than 50% of the directors or members of another governing body that directs the
management and policies of such Person.
"Delaware Act" means the Delaware Revised Limited Liability Company
Act, 6 Del. C. Section 18-101, et seq., as amended from time to time.
"Dissolution Event" has the meaning set forth in Section 13.1(b).
"Event of Bankruptcy" means, with respect to any Member or the Company,
any of the following acts or events:
(a) making an assignment for the benefit of creditors;
(b) filing a voluntary petition in bankruptcy;
(c) becoming the subject of an order for relief or being
declared insolvent or bankrupt in any federal or state bankruptcy or
insolvency proceeding;
(d) filing a petition or answer seeking a reorganization,
arrangement, composition, readjustment, liquidation, dissolution, or
similar relief under any statute, law, or regulation;
(e) filing an answer or other pleading admitting or failing to
contest the material allegations of a petition filed against it in a
proceeding of the type described in parts (a) through (d) of the
definition;
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(f) seeking, consenting to, or acquiescing in the appointment
of a trustee, receiver, or liquidator of all or any substantial part of
its properties; or
(g) the expiration of 90 days after the date of the
commencement of a proceeding against such Person seeking
reorganization, arrangement, composition, readjustment, liquidation,
dissolution, or similar relief under any statute, law, or regulation if
the proceeding has not been previously dismissed or the expiration of
60 days after the date of the appointment, without such Person's
consent or acquiescence, of a trustee or receiver for the liquidation
of such Person or of all or any substantial part of such Person's
properties, if the appointment has not been previously vacated or
stayed, or the expiration of 60 days after the date of expiration of a
stay, if the appointment has not been previously vacated.
"Fair Market Value" has the meaning set forth in Section 11.7(c).
"Financial Statements" means the audited financial statements called
for in Section 9.3.
"Fiscal Year" means the 12-month period ending December 31 of each
year; provided that the initial Fiscal Year shall be the period beginning on the
Commencement Date and ending December 31, 1999, and the last Fiscal Year shall
be the period beginning on January 1 of the calendar year in which the final
liquidation and termination of the Company is completed and ending on the date
such final liquidation and termination is completed (to the extent any
computation or other provision hereof provides for an action to be taken on a
Fiscal Year basis, an appropriate proration or other adjustment shall be made in
respect of the initial and final Fiscal Years to reflect that such periods are
less than full calendar year periods).
"Franklin Managers" means the Managers designated by Franklin pursuant
to Section 7.1.
"Franklin Replacement Options" has the meaning set forth in Section
7.13.
"Indemnitee" has the meaning set forth in Section 7.9.
"Independent Accountants" means any of the five largest nationally
recognized accounting firms in the United States, as selected by the Management
Committee. Deloitte & Touche LLP shall be the initial Independent Accountant.
"Initial Liquidation Preference" has the meaning set forth in Section
12.2.
"Initial Public Offering" means any underwritten public offering of
securities of RPH (which is intended to be the corporate successor to the
Company in the event of an Initial Public Offering, by merger of the Company
and, subject to Section 11.12 hereof, Franklin into RPH), or its successor, the
gross proceeds of which exceed $50,000,000.
"Liquidation Preference" has the meaning set forth in Section 12.2.
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"Liquidator" has the meaning set forth in Section 13.3.
"Losses" has the meaning set forth in Section 4.3(b).
"Major Decision" has the meaning set forth in Section 7.2.
"Management Committee" means a committee appointed by Franklin, RPH and
Vestar in accordance with Section 7.1 hereof.
"Manager" has the meaning set forth in Section 7.1.
"Member" means Franklin, RPH, Vestar and any other Person who is
admitted as a member in the Company on and after the Closing Date and whose
admission has been reflected on the books and records of the Company.
"Member Minimum Gain" shall mean partner nonrecourse debt minimum gain
as determined under the rules of Regulations Section 1.704-2(i).
"Member Nonrecourse Deduction" has the meaning set forth in Regulations
Section 1.704-2(i)(1) and (2).
"Merger Agreement" means the Contribution and Merger Agreement dated as
of April 29, 1999, among Suiza Foods, Franklin, the Suiza Companies identified
therein, RPH, Xxxx Plastics, Inc., a Delaware corporation, the Xxxx Companies
identified therein, Vestar, and the Company.
"Mergers" means the Mergers, as defined in the Merger Agreement,
pursuant to which the Suiza Companies and the Xxxx Companies will be merged into
the Company.
"Net Income" of a Person means the net income of such Person,
determined in accordance with generally accepted accounting principles.
"Nonrecourse Deductions" has the meaning set forth in Section 1.704-2
(b)(1) of the Regulations.
"PCI" means Plastic Containers, Inc., a Delaware corporation and
wholly-owned subsidiary of Continental Can Company, Inc. or, after certain
corporate restructuring transactions, Plastic Containers LLC, a Delaware limited
liability company and wholly-owned subsidiary of Franklin.
"Percentage Interest" means the percentage interest of a Member in
certain allocations of Profits, Losses, and other items of income, gain, loss,
or deduction and certain distributions of cash and property, which with respect
to each Member shall be equal to the number of Units owned by such Member as a
percentage of the total number of Units owned by all Members at any given time.
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"Person" means an individual, corporation, partnership, limited
liability company, trust, estate, unincorporated organization, association, or
other entity.
"Plastics Operations" means any manufacture, distribution or sale of
plastic packaging products and the conduct of any operations ancillary thereto,
including but not limited to any operations conducted by any Xxxx Company or any
Suiza Company immediately prior to Closing.
"Preferred Capital Account" means the capital account maintained for a
Member pursuant to Section 4.3 with respect to Preferred Units held by such
Member.
"Preferred Capital Account Deficit" means, with respect to any Member,
the amount by which the aggregate Liquidation Preference of the Preferred Units
held by such Member exceeds such Member's Preferred Capital Account.
"Preferred Units" means the preferred interest of a Member of the
Company issued in accordance with Article XII.
"Principal Companies" has the meaning set forth in Section 7.7(b).
"Pro Rata Share" has the meaning set forth in Section 7.11(a).
"Profits" has the meaning set forth in Section 4.3(b).
"Redemption Price" has the meaning set forth in Section 12.2.
"Registration Rights Agreement" has the meaning set forth in Section
11.12(b).
"Regulations" means the Treasury Regulations promulgated under the
Code, as amended and in effect (including corresponding provisions of any
succeeding regulations).
"Regulatory Allocations" has the meaning set forth in Section 5.3.
"Xxxx Companies" has the meaning given to it in the Merger Agreement.
"Xxxx Members" means RPH, Vestar, and any Affiliate of either of them
that becomes a Member, or for purposes of Article XI, an RPH stockholder.
"RPH" means Xxxx Plastics Holdings, Inc., a Delaware corporation.
"RPH Managers" means the Manager designated by RPH pursuant to Section
7.1.
"Suiza Companies" has the meaning given to it in the Merger Agreement.
"Suiza Foods" means Suiza Foods Corporation, a Delaware corporation.
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"Suiza Member" means Franklin and any Affiliate of Franklin that
becomes a Member; provided, however, that for purposes of Section 7.7, neither
Xxxxx X. Xxxxxx or Xxxx X. Xxxxxx shall ever be included within the definition
of "Suiza Member".
"Tax Matters Partner" has the meaning set forth in Section 10.1.
"Units" means the interest of a Member in the Company, including,
without limitation, such Member's right: (a) to a distributive share of the
Profits, Losses, and other items of income, gain, loss, deduction, and credit of
the Company; (b) to a distributive share of the assets of the Company; and (c)
to participate in the management and operation of the Company as provided in
this Agreement. The initial number of Units of each Member is set forth below:
--------------------------- ----------------------------------------------------
MEMBER INITIAL NUMBER OF UNITS
--------------------------- ----------------------------------------------------
Franklin 4,900,000
--------------------------- ----------------------------------------------------
--------------------------- ----------------------------------------------------
RPH 3,050,000
--------------------------- ----------------------------------------------------
--------------------------- ----------------------------------------------------
Vestar 2,050,000
--------------------------- ----------------------------------------------------
--------------------------- ----------------------------------------------------
TOTAL 10,000,000
--------------------------- ----------------------------------------------------
"VCP Affiliates" has the meaning set forth in Section 7.7(d).
"Vestar" means Vestar Packaging LLC, a Delaware limited liability
company.
"Unpaid Distribution Amount" shall mean, for each Preferred Unit, the
amount of distributions accrued during the most recently completed calendar
quarter which distributions have neither been paid nor been taken into account
through an increase in Liquidation Preference on such Preferred Units.
"Unusual Items" of income or loss mean any extraordinary items of
income or loss, any nonoperating gains or losses resulting from the sale of
assets, any merger or acquisition expenses and any restructuring charges, all as
reflected in or determined from the Financial Statements.
ARTICLE III
PURPOSE
3.1 Purposes and Scope. Subject to the provisions of this
Agreement, the purposes of the Company are to:
(a) acquire (directly or through subsidiaries) the
operations of the Xxxx Companies and the Suiza Companies through the
Mergers and the Contributions;
(b) own, operate, manage, maintain, improve, develop,
purchase, sell or exchange, and otherwise acquire or dispose of,
Plastics Operations; provided, however, that the Company may also
invest or expend up to $25 million in the aggregate to own,
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operate, manage, maintain, improve, develop, purchase, and otherwise
acquire or dispose of non-plastic packaging operations;
(c) borrow money in furtherance of any or all of the
objectives of the Company business, and to secure the same by mortgage,
pledge, or other liens; and
(d) do any and all other acts or things that may be incidental
or necessary to carry on the business of the Company as herein
contemplated. The Company shall not engage in any other business or
activity not intended to implement the foregoing without the prior
written consent of the Management Committee.
ARTICLE IV
CAPITAL CONTRIBUTIONS
4.1 Initial Capital Contributions. The initial Capital Contributions of
Franklin and Xxxx are being effected on the Closing Date through the Mergers.
The initial Capital Contributions of PCI and Vestar are being effected on the
Closing Date through the Contributions. The Members hereby agree that they will
take all reasonable steps to determine each Member's Capital Account as of the
Closing Date within 30 days after the Closing Date.
4.2 Non-Contemplated Contributions.
(a) If the Management Committee approves (in accordance with
the Major Decision provisions of Section 7.3) any additional Capital
Contributions beyond those required by Section 4.1, the Company shall
deliver a written notice to all of the Members (a "Contribution
Notice") requesting such additional Capital Contributions. Each
Contribution Notice shall specify the following information:
(i) the aggregate amount of Capital
Contributions requested in the Contribution Notice;
(ii) the amount of additional cash funds each Member
is required to contribute to the Company (which Capital
Contributions shall be made by the Members in proportion to
their Percentage Interests);
(iii) the date on which such additional Capital
Contributions are due, which date shall be approved in advance
by the Management Committee; and
(iv) wiring or other instructions for the bank
account into which the required Capital Contribution is to be
deposited.
(b) Any Capital Contributions made pursuant to Section 4.2(a)
shall be spent by the Company in accordance with the general directions
of the Management Committee, as approved in connection with the
approval of such Capital Contributions.
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(c) Except as provided in Section 4.1 hereof and in the
foregoing provisions of this Section 4.2, no Member shall be required
to make any Capital Contribution.
(d) Upon the exercise of a Franklin Replacement Option, for
all purposes, including Capital Accounts and Percentage Interests, a
number of Units shall be considered transferred from Franklin to RPH
and Vestar such that RPH's and Vestar's respective Percentage Interests
immediately after the exercise of the Franklin Replacement Option shall
be equal to their respective Percentage Interests immediately prior to
such exercise.
4.3 Capital Accounts.
(a) Maintenance Rules. The Company shall maintain for each
Member a separate Capital Account and, if applicable, a Preferred
Capital Account in accordance with this Section 4.3, which shall
control the division of assets upon liquidation of the Company as
provided in Section 13.3. The Capital Account and Preferred Capital
Account shall be maintained in accordance with the following
provisions:
(i) Such Capital Account shall be increased by the
cash amount or Book Value of any property contributed by such
Member to the Company pursuant to this Agreement, such
Member's share of Profits allocable to Units and any items in
the nature of income or gain which are specially allocated to
such Member pursuant to Section 5.2 and Section 5.3 hereof
with respect to Units held by such Member, and the amount of
any Company liabilities assumed by such Member or which are
secured by any property distributed to such Member.
(ii) Such Capital Account shall be decreased by the
cash amount or Book Value of any property distributed to such
Member pursuant to this Agreement, such Member's allocable
share of Losses and any items in the nature of deductions or
losses which are specially allocated to such Member pursuant
to Section 5.2 and Section 5.3 hereof, and the amount of any
liabilities of the Member assumed by the Company or which are
secured by any property contributed by such Member to the
Company.
(iii) Such Preferred Capital Account shall be
established upon issuance of Preferred Units to such Member in
an amount equal to the Initial Liquidation Preference of the
Preferred Units so issued.
(iv) Such Preferred Capital Account shall be
increased by such Member's share of Profits allocable to
Preferred Units and any items in the nature of income or gain
which are specially allocated to such Member pursuant to
Section 5.2 and Section 5.3 hereof with respect to Preferred
Units held by such Member.
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(v) In the event all or a portion of an interest in
the Company is transferred in accordance with the terms of
this Agreement, the transferee shall succeed to the Capital
Account and/or Preferred Capital Account of the transferor to
the extent it relates to the transferred interest; provided,
however, that if the transfer causes a termination of the
Company under Section 708(b)(1)(B) of the Code, then the
Company shall be deemed to have contributed its assets to a
new limited liability company in exchange for interests in the
new limited liability company, followed by a distribution of
the interests in the new limited liability company to the
Company and liquidation of the Company. Such deemed
liquidation and reconstitution shall not cause the Company to
be dissolved or reconstituted for purposes other than
maintenance of the Capital Accounts and federal income tax,
unless otherwise provided in Article XII.
(vi) Notwithstanding anything in this Section 4.3 to
the contrary, upon the exercise of a Franklin Option or a
Partnership Option the initial Capital Account of the
exercising Member shall be equal to the exercise price of such
option.
The foregoing provisions and the other provisions of this Agreement
relating to the maintenance of Capital Accounts and Preferred Capital
Accounts generally are intended to comply with Section 1.704-1(b) of
the Regulations and shall be interpreted and applied in a manner
consistent with such Regulations. If the Management Committee
reasonably determines that it is prudent to modify the manner in which
the Capital Accounts or Preferred Capital Accounts, or any increases or
decreases to the Capital Accounts or Preferred Capital Accounts, are
computed in order to comply with such Regulations, the Management
Committee may authorize such modifications, provided that it does not
have any effect on the amounts distributable to any Person pursuant to
Section 13.3 hereof upon the dissolution of the Company.
(b) Definition of Profits and Losses. "Profits" and "Losses"
mean, for each Fiscal Year or other period, an amount equal to the
Company's taxable income or loss for such year or period, determined in
accordance with Code Section 703(a) (for this purpose, all items of
income, gain, loss or deduction required to be stated separately
pursuant to Code Section 703(a)(1) shall be included in taxable income
or loss), with the following adjustments:
(i) Income of the Company that is exempt from federal
income tax and not otherwise taken into account in computing
Profits and Losses pursuant to this Section 4.3(b) shall be
added to such taxable income or loss;
(ii) Any expenditures of the Company described in
Code Section 705(a)(2)(B), or treated as Code Section
705(a)(2)(B) expenditures pursuant to Regulations Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in
computing Profits and Losses pursuant to this Section 4.3(b)
shall be subtracted from such taxable income or loss;
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(iii) In the event the Book Value of any Company
asset is adjusted pursuant to Section 4.3(c)(ii) or Section
4.3(c)(iii), the amount of such adjustment shall be taken into
account as gain or loss from the disposition of such asset for
purposes of computing Profits and Losses;
(iv) Gain or loss resulting from any disposition of
property with respect to which gain or loss is recognized for
federal income tax purposes shall be computed by reference to
the Book Value of the property disposed of, notwithstanding
that the adjusted tax basis of such property differs from its
Book Value;
(v) In lieu of the deduction for depreciation, cost
recovery or amortization taken into account in computing such
taxable income or loss, there shall be taken into account
"Book Depreciation" as defined in this Section 4.3(b)(v).
"Book Depreciation" for any asset means for any Fiscal Year or
other period an amount that bears the same ratio to the Book
Value of that asset at the beginning of such Fiscal Year or
other period as the federal income tax depreciation,
amortization or other cost recovery deduction allowable for
that asset for such year or other period bears to the adjusted
tax basis of that asset at the beginning of such year or other
period. If the federal income tax depreciation, amortization,
or other cost recovery deduction allowable for any asset for
such year or other period is zero, then Book Depreciation for
that asset shall be determined with reference to such
beginning Book Value using any reasonable method selected by
the Management Committee; and
(vi) Notwithstanding any other provision of this
Section 4.3(b), any items that are specially allocated
pursuant to Section 5.2 or Section 5.3 shall not be taken into
account in computing Profits and Losses.
(c) Definition of Book Value. "Book Value" means for any asset
the asset's adjusted basis for federal income tax purposes, except as
follows:
(i) The initial Book Value of any asset contributed
by a Member to the Company shall be the gross fair market
value of such asset, as determined by the Management
Committee.
(ii) The Book Values of all Company assets shall be
adjusted to equal their respective gross fair market values,
as determined by the Management Committee, as of the following
times: (A) the acquisition of an additional interest in the
Company by any new or existing Member in exchange for more
than a de minimis capital contribution if the Management
Committee reasonably determines that such adjustment is
necessary or appropriate to reflect the relative economic
interests of the Members in the Company; (B) the distribution
by the Company to a Member of more than a de minimis amount of
Company property as consideration
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for an interest in the Company if the Management Committee
reasonably determines that such adjustment is necessary or
appropriate to reflect the relative economic interests of the
Members in the Company; and (C) the liquidation of the Company
within the meaning of Regulation Section 1.704-1(b)(2)(ii)(g);
(iii) The Book Value of any Company asset distributed
to any Member shall be the gross fair market value of such
asset on the date of distribution, as determined by the
Management Committee.
(iv) The Book Values of Company assets shall be
increased (or decreased) to reflect any adjustment to the
adjusted basis of such assets pursuant to Code Section 734(b)
or Code Section 743(b), but only to the extent that such
adjustments are taken into account in determining Capital
Accounts pursuant to Regulations Section 1.704-1(b)(2)(iv)(m)
and Section 5.2(d) hereof; provided, however, that Book Values
shall not be adjusted pursuant to this Section 4.3(c)(iv) to
the extent the Management Committee determines that an
adjustment pursuant to Section 4.3(c)(ii) is necessary or
appropriate in connection with a transaction that would
otherwise result in an adjustment pursuant to this Section
4.3(c)(iv).
(v) If the Book Value of an asset has been determined
or adjusted pursuant to Section 4.3(c)(i), Section 4.3(c)(ii),
or Section 4.3(c)(iv) hereof, such Book Value shall thereafter
be adjusted by the Book Depreciation taken into account with
respect to such asset for purposes of computing Profits and
Losses.
4.4 Interest. Except as otherwise provided in this Agreement, no
interest shall be paid by the Company on Capital Contributions or on balances in
Capital Accounts or Preferred Capital Accounts.
4.5 No Withdrawal. No Member shall be entitled to withdraw any part of
its Capital Contribution or its Capital Account or Preferred Capital Account or
to receive any distribution from the Company, except as provided in Articles IV,
VI, and XII.
4.6 Limitation on Capital Contributions and Loans. Except as
specifically provided in this Agreement, no Member may contribute capital, loan,
or advance money to the Company.
ARTICLE V
ALLOCATIONS
5.1 Allocation of Profits and Losses.
(a) Allocation of Profit Generally. After giving effect to the
allocations set forth in Section 5.2 and Section 5.3, and after giving
effect to all distributions of cash or property (other than cash or
property to be distributed pursuant to Article XIII), Profits for any
Fiscal Year shall be allocated to the Members in the following manner:
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(i) First, to each Member with Preferred Units in
proportion to their Preferred Capital Account Deficit until
the Preferred Capital Account balances of each such Member
equal the aggregate Liquidation Preference of the Preferred
Units held by such Member;
(ii) Second, to each Member with a negative balance
in its Adjusted Capital Account, pro rata in accordance with
such negative Adjusted Capital Account balances, until such
negative Adjusted Capital Account balances have been
eliminated; and
(iii) Third, to the Members in proportion to their
Percentage Interests.
(b) Allocation of Losses.
(i) After giving effect to the provisions of Section
5.2 and Section 5.3, and subject to the limitation set forth
in Section 5.1(b)(ii), Losses for any Fiscal Year shall be
allocated to the Members in the following manner:
(A) First, to the Members until each of
their Adjusted Capital Account balances is reduced to
zero dollars ($0), in proportion to their Adjusted
Capital Account balances; and
(B) Next, to the Members in proportion to
their Percentage Interests.
(ii) Notwithstanding anything to the contrary in
Section 5.1(b)(i):
(A) The Losses allocated pursuant to Section
5.1(b)(i) hereof to any Member for any Fiscal Year
shall not exceed the maximum amount of Losses that
may be allocated to such Member without causing such
Member to have an Adjusted Capital Account Deficit at
the end of such Fiscal Year.
(B) If some but not all of the Members would
have an Adjusted Capital Account Deficit as a
consequence of an allocation of Losses pursuant to
Section 5.1(b)(i) hereof, the limitations set forth
in this Section 5.1(b)(ii) shall be applied by
allocating Losses pursuant to this Section 5.1(b)(ii)
only to those Members who would not have an Adjusted
Capital Account Deficit as a consequence of receiving
such an allocation of Losses (with the allocation of
such Losses among such Members to be determined by
the Management Committee, based on the allocation
that is most likely to effectuate the distribution
priorities set forth in Section 6.1 hereof).
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(C) If no Member may receive an additional
allocation of Losses pursuant to Section
5.1(b)(ii)(B) above, such additional Losses not
allocated pursuant to Section 5.1(b)(ii)(B) shall be
allocated solely to the Members in proportion to
their Percentage Interests.
5.2 Special Allocations.
(a) Minimum Gain Chargeback--Company Nonrecourse Liabilities.
If there is a net decrease in Company Minimum Gain during any Company
Fiscal Year, certain items of income and gain shall be allocated (on a
gross basis) to the Members in the amounts and manner described in
Regulations Section 1.704-2(f) and (j)(2)(i) and (ii), subject to the
exemptions set forth in Regulations Section 1.704-2(f)(2), (3), (4),
and (5). This Section 5.2(a) is intended to comply with the minimum
gain chargeback requirement (set forth in Regulations Section
1.704-2(f)) relating to Company nonrecourse liabilities (as defined in
Regulations Section 1.704-2(b)(3)) and shall be so interpreted.
(b) Minimum Gain Chargeback--Member Nonrecourse Debt. If there
is a net decrease in Member Minimum Gain during any Company Fiscal
Year, certain items of income and gain shall be allocated (on a gross
basis) as quickly as possible to those Members who had a share of the
Member Minimum Gain (determined pursuant to Regulations Section
1.704-2(i)(5)) in the amounts and manner described in Regulations
Section 1.704-2(i)(4), (j)(2)(ii), and (j)(2)(iii). This Section 5.2(b)
is intended to comply with the minimum gain chargeback requirement (set
forth in Regulations Section 1.704-2(i)(4)) relating to partner
nonrecourse debt (as defined in Regulations Section 1.704-2(b)(4)) and
shall be so interpreted.
(c) Qualified Income Offset. If, after applying Section 5.2(a)
and Section 5.2(b), any Member has an Adjusted Capital Account Deficit,
items of Company income and gain shall be specially allocated (on a
gross basis) to each such Member in an amount and manner sufficient to
eliminate, to the extent required by the Regulations, the Adjusted
Capital Account Deficit of such Member as quickly as possible.
(d) Optional Basis Adjustments. To the extent an adjustment to
the adjusted tax basis of any Company asset pursuant to Code Sections
734(b) or 743(b) is required, pursuant to Regulations Section
1.704-1(b)(2)(iv)(m), to be taken into account in determining Capital
Accounts, the amount of such adjustment to the Capital Accounts shall
be treated as an item of gain (if the adjustment increases the basis of
the asset) or loss (if the adjustment decreases such basis) and such
gain or loss shall be specially allocated to the Members in a manner
consistent with the manner in which their Capital Accounts are required
to be adjusted pursuant to such Section of the Regulations.
(e) Nonrecourse Deductions. Nonrecourse Deductions for any
Fiscal Year shall be specially allocated among the Members in
proportion to their Percentage Interests.
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(f) Member Nonrecourse Deductions. Member nonrecourse
deductions shall be allocated pursuant to Regulations Section
1.704-2(b)(4) and (i)(1) to the Member who bears the economic risk of
loss with respect to the deductions.
(g) Special Allocation: Economic Sharing Arrangement.
Notwithstanding anything to the contrary in this Article V, the Members
acknowledge and agree that the manner in which distributions are to be
made pursuant to Section 6.1 correctly reflects the Members' economic
sharing arrangement in the Company. To the extent that allocations of
Profits, Losses, and other items of income, gain, loss, and deduction
set forth in this Article V (other than this Section 5.2(g)) could
produce an economic sharing arrangement among the Members different
than that described in Section 6.1, then the Company shall specially
allocate items of gross income, gain, loss, and deduction among the
Members in any manner that may be required to cause the allocations of
Profits, Losses, and other items of income, gain, loss, and deduction
described in Article V to be consistent with the economic sharing
arrangement described in Section 6.1.
5.3 Curative Allocations. The allocations set forth in Section
5.1(b)(ii) and Section 5.2(a) through Section 5.2(f) hereof (the "Regulatory
Allocations") are intended to comply with certain requirements of the
Regulations. It is the intent of the Members that, to the extent possible, all
Regulatory Allocations shall be offset either with other Regulatory Allocations
or with special allocations of other items of Company income, gain, loss, or
deduction pursuant to this Section 5.3. Therefore, notwithstanding any other
provisions of this Article V (other than the Regulatory Allocations), the
Management Committee shall make such offsetting special allocations of Company
income, gain, loss, or deduction in whatever manner it determines appropriate so
that, after such offsetting allocations are made, each Member's Capital Account
balance is, to the extent possible, equal to the Capital Account balance such
Member would have had if the Regulatory Allocations were not part of the
Agreement and all Company items were allocated pursuant to Section 5.1(a),
Section 5.1(b)(i), and Section 5.2(g) hereof. In exercising its discretion under
this Section 5.3, the Management Committee shall take into account future
Regulatory Allocations under Sections 5.2(a) and 5.2(b) that, although not yet
made, are likely to offset other Regulatory Allocations previously made under
Sections 5.2(e) and 5.2(f).
5.4 Tax Allocations: Code Section 704(c).
(a) In accordance with Code Section 704(c) and the Regulations
thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for
tax purposes, be allocated among the Members so as to take account of
any variation between the adjusted basis of such property to the
Company for federal income tax purposes and its initial Book Value
(computed in accordance with Section 4.3(c)(i) hereof).
(b) If the Book Value of any Company asset is adjusted
pursuant to Section 4.3(c)(ii) hereof, subsequent allocations of
income, gain, loss, and deduction with respect to such asset shall take
account of any variation between the adjusted basis of such
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asset for federal income tax purposes and its Book Value in the same
manner as under Code Section 704(c) and the Regulations thereunder.
(c) Any elections or other decisions relating to such
allocation shall be made by the Management Committee.
(d) Allocations pursuant to this Section 5.4 are solely for
purposes of federal, state, and local taxes and shall not affect or in
any way be taken into account in computing any Person's Capital
Account, Adjusted Capital Account, or share of Profits, Losses, and
other items or distributions pursuant to any provision of this
Agreement.
5.5 Allocations Upon Option Exercise
(a) Upon the exercise of a Xxxx Option, any deduction arising
solely as a result of such exercise shall be specially allocated to
RPH.
(b) Notwithstanding anything in this Article V to the
contrary, upon the exercise of a Franklin Replacement Option, or any
other option to purchase Units granted by the Company from time to time
(a "Company Option"), or both, allocations shall be made in the
following order and priority:
(i) first, if there has been an exercise of a Company
Option, all Company income shall be allocated in the year of
such exercise and thereafter to the exercising Member until an
amount of Company income has been allocated to such exercising
Member such that, after such allocation, the proportion that
the exercising Member's Adjusted Capital Account balance bears
to the total Adjusted Capital Account balances of all Members
is equal to the exercising Member's Percentage Interest
immediately after such exercise,
(ii) second, according to the provisions of this
Article V, except that if there has been an exercise of a
Franklin Replacement Option, all allocations that would have
been made to Franklin under this Article V shall be made to
Members who have exercised a Franklin Replacement Option (the
"Franklin Option Members") in the year of exercise and
thereafter until an amount of Company income has been
allocated to the Franklin Option Members such that, after such
allocation, the proportion that each Franklin Option Member's
Adjusted Capital Account balance bears to the total Adjusted
Capital Account balances of all Members is equal to the
exercising Member's Percentage Interest immediately after such
exercise, and
(ii) third, according to the provisions of this
Article V.
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5.6 Other Allocation Rules.
(a) For purposes of determining the Profits, Losses, or any
other item allocable to any period, Profits, Losses, and any such other
item shall be determined on a daily, monthly, or other basis, as
determined by the Management Committee using any permissible method
under Code Section 706 and the Regulations thereunder.
(b) For federal income tax purposes, every item of income,
gain, loss and deduction shall be allocated among the Members in
accordance with the allocations under Sections 5.1, 5.2, 5.3, 5.4 and
5.5.
(c) The Members are aware of the income tax consequences of
the allocations made by this Article V and hereby agree to be bound by
the provisions of this Article V in reporting their shares of Company
income and loss for income tax purposes.
(d) The Members agree that the Members' Percentage Interests
represent the Members' respective interests in Company profits for
purposes of allocating excess nonrecourse liabilities (as defined in
Regulations Section 1.752-3(a)(3)) pursuant to Regulations Section
1.752-3(a)(3).
(e) Notwithstanding anything herein to the contrary, if a
deduction arises solely as a result of a cancellation of the Units held
as a result of a prior exercise by the holder of the Franklin
Replacement Option by reason of the exercise of the holders' put rights
pursuant to Section 7 of the applicable Replacement Units Option
Agreement, then any such deduction shall be especially allocated to
Franklin.
ARTICLE VI
DISTRIBUTIONS
6.1 Distributions of Available Cash. The Management Committee shall
review the Company's accounts at the end of each calendar quarter to determine
whether distributions are appropriate. Subject to Section 18-607 of the Delaware
Act, the Management Committee shall authorize such distributions of Available
Cash as it may determine in its sole discretion. All such distributions of cash
shall be made to the Members in the following manner:
(a) First, to each Member with Preferred Units in proportion
to the sum of (i) the amount by which the Liquidation Preference
exceeds the Initial Liquidation Preference and (ii) the aggregate
Unpaid Distribution Amount for all of the Preferred Units owned by each
such Member; and
(b) Second, to each Member in proportion to the Percentage
Interests.
Notwithstanding anything to the contrary above, if Available Cash is
derived from a transaction that occurs in connection with the dissolution,
termination and liquidation of the
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Company, any Available Cash that is derived from or attributable to such a
transaction shall be distributed to the Members in accordance with Section
13.3 hereof.
6.2 Amounts Withheld. Notwithstanding any other provision of this
Agreement to the contrary, each Member hereby authorizes the Company to withhold
and to pay over, or otherwise pay, any withholding or other taxes payable by the
Company with respect to such Member as a result of such Member's participation
in the Company. If and to the extent that the Company shall be required to
withhold or pay any such taxes, such Member shall be deemed for all purposes of
this Agreement to have received a payment from the Company as of the time such
withholding or tax is paid, which payment shall be deemed to be a distribution
with respect to such Member's Units to the extent that the Member (or any
successor to such Member's Units) is entitled to receive a distribution. Any
withholdings authorized by this Section 6.2 shall be made at the maximum
applicable statutory rate under the applicable tax law unless the Company shall
have received an opinion of counsel or other evidence satisfactory to the
Management Committee to the effect that a lower rate is applicable, or that no
withholding is applicable.
6.3 Excess Distributions. To the extent that the aggregate of actual
and deemed distributions to a Member under this Article VI for any period
exceeds the distributions to which such Member is entitled for such period, the
amount of such excess shall be considered an amount upon which the Company shall
pay a preferred return to all other Members, in proportion to the Percentage
Interests of such other Members, until such excess has been repaid to the
Company by the Member receiving such excess distribution, which repayment shall
be made out of distributions to which such Member would otherwise be
subsequently entitled if the Member does not otherwise repay such excess. The
preferred return payable hereunder shall be seven and one-half percent (7.5%)
per annum, accruing from and after the date on which such excess is distributed.
Notwithstanding any other provision in this Agreement to the contrary, if an
excess distribution or advance distribution made to a Member or a shortfall tax
distribution as calculated under Section 6.4(c) remains outstanding when such
Member or any other Member disposes of its interest in the Company, by transfer,
liquidation, conversion into stock of RPH or otherwise, a payment by such Member
or an adjustment to such other Member's Units shall be made to settle the
outstanding amount; provided, that, any adjustment to the Member's Units in the
Company will be made in Preferred Units to insure that Vestar and Xxxx,
collectively, own at least 51% of the common equity in the Company.
6.4 Tax Distributions.
(a) Notwithstanding anything to the contrary in Section 6.1,
the Managers shall cause the Company from time to time to distribute to
(x) RPH and Franklin (and to an option holder or transferee who becomes
a Member as a result of option exercise or Unit transfer) an amount
equal to the excess of (i) the Company's Estimated Net Taxable Income
(defined below) for the applicable Fiscal Year (or portion thereof) to
which such distribution relates which is allocable to such Member in
excess of the cumulative Company Estimated Net Taxable Income allocated
to such Member from prior Fiscal Years, multiplied by the actual
effective federal and state and local tax rates (including, to the
extent applicable, alternative minimum tax, if any) applicable to the
relevant
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corporation or individual, as the case may be, in effect
during the Fiscal Year to which such distribution relates, over (ii)
the sum of distributions already made to such Member during the
relevant Fiscal Year, and (y) Vestar an amount equal to the excess of
(i) the Company's Estimated Net Taxable Income for the applicable
Fiscal Year (or portion thereof) to which such distribution relates
which is allocable to Vestar in excess of the cumulative Company
Estimated Net Taxable Income allocated to such Member from prior Fiscal
Years, multiplied by the maximum marginal federal income and New York
State and New York City individual tax rate (including, to the extent
applicable, alternative minimum tax, if any) in effect during the
Fiscal Year to which such distribution relates, over (ii) the sum of
distributions already made to Vestar during the relevant Fiscal Year
(distributions under (i) or (ii) being referred to herein as "Tax
Distributions"). For these purposes, "Company Estimated Net Taxable
Income" means (Y) the estimate of the aggregate amount of items of
taxable income and gain of the Company for the applicable Fiscal Year
(or portion thereof) to which such distribution relates, minus (Z) the
estimate of the aggregate amount of items of taxable deduction and loss
for such Fiscal Year (or portion thereof) to which such distribution
relates. The Managers shall determine the Company Estimated Net Taxable
Income and each Member's allocable share of Company Estimated Net
Taxable Income. For purposes of calculating RPH's or Franklin's actual
effective tax rates, all other non-Company items of income, deduction,
gain, loss and credits available to such Member shall be taken into
account. The Members acknowledge and agree that the sole purpose of
this Section 6.4(a) is to enable the Company to distribute sufficient
cash to each Member to permit each Member to timely satisfy its
estimated income tax obligations, if any, arising from the Member's
allocable share of the Company's taxable income. The Manager shall make
such distributions on or about April 15, June 15, September 15 and
December 15 of each year and/or on any other date that similarly
coincides with the due date of any estimated income tax obligation of
any Member. The provisions of this Section 6.4(a) shall apply to
Company Net Taxable Income allocated to the Members as a result of a
final adjustment by a taxing authority to Company Net Taxable Income;
provided, that, no Tax Distribution shall be made to Franklin as a
result of the disallowance of the current deduction claimed by the
Company for the bond tender premium paid in connection with the
redemption of the PCI Notes; provided, further, that any Tax
Distribution made to RPH or Vestar as a result of such disallowance
shall not be deemed an advance distribution as provided in Section
6.4(b) and thus not subject to the provisions of Section 6.4(d);
provided, further, that amounts that would otherwise be payable as
subsequent Tax Distributions to Franklin shall be deemed paid in an
amount equal to the Tax Distributions made to RPH and Vestar as a
result of such disallowance, but in the event of a final adjustment by
a taxing authority disallowing the deduction of the bond tender premium
claimed by Franklin, any amounts that Franklin would have received as
Tax Distributions but for the deemed payment described above shall be
paid to it and Franklin shall receive a Tax Distribution both in
accordance with Section 6.4(a) as a result of the disallowance of the
current deduction claimed by the Company for the bond tender premium.
Notwithstanding anything to the contrary in this Section 6.4, an option
holder who becomes a Member as a result of exercise is not entitled to
a Tax Distribution relating to compensatory income allocated
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pursuant to Section 5.5 of this Agreement from the Company to such
option holder as a result of such option exercise.
(b) For purposes of this Agreement, amounts distributed to the
Members pursuant to Section 6.4(a) shall be deemed to be advance
distributions of amounts to be distributed pursuant to Section 6.1.
(c) If a Member receives an actual Tax Distribution for the
year in an amount less than the Member's Adjusted Tax Distribution
Amount, then such shortfall tax distribution will be subject to the
provisions of Section 6.4(d). The Member's Adjusted Tax Distribution
Amount, for purposes of this clause is equal to (y) the largest Tax
Distribution Amount of all the Members multiplied by (z) such Member's
Percentage Interest. Tax Distribution Amount for each Member is
determined by dividing the actual Tax Distribution made to a Member by
such Member's Percentage Interest.
(d) In the case of a shortfall tax distribution as computed
under Section 6.4(c), the amount of such shortfall shall be considered
an amount upon which the Company shall pay a preferred return to such
Member until such shortfall has been repaid to the Company by the
Member receiving the largest Tax Distribution Amount, which repayment
shall be made out of distributions to which such Member would otherwise
be subsequently entitled unless the Members agree to settle the
outstanding amounts through payments. The preferred return payable
hereunder shall be seven and one-half percent (7.5%) per annum,
accruing from and after the date on which such shortfall tax
distribution is created.
ARTICLE VII
MANAGEMENT OF THE COMPANY
7.1 Management Committee.
(a) The Company shall be managed by a Management Committee
consisting initially of seven individuals (the "Managers"). Two
Managers shall be appointed by RPH, two Managers shall be appointed by
Vestar, two Managers shall be appointed by Franklin, and one Manager
shall be the Chief Executive Officer of the Company (who initially
shall be Xxxxxxx Xxxxx). RPH, Vestar and Franklin shall have the right
to remove and replace those Managers appointed by them at any time
effective immediately upon written notice. The initial RPH Managers
shall be Xxxxxx X. Xxxxx and Xxxxxxx Xxxxxxxxx, the initial Vestar
Managers shall be Xxxxx X. Xxxxxx and Xxxx X. Xxxxxxx, and the initial
Franklin Managers shall be Xxxxx X. Xxxxxx and ____________________.
RPH may designate one of the RPH Managers as the Chairman of the
Management Committee, and such Manager will preside (when present) at
all meetings of the Management Committee. The Management Committee may
be expanded in size from time to time to add "independent" Managers or,
at the request of the Xxxx Parent and Vestar, B. Xxxxxx Xxxxx. For each
independent Manager added, or if B. Xxxxxx Xxxxx is added to the
Management Committee, RPH and Vestar shall be entitled to jointly
appoint such additional Managers
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as may be necessary to ensure that RPH and Vestar, jointly, are able to
designate a majority in number of the Managers.
(b) Subject to the rights expressly granted to the Members or
to particular Members hereunder, the Management Committee shall have
general powers of supervision, direction and control over the business
of the Company. The Management Committee shall have the general powers
and duties typically vested in the board of directors of a corporation
and all other powers and duties over the Company and its business,
except as expressly provided elsewhere in this Agreement.
(c) The presence of Managers entitled to cast at least a
majority of votes shall be necessary to constitute a quorum at any
meeting of the Management Committee. Except as expressly provided with
respect to Major Decisions in Section 7.3, any matter submitted to a
vote or consent of the Management Committee at which a quorum is
present may be approved by a majority of the votes represented at such
meeting. No Member or Manager, acting solely in its capacity as a
Member or Manager, shall have the power and authority to act for and
bind the Company with respect to any matter unless such matter has been
approved by the Management Committee as set forth herein.
(d) Any Manager may participate in a meeting through use of a
conference telephone, video conference or similar communication
equipment, so long as all Managers participating in the meeting can
hear one another, and any Manager participating in such manner will be
considered "present" at such meeting. Accurate minutes of each meeting
of the Management Committee shall be maintained by a Manager or officer
designated by the Management Committee for that purpose.
(e) Meetings of the Management Committee for any purpose may
be called at any time by any Manager. Unless waived as set forth below,
at least two Business Days notice of the time, place and general
subject matter of each meeting of the Management Committee shall be
delivered personally to each of the Managers or personally communicated
to them by another Manager or an officer of the Company, and confirmed
in writing by facsimile, or communicated by FedEx or other comparable
overnight courier service (receipt requested). Notice shall be
transmitted to the last known facsimile number or address of the
Manager as shown on the records of the Company. Such notice as above
provided shall be considered due, legal and personal notice to such
Manager. With respect to any meeting not duly called or noticed in
accordance with the foregoing provisions, any transactions carried out
at such meeting will be as valid as if they had occurred at a meeting
duly called and noticed if: (i) all Managers are present at the
meeting; or (ii) those Managers not present at the meeting sign a
waiver of notice of such meeting, whether before or after the meeting.
(f) Any action required or permitted to be taken by the
Management Committee may be taken without a meeting and will have the
same force and effect as if taken by a vote of the Managers at a
meeting properly called and noticed, if authorized by a writing signed
individually or collectively by all, but not less than all, of the
Managers.
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7.2 Major Decisions. The term "Major Decision" means any decision by
the Management Committee with respect to any of the following matters:
(a) issuing any Units or any security, including any
indebtedness, convertible into Units, or any other form of equity in
the Company, other than (i) granting options to management employees of
the Company to purchase up to 810,811 Units in the aggregate, (ii)
issuing Units pursuant to the exercise of such options, (iii) issuing
Units pursuant to the options held by certain employees of Franklin
that have been converted into options to acquire Units pursuant to the
Merger Agreement, and (iv) issuing Units or any security, including any
indebtedness, convertible into Units, or any other form of equity in
the Company, in one or more private offerings (excluding any issuances
referred to in (i), (ii) or (iii) above) where the aggregate purchase
price for all such issuances does not exceed $50 million;
(b) accepting or requiring any Member to make any additional
Capital Contribution to the Company;
(c) incurring indebtedness or entering into guarantees for
borrowed money (excluding trade payables incurred in the ordinary
course of business or refinancing of indebtedness incurred in
connection with the transactions contemplated by the Merger Agreement
or borrowing after the Closing Date under the Tranche C term loan
facility or the revolving credit facility included in the senior bank
financing of the Company on the Closing Date and refinancings thereof)
in excess of $80 million;
(d) selling, leasing, pledging or granting a security interest
or encumbrance in all or substantially all of the Company's assets,
except in connection with the incurrence of indebtedness for borrowed
money that does not involve a Major Decision under the preceding
paragraph;
(e) acquiring (whether through an asset purchase, merger,
equity purchase or otherwise) any Plastics Operations or other assets
(excluding acquisitions of raw materials and supplies in the ordinary
course of business) having a value, individually or in the aggregate
for any series of related transactions, in excess of $80 million;
(f) selling or otherwise disposing of any Plastics Operations
or other assets (excluding sales or other dispositions of inventory in
the ordinary course of business) having a value, individually or in the
aggregate for any series of related transactions, in excess of $80
million;
(g) except as otherwise permitted in Section 7.6(b) or Section
7.8, entering into or amending any transaction or agreement between the
Company and a Member or an Affiliate of a Member, including any
amendment to the VCP Management Agreement;
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(h) making any material election or other decision pursuant to
Section 5.4(c), which relates to Code Section 704(c);
(i) any change in the purpose or scope of the Company pursuant
to Article III;
(j) amending or granting a waiver with respect to this
Agreement;
(k) authorizing any consolidation, dissolution, or liquidation
of the Company or any merger in which the Company does not survive,
other than pursuant to an Initial Public Offering;
(l) converting the Company into a corporation, other than
pursuant to an Initial Public Offering;
(m) executing or delivering any assignment for the benefit of
creditors of the Company;
(n) filing any voluntary petition in bankruptcy or
receivership with respect to the Company;
(o) authorizing the payment in cash of distributions on the
Preferred Units under Section 12.2(b);
(p) authorizing the optional redemption of Preferred Units
under Section 12.2(c); or
(q) entering into any agreement with any Person that would
afford such Person priority over any of Suiza, Franklin, RPH or any
other person contemplated to be a party to the Registration Rights
Agreement with regard to the exercise of incidental registration rights
pursuant to Section 2.2(a) and 2.2(b) of the Registration Rights
Agreement.
7.3 Approval of Major Decisions. Notwithstanding any contrary
provisions of Section 7.1:
(a) Any Major Decision must be approved by the affirmative
vote of not less than a majority of the Managers present and entitled
to vote at a meeting of the Management Committee at which a quorum is
present. Such affirmative vote shall include (i) the vote of the
Franklin Manager specifically designated by Suiza from time to time for
approval of Major Decisions, who shall initially be
____________________, and (ii) the vote of the Vestar Manager
specifically designated by Vestar from time to time for approval of
Major Decisions, who shall initially be Xxxxx X. Xxxxxx.
(b) Section 7.2 and the requirement for the affirmative vote
of the Franklin Manager described in Section 7.3(a)(i) shall not apply
from and after the date of the first
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to occur of the following events: (i) a Change in Control of Suiza
Foods, (ii) an Initial Public Offering, or (iii) Franklin holds less
than 10% of the Percentage Interests.
(c) Section 7.2 and the requirement for the affirmative vote
of the Vestar Manager described in Section 7.3(a)(ii) shall not apply
from and after the date of the first to occur of the following events:
(i) a Change in Control of RPH, (ii) a Change in Control of Vestar,
(iii) an Initial Public Offering, or (iv) RPH and Vestar, collectively,
hold less than 10% of the Percentage Interests.
7.4 Officers. The officers of the Company shall include a President, a
Secretary and such other officers as the Management Committee in its discretion
may appoint, and such officers will have any powers delegated to them by the
Management Committee (subject to any limitations on the authority of the
Management Committee set forth in this Agreement).
7.5 Certificate of Formation. The President or another officer of the
Company shall cause to be filed at the Company's expense such certificates or
documents (including, without limitation, copies, renewals, amendments or
restatements of the Certificate) as may be determined by such officer to be
reasonable and necessary or appropriate for the formation or qualification and
operation of a limited liability company in the State of Delaware and in any
other state in which the Company may elect to do business.
7.6 Compensation and Reimbursement of Member Expenses.
(a) Except as provided in Section 7.6(b), no Member shall be
compensated for any services rendered to the Company by such Member or
its designees on the Management Committee. Notwithstanding anything to
the contrary in this Agreement, each Member shall be reimbursed for
out-of-pocket expenses that such Member makes for or on behalf of the
Company, to the extent such expenses are authorized by the Management
Committee.
(b) Vestar will perform certain advisory services for the
Company pursuant to the VCP Management Agreement as defined in the
Merger Agreement.
7.7 Outside Activities; Noncompetition.
(a) Subject to Section 7.7(b), (c) and (d), a Member, any
Affiliate of a Member, and any director, officer, partner, or employee
of a Member or any Affiliate thereof, may have business interests and
engage in business activities in addition to those relating to the
Company and may engage in any businesses and activities for its own
account and for the accounts of others without having or incurring any
obligation to offer any interest in or funds from such properties,
businesses or activities to the Company or any Member, and no other
provision of this Agreement shall be deemed to prohibit the Members or
any such other Person from conducting such other businesses and
activities. Neither the Company nor any Member shall have any rights by
virtue of this Agreement or the limited liability company relationship
created hereby in any business ventures of the
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other Member or any Affiliate of such Member or any director, officer,
partner, or employee of the other Member or any Affiliate thereof.
(b) Neither Suiza Foods, nor the Suiza Member, nor any
Controlled Affiliates of Suiza Foods or the Suiza Member (collectively,
the "Suiza Affiliates") may, directly or indirectly, operate or acquire
any interest in a business or operation that (1) manufactures or sells
(i) plastic packaging products that are substantially similar to the
products then manufactured or sold by any of the Suiza Companies or the
Xxxx Companies (prior to the Closing Date) and the Company and its
subsidiaries (after the Closing Date) (collectively, the "Principal
Companies") or (ii) plastic bottles for dairy, water, juice or other
beverages and (2) sells such products in a common geographic market as
the substantially similar products then sold by the Principal Companies
or in any Proposed Geographic Market (collectively, a "Competing
Business"); provided that:
(i) nothing in this Section 7.7(b) shall restrict (A)
the continued ownership or operation in the ordinary course of
business of Xxxx Plastics, Inc. in Puerto Rico, (B) the
operations conducted by Controlled Affiliates of Suiza Foods
that manufacture plastic packaging products solely for their
own use, or (C) subject to the terms and conditions of the
Supply Agreement, the acquisition of a Competing Business
which generated 50% or less of the revenues of the total
enterprise being acquired by the Suiza Affiliate for the
twelve months preceding such acquisition; provided that, for
purposes of this subsection (c), within six months of such
acquisition the Suiza Affiliate offers to sell to the Company
the Competing Business and agrees to work in good faith to
establish a mutually acceptable purchase price for the
Competing Business, or if a mutually acceptable purchase price
is not agreed upon, the Suiza Affiliate transfers the
Competing Business to an unaffiliated third party within
twelve months of the acquisition; and
(ii) this Section 7.7(b) shall be of no force or
effect from and after the later of the fifth anniversary of
the Closing Date and the date on which the Suiza Members and
their Controlled Affiliates, in the aggregate, cease to own
10% or more of the Units.
(c) Neither RPH nor any of its Affiliates (excluding the
Company and its subsidiaries) may, directly or indirectly, engage or
participate in any Plastics Operations in the United States, Mexico and
any other country in which any of the Principal Companies does
business; provided that this Section 7.7(c) shall be of no force or
effect from and after the later of the fifth anniversary of the Closing
Date and the date on which Vestar and RPH and their Controlled
Affiliates, in the aggregate, cease to own 10% of the Units.
(d) Entities Controlled by Vestar Equity Partners, L.P. or
Vestar Capital Partners III, L.P. or any merchant banking fund or other
entity Controlled by Vestar Equity Partners, L.P. or Vestar Capital
Partners III, L.P. or by the Controlling persons of Vestar Equity
Partners, L.P. or Vestar Capital Partners III, L.P. (collectively, the
"VCP Affiliates") shall not, directly or indirectly, (x) acquire a
Controlling interest in, or (y) after
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the date hereof, make an equity investment valued at the time of
investment at $75 million or more in, any Competing Business; provided
that:
(i) nothing in this Section 7.7(d) shall restrict (A)
the continued ownership or operation in the ordinary course of
business of Xxxxxxx Xxxxxxx Holdings, Inc. and its
subsidiaries and their respective transferees and successors
(collectively, "Xxxxxxx-Xxxxxxx"), or (B) any action taken or
transaction effected by Xxxxxxx-Xxxxxxx or by
Xxxxxxx-Xxxxxxx'x Affiliates in respect of Xxxxxxx-Xxxxxxx if
immediately following such action or transaction
Xxxxxxx-Xxxxxxx is not Controlled by the VCP Affiliates;
(ii) nothing in this Section 7.7(d) shall restrict
any acquisition of a Competing Business that (A) generated
less than $25 million in revenues for the twelve months
preceding such acquisition; provided that in no event shall
any VCP Affiliate acquire any enterprise with respect to which
a Competing Business generated more than 50% of the revenues
of the total enterprise being acquired by the VCP Affiliate
for the twelve months preceding such acquisition, or (B)
generated 50% or less of the revenues of the total enterprise
being acquired by the VCP Affiliate for the twelve months
preceding such acquisition; provided that within six months of
such acquisition the VCP Affiliate offers to sell to the
Company the Competing Business and agrees to work in good
faith to establish a mutually acceptable purchase price for
the Competing Business, or if a mutually acceptable purchase
price is not agreed upon, the VCP Affiliate transfers the
Competing Business to an unaffiliated third party within
twelve months of the acquisition, or (C) is in a product
category for which the Principal Companies have less than $25
million in revenues; and
(iii) this Section 7.7(d) shall be of no force or
effect from and after the later of the fifth anniversary of
the Closing Date and the date on which Vestar and RPH, in the
aggregate, cease to own 10% of the Units.
(e) The Members acknowledge and agree that their respective
obligations under this Section 7.7 are a material inducement and
condition to this Agreement and the obligations of the parties
hereunder and that the restrictions and remedies contained in this
Section 7.7 are reasonable as to time, geographic area and scope of
activity and do not impose a greater restraint than is necessary to
protect the goodwill and other legitimate business interests of the
Company. It is the intent of all parties hereto that the foregoing
restrictions against unlawful and unfair competitive activities be
given the fullest effect consistent with applicable law.
(f) If any of the provisions of this Section 7.7 is found by a
court of competent jurisdiction to contain unreasonable or unnecessary
limitations as to time, geographic area or scope of activity, then such
court is hereby directed to reform such provisions to the minimum
extent necessary to cause the limitations contained therein as to time,
geographical area and scope of activity to be reasonable and
enforceable.
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(g) The Members acknowledge and agree that (i) the Company
would be irreparably harmed by any violation of their respective
obligations under this Section 7.7 and that, in addition to all other
rights or remedies available at law or in equity, the parties will be
entitled to injunctive and other equitable relief to prevent or enjoin
any such violation, without posting any bond whatsoever and (ii) this
Section 7.7 will inure to the benefit of the Company and its successors
(including its successors by merger) regardless of whether the parties
bound hereby continue as Members of the Company or members or
stockholders of any successor to the Company.
(h) For purposes of this Section 7.7, a "Proposed Geographic
Market" shall mean any geographic market in which the Company and its
subsidiaries intend to sell products substantially similar to products
sold by the Principal Companies, such intent being evidenced by (i) a
resolution of the Management Committee to conduct business or begin
operations in such geographic market or (ii) the approval by the
Management Committee of a budget authorizing capital expenditures
specifically for the conduct of business in such geographic market.
7.8 Transactions with Affiliates. Except as otherwise permitted in
Section 7.6(b), and except for any transaction or agreement approved as a Major
Decision pursuant to Section 7.3, the Company may not enter into any transaction
or agreement with any Member or any Affiliate of a Member if the terms of such
transaction or agreement are materially less favorable to the Company than the
terms that could be obtained by the Company through an arms length transaction
or agreement with an unrelated party.
7.9 Indemnification of Members. The Company shall indemnify and hold
harmless the Members and their Affiliates (other than the Company and its
subsidiaries), and their respective directors, officers, constituent partners,
employees and advisors and other representatives, and the Managers designated by
the Members (individually, an "Indemnitee"), as follows (provided that no such
indemnification shall be available to a Member and its Affiliates in respect of
any claim which is an indemnifiable claim against any of them pursuant to
Section 12.2 or 12.3 of the Merger Agreement):
(a) In any threatened, pending, or completed action, suit, or
proceeding, whether civil, criminal, administrative, arbitrative, or
investigative, to which an Indemnitee was or is a party or is
threatened to be made a party by reason of the fact that such
Indemnitee is or was a Member or an Affiliate of a Member (other than
the Company and its subsidiaries) or a director, officer, employee, or
constituent partner of a Member or an Affiliate of a Member (other than
the Company and its subsidiaries), or a Manager, the Company shall
indemnify such Indemnitee against attorneys' fees, judgments, fines,
penalties, settlements, and reasonable expenses actually incurred by
such Indemnitee in connection with the defense or settlement of such
action, suit or proceeding, if such Indemnitee acted in good faith, and
in the case of the exercise of authority by the Indemnitee under the
Delaware Act or this Agreement, other than service for another
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enterprise, in a manner reasonably believed by such Indemnitee to be in
the best interests of the Company and, in all other cases, that the
Indemnitee's conduct was at least not opposed to the Company's best
interests, and with respect to any criminal action or proceeding, the
Indemnitee did not have reasonable cause to believe that his conduct
was unlawful. In no event, however, shall indemnification ever be made
in relation to a proceeding in which the Indemnitee has been found
liable for fraud or a criminal act or for gross negligence or willful
or intentional misconduct, in the Indemnitee's performance of its duty
to the Company or in relation to a proceeding which arises out of a
material violation by the Indemnitee of the terms and provisions of
this Agreement. The termination of a proceeding by judgment, order,
settlement, conviction, or upon a plea of nolo contendere, or its
equivalent, shall not, of itself, create a presumption that an
Indemnitee did not act in good faith and in a manner reasonably
believed by such Indemnitee to be in the best interests of the Company
or not opposed to the Company's best interests.
(b) Promptly after receipt by an Indemnitee of notice of the
commencement of any proceeding against it, such Indemnitee will, if a
claim is to be made against an Indemnitor, give notice to the
Indemnitor of the commencement of such claim, but the failure to notify
the Indemnitor will not relieve the Indemnitor of any liability that it
may have to any Indemnitee, except to the extent that the Indemnitor
demonstrates that the defense of such action is prejudiced by the
Indemnitee's failure to give such notice.
(c) If any proceeding is brought against an Indemnitee and it
gives notice to the Indemnitor of the commencement of such proceeding,
the Indemnitor will, to the extent that it wishes (unless (i) the
Indemnitor is also a party to such proceeding and the Indemnitee
determines in good faith that joint representation would be
inappropriate, or (ii) the Indemnitor fails to provide reasonable
assurance to the Indemnitee of its financial capacity to defend such
proceeding and provide indemnification with respect to such
proceeding), assume the defense of such proceeding with counsel
satisfactory to the Indemnitee and, after notice from the Indemnitor to
the Indemnitee of its election to assume the defense of such proceeding
and an acknowledgment of its indemnification obligation with respect
thereto, the Indemnitor will not, as long as it diligently conducts
such defense, be liable to the Indemnitee under this section for any
fees of other counsel or any other expenses with respect to the defense
of such proceeding, in each case subsequently incurred by the
Indemnitee in connection with the defense of such proceeding, other
than reasonable costs of investigation. If the Indemnitor assumes the
defense of a proceeding in accordance with the preceding sentence, (i)
no compromise or settlement of such claims may be effected by the
Indemnitor without the Indemnitee's consent (which consent shall not be
unreasonably withheld) unless (A) there is no finding or admission of
any violation of legal requirements or any violation of the rights of
any Person and no effect on any other claims that may be made against
the Indemnitee, and (B) the sole relief provided is monetary damages
that are paid in full by the Indemnitor and (ii) the Indemnitee will
have no liability with respect to any compromise or settlement of such
claims effected without its consent (which consent shall not be
unreasonably withheld). If notice is given to an Indemnitor of the
commencement of any proceeding
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and the Indemnitor does not, within 20 days after the Indemnitee's
notice is given, give notice to the Indemnitee of its election to
assume the defense of such proceeding, the Indemnitor will be bound by
any determination made in such proceeding or any compromise or
settlement reasonably effected by the Indemnitee.
(d) Notwithstanding the foregoing, if an Indemnitee determines
in good faith that there is a reasonable probability that a proceeding
may adversely affect it or its Affiliates other than as a result of
monetary damages for which it would be entitled to indemnification
under this Agreement, the Indemnitee may, by notice to the Indemnitor,
assume the exclusive right to defend, compromise, or settle such
proceeding, but the Indemnitor will not be bound by any determination
of a proceeding so defended or any compromise or settlement effected
without its consent (which may not be unreasonably withheld).
(e) Any indemnification permitted under this Section 7.9 shall
be made only out of the assets of the Company and no Member shall be
obligated to contribute to the capital of or loan funds to, the Company
to enable the Company to provide such indemnification.
(f) The indemnification provided by this Section 7.9 shall be
in addition to any other rights to which each Indemnitee may be
entitled under any agreement or vote of the Members, as a matter of law
or otherwise, as to action in the Indemnitee's capacity as a Member, as
a director, officer, employee, or constituent partner of a Member, or
as a Manager, and shall continue as to an Indemnitee who has ceased to
serve in such capacity and shall inure to the benefit of the heirs,
successors, assigns, administrators, and personal representatives of
the Indemnitee.
(g) Except as otherwise provided in this Agreement, the
Company may purchase and maintain insurance on behalf of any one or
more Indemnitees if approved by the Management Committee.
(h) In no event may an Indemnitee subject a Member to personal
liability by reason of the indemnification provisions of this
Agreement.
(i) The provisions of this Section 7.9 are for the benefit of
the Indemnitees and the heirs, successors, assigns, administrators, and
personal representatives of the Indemnitees and shall not be deemed to
create any rights for the benefit of any other Persons.
7.10 Liability of the Members.
(a) Neither the Members nor their respective owners,
directors, officers, employees, or agents nor their designated Managers
shall be liable to the Company or to the other Members for errors in
judgment or for any acts or omissions that do not constitute gross
negligence or willful or wanton misconduct.
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(b) Each Member may exercise any of the powers granted to them
by this Agreement and perform any of the duties imposed upon them
hereunder either directly or by or through agents.
7.11 Preemptive Rights.
(a) Grant of Preemptive Rights. The Company will not issue or
sell any new Units without first complying with this Section 7.11;
provided, however, that the Company may (i) grant options to management
employees of the Company to purchase up to ____ Units in the aggregate,
which represents 7.5% of the total Units on a fully diluted basis,
taking into account, for the purpose of the denominator only, the Units
initially issued and the options rolled over from Franklin, (ii) issue
Units pursuant to the exercise of such options, and (iii) issue Units
pursuant to the options held by certain employees of Franklin that have
been converted into options to acquire Units pursuant to the Merger
Agreement, without first complying with this Section 7.11. The Company
hereby grants to each of Franklin, RPH and Vestar the preemptive right
to purchase up to its Pro Rata Share of any new Units that the Company
may, from time to time, propose to sell or issue, other than in an
Initial Public Offering. For purposes of this Agreement, Pro Rata Share
means, with respect to each of Franklin, RPH and Vestar, the percentage
of all outstanding fully diluted Units of the Company beneficially
owned by each of Franklin, RPH and Vestar.
(b) Notice. If the Company proposes to issue or sell new
Units, the Company will provide each of Franklin, RPH and Vestar with
written notice of its intention (the "New Units Notice"). The New Unit
Notice will describe the type of new Units to be offered and the price
and other terms upon which the Company proposes to issue or sell the
new Units.
(c) Exercise of Preemptive Rights. Each of Franklin, RPH and
Vestar will have 30 days from the date of receipt of the New Units
Notice and any information delivered by or on behalf of the Company to
any proposed purchasers or as it may reasonably request to facilitate
their investment decision, to agree to purchase up to its Pro Rata
Share of the new Units for the price and upon the other terms specified
in the New Units Notice. Each of Franklin, RPH and Vestar will provide
written notice to the Company stating the quantity of such new Units
that it agrees to purchase. The sale of the new Units will occur in
accordance with the terms on which the new Units will otherwise be
sold.
(d) Failure to Exercise Preemptive Rights. If any or all of
Franklin, RPH or Vestar fail to exercise fully such preemptive right
within such 30-day period, the Company will have 60 days to sell the
new Units at no less than 95% of the price set forth in the New Units
Notice and otherwise upon substantially the same terms specified in the
New Units Notice. In the event that the Company has not sold such new
Units within such 60-day period, the Company will not thereafter issue
or sell any new Units without again complying with this Section 7.11.
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(e) Termination of Preemptive Rights. The preemptive rights
existing pursuant to this Section 7.11 shall terminate if the Company
(or its corporate successor) consummates an Initial Public Offering.
7.12 Certain Anti-dilutive Rights.
(a) If at any time after the date hereof the Company shall
issue or sell any Units or any immediately exercisable warrants,
options or rights to subscribe for or purchase Units or other
immediately exercisable securities exercisable or convertible into
Units, and the consideration per Unit for, and/or the price per Unit at
which, such warrants, options or rights are exercisable for or such
securities are convertible into, such Units is less than the Fair
Market Value of the Units immediately prior to such issuance or sale,
then, forthwith upon such issuance or sale, the number of Suiza
Member's Units shall be adjusted so that for each Unit held by a Suiza
Member, such Suiza Member shall be entitled to receive a number of
Units equal to the product of (a) the number of Units held by such
Suiza Member before such adjustment and (b) a fraction the numerator of
which shall be the number of Units outstanding immediately prior to
such issuance or sale, plus the number of additional Units offered for
sale or issuable pursuant to such warrants, options or rights and the
denominator of which shall be the number of Units outstanding
immediately prior to such issuance or sale, plus the number of Units
which the aggregate offering price of the Units so offered for sale
and/or the exercise price for the Units issuable pursuant to such
warrants, options or rights would purchase at such Fair Market Value
(determined by multiplying such number of Units offered or issuable by
the offering price per Unit of such Units or the exercise price of such
warrants, options or rights and dividing the product so obtained by
such Fair Market Value); provided, however, that the Company may (i)
grant options to management employees of the Company to purchase up to
___ Units in the aggregate, which represents [7.5%] of the total Units
on a fully diluted basis, taking into account, for the purpose of the
denominator only, the Units initially issued and the options rolled
over from Franklin and RPH, (ii) issue Units pursuant to the exercise
of such options, (iii) issue Units pursuant to the options held by
certain employees of Franklin that have been converted into options to
acquire Units pursuant to the Merger Agreement, (iv) issue Units to a
buyer if the Suiza designated Manager had the opportunity to veto the
sale of the Units under Section 7.2(a) but elected not to do so, and
(v) issue Units in connection with the conversion of the Preferred
Units in accordance with the term of this Agreement, without first
complying with this Section 7.12.
(b) If at any time after the date hereof the Company shall
issue or sell to any person any securities convertible into or
exercisable for Units ("Convertible Securities") (other than securities
described in Section 7.12(a) above), whether or not the rights to
exchange or convert thereunder are immediately exercisable, and the
price per Unit for which Units are issuable upon such conversion or
exchange is less than the Fair Market Value in effect immediately prior
to the time of such issue or sale, then the number of the Suiza
Member's Units shall be adjusted as provided in Section 7.12(a) above
on the basis that (i) the maximum number of Units necessary to effect
the conversion or exchange of
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all such Convertible Securities shall be deemed to have been issued and
outstanding, (ii) the price per Unit of such Units shall be deemed to
be the average price in any range of prices at which such additional
Units are issuable to such holders upon conversion, and (iii) the
Company shall be deemed to have received all of the consideration
payable (including amounts payable upon conversion) therefor, if any,
as of the date of the actual issuance of such Convertible Securities.
No adjustment of the number of the Suiza Member's Units shall be made
under this Section 7.12(b) upon the issuance of any Convertible
Securities which are issued pursuant to the exercise of any warrants,
options or other subscription or purchase rights therefor, if any such
adjustment shall previously have been made upon the issuance of such
warrants, options or other rights pursuant to Section 7.12(a) above. No
further adjustments of the number of the Suiza Member's Units shall be
made upon the actual issuance of such Units upon conversion or exchange
of such Convertible Securities and, if any issue or sale of such
Convertible Securities is made upon exercise of any warrant, option or
other right to subscribe for or to purchase any such Convertible
Securities for which adjustments of the number of Suiza Member's Units
have been or are to be made pursuant to other provisions of this
Section 7.12, no further adjustments of the number of the Suiza
Member's Units shall be made by reason of such issue or sale. For the
purposes of this Section 7.12(b), the date as of which the number of
Units shall be computed shall be the earlier of (i) the date on which
the Company shall enter into a firm contract for the issuance of such
Convertible Securities and (ii) the date of actual issuance of such
Convertible Securities. Such adjustments shall be made upon each
issuance of Convertible Securities and shall become effective
immediately after such issuance.
(c) No adjustment in the number of the Suiza Member's Units
issuable hereunder shall be required unless such adjustment would
require an increase or decrease of at least one quarter of one percent
(0.25%) in the number of the Suiza Member's Units; provided, however,
that any adjustments which by reason of this Section 7.12(c) are not
required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations shall be made to the
nearest one-thousandth of a Unit.
(d) The number of Units outstanding at any given time shall
not include Units directly or indirectly owned or held by or for the
account of the Company or any of its subsidiaries, and the disposition
of any such Units shall be considered an issue or sale of Units for the
purposes of this Section 7.12.
(e) Units issued (i) pursuant to the option plans and
allocation of options referred to in Section 2.3 of the Merger
Agreement, (ii) to members of the Company's management as part of a
stock option plan or other stock-based incentive plan with the approval
of a majority of the holders of Units, or (iii) by the Company as
consideration in a merger, acquisition or other business combination,
shall be deemed to be issued at Fair Market Value for the purposes of
this Section 7.12.
(f) No adjustment in the number of the Suiza Member's Units
issuable hereunder shall be required if the Franklin Manager(s) voted
in favor of the issuance or
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sale of Units by the Company, and the affirmative vote of such Franklin
Manager(s) was required under this Agreement for approval of such
issuance or sale.
(g) The rights existing pursuant to this Section 7.12 shall
terminate if the Company (or its corporate successor) consummates an
Initial Public Offering.
7.13 Exercise of Certain Options. The Company has granted the options
to purchase Units listed on Exhibit 7.13(a) to certain employees of the Company
formerly employed by Franklin in replacement of such persons' options to
purchase Franklin stock (the "Franklin Replacement Options"). Upon each exercise
of any of the Franklin Replacement Options, Franklin shall transfer to the
Company for cancellation, without payment therefor by the Company, a number of
Units equal to the number of Units issued upon such exercise of a Franklin
Replacement Option. Options granted by RPH to its or its Affiliates' employees
shall remain options to purchase RPH common stock.
ARTICLE VIII
RIGHTS AND OBLIGATIONS OF MEMBERS
8.1 Limitation of Liability. The Members shall have no liability under
this Agreement except as provided in Article IV and Article VI of this
Agreement.
8.2 Return of Capital. No Member shall be entitled to the withdrawal or
return of its Capital Contribution, except to the extent, if any, that
distributions made pursuant to this Agreement or upon termination of the Company
may be considered as such by law and then only to the extent provided for in
this Agreement.
ARTICLE IX
BOOKS, RECORDS, ACCOUNTING AND REPORTS
9.1 Records and Accounting. The officers of the Company shall keep or
cause to be kept appropriate books and records with respect to the Company's
business (including without limitation, any books, records, statements, or
information required to be maintained by the Company under the Delaware Act),
which shall at all times be kept at the principal office of the Company or such
other office as the Management Committee may approve for such purposes. Any
books and records maintained by the Company in the regular course of its
business, including books of account and records of Company proceedings, may be
kept on, or be in the form of, punch cards, magnetic tape, photographs,
micrographics or any other information storage device, provided that the books
and records so kept are convertible into clearly legible written form within a
reasonable period of time. The books of the Company shall be maintained for
financial reporting purposes on the accrual basis of accounting.
9.2 Fiscal Year. The Fiscal Year of the Company shall be the calendar
year for tax and accounting purposes.
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9.3 Reports.
(a) The officers of the Company shall deliver to each Member,
not later than 60 days following the end of each Fiscal Year, Financial
Statements, including a balance sheet, an income statement, and an
annual statement of source and application of funds of the Company for
such Fiscal Year prepared in accordance with generally accepted
accounting principles and audited by the Independent Accountants.
(b) No later than 30 days after the last day of each fiscal
quarter during the term of this Agreement, the officers of the Company
shall cause the Company to prepare, or cause to be prepared and
delivered to each Member, a balance sheet together with a profit and
loss statement for such fiscal quarter together with a cumulative
profit and loss statement for the year-end with comparative statements
for the previous year if applicable.
(c) No later than 30 days after the last day of each calendar
month during the term of this Agreement, the officers of the Company
shall cause the Company to prepare, or cause to be prepared and
delivered to each Member, a balance sheet together with a profit and
loss statement for such calendar month together with a cumulative
profit and loss statement for the year-end with comparative statements
for the previous year if applicable.
9.4 Documents. Each Member shall have the right to inspect, review and
make copies (with such copies at Company expense) of documents relating to the
business of the Company.
9.5 Certain Administrative Expenses of RPH. The Company shall reimburse
RPH for all administrative costs and expenses of RPH, including but not limited
to, costs associated with financial audits and tax filings.
ARTICLE X
TAX MATTERS
10.1 Tax Matters Partner. RPH shall be the "Tax Matters Partner" for
Federal income tax purposes pursuant to Section 6231 of the Code with respect to
each applicable taxable year of the Company. RPH is authorized to do whatever is
necessary to qualify as such.
10.2 Annual Tax Returns.
(a) RPH shall prepare or cause the Independent Accountants to
prepare, at the Company's expense, and shall timely file, or cause the
timely filing of, all tax returns and shall, on behalf of the Company,
timely file, or cause the timely filing of, all other writings required
by any governmental authority having jurisdiction to require such
filing. RPH shall submit the proposed returns to each Member for its
review and approval no later than 15 days prior to the due date of the
returns, after giving effect to any extensions of
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time unless an extension would effectively make or make unavailable a
material tax election.
(b) If a Member disagrees with the treatment of any
partnership item (within the meaning of Section 6231(a)(3) of the Code
and Regulations) on a tax return of the Company, then such Member shall
give written notice to RPH. If, after good faith consultation, an
agreement regarding the treatment of such item cannot be reached within
ten (10) days after the receipt of notice, the Company shall seek
written advice from a mutually agreed upon independent tax counsel or
mutually agreed upon Independent Accountants. Such advice shall
recommend the treatment which is consistent with the terms of this
Agreement, the respective interests of the Members, and for which there
exists substantial authority in support thereof. Such recommended
treatment shall be the one reported on the return.
(c) Without the prior approval of the Management Committee, no
Member shall file an amended return of the Company or a request for an
administrative adjustment under Section 6227 of the Code, nor shall any
Member (other than the Tax Matters Member, as provided herein) commence
any administrative or judicial proceeding relating to a return of the
Company. If, after good faith consultation, such approval is not
provided, no Member shall file such return or request, or commence such
proceeding unless a mutually agreed upon independent tax counsel
renders an opinion that there is substantial authority for the proposed
treatment of the tax items with respect to which such return, request,
or proceeding relates. Nothing herein shall be construed to prevent a
Member from undertaking any administrative or judicial proceeding with
respect to its own return.
10.3 Notice and Limitations on Authority.
(a) Each Member shall notify the other Members upon receipt of
any notice regarding a material audit or tax examination of the Company
and upon any request for material information by United States federal,
state, local, or other tax authorities.
(b) RPH shall, within ten (10) days after the receipt thereof,
forward to each Member a photocopy of any material correspondence
relating to the Company received from the Internal Revenue Service. RPH
shall, within ten (10) days thereof, advise each Member in writing of
the substance of any material conversation affecting the Company held
with any representative of the Internal Revenue Service.
(c) RPH shall have all the authority granted by the Code and
Regulations to the Tax Matters Partner, including the authority:
(i) to enter into a settlement agreement with the
Internal Revenue Service which purports to bind Members other
than the Tax Matters Partner;
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(ii) to file a petition as contemplated in Section
6226(a) or 6228 of the Code;
(iii) to intervene in any action as contemplated in
Section 6226(b)(5) of the Code;
(iv) to file any request contemplated in Section
6227(b) of the Code; and
(v) to enter into an agreement extending the period
of limitations as contemplated in Section 6229(b)(1)(B) of the
Code.
10.4 Tax Elections. RPH shall do all acts, make all elections and take
whatever reasonable steps are required to maximize, in the aggregate, the
federal, state, and local income tax advantages available to the Company and
shall defend all tax audits and litigation with respect thereto at the expense
of the Company. RPH shall maintain the books, records, and tax returns of the
Company in a manner consistent with the acts, elections and steps taken by the
Company. In making any election for each Fiscal Year for tax purposes, RPH shall
make such election, to the extent reasonably possible, in a manner that
maximizes the benefit and minimizes the detriment of each such election to each
Member.
10.5 Actions in Event of Audit. If an audit of the Company's tax
returns occurs, RPH shall, at the expense of the Company, notify the Members
thereof, participate in the audit and contest, and settle or otherwise
compromise assertions of the auditing agent which may be adverse to the Company
in accordance with this Article X. RPH may, if it determines that the retention
of accountants or other professionals would be in the best interests of the
Company, retain such accountants or other professionals to assist in such
audits. The Company shall indemnify and reimburse RPH for all reasonable
expenses, including legal and accounting fees, claims, liabilities, losses and
damages borne by RPH or its Affiliates which were incurred in connection with
any administrative or judicial proceeding with respect to any audit of the
Company's tax returns, except to the extent caused by the gross negligence or
willful misconduct of RPH.
10.6 Organizational Expenses. The Company shall elect to deduct
expenses incurred in organizing the Company ratably over a 60-month period as
provided in Section 709 of the Code.
10.7 Taxation as a Partnership. No election shall be made by the
Company or any Member for the Company to be excluded from the application of any
of the provisions of Subchapter K, Chapter 1 of Subtitle A of the Code or from
any similar provisions of any state tax laws.
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ARTICLE XI
TRANSFERS OF UNITS; NEW MEMBERS
11.1 Transfer Restrictions. After the Closing Date, a Member may not
transfer any of its Units or Preferred Units except as specifically permitted
pursuant to this Article XI. After the fourth anniversary of the Closing Date,
the Xxxx Members shall be permitted to sell all or less than all of their Units
or Preferred Units, subject to Section 11.5. For purposes of this Article XI,
the term "transfer," when used with respect to any units, includes a sale,
assignment, gift, pledge, encumbrance, hypothecation, mortgage, exchange, or any
other disposition.
11.2 Transfer to Affiliates and Pledgees. A Member may (A) pledge all
or any portion of its Units or Preferred Units to a financial institution to
secure bona fide indebtedness of such Member or its Affiliates and transfer such
Units or Preferred Units to the pledgee in connection with or following
foreclosure of such pledge, provided that (i) neither such financial institution
nor any of its Affiliates shall be engaged in Plastics Operations, (ii) if the
financial institution forecloses on the Units or Preferred Units, the financial
institution agrees to become a party to, and be bound to the same extent as the
pledgor by the terms of, this Agreement pursuant to the provisions of Section
11.10, and (iii) if the financial institution forecloses on the Units, (x) such
Units shall automatically become non-voting Units, and (y) such financial
institution shall have no right to appoint Managers and no rights under Sections
7.2, 7.3, 7.11, 7.12, 11.5, 11.6 or 11.7; and (B) transfer all or any portion of
its Units or Preferred Units to an Affiliate of such Member upon compliance with
Section 11.4, provided that such Affiliate agrees to become a party to, and be
bound to the same extent as its transferor by the terms of, this Agreement
pursuant to the provisions of Section 11.10, and provided further that such a
transfer to an Affiliate of such Member would not result in a federal income tax
termination of the Company pursuant to Section 708(b)(1)(B) of the Code. If a
proposed transfer to an Affiliate is prohibited under the proviso in the
preceding sentence concerning Section 708(b)(1)(B) (a "Blocked Affiliate
Transfer"), no other transfer to an Affiliate may be made without the prior
written consent of the Member proposing the Blocked Affiliate Transfer until the
Blocked Affiliate Transfer is no longer prohibited by such proviso, at which
time the Blocked Affiliate Transfer may occur. If the Member proposing such
transfer does not effect such transfer within 30 days after the time that such
transfer becomes no longer prohibited, other transfers to Affiliates may be made
(still subject to the provisos above).
11.3 [Reserved]
11.4 Registration. If any Units or Preferred Units are to be assigned,
transferred or sold, either: (a) such Units or Preferred Units shall be
registered under the Securities Act of 1933, as amended, and any applicable
state securities laws; or (b) the transferor shall provide an opinion of counsel
that the proposed assignment, transfer, or sale is exempt from such registration
requirements, which opinion shall not be deemed provided unless and until it is
accepted by the Management Committee, which acceptance shall not be unreasonably
withheld. The Company and the Members have no obligation or intention whatsoever
either to register Units or Preferred
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Units for resale under any federal or state securities laws or to take any
action which would make available to any Person any exemption from the
registration requirements of such laws.
11.5 Right of First Offer; Tag-Along Rights.
(a) If, after the fourth anniversary of the Closing Date and
prior to the Initial Public Offering, the Xxxx Members desire to sell
all or less than all the Units and/or Preferred Units held by such
Members and/or the stock of RPH owned by Vestar or its Affiliates (or
any successive equity interests in successors of RPH), the Xxxx Members
shall offer such Units and/or Preferred Units and/or stock to the Suiza
Member by giving written notice (the "Notice") to the Suiza Member to
such effect, enclosing the offer to sell such Units and/or Preferred
Units and/or stock to the Suiza Member, the consideration per Unit
and/or Preferred Units and/or share, and the other material terms of
the offer. Upon receipt of the Notice, the Suiza Member shall have the
right and option to purchase such Units and/or Preferred Units and/or
stock offered by the Xxxx Members, pro rata according to their
respective holdings of Units or in such other proportions as they may
agree upon, for cash at the purchase price per Unit and/or share
specified in the Notice, exercisable for 30 days after receipt of the
Notice. Failure of the Suiza Member to respond to such Notice within
such 30-day period shall be deemed to constitute a notification to the
Xxxx Member of the Suiza Member's decision not to purchase such Units
and/or Preferred Units and/or stock under this Section 11.5(a).
(b) The Suiza Member may exercise the right and option to
purchase all (but not less than all) of such Units and/or Preferred
Units and/or stock offered by the Xxxx Members by giving written notice
of exercise to the Xxxx Members within such 30-day period, specifying
the date (not later than three Business Days after the date of such
notice) upon which payment of the purchase price for the Units and/or
Preferred Units and/or stock shall be made and the identity of the
Suiza Member who will purchase such Units and/or Preferred Units and/or
stock. The Xxxx Members shall deliver to the Suiza Member at the
Company's principal office, at least one day prior to the payment date,
wire transfer instructions, and on or before the payment date specified
in such notice, appropriate documentation transferring such Units
and/or Preferred Units and/or stock, against payment of the purchase
price therefor by the Suiza Member in immediately available funds.
(c) In the event that all of the Units and/or Preferred Units
and/or stock offered by the Xxxx Members are not purchased by the Suiza
Member, subject to the Suiza Member's rights as set forth in the
remainder of this Section 11.5, during the 90-day period commencing on
the expiration of the rights and options provided for in this Section
11.5, the Xxxx Members may sell the unpurchased Units and/or Preferred
Units and/or stock offered by the Xxxx Members to a third party for a
consideration equal to or greater than 95% of the consideration
specified in the Notice, free of the restrictions contained in this
Section 11.5 (but subject to the other terms and conditions hereof).
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(d) If the Suiza Member elects not to exercise its rights to
purchase Units and/or Preferred Units and/or stock of the Xxxx Members
under subsections (a), (b) and (c) of this Section 11.5, the Suiza
Member shall have the right (but not the obligation) to participate in
the Xxxx Members' sale of Units and/or Preferred Units and/or stock by
requiring the Xxxx Members' proposed transferee to purchase a number of
Units from the Suiza Member as set forth in Section 11.5(e).
(e) (i) If the Suiza Member owns any Preferred Units, the
Suiza Member shall be permitted to require that the proposed
transferee purchase from such Suiza Member exercising its
tag-along rights pursuant to Section 11.5(d) above (the
"Tagging Member"), in lieu of a number of Units (other than
Converted Units, as defined below) proposed to be transferred
by the Xxxx Members, a number of Units not in excess of the
number of As-Converted Units held by the Suiza Member (and not
in excess of the number of Units proposed to be sold to such
transferee by the Xxxx Members); provided, however, to the
extent that any Converted Units proposed to be sold by the
Suiza Member ("Suiza Converted Units") would displace
Converted Units proposed to be sold by the Xxxx Members ("Xxxx
Converted Units"), the number of Suiza Converted Units and
Xxxx Converted Units to be sold shall be treated as "Units"
and determined in accordance with the formula set forth in
Section 11.5(e)(iii). Subject to the proviso in the
immediately preceding sentence, the number of Converted Units
that the Suiza Member elects to sell to the proposed
transferee in accordance with this Section 11.5(e)(i) shall
directly reduce, on a one-for-one basis, the number of Units
to be sold by the Xxxx Members, pro rata in accordance with
the number of Units proposed to be sold by each Xxxx Member,
to such proposed transferee. Any Suiza Member exercising its
tag-along rights pursuant to this Section 11.5(e)(i) shall
convert such number of its Preferred Units into the number of
As-Converted Units proposed to be transferred by it (such
newly issued Units, together with any Units issued to a Xxxx
Member pursuant to Section 12.2(f), "Converted Units") in
accordance with the formula set forth in the definition of
"As-Converted Units" immediately prior to the closing of the
purchase of the Units pursuant to Section 11.5(g).
(ii) In lieu of, or in addition to, the tag-along rights
afforded to the Suiza Member pursuant to Section 11.5(e)(i),
if the Suiza Member owns any Preferred Units and the
Transferring Member (as defined below) proposes to transfer
Preferred Units, the proposed transferee shall be required to
purchase a number of Preferred Units from the Suiza Member up
to the product (rounded up to the nearest whole number) of (i)
the quotient determined by dividing (A) the aggregate number
of Preferred Units beneficially owned on a fully diluted basis
by the Suiza Member and sought by the Suiza Member to be
included in the contemplated transfer by (B) the aggregate
number of Preferred Units beneficially owned (including those
beneficially owned by Vestar or its Affiliate through its
ownership of RPH) on a fully diluted basis by the proposed
transferring Members
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(the "Transferring Members") and all Tagging Members and
sought by the Transferring Members and all Tagging Members to
be included in the contemplated transfer, in each case as
Preferred Units, and (ii) the total number of Preferred Units
proposed to be directly or indirectly transferred to the
transferee in the contemplated transfer (which includes the
proportion of Preferred Units owned by RPH equal to the
proportion of shares of RPH proposed to be transferred).
(iii) Subject to Section 11.5(e)(i), the proposed
transferee shall be required to purchase a number of Units of
the Tagging Members up to the product (rounded up to the
nearest whole number) of (i) the quotient determined by
dividing (A) the aggregate number of Units (other than
Converted Units to be sold in accordance with Section
11.5(e)(i) but including Converted Units to be sold in
accordance with this Section 11.5(e)(iii) pursuant to Section
11.5(e)(i)) beneficially owned on a fully diluted basis by the
Tagging Member and sought by the Tagging Member to be included
in the contemplated transfer by (B) the aggregate number of
Units (other than as aforesaid) beneficially owned (including
those beneficially owned by Vestar or its Affiliate through
its ownership of RPH) on a fully diluted basis by the proposed
Transferring Members, including any Units displaced pursuant
to Section 11.5(e)(i), and all Tagging Members and sought by
the Transferring Members and all Tagging Members to be
included in the contemplated transfer and (ii) the total
number of Units (other than Converted Units to be sold in
accordance with Section 11.5(e)(i)) proposed to be directly or
indirectly transferred to the transferee in the contemplated
transfer (which includes the proportion of Units owned by RPH
equal to the proportion of shares of RPH proposed to be
transferred).
(iv) Any transfers made by the Tagging Member
pursuant to this Section 11.5(e) shall be at the same price
per Unit or Preferred Unit (including, in the case of a sale
of shares of RPH, the price per Unit underlying the specified
per share price) and upon the same terms and conditions
(including without limitation time of payment and form of
consideration) as to be paid and given to the Transferring
Members; provided that in order to be entitled to exercise its
right to sell Units to the proposed transferee pursuant to
this Section 11.5, the Suiza Member must agree to make to the
transferee the same representations, warranties, covenants,
indemnities and agreements as the Xxxx Members agree to make
in connection with the proposed transfer of the Units and/or
shares of the Xxxx Members (except that in the case of
representations and warranties pertaining specifically to the
Xxxx Members, the Suiza Member shall make the comparable
representations and warranties pertaining specifically to
itself).
(f) In connection with a proposed sale of their Units and/or
Preferred Units and/or stock of RPH, the Xxxx Members shall inform the
proposed transferee of the tag-along rights provided for in Section
11.5(e) and obtain the proposed transferee's agreement to purchase
Units and/or Preferred Units or shares in accordance with the terms
hereof. The tag-along rights provided by this Section 11.5 must be
exercised by the
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Suiza Member within the same 30 day period following receipt of the
Notice as is provided for the right and option to purchase provided in
Section 11.5(a), by delivery of a written notice to the Xxxx Members
indicating the Suiza Member's desire to exercise its tag-along rights
and specifying the number of Units (including Converted Units) and/or
Preferred Units it desires to sell. If the proposed transferee fails to
purchase Units and/or Preferred Units from the Suiza Member after
properly exercising its tag-along rights, then the Xxxx Members shall
not be permitted to make the proposed transfer, and any such attempted
transfer shall be void and of no effect.
(g) If the Suiza Member exercises its rights to tag-along
under this Section 11.5, the closing of the purchase of the Units
and/or Preferred Units with respect to which such rights have been
exercised shall take place concurrently with the closing of the sale of
the Xxxx Members' Units and/or Preferred Units and/or shares. No
transfer shall occur pursuant to this Section 11.5 unless the
transferee shall agree to become a party to, and be bound to the same
extent as its transferor by the terms of, this Agreement pursuant to
the provisions of Section 11.9.
(h) For purposes of this Section 11.5(e), (f) and (g) and with
respect to the Suiza Member's tag along rights as set forth therein,
"Suiza Member" shall be deemed to include any employee optionee who
exercises options to acquire Units pursuant to Company option plans,
provided that the exercising optionee agrees to become a party to, and
be bound to the same extent as the Suiza Member by the terms of, this
Agreement pursuant to the provisions of Section 11.10.
11.6 Drag-Along Rights.
If the Xxxx Members propose to sell all of their Units in the
Company and/or stock in RPH (or any successive equity interests in
successors of RPH) and the Suiza Member have not exercised their right
to buy or to sell pursuant to Section 11.5 within the time periods
required, then the Xxxx Members shall have the right (but not the
obligation) to require the Suiza Member and all other Members to
participate in such sale by requiring the Suiza Member and all other
Members to sell their Units to the proposed purchaser on the same terms
as have been offered by such purchaser to the Xxxx Members. The
election by the Xxxx Members to require the Suiza Member and all other
Members to participate in such sale shall be exercisable by the Xxxx
Members within thirty days after the date on which the Suiza Member
notify the Xxxx Members of their election not to purchase the Units (or
shares) of the Xxxx Members, and in the event that the Xxxx Members do
not elect to do so within such thirty days, the Xxxx Members will be
deemed conclusively to have waived such right. Notwithstanding anything
to the contrary elsewhere herein, Sections 7.2 and 7.3 shall not apply
to prevent the Xxxx Members from exercising their rights under this
Section 11.6. For purposes of this Section 11.6 and with respect to the
Xxxx Members' drag along rights as set forth herein, "Suiza Members"
shall be deemed to include any employee optionee who exercises options
to acquire Units pursuant to Company option plans.
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11.7 Put Rights. (a) At any time on or after the fourth anniversary of
the Closing Date and prior to the Initial Public Offering, the Suiza Member
shall have the right, but not the obligation, to offer to sell to the Xxxx
Members all (but not less than all) the Units and/or Preferred Units held by the
Suiza Member and/or the stock of Franklin owned by Continental Can Company, Inc.
or its Affiliates (or any successive equity interests in successors of Franklin)
at Fair Market Value, which shall be determined in accordance with the
procedures set forth in Section 11.7(c). If after 30 days after the
determination of the Fair Market Value, the Xxxx Members decline to purchase
such Units and/or Preferred Units, the Suiza Member shall have the right, but
not the obligation, to offer to sell to the Company all (but not less than all)
its Units and/or Preferred Units or Franklin Stock at Fair Market Value. In the
event of such an offer by written notice to the Company, the Company shall
either (i) notify in writing the Suiza Member within 30 days of its receipt of
such written offer of its intention to purchase the Units and/or Preferred Units
or stock and purchase all such Units and/or Preferred Units or stock for cash
within 30 days after its notice of its intent to purchase the Units and/or
Preferred Units or stock or (ii) notify the Suiza Member, by written notice
within 30 days after receipt of such written offer, that the Company will use
its reasonable best efforts to either (A) cause a sale of business of the
Company as expeditiously as practicable or (B) consummate an Initial Public
Offering as expeditiously as practicable. Sections 7.2 and 7.3 shall not apply
to any action taken by the Company pursuant to or in connection with the
preceding sentence. If the Company is unable to sell the business or consummate
an Initial Public Offering within 180 days following the expiration of the 30
day period referred to in this subsection, however, the Suiza Member shall have
the right to sell its Units and/or Preferred Units or stock without further
restriction or impediment, except that (x) any transferee shall agree to become
a party to, and be bound to the same extent as the Suiza Member by the terms of,
this Agreement pursuant to the provisions of Section 11.10, and (y) the Xxxx
Members shall have the right to tag along with any such sale on effectively the
same terms as set forth for the Suiza Member in Section 11.5(e), (f) and (g) and
the Suiza Member shall have the right to drag along the Xxxx Members on
effectively the same terms as set forth for the Xxxx Members in Section 11.6,
provided the Suiza Member agrees to purchase the Xxxx Members' RPH stock in
addition to Units if the Xxxx Members so request in writing; provided, further,
however that at such time, if the Suiza Member so requests in writing, RPH in a
writing reasonably satisfactory in form and substance to the Suiza Member
represents and warrants to the Suiza Member that RPH has no assets other than
its Units and Preferred Units and has no liabilities or obligations of any
nature (whether known or unknown and whether absolute, accrued, contingent or
otherwise), and provides customary indemnification (with no "basket" or "cap"
and payable solely in cash without any offsets) to the Suiza Member for any
breach thereof. Such representation, warranty and indemnity shall survive until
the expiration of the applicable statute of limitations.
(b) If, after the fourth anniversary of the Closing Date and prior to
an Initial Public Offering, any of the Managers appointed by Franklin vote
against a proposal to effect an Initial Public Offering or a sale of the Company
or all or substantially all of its assets, thereby causing such proposal not to
be approved pursuant to Section 7.3, the Xxxx Members shall have the right, but
not the obligation, within 30 days after such proposal was not approved, to
offer to sell to the Suiza Member all (but not less than all) their Units and/or
Preferred Units and stock of RPH at
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Fair Market Value, which shall be determined in accordance with the procedures
set forth in Section 11.7(c). If after 30 days after the determination of the
Fair Market Value, the Suiza Member declines to purchase such Units and/or
Preferred Units and stock, the Xxxx Members shall have the right, but not the
obligation, to offer to sell to the Company all (but not less than all) their
Units and/or Preferred Units and stock at Fair Market Value. In the event of
such an offer by written notice to the Company, the Company shall either (i)
purchase all such Units and/or Preferred Units and stock for cash within 30 days
after its notice of its intent to purchase the Units and/or Preferred Units and
stock or (ii) notify the Xxxx Members, by written notice within 30 days after
receipt of such written notice, that the Company will use its reasonable best
efforts to either (A) cause a sale of business of the Company as expeditiously
as practicable or (B) consummate an Initial Public Offering as expeditiously as
practicable. Sections 7.2 and 7.3 shall not apply to any action taken by the
Company pursuant to or in connection with the preceding sentence. For the
purpose of this Section 11.7(b), a sale of all of the Units and Preferred Units
owned by Vestar together with a sale of all of the shares of RPH shall be deemed
to be a sale of all of the Units and Preferred Units owned by the Xxxx Members.
If the Company is unable to sell the business or consummate an Initial Public
Offering within 180 days following the expiration of the 30 day period referred
to in this subsection, however, the Xxxx Members shall have the right to sell
their Units (as well as their RPH stock) and Preferred Units without further
restriction or impediment, except that (x) any transferee shall agree to become
a party to, and be bound to the same extent as the Xxxx Members by the terms of,
this Agreement pursuant to the provisions of Section 11.10, and (y) the Suiza
Member shall have the right to tag along with any such sale on the terms set
forth in Section 11.5(e), (f), and (g), and the Xxxx Members shall have the
right to drag along the Suiza Member on the terms set forth in Section 11.6,
provided the Xxxx Members agree to purchase the stock of Franklin owned by
Continental Can Company, Inc. or its Affiliates in addition to Units if the
Suiza Member so requests in writing; provided further, however that at such
time, Suiza Foods in a writing reasonably satisfactory in form and substance to
the Xxxx Members represents and warrants to the Xxxx Member that Franklin has no
assets other than its Units and Preferred Units and has no liabilities or
obligations of any nature (whether known or unknown and whether absolute,
accrued, contingent or otherwise), and provides customary indemnification (with
no "basket" or "cap" and payable solely in cash without any offsets) to the Xxxx
Members for any breach thereof. Such representation, warranty and indemnity
shall survive until the expiration of the applicable statute of limitations.
(c) "Fair Market Value" of any Units and/or Preferred Units or stock
means as of any date the fair market value thereof, as mutually determined by
the Suiza Members and the Xxxx Members. If the parties cannot agree on a Fair
Market Value, they will select a mutually acceptable independent appraiser to
determine such value. If the parties cannot mutually agree upon an independent
appraiser within 30 days, each of the Suiza Members and the Xxxx Members shall
have an additional 15 days to select an independent appraiser and the two
independent appraisers selected by the parties shall then have 15 days to select
a third independent appraiser. The independent appraiser or appraisers selected
shall determine the Fair Market Value of the Units, Preferred Units and stock
and deliver an opinion in writing to the parties within 30 days after its or
their engagement. The determination of the appraiser or appraisers shall be
final. The Company will bear the cost of the appraisal.
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11.8 Prohibited Transfers. Any transfer or purported transfer, whether
by operation of law or otherwise, of any Units shall be null and void and of no
legal effect if such transfer is prohibited by this Article XI or by other
provisions of this Agreement.
11.9 Rights of Assignee.
(a) Except as provided in this Article XI, and as required by
operation of law, the Company shall not be obligated for any purpose
whatsoever to recognize the transfer by any Member of any Units and/or
Preferred Units if such transfer violates the terms of this Article XI.
(b) Any transfer of Units and/or Preferred Units must be in
writing, may not contravene any of the provisions of this Agreement or
the Delaware Act, and must be executed by the transferor and delivered
to the Company and recorded on the books of the Company. Any transfer
which contravenes any of the provisions of this Agreement or the
Delaware Act shall be of no force and effect and shall not be
recognized by the Company.
(c) A transferee of Units and/or Preferred Units who is not
already a Member or is not admitted as a Member pursuant to Section
11.10 shall have no right to require any information or account of the
Company's transactions or to inspect the Company books or to vote, but
shall only be entitled to receive the allocations and distributions to
which his transferor would otherwise be entitled under this Agreement.
(d) Any transferee who does not become a Member and desires to
make a further transfer of such Units and/or Preferred Units shall be
subject to all of the provisions of this Article XI to the same extent
and in the same manner as any Member desiring to transfer his Units
and/or Preferred Units.
(e) A transferee or assignee of Units and/or Preferred Units,
whether or not admitted as a Member hereunder, shall have no rights
under Sections 7.11, 7.12 or 11.7 hereunder.
11.10 Admission as a New Member.
(a) Subject to the other provisions of this Article XI, a
permitted transferee of a Unit and/or Preferred Unit (if such
transferee is not already a Member) or a Person who exercises an
employee option to acquire Units pursuant to a Company option plan
shall be admitted as a Member only after the satisfactory completion of
items (i) through (iv) below, and if applicable, item (v):
(i) The transferee or optionee accepts and agrees to
be bound by the terms and provisions of this Agreement;
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(ii) a counterpart of this Agreement and such other
documents or instruments as the Management Committee may
reasonably require is executed by the transferee or optionee
to evidence such acceptance and agreement;
(iii) the transferee or optionee pays or reimburses
the Company for all reasonable legal fees, filing, and
publication costs incurred by the Company in connection with
the admission of the transferee or optionee as a Member;
(iv) the Management Committee approves the admission
of such permitted transferee or optionee, which approval may
be withheld in the reasonable discretion of such Management
Committee; provided that such approval will not be required in
connection with a transfer to or by a pledgee in connection
with or following foreclosure of such pledge; and provided
further, that Xxxx X. Xxxxxx and Xxxxx X. Xxxxxx shall in any
event be permitted transferees or optionees; and
(v) if the transferee is not an individual, the
transferee provides the Company with evidence satisfactory to
counsel for the Company of the authority of such transferee to
become a Member under the terms and provisions of this
Agreement.
(b) The Management Committee or officers of the Company shall
make all official filings and publications as promptly as practicable
after the satisfaction by the transferee or optionee of the conditions
contained in this Article XI to the admission of such transferee or
optionee as a Member.
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11.11 Distributions and Allocations in Respect of Transferred Units. If
any Units and/or Preferred Units are sold, assigned, or transferred during any
Fiscal Year without violating the provisions of this Article XI, Profits,
Losses, and all other items attributable to the transferred (or adjusted)
interest for such period shall be divided and allocated between the affected
Persons by taking into account their varying interests during the period in
accordance with Code Section 706(d), using any conventions permitted by law and
approved by the Management Committee. All distributions on or before the date of
such transfer shall be made to the transferor. Solely for purposes of making
such allocations and distributions in the case of a transfer, the Company shall
recognize such transfer not later than the end of the calendar month during
which it is given notice of such transfer, provided that if the Company does not
receive a notice stating the date such Units and/or Preferred Units were
transferred and such other information as the Management Committee may
reasonably require within 30 days after the end of the Fiscal Year during which
the transfer occurs, then all of such items shall be allocated, and all
distributions shall be made, to the Person who, according to the books and
records of the Company, on the last day of the Fiscal Year during which the
transfer occurs, was the owner of the Units and/or Preferred Units. Neither the
Company nor any Member shall incur any liability for making allocations and
distributions in accordance with the provisions of this Section 11.11, whether
or not any Member or the Company has knowledge of any transfer of ownership of
any interest.
11.12 Conversion to Corporate Form.
(a) In the event that the Management Committee shall determine
that the business of the Company should be conducted in the form of a
corporation rather than a limited liability company so that an Initial
Public Offering can occur, the Managers shall have the power to merge
the Company into RPH, and take such other action as they shall deem
advisable in connection therewith. Franklin anticipates that it will
simultaneously merge into RPH in the event of an Initial Public
Offering. RPH agrees to permit the merger of Franklin into RPH at such
time if Franklin so requests in writing at least 60 days prior to the
merger of the Company into RPH and if Suiza Foods (and/or the successor
by operation of law to Suiza Foods or the transferee of substantially
all of its assets) in a writing reasonably satisfactory in form and
substance to RPH represents and warrants to RPH at that time that
Franklin has no assets other than its Units and Preferred Units and has
no liabilities or obligations of any nature (whether known or unknown
and whether absolute, accrued, contingent or otherwise), and provides
customary indemnification (with no "basket" or "cap" and payable solely
in cash without any offsets) to RPH for any breach thereof. Such
representation, warranty and indemnity shall survive until the
expiration of the applicable statute of limitations. In connection with
any such merger of the Company and/or Franklin into RPH, the Members or
Franklin Shareholders, as the case may be, shall receive, in exchange
for their Units or shares of Franklin Stock, shares of common stock of
RPH in proportion to their Units and, if Franklin is merged into RPH,
warrants to purchase Franklin stock will be exchanged for RPH stock
equal in value to such warrants.
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(b) Prior to taking such action to merge the Company and/or
Franklin into RPH, the Management Committee shall submit to the
Members, and the Members agree to approve, the proposed forms of an
amended certificate of incorporation, by-laws and any other governing
documents for RPH. In addition, each of the Members agrees to take all
action necessary with respect to its Units in order to approve any
merger of the Company and/or Franklin into RPH in accordance with this
Section 11.12. Upon such merger, RPH shall enter into a Registration
Rights Agreement with each of the Members with respect to the stock of
RPH substantially in the form attached hereto as Exhibit 11.12(b).
ARTICLE XII
PREFERRED UNITS
12.1 Issuance of Preferred Units. The Company shall issue Preferred
Units to those Members, at the times and with an aggregate liquidation
preference as specified in the Merger Agreement. Upon any such issuance (i) the
initial Capital Contributions described in Section 4.1 shall be deemed to be
retroactively and proportionately reduced in an aggregate amount equal to the
aggregate initial liquidation preference of the Preferred Units so issued and
(ii) consequently, the Capital Account of each Member shall be reduced in
proportion to their Percentage Interests in an aggregate amount for all Members
equal to the aggregate initial liquidation preference of the Preferred Units so
issued.
12.2 Terms of Preferred Units.
(a) Liquidation Preference. Each Preferred Unit shall have an
initial liquidation preference equal to $1,000 (the "Initial
Liquidation Preference"). Such liquidation preference shall be
increased from time to time as a result of the accrual of distributions
as described in Section 12.2(b) and shall be decreased from time to
time by the amount of distributions made on such Preferred Unit
pursuant to Section 6.1 (such liquidation preference as so increased or
decreased from time to time, the "Liquidation Preference").
(b) Distribution Rights. Each Preferred Unit shall accrue
distribution rights at a rate of 3.125% per calendar quarter on the
average daily Liquidation Preference during such calendar quarter.
Subject to Section 7.2(o), such distribution rights shall be payable in
cash within 15 days of the end of such calendar quarter. If the full
amount of any distribution is not made within such 15 day period, the
Liquidation Preference on such Preferred Unit shall be deemed to be
increased by the amount of such distribution not so made. Such increase
shall be deemed to have occurred on the first day of such 15 day period
and shall accrue distribution rights from that day forward until paid
or redeemed, together with any future distributions thereon, in full.
(c) Optional Redemption. Subject to Section 7.2(p), the
Company, at its option, may redeem Preferred Units, in whole or in
part, at any time or from time to time, at a redemption price per
Preferred Unit equal to the sum of (A) the aggregate Liquidation
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Preference of the Preferred Units to be redeemed, (B) the aggregate
Unpaid Distribution Amount with respect to such Preferred Units and (C)
distributions that accrued on such Preferred Units during that portion
of the calendar quarter in which such redemption occurs (such sum, the
"Redemption Price").
(d) Mandatory Redemption. The Company shall redeem, prior to
redeeming or repurchasing any other Units, all Preferred Units at the
Redemption Price upon the occurrence of the following: (i) a sale,
lease, exchange, or other transfer (in one transaction or a series of
related transactions) of all or substantially all of the assets of the
Company, (ii) an Initial Public Offering or (iii) the merger of the
Company into RPH in accordance with Section 11.12.
(e) Redemption Procedures. In the event the Company shall
redeem (either optionally or mandatorily) Preferred Units, notice of
such redemption shall be given by first class mail, postage prepaid,
mailed not less than 10 nor more than 60 days prior to the redemption
date, to each holder of record of the Preferred Units to be redeemed.
Each such notice shall state: (i) the redemption date, (ii) the number
of Preferred Units to be redeemed and, if fewer than all the Preferred
Units held by such holder are to be redeemed, the number of such
Preferred Units to be redeemed from such holder, (iii) the Redemption
Price and (iv) that distributions on the Preferred Units to be redeemed
will cease to accrue on the redemption date. Notice having been mailed
as aforesaid, from and after the redemption date (unless there shall be
a default by the Company in providing money for the payment of the
redemption price) distributions on the Preferred Units so called for
redemption shall cease to accrue, and such Preferred Units shall no
longer be deemed to be outstanding, and all rights of the holders
thereof (except the right to receive from the Company the Redemption
Price) shall cease.
(f) Conversion Rights. Any Preferred Units held by any Suiza
Member shall not be convertible into Units except as provided in
Section 11.5(e)(i). Any Preferred Units held by any Xxxx Member may be
converted into Units at any time following the fourth anniversary of
the Closing Date in connection with a proposed sale of Units made in
accordance with Section 11.5. If, after the fourth anniversary of the
Closing Date, any Xxxx Member proposes to sell Units, such Xxxx Member
shall be permitted to convert Preferred Units into a number of Units
determined by dividing the aggregate Liquidation Preference of the
number of Preferred Units sought to be converted by the price per Unit
proposed to be paid for each Unit proposed to be sold by such Xxxx
Member; provided, however, that no Xxxx Member shall be permitted to
exercise such conversion right so as to receive a greater number of
Units than will be transferred by it in such sale. Any such conversion
shall be made immediately prior to the closing of any such sale.
(g) Voting Rights. The approval of the holders of a majority
of all of the Preferred Units (as measured by liquidation value) at the
time outstanding, given in person or by proxy, either in writing or by
a vote at a meeting called for the purpose at which the holders of
Preferred Units shall vote together as a class, shall be necessary for
authorizing, effecting or validating the amendment, alteration or
repeal, whether by merger,
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consolidation or otherwise, of any of the provisions of this Agreement
so as to affect adversely the powers, preferences or other special
rights of the Preferred Units. Except as set forth herein or required
by applicable law, holders of Preferred Units shall have no voting
rights and their consent shall not be required for taking any corporate
action.
ARTICLE XIII
DISSOLUTION AND LIQUIDATION
13.1 Dissolution.
(a) Except as set forth in this Agreement, no Member shall
have the right to terminate this Agreement or to dissolve the Company
by its express will or by withdrawal without the consent of the other
Members.
(b) The Company shall be dissolved upon the first to occur of
any of the following events: (each such event is referred to as a
"Dissolution Event"):
(i) any Member suffers an Event of Bankruptcy;
(ii) an election to dissolve the Company is
unanimously approved in writing by the Members; or
(iii) any other event occurs that, under the Delaware
Act, would cause the Company's dissolution.
13.2 Continuation of the Company. Upon the occurrence of an event
described in Section 13.1(b)(i) or Section 13.1(b)(iii), the Company shall be
carried on without dissolution if approved by Members holding 50% or more of the
Percentage Interests. In all other cases, upon the occurrence of an event
described in Section 13.1(b), the Company shall be deemed to be dissolved and
reconstituted only if Members holding 100% of the Percentage Interests
(excluding for these purposes any Percentage Interests held by the Member with
respect to which such Dissolution Event occurred) elect to continue the Company
within 90 days of such event. If no election to continue the Company is made
within 90 days of such event, the Company shall conduct only those activities
necessary to wind up its affairs. If an election to continue the Company is made
upon the occurrence of an event described in Section 13.1(b), then:
(a) the Company shall be deemed to be reconstituted and shall
continue until the end of the term for which it is formed unless
earlier dissolved in accordance with this Article XIII; and
(b) all necessary steps shall be taken to amend or restate
this Agreement and the Certificate of Formation, provided that the
right of Members holding 100% of the Percentage Interests (excluding
for these purposes any Percentage Interests held by a Member with
respect to which such Dissolution Event occurred) to continue the
Company shall not exist and may not be exercised unless the Company has
received an opinion of
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counsel acceptable to the Management Committee that (i) the exercise of
the right would not result in the loss of limited liability of any
Member; and (ii) neither the Company nor the reconstituted Company
would be treated as an association taxable as a corporation for federal
income tax purposes upon the exercise of such right to continue.
13.3 Liquidation.
(a) Upon the dissolution of the Company, unless an election to
continue the Company is made pursuant to Section 13.2, RPH shall serve
as liquidator ("Liquidator") of the Company.
(b) Upon dissolution or resignation of the Liquidator, a
successor and substitute Liquidator (who shall have and succeed to all
rights, powers and duties of the original Liquidator) shall within 30
days thereafter be approved by the Members holding 70% of the
Percentage Interests. The right to appoint a successor or substitute
Liquidator in the manner provided herein shall be recurring and
continuing for so long as the functions and services of the Liquidator
are authorized to continue under the provisions hereof, and every
reference herein to the Liquidator will be deemed to refer also to any
such successor or substitute Liquidator appointed in the manner herein
provided.
(c) Except as expressly provided in this Article XIII, the
Liquidator appointed in the manner provided herein shall have and may
exercise, without further authorization or consent of any of the
parties hereto, all of the powers conferred upon the Management
Committee under the terms of this Agreement to the extent necessary or
desirable in the good faith judgment of the Liquidator to carry out the
duties and functions of the Liquidator hereunder for and during such
period of time as shall be reasonably required in the good faith
judgment of the Liquidator to complete the winding up and liquidation
of the Company as provided for herein.
(d) Except as otherwise provided in this Article XIII
(including Section 13.5 below), the Liquidator shall liquidate the
assets of the Company, and, after making all allocations and
distributions otherwise required by this Agreement, shall apply and
distribute the net proceeds of such liquidation in the following order
of priority:
(i) to the creditors of the Company, including
Members, in the order of priority provided by applicable law;
(ii) to the Members with Preferred Units in
proportion to the sum of (A) the aggregate Liquidation
Preference of the Preferred Units held by such Member, (B) the
aggregate Unpaid Distribution Amount with respect to such
Preferred Units and (C) dividends that accrued on such
Preferred Units during that portion of the calendar quarter in
which such liquidation occurs; and
(iii) then, the remaining balance of the liquidation
proceeds, if any, to the Members in accordance with their
respective positive Capital Account
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balances, after taking into account all allocations of Profit,
Loss and other items of income, gain, loss and deduction, and
distributions for all periods, including prior distributions
made pursuant to this Article XIII provided, that, profit or
loss of the Company resulting from the sale or other
disposition of all or substantially all of the Company's
Assets or otherwise associated with the liquidation of the
Company shall be allocated in a manner designed, to the extent
possible, to cause the Capital Account balance of each Member
to equal the amount that would be distributed to such Member
if all of the Company's Assets were distributed to the Members
in accordance with the provisions of Section 6.1 of this
Agreement; provided, however, that, notwithstanding anything
in this Article XIII to the contrary, the Liquidator may place
in escrow a reserve of cash or other assets of the Company for
contingent liabilities in an amount determined by the
Liquidator to be appropriate for such purposes.
13.4 Reserves. After all of the assets of the Company have been
distributed, the Company shall terminate. If at any time thereafter any funds in
any cash reserve fund referred to in Section 13.3(d) are released because the
need for such cash reserve fund has ended, such funds shall be distributed to
the Members in the same manner as if such distribution had been made pursuant to
Section 13.3(d).
13.5 Distribution in Kind. Notwithstanding the provisions of Section
13.3 which require the liquidation of the assets of the Company, but subject to
the order of priorities set forth therein and subject also to Section 13.4, if
upon the dissolution of the Company the Management Committee determines that an
immediate sale of part or all of the Company's assets would be impractical or
would cause undue loss to the Members, the Liquidator may, in good faith, defer
for a reasonable time the liquidation of any assets except those necessary to
satisfy liabilities of the Company (other than those to Members). The Liquidator
may distribute to the Members, in lieu of cash, such Company assets as the
Liquidator deems not suitable for liquidation. Any distributions in kind shall
be subject to such conditions relating to the disposition and management thereof
as the Liquidator and the Management Committee deem reasonable and equitable.
The Management Committee shall value any property distributed in kind based upon
such property's fair market value as determined using such reasonable method of
valuation as it may adopt.
13.6 Disposition of Documents and Records. All documents and records of
the Company, including, without limitation, all financial records, vouchers,
canceled checks and bank statements, shall be delivered to RPH upon termination
of the Company. RPH shall retain such documents and records for a period of not
less than six (6) years and shall make such documents and records available
during normal business hours to any other Member for inspection and copying at
the other Member's cost and expense.
13.7 Negative Capital Accounts. If, after the allocations of Profit,
Loss, and other items of income, gain, loss, deduction or credit under Article V
and after distributions of cash under Article VI, any Member shall ever have a
negative balance in such Member's Capital Account, no Member shall have any
obligation to restore such negative balance, or to make any
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contribution to the capital of the Company by reason thereof, and such negative
balance shall under no circumstances be considered a liability of the Company or
of any Member.
13.8 Filing of Certificate of Cancellation. Upon the completion of the
distribution of Company property as provided in Sections 13.3, 13.4, and 13.5,
the Company shall be terminated, and the Liquidator (or the Members if
necessary) shall cause the Certificate to be canceled and will take such other
actions as may be necessary to terminate the Company.
13.9 Return of Capital. No Member shall be personally liable for the
return of the Capital Contributions of any other Members, or any portion
thereof, it being expressly understood that any such return shall be made solely
from Company assets.
13.10 Waiver of Partition. Each Member hereby waives any rights to
partition of the Company property.
ARTICLE XIV
AMENDMENT OF AGREEMENT
14.1 Amendment Procedures.
(a) Amendments to this Agreement may be proposed by any
Member, which shall give written notice to all Members of the text of
such amendment, together with a statement of the purpose of such
amendment.
(b) Proposed amendments to this Agreement shall be adopted,
subject to Section 7.2, if they have been approved in writing by
Members holding 80% of the Percentage Interests; provided, however,
that no amendment shall be adopted without the consent of each Member
affected if the amendment adversely affects such Member's economic
interests relating to the Member's Units or if the amendment adversely
affects such Member's rights with respect to management or control of
the Company, except, in each case, for such amendments that adversely
affect all Members' economic interests and rights proportionately. The
President shall, within a reasonable time after the adoption of any
amendment to this Agreement, make official filings or publications
required or desirable to reflect such amendment, including any required
filing for recordation of any parallel amendment to the Certificate.
ARTICLE XV
GENERAL PROVISIONS
15.1 Addresses and Notices. Any notice provided in or permitted under
this Agreement shall be made in writing and may be given or served by: (a)
delivering the same in person to the party to be notified; (b) depositing the
same in the mail, postage prepaid, registered or certified with return receipt
requested, and addressed to the party to be notified at the address herein
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specified; (c) delivering the same on a prepaid basis via a nationally
recognized courier service, such as Federal Express; or (d) sending the same by
facsimile transmission, followed by delivery of a hard copy via a nationally
recognized courier service, such as Federal Express. If notice is deposited in
the mail pursuant to this Section 15.1, it will be deemed received on the third
(3rd) Business Day after it is so deposited. Notice given in any other manner
shall be deemed received only if and when actually received by the party to be
notified. For the purpose of notice, the address of the parties shall be, until
changed as hereinafter provided for, as follows:
If to any RPH or Vestar: with a copy to:
Xxxx Plastic Holdings, Inc. Xxxxxxx Xxxxxxx & Xxxxxxxx
00000 Xxxx Xxxxxx Xxxxx, Xxxxx 000 000 Xxxxxxxxx Xxxxxx
Xxxxxxx Xxx, Xxxxxxxxxx 00000 Xxx Xxxx, Xxx Xxxx 00000
Attention: Chief Financial Officer Attention: Xxxxx X. Xxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
and
Vestar Packaging, LLC
Seventeenth Street Plaza
0000 00xx Xxxxxx, Xxxxx 0000
Xxxxxx, XX 00000
Attention: Xxxx X. Xxxxxxx
Telecopy: (000) 000-0000
If to Franklin: with a copy to:
Suiza Foods Corporation Xxxxxx & Xxxx, L.L.P.
0000 XxXxxxxx Xxx., XX 00, Xxxxx 0000 0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000 Xxxxxx, Xxxxx 00000
Attention: President and General Counsel Attention: Xxxxxxx X. XxXxxxxxx
Telecopy: (000) 000-0000 Telecopy: (000) 000-0000
The parties shall have the right from time to time and at any time to change
their respective addresses and each shall have the right to specify as its
address any other address by at least 15 days' prior written notice to the other
parties. Each party shall have the right from time to time to specify additional
parties (not to exceed two additional parties) to whom notice hereunder must be
given by delivering to the other party 15 days' prior written notice thereof,
setting forth the address of such additional parties. Notice required to be
delivered hereunder to any party shall not be deemed to be effective until the
additional parties, if any, designated by such party have been given notice in a
manner deemed effective pursuant to the terms of this Section 15.1.
15.2 Titles and Captions. All article and section titles and captions
in this Agreement are for convenience only. They shall not be deemed part of
this Agreement and in no way define, limit, extend or describe the scope or
intent of any provisions hereof. Except as specifically
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provided otherwise, references to "Articles" and "Sections" are to Articles and
Sections of this Agreement.
15.3 Pronouns and Plurals. Whenever the context may require, any
pronoun used in this Agreement shall include the corresponding masculine,
feminine or neuter forms, and the singular form of nouns, pronouns and verbs
shall include the plural and vice versa. The locative adverbs "hereof,"
"herein," "hereafter," etc. refer to this Agreement as a whole.
15.4 Further Action. The parties shall execute all documents, provide
all information and take or refrain from taking action as may be necessary or
appropriate to achieve the purposes of this Agreement.
15.5 Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and their heirs, executors, administrators,
successors, legal representatives, and permitted assigns.
15.6 Integration. This Agreement constitutes the entire agreement among
the parties hereto pertaining to the subject matter hereof and supersedes all
prior agreements and understandings pertaining thereto.
15.7 No Third Party Beneficiary. This Agreement is made solely and
specifically between and for the benefit of the parties hereto, and their
respective successors and assigns subject to the express provisions hereof
relating to successors and assigns, and no other Person whatsoever shall have
any rights, interest, or claims hereunder or be entitled to any benefits under
or on account of this Agreement as a third party beneficiary or otherwise. It is
expressly understood that the right of the Company or the Members to require any
additional Capital Contributions under the terms of this Agreement shall not be
construed as conferring any rights or benefits to or upon any Person not a party
to this Agreement, or the holder of any obligations secured by a mortgage, deed
of trust, security interest or other lien or encumbrance upon or affecting the
Company or any interest of a Member therein.
15.8 Waiver. No failure by any party to insist upon the strict
performance of any covenant, duty, agreement or condition of this Agreement or
to exercise any right or remedy consequent upon a breach thereof shall
constitute waiver of any such breach or any other covenant, duty, agreement or
condition.
15.9 Counterparts. This Agreement may be executed in counterparts, all
of which together shall constitute one agreement binding on all the parties
hereto, notwithstanding that all such parties are not signatories to the
original or the same counterpart. Each party shall become bound by this
Agreement immediately upon affixing its signature hereto or, in the case of a
transferee, upon executing and delivering such documents as required by the
Management Committee.
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15.10 APPLICABLE LAW. THIS AGREEMENT SHALL BE CONSTRUED IN ACCORDANCE
WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF THE STATE
OF DELAWARE APPLICABLE TO CONTRACTS ENTERED INTO AND TO BE PERFORMED IN THE
STATE OF DELAWARE.
15.11 Invalidity of Provisions. If any provision of this Agreement is
declared or found to be illegal, unenforceable or void, in whole or in part,
then the parties shall be relieved of all obligations arising under such
provision, but only to extent that it is illegal, unenforceable or void, it
being the intent and agreement of the parties that this Agreement shall be
deemed amended by modifying such provision to the extent necessary to make it
legal and enforceable while preserving its intent or, if that is not possible,
by substituting therefor another provision that is legal and enforceable and
achieves the same objectives.
15.12 Confidentiality. Each party to this Agreement agrees to keep
confidential the terms of this Agreement and any materials provided in
connection with this Agreement. Notwithstanding the foregoing, each party to
this Agreement may disclose the terms, and any all materials provided in
connection with this Agreement, (a) to its counsel, accountants, auditors or
other agents whose professional responsibility it is to hold such information
confidential, (b) as may be required by any statute, court order, administrative
order or decree or governmental ruling or regulation of the United States or
other applicable jurisdiction, including Internal Revenue Service auditors, or
as may be requested by the Internal Revenue Service or any other governmental
entity, or (c) to such other Persons as are reasonably deemed necessary by such
party to protect the interests of such party or for the purposes of enforcing
such documents and who agree to hold such information confidential on the terms
hereof.
SIGNATURE PAGES ARE ATTACHED HERETO
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IN WITNESS WHEREOF, the parties hereto, intending to be legally bound,
have executed this Agreement as of the day and year first above written.
MEMBERS:
XXXX PLASTIC HOLDINGS, INC.,
a Delaware corporation
By: /s/ XXXXXX X. XXXXX
Name: Xxxxxx X. Xxxxx
Title: President and Chief Executive Officer
VESTAR PACKAGING LLC, a
Delaware limited liability company
By: /s/ XXXXXX X. SILVER
Name: Xxxxxx X. Silver
Title:
FRANKLIN PLASTICS, INC., a Delaware
corporation
By: /s/ XXXXXXXX X. XXXXXXX
Name: Xxxxxxxx X. Xxxxxxx
Title: Vice President
