TABLE OF CONTENTS
SHAREHOLDERS' AGREEMENT
by and among
Consolidated Mercantile Incorporated,
Glencoe Skydome Holdings, L.P.,
Xxxxx Xxxxxxxxxx
and
Xxxx X. Xxxxxx,
as Shareholders of
Polyair Inter Pack Inc.
Table of Contents
Page
ARTICLE I GOVERNANCE................................................1
1.1 Board of Directors........................................1
1.2 Subsidiary Boards.........................................3
1.3 Meeting Provisions........................................3
1.4 Secretary.................................................4
1.5 Compensation..............................................4
1.6 Exercise of Voting Rights.................................5
1.7 Board Approvals...........................................5
1.8 Monthly Operations Review Meeting.........................6
1.9 Board Observation Rights..................................6
1.10 Further Action............................................6
1.11 1996 Agreement............................................7
1.12 Breach....................................................7
ARTICLE II RESTRICTIONS ON TRANSFER..................................7
2.1 Restrictions on Transfer..................................7
2.2 Required Sale.............................................8
2.3 Prohibited Transfers......................................9
ARTICLE III SHARE CERTIFICATES.......................................10
3.1 Legend on Certificates...................................10
ARTICLE IV MATTERS PERTAINING TO PPK LP.............................10
4.1 Formation................................................10
4.2 Voting...................................................10
4.3 Management...............................................11
4.4 Share Acquisitions.......................................11
4.5 Mandatory Share Acquisition..............................11
4.6 Limitation on Share Acquisitions.........................12
4.7 Share Acquisition Funding................................12
4.8 Debt Service.............................................12
4.9 Actions Requiring Approval...............................13
ARTICLE V TERM.....................................................13
ARTICLE VI MISCELLANEOUS............................................13
6.1 CMI Consolidated Financial Statements....................13
6.2 No Third-Party Beneficiaries.............................13
6.3 Entire Agreement.........................................14
6.4 Succession and Assignment................................14
6.5 Counterparts.............................................14
6.6 Headings.................................................14
6.7 Notices..................................................14
6.8 Governing Law and Consent to Jurisdiction................15
6.9 Specific Performance.....................................15
6.10 Amendments...............................................16
6.11 Severability.............................................16
6.12 Expenses.................................................16
6.13 Incorporation of Exhibits and Schedules..................16
SHAREHOLDERS' AGREEMENT
THIS AGREEMENT is made and entered into effective as of this 10th day of March,
2004, by and among Consolidated Mercantile Incorporated, an Ontario corporation
("CMI"), Glencoe Skydome Holdings, L.P., a Delaware limited partnership ("GSH"),
Xxxxx Xxxxxxxxxx ("Schnurbach") and Xxxx X. Xxxxxx ("Xxxxxx"). CMI, GSH,
Schnurbach and Xxxxxx are referred to herein individually as a "Shareholder" and
collectively as the "Shareholders".
WHEREAS, the Shareholders are the record and beneficial owners of an aggregate
of 3,381,834 shares of the common stock, constituting 55.1% of the 6,137,800
issued and outstanding shares of capital stock (the "Polyair Common Stock") of
Polyair Inter Pack Inc., an Ontario corporation ("Polyair"), as follows:
Shareholder Shares
CMI 1,427,967
GSH 1,827,667
Schnurbach 101,200
Xxxxxx 25,000
WHEREAS, Xxxxxx indirectly exercises control and direction over approximately
51.8% of the issued and outstanding shares of CMI;
WHEREAS, CMI exercises the voting rights relating to 510,463 shares of Polyair
Common Stock owned by shareholders who are not parties to this Agreement;
WHEREAS, the Shareholders desire to enter into this Agreement restricting the
transfer of Polyair Common Stock, and governing the manner in which they will
regulate their relationship and other contractual rights involving Polyair and
its subsidiaries.
NOW, THEREFORE, in consideration of the premises and promises contained herein,
the parties agree as set forth below.
ARTICLE I
GOVERNANCE
1.1 Board of Directors.
(a) Each Shareholder shall vote all of its shares of Polyair Common Stock
and all future acquired shares and any other shares over which it exercises
voting control (the "Polyair Shares") to fix the number of individual
members of the board of directors of Polyair (individually, a "Director"
and collectively, the "Directors") at seven (7) and to elect and continue
in office as Directors, four (4) individuals nominated by CMI and three (3)
individuals nominated by GSH; provided, however, that, unless otherwise
agreed by GSH, one of CMI's nominees shall have no direct or indirect
relationship with Xxxxxx or CMI (whether as a relative of Xxxxxx or as an
employee or creditor of CMI or an Affiliate of CMI or Xxxxxx) and shall be
reasonably acceptable to GSH (the "Fourth Director"). If in any year GSH
rejects three (3) of CMI's nominees as the Fourth Director not being
acceptable, CMI may then select as its nominee for the Fourth Director an
individual (other than the rejected nominees) meeting the foregoing
criteria, who is or has been a director of a publicly-held company or has
comparable experience. GSH's nominees need not be Canadian citizens or
residents of Canada.
(b) If the applicable requirements of the securities laws or any stock
exchange on which Polyair Shares are listed require that a majority of the
board be independent, then two of CMI's nominees and two of GSH's nominees
shall meet such requirements. If at any time the Board of Polyair shall be
comprised of other than seven (7) Directors, the number of CMI and GSH
nominees shall be adjusted so as to preserve the proportion in Section
1.1(a) hereof.
(c) Promptly after the date hereof, the Shareholders, shall cause the
following individuals to be elected as Directors:
Xxx Xxxxxxx
Xxxxxx X. Xxxxxxx
Xxxx X. Xxxxxx
Xxx X. Xxxxxx
G. Xxxxxxx Xxxxxxxxx
Xxxxx Xxxxxxxxxx
Xxxxxx Xxxxxxxxx
GSH hereby consents to the nomination of Schnurbach as the initial Fourth
Director, notwithstanding the fact that he may be deemed to be an employee
of an Affiliate of CMI or that he may be a shareholder or optionholder of
CMI.
(d) Following November 15, 2005, GSH may upon fourteen (14) days prior
notice unilaterally require the termination of Schnurbach as an executive
officer of Polyair. Any such termination shall be without prejudice to any
of Schnurbach's rights under his employment agreement with Polyair. Prior
to the expiration of the fourteen (14) day notice period, CMI shall notify
GSH of its election to either (i) assist GSH in effecting the termination
of Schnurbach or (ii) exercise its rights as a Requesting Shareholder under
Section 2.2 of this Agreement (notwithstanding that the third anniversary
of the date of this Agreement shall not have occurred), in which case, GSH
agrees not to pursue the termination of Schnurbach , so long as CMI
continues to diligently pursue a required sale under Section 2.2 of this
Agreement.
(e) The parties acknowledge that until and unless the Shareholders
represent all of the shareholders of Polyair, this Agreement shall not be
interpreted as restricting in whole or in part the powers of the directors
of Polyair or any Polyair Company to manage or supervise the management of
the business and affairs of any Polyair Company or the ability of
Directors, Officers and Senior Managers to fulfill their fiduciary duties
under applicable law.
1.2 Subsidiary Boards. CMI and GSH shall request their respective Director
nominees to propose that the Polyair Board of Directors shall set the number of
directors and elect or appoint to the board of directors or other governing body
of each entity directly or indirectly owned or controlled by Polyair (each a
"Polyair Subsidiary" and together with Polyair, the "Polyair Companies", each a
"Polyair Company"; for greater certainty, the foregoing definitions in each case
exclude PPK LP and its general partner, which are covered elsewhere herein)
members in approximately the same proportion as those set forth for Polyair in
Section 1.1 hereof; provided, however, that with respect to subsidiaries which
are not wholly-owned by Polyair ("Non-Wholly Owned Subsidiaries"), the
composition of the board shall be subject to the agreements referred to in
Schedule 1.2. In the event that there is a change in the proportion of Directors
that either CMI or GSH is entitled to nominate in accordance with Section 1.1
hereof, such change shall also apply to the designation of members to other
Polyair Company governing boards.
1.3 Meeting Provisions. CMI and GSH shall request their respective Director
nominees to propose that each Polyair Company adopt resolutions to provide the
following (provided that in respect of Non-Wholly Owned Subsidiaries, such
resolutions may not conflict with the provisions of the agreements referred to
in Schedule 1.2):
(a) Board Meetings. Regular meetings of the board of Polyair shall be held
at least once per fiscal quarter on dates established in advance by
resolution of the board (Directors and the Secretary may participate in
meetings by telephone);
(b) Out-of-Pocket Expenses. Directors shall be reimbursed for their
reasonable out-of-pocket expenses incurred in connection with their
attendance at meetings;
(c) Location of Board Meetings. At least one board meeting of Polyair each
year shall be held in each of Xxxxxxx, Xxxxxxxx xxx Xxxxxxx, Xxxxxxx
(Directors and the Secretary may participate in meetings by telephone);
(d) Notice; Waiver of Notice. All board meetings shall be held on at least
five (5) calendar days advance notice with notice of each regular or
special meeting given by the Secretary (Directors may waive notice by
attending the meeting);
(e) Quorum. The quorum for any meeting of a board or committee shall
require the presence of at least one Director nominated by GSH; provided,
however, that if the meeting has been adjourned for failure to achieve a
quorum for at least two (2) full business days, then following written
notice of the reconvened meeting, the failure of such nominee to attend a
meeting in respect of which notice has been duly given shall not preclude
the reconvened meeting from proceeding, if a quorum is otherwise present as
determined in accordance with the by-laws of the Polyair Company; and
(f) Committees. Any committee of Directors of any Polyair Company shall
consist of two or three members of the applicable board and shall include
at least one GSH nominee. Polyair shall designate an audit committee with
three members and a compensation committee with two members (the
"Compensation Committee"). The Directors shall permit the Secretary to
attend each committee meeting and shall deliver a report of each committee
meeting at the board meeting next following the committee meeting.
1.4 Secretary. CMI and GSH shall request their respective Director nominees
to propose that each Polyair Company cause the Secretary and one assistant
secretary of such Polyair Company (except in the case of a Non-Wholly Owned
Subsidiary to the extent the provisions of this Section conflict with the
agreements listed on Schedule 1.2) to be an individual nominated by GSH (such
individuals to be collectively referred to herein as the "Secretary"), who shall
have the following responsibilities:
(a) Keep the minutes of the meetings of the shareholders and of the boards
of directors, including all committee meetings;
(b) See that all notices are duly given in accordance with the provisions
of law or the applicable charter and bylaws;
(c) Maintain the stock ledger and record books of each Polyair Company,
provided that the shareholder register of Polyair shall be maintained by a
transfer agent appointed by the board (currently Computershare Trust
Company of Canada);
(d) Approve any and all press releases or written communications with the
general public prior to their release, unless such communication or
meetings have been approved by the board of Directors or a committee
thereof;
(e) Have access to all books and records of each Polyair Company;
(f) Circulate or be copied on any reports or materials delivered to
directors of any Polyair Company; and
(g) In general, perform all duties incident to the office of Secretary, and
such other duties as are provided for by the applicable bylaws and as from
time to time are delegated or assigned by the board of directors or by the
chief executive officer of the Polyair Company; provided, however, that if
the Secretary fails to perform any of the foregoing, the board of Directors
of the relevant Polyair Company may appoint another assistant secretary to
perform such duties as such board may direct.
1.5 Compensation. CMI and GSH shall request their respective Director
nominees to propose that the compensation of Officers and Senior Managers
(including salary, benefits, perquisites, bonus, and the grant of any stock
options, stock appreciation rights or other equity based compensation) and any
employment arrangement, whether written or unwritten, shall be determined by
unanimous approval of the Compensation Committee, except in the case of a
Non-Wholly Owned Subsidiary to the extent the provisions of this Section
conflict with the agreements listed on Schedule 1.2. Neither CMI nor GSH nor any
of their Affiliates shall engage in any transactions with Polyair, or accept the
payment of fees in respect of services from Polyair, without the prior approval
of the other. "Affiliate" shall mean any person or entity which, directly or
indirectly, through one or more intermediaries, controls, is controlled by, or
is under common control with, such person or entity; provided, however, that PPK
LP shall not be deemed to be an Affiliate for purposes of this Agreement. A
person or entity shall be deemed to control another person or entity, if the
controlling person or entity possesses, directly or indirectly, the power to
direct, or cause the direction of, the management and policies of the other
person or entity, whether through the ownership of voting securities, membership
interests, by contract or otherwise. "Officers and Senior Managers" shall mean
those persons holding the offices president, chief financial officer, chief
executive officer, chief operating officer, vice president of manufacturing of
Polyair, or a division president, or a president or senior manager in charge of
manufacturing of any significant Polyair subsidiary.
1.6 Exercise of Voting Rights. GSH and CMI shall only vote in favour of a
shareholder resolution approving or directing the taking by Polyair of any of
the following actions upon consent of the other:
(a) amend the charter or bylaws of any Polyair Company;
(b) liquidate or dissolve any material Polyair Company;
(c) approve any amalgamation, merger, consolidation, reorganization,
recapitalization or similar transaction involving any Polyair Company;
(d) approve or dismiss auditors.
On all shareholder matters not expressly referred to in Sections 1.1
through 1.6, GSH shall exercise the voting rights attaching to all of the
Polyair Shares owned or controlled by GSH as directed by CMI.
1.7 Board Approvals. GSH and CMI shall request that their Director nominees
shall, subject to any obligation such nominee may otherwise have at law as a
result of its appointment or election as a director of a Polyair Company, only
vote in favour of the actions enumerated below, if a majority of each other's
nominees is also in favour thereof and, in any event, such action is approved by
at least 5 of the 7 Directors (or if the board of Polyair consists of a number
other than 7, by a number equal to the number of CMI nominees plus one), except
in the case of a Non-Wholly Owned Subsidiary to the extent the provisions of
this Section conflict with the agreements listed on Schedule 1.2:
(a) issue any preference shares, any additional common shares or any other
shares of capital stock, or equivalent thereto, of any Polyair Company or
repurchase or redeem any such shares, or equivalent thereto, of any Polyair
Company, except for the 1,072,500 shares of Polyair Common Stock reserved
for issuance under the Polyair Stock Option Plan or the 598,802 shares
reserved for issuance under Polyair's US$5,000,000 Convertible Promissory
Note, due March 31, 2009, dated May 8, 2003 held by Jacuzzi Leisure
Products;
(b) hire for employment or terminate the employment of any Officers or
Senior Managers;
(c) pay or agree to pay any charges imposed by any Shareholder or any of
their Affiliates (but excluding, for greater certainty, payments made to
Schnurbach pursuant to the terms of his employment agreement with Polyair);
(d) change any Polyair dividend or distribution policy;
(e) establish or terminate any committee (or appoint or remove any chairman
of any committee) of the Board of any Polyair Company;
(f) dispose of any material business or material assets of any Polyair
Company or acquire any material business or material assets of any third
party;
(g) incur debt for any material amount of borrowed money other than
pursuant to a credit facility previously approved by the board of the
relevant Polyair Company;
(h) approve any Polyair's annual operating and capital expenditure budgets
and any material changes or variation in such budgets; or
(i) approve Polyair's investor relations policies and programs, including
the distribution of any written materials presented to, or the initiation
of meetings or conferences with, investment bankers or financial analysts.
1.8 Monthly Operations Review Meeting. CMI and GSH shall request their
respective Director nominees to propose that each Polyair Company cause the
senior management of each Polyair Company, including the Secretary, to meet
monthly to discuss the business and operations of the Polyair Companies,
including summary balance sheet, income statement and cash flow information,
capital expenditures, budgets and the performance of business plans. The CEO of
Polyair shall circulate appropriate information to the Secretary and the other
participants prior to the meeting. Xxxx Xxxxxx shall, for as long as he is a
director of Polyair, be given the opportunity to attend and chair such meeting.
1.9 Board Observation Rights. CMI and GSH shall request their respective
Director nominees to propose that Polyair authorize a representative designated
by GSH and a representative designated by CMI to attend all meetings of the
board of Directors as an observer; provided, however, that each observer
executes a reasonable confidentiality and non-disclosure agreement prepared by
Polyair whereby the observer agrees to hold in confidence all confidential
information so provided. In the event that disclosure of any information to or
attendance at any meeting or portion thereof by an observer could reasonably be
expected to adversely affect the attorney-client privilege between Polyair and
its counsel, Polyair shall have the right to withhold such information from the
observer or to exclude the observer from such meeting or portion thereof. The
parties acknowledge that Xxxxxx X. Xxxxxx is acceptable as CMI's designated
representative to act as an observer.
1.10 Further Action. If Polyair ceases to be a registrant under the United
States Securities and Exchange Act of 1934 and a reporting issuer under
applicable Canadian securities legislation, each Shareholder shall cause the
articles of incorporation and bylaws of Polyair and any Polyair Company to
implement the provisions of this Article I and to require that the items listed
in Section 1.7 shall not be taken by Polyair without the approval of CMI and GSH
or a majority of the Directors designated by each of GSH and CMI.
1.11 1996 Agreement. With respect to the Shareholder Agreement, dated
February 20, 1996, as amended, among certain of the Shareholders, other
shareholders of Polyair, Computershare Trust Company of Canada, as Trustee and
as Escrow Agent, and Polyair (the "1996 Agreement"), CMI shall obtain a waiver
to eliminate the right of the parties thereto to exercise their right of first
refusal on any CMI shares and the right of the parties thereto, who are not
Shareholders hereunder, to be nominated as a Director of Polyair. To the extent
the provisions of this Agreement conflict with the 1996 Agreement, the
provisions of this Agreement shall prevail as among the Shareholders. CMI agrees
not to amend the 1996 Agreement without the prior written consent of GSH, which
consent shall not be unreasonably withheld.
1.12 Breach. Any failure to effect results contemplated by the provisions
of this Article I shall be deemed a breach of this Agreement. Upon the
occurrence of a such breach, either CMI or GSH shall give notice of such breach
and the parties shall take such action as is necessary to cure the breach within
sixty (60) calendar days. If a cure is not effective by the end of such
sixty-day period, notwithstanding anything else to the contrary contained in
this Agreement, the notifying party shall be entitled to pursue remedies for the
breach available at law or in equity.
ARTICLE II
RESTRICTIONS ON TRANSFER
2.1 Restrictions on Transfer. Each Shareholder agrees not to sell,
transfer, pledge or assign all or any portion of the Polyair Shares now owned or
hereafter acquired by such Shareholder, except in connection with, and strictly
in compliance with the conditions of, any of the following permitted transfers
"Permitted Transfers"):
(a) Transfers effected pursuant to Section 2.2 made strictly in accordance
with the procedures set forth therein;
(b) Transfers by GSH or CMI to any Affiliate;
(c) Transfers by any Shareholder who is an individual upon such person's
death to his heirs, executors or administrators or to a trust under his
will or transfers between such person and his or her guardian or
conservator;
(d) Transfers to Xxxxxx Xxxxxx in accordance with rights granted by CMI to
him prior to the date hereof, the details of which appear in Schedule 2.1
to this Agreement; or
(e) Shares acquired by Schnurbach upon exercise of options issued by
Polyair or CMI, the details of which appear in Schedule 2.1 to this
Agreement and which, for greater certainty, may be sold, transferred or
assigned without any of the restrictions of this Agreement.
In the case of a Permitted Transfer under Section 2.1 (b) or (c), the
transferee of such Permitted Transfer (a "Permitted Transferee") shall
execute a Joinder Agreement in substantially the form of Exhibit A attached
hereto. Notwithstanding anything to the contrary in this Agreement or any
failure to execute a Joinder Agreement as contemplated hereby, Permitted
Transferees shall take any Polyair Shares so transferred subject to all
provisions of this Agreement as if such shares were still held by the
transferor, whether or not they so agree with the transferor and/or
Polyair.
2.2 Required Sale. At any time after the third anniversary of the date of
this Agreement, upon the request of either CMI or GSH (the "Requesting
Shareholder"), the Shareholders shall request their respective Director nominees
to propose that Polyair retain an investment banker of recognized standing on
terms reasonably acceptable to CMI and GSH to effect the sale or other
disposition of its business and assets by auction or otherwise or to seek a
buyer for all of the outstanding Polyair Shares. Subject to applicable laws and
stock exchange requirements, the Shareholders shall use commercially reasonable
best efforts to cause such sale to take place. Nothing contained in this Section
2.2 shall create any rights in any shareholder of Polyair or any other third
party. If Polyair fails to promptly and diligently pursue the foregoing, in
addition to any other rights or remedies the Requesting Shareholder may have
hereunder, the Requesting Shareholder may arrange for the sale of all shares of
Polyair Common Stock owned or controlled by the Shareholders, which sale may be
effected either directly or by a vote of shareholders by merger or otherwise (a
"Proposed Transaction") by complying with remaining the provisions of this
Section 2.2.
(a) Offer Notice. The Requesting Shareholder shall deliver written notice
(the "Offer Notice") at least thirty (30) calendar days prior to the
closing date of the Proposed Transaction to each other Shareholder (the
"Remaining Shareholders"). The Offer Notice shall specify (i) the number of
shares subject to the Proposed Transaction (the "Offered Shares"), which
shall include all Polyair Shares owned by the Requesting Shareholder, (ii)
the consideration per share to be paid for the Offered Shares, which shall
be paid in cash less a pro rata share of the reasonable third party
expenses, commissions and fees incurred by the Shareholders in connection
with the Proposed Transaction allocated on a per share basis (the "Offer
Price"), (iii) the identity of the potential buyer(s), which shall not be
an Affiliate of the Requesting Shareholder (the "Proposed Transferee") and
(iv) all other material terms and conditions of the Proposed Transaction.
(b) Obligation to Transfer. Each Remaining Shareholder shall be obligated
to: (i) sell, transfer and deliver or cause to be sold, transferred and
delivered to the Proposed Transferee all of the Remaining Shareholder's
Polyair Shares on the same terms applicable to the Requesting Shareholder,
subject to receipt of the Offer Price in cash; (ii) execute and deliver
such stock powers or other instruments of conveyance and assignment to
transfer ownership and title to its Polyair Shares to the Proposed
Transferee; and (iii) take such other action, including voting by such
Shareholder in favor of any Proposed Transaction and executing any purchase
agreements, voting or proxy agreements, merger or amalgamation approvals,
indemnity agreements, escrow agreements or related documents, as the
Requesting Shareholder or Proposed Transferee may reasonably require in
order to effect the Proposed Transaction.
(c) If any Remaining Shareholder fails or refuses to vote or transfer its
Polyair Shares as required by, or votes or attempts to vote its Polyair
Shares in contravention of this Section 2.2, then such Remaining
Shareholder hereby appoints the Requesting Shareholder its agent and
attorney-in-fact, to sell its Polyair Shares in accordance with the terms
of this Section 2.2 and grants to the Requesting Shareholder its proxy to
vote its Polyair Shares in accordance with the terms of this Section 2.2.
To the fullest extent permitted by applicable law, each Remaining
Shareholder hereby waives any and all appraisal rights with respect to any
Proposed Transaction. At the closing of the Proposed Transaction, each
Remaining Shareholder shall deliver, against receipt of the Offer Price,
certificates representing the Polyair Shares which such party holds of
record or beneficially, with all endorsements necessary for transfer. In
the event that any party fails or refuses to comply with the provisions of
this Section 2.2, the other Shareholders and the Proposed Transferee, at
their option, may elect to proceed with the Proposed Transaction
notwithstanding such failure or refusal and, in such event and upon tender
of the Offer Price to any noncomplying Shareholder, the rights of any such
noncomplying Shareholder with respect to its Polyair Shares shall cease,
other than its right to receive the Offer Price.
(d) Representations. In the event that the Shareholders are required to
provide any representations or indemnities in connection with the Proposed
Transaction (other than representations or indemnities concerning such
Shareholder's valid ownership of its Polyair Shares, free and clear of all
liens and encumbrances (other than those arising under applicable
securities laws), and its authority, power and right to enter into and
consummate the Proposed Transaction without violating any other agreement,
which representations the Shareholders hereby agree to provide), no
Shareholder shall be liable for more than its pro rata share (based upon
the Offer Price received) of any liability for misrepresentation or
indemnity, and such liability shall not exceed of the total received by a
Shareholder for its Polyair Shares.
(e) Private Placement. Nothing in this Section 2.2 shall prevent either CMI
or GSH from arranging a Proposed Transaction for Polyair Common Stock owned
by the other Shareholder or negotiating for the purchase of the other's
shares in a private placement transaction conducted by such Shareholder
without directly involving Polyair.
(f) Sale to Proposed Transferee. If the Proposed Transaction is not
consummated in accordance with its terms within the later of (i) ninety
(90) calendar days after the Offer Notice, and (ii) the satisfaction of all
governmental and shareholder approval or filing requirements, the Proposed
Transaction shall be deemed to lapse, and any transfers of Offered Shares
pursuant to such Proposed Transaction shall be deemed to be in violation of
the provisions of this Agreement, unless the Remaining Shareholder provides
a new Offer Notice.
2.3 Prohibited Transfers. If any transfer or pledge is made or attempted
contrary to the provisions of this Agreement, such purported transfer shall be
void ab initio, and the Requesting Shareholder, as well as the transferred
Polyair Shares shall remain subject to this Agreement. Each other Shareholder
shall have, in addition to any other legal or equitable remedies which they may
have, the right to enforce the provisions of this Agreement by actions for
specific performance (to the extent permitted by law).
ARTICLE III
SHARE CERTIFICATES
3.1 Legend on Certificates. The following legend shall be typed on each
certificate evidencing any of the Polyair Common Stock (which, in the case of
CMI and Xxxxx Xxxxxxxxxx, shall be in addition to the legends required under the
1996 Agreement):
THE SECURITIES REPRESENTED HEREBY ARE SUBJECT TO THE PROVISIONS OF A
SHAREHOLDERS' AGREEMENT DATED AS OF MARCH , 2004, INCLUDING RESTRICTIONS ON
TRANSFER. A COMPLETE AND CORRECT COPY OF THIS AGREEMENT IS AVAILABLE FOR
INSPECTION FROM THE REGISTERED HOLDER AND WILL BE FURNISHED UPON WRITTEN
REQUEST AND WITHOUT CHARGE.
ARTICLE IV
MATTERS PERTAINING TO PPK LP
4.1 Formation. Once the terms of the initial Future Purchase (as defined
below in Section 4.4) have been agreed to by CMI and GSH, CMI, GSH and
Schnurbach shall organize an Ontario limited partnership having an entity owned
equally by CMI and GSH as the general partner and those three (3) Shareholders
as limited partners ("PPK LP"). PPK LP's business and activities shall be
limited solely to acquiring shares of Polyair Common Stock not otherwise subject
to this Agreement. The limited partnership capital and other economic interests
of each Shareholder/limited partner of PPK LP shall be evidenced by limited
partnership units issued by PPK LP. The number of limited partnership units
issued to each limited partner shall be equal to the number of shares of Polyair
Common Stock owned by such Shareholder on the date of the formation of PPK LP;
provided, however, that if GSH owns fifty percent (50.0%) or greater of the
total number of shares of Polyair Common Stock owned by the Shareholders under
this Agreement, GSH's ownership and economic interest in PPK LP shall be set at
forty-nine and nine tenths percent (49.9%). Participating limited partners shall
execute a limited partnership agreement containing the provisions set forth in
this Article IV in the form approved by CMI and GSH. PPK LP shall execute a
Joinder Agreement in substantially the form attached hereto as Exhibit A and
shall become a Shareholder under this Agreement. PPK LP shall take all action
necessary to assure capital gains treatment for GSH or the proceeds of any sale
of its Polyair Common Stock, including compliance with rules and regulations
affecting passive foreign investment companies and making a qualified electing
fund filing.
4.2 Voting. Notwithstanding the limited partnership units or other economic
interests of the limited partners in PPK LP, voting on all matters shall be by
the general partner, allocated 50.01% to CMI and 49.99% in GSH. Limited partners
of PPK LP shall have no voting rights, except as otherwise required by law.
4.3 Management. The business and affairs of PPK LP shall be managed by its
general partner, which shall have a governing board, consisting of 1 nominee of
CMI and 1 nominee of GSH. Approvals with respect to any Future Purchase shall
require unanimous consent of the governing board. The limited partnership
agreement and constituent documents of the general partner shall provide for a
Secretary acceptable to GSH with duties and authority comparable to those
detailed in Section 1.4 of this Agreement (the "LLC Secretary"). The agreements
and understandings regarding the governance and management of Polyair set forth
in Article I of this Agreement and the restrictions on transfer set forth in
Article II of this Agreement, as well as the forfeiture contemplated by Article
V of this Agreement shall be incorporated, mutatis mutandis, in the limited
partnership agreement of PPK LP.
4.4 Share Acquisitions. CMI and GSH agree to promptly consider any written
proposal submitted by the other with respect to a potential purchase of Polyair
Common Stock not subject to this Agreement (a "Future Purchase") by PPK LP at a
price and on such terms as agreed to by CMI and GSH and in compliance with
applicable laws. No Shareholder shall acquire any additional shares of Polyair
Common Stock without first offering PPK LP the opportunity to purchase such
shares and being notified in writing by the LLC Secretary that PPK LP has
declined to purchase such shares; provided, however, that if PPK LP has not been
formed at the time of such notice, notice will be given to the other
Shareholders. Notwithstanding the foregoing, through June 30, 2004, Xxxxxx and
CMI, and any entity directly owned or controlled by either of them, may acquire
shares of Polyair Common Stock and increase their aggregate ownership to 51% of
the aggregate number of shares owned by CMI and GSH without first offering such
opportunity to PPK LP; provided, however, that all shares so acquired shall be
subject to this Agreement.
4.5 Mandatory Share Acquisition. At any time after June 30, 2004 and prior
to the third anniversary of the date of this Agreement, CMI and GSH shall each
have the right to require PPK LP to offer to acquire up to 1,200,000 shares of
Polyair Common Stock outstanding (other than shares owned by a Shareholder or
its Affiliates), subject to the following:
(a) the offer to acquire will comply with applicable laws and, if required
under applicable securities laws, be effected by way of formal bid (as
defined under applicable Canadian securities laws) or in accordance with an
exemption therefrom;
(b) the offer price must be agreed to by CMI and GSH;
(c) if the offer to acquire is to proceed by way of formal bid, the offer
price must be confirmed as being "fair from a financial point of view" by
financial advisors to Polyair;
(d) PPK LP may only be required to make one such offer to acquire during
the term of this Agreement;
(e) funding of PPK LP for the purchases resulting from the offer to acquire
will be in accordance with Section 4.7; and
(f) any share acquisitions by PPK LP pursuant to Section 4.4 or otherwise
shall reduce the number of shares required to be acquired under this
Section 4.5.
4.6 Limitation on Share Acquisitions. Notwithstanding the provisions of
Sections 4.4 and 4.5 of this Agreement, if on the date of formation of PPK LP,
the number of Polyair Shares owned by GSH represents fifty percent (50%) or
greater of the total number of shares owned by the Shareholders, then GSH may
elect to acquire directly or to receive an option to acquire that number of
shares of Polyair Common Stock which would maintain GSH's relative percentage
ownership as among the Shareholders in effect immediately prior to the formation
of PPK LP. The exercise price per share under the option shall be PPK LP's
acquisition price. The terms and conditions of such option, if any, shall be
reflected in the terms of the limited partnership agreement for PPK LP.
By way of example, on the date hereof, GSH owns 1,827,667 (54.044%) of the
3,381,834 shares of Polyair Common Stock owned by the Shareholders.
Consequently, of every 100,000 shares purchased by PPK LP, GSH shall
acquire (or receive an option to acquire) 8,272 (8.272%) of the shares, so
that with a 49.9% economic interest in the balance of 91,728 shares, GSH
will, either directly or upon exercise of the option, acquire an ownership
interest in 54,044 of the 100,000 shares acquired.
4.7 Share Acquisition Funding. The funding for any Future Purchase shall be
from the proceeds of amounts borrowed by PPK LP from third parties at a market
rate (on a basis comparable to loans made for similar blocks of securities), and
on terms and conditions acceptable to CMI and GSH. CMI and GSH shall, in their
capacity as shareholders of the general partner of PPK LP (and shall direct the
board of the general partner to), authorize any such borrowing by PPK LP. GSH
may be retained as financial advisor for any such financing. The debt shall be
secured by the shares so acquired, as well as a limited guaranty by each of CMI
and GSH, secured by a pledge of such Shareholder's shares of Polyair Common
Stock; provided, however, that the number of shares pledged by GSH shall be one
less than the number of shares pledged by CMI. If GSH exercises its rights under
Section 4.6, GSH will provide an additional guaranty secured by the shares so
acquired. Each guaranty shall be without recourse to such Shareholder, except to
the extent of the pledged shares. PPK LP shall endeavor to arrange financing of
any Future Purchase without (i) dilution to the voting or equity interest of CMI
or (ii) an increase of the equity or economic interest of GSH to fifty percent
(50%) or greater. CMI acknowledges that GSH will require the support of the
board of Polyair and shall be paid a commitment fee and reimbursement of
out-of-pocket due diligence expenses in respect of any role it plays in
connection with such Future Purchase.
4.8 Debt Service. Payments of principal and interest and all fees, costs
and expenses related to debt incurred in connection with a Future Purchase (the
"Debt Service") shall be paid in a timely manner. The general partner shall be
authorized to sell Polyair Shares or additional limited partnership units to
fund Debt Service. In the event that the Debt Service cannot be funded by such
sales, the LLC Secretary shall make a capital call for each limited partner to
fund in cash its pro rata share based upon the limited partner's percentage of
limited partnership units in PPK LP owned on the date of such call. The limited
partners shall be severally liable for all such capital calls (pro rata to their
interest in PPK LP); provided, however, that GSH shall have no obligation to
increase its ownership in PPK LP to fifty percent (50%) or greater. Upon the
failure of any limited partner to fund a capital call, its limited partnership
units shall be reduced by the amount of the call and transferred to the account
of the limited partner(s) covering such amount. For purposes of this
calculation, limited partnership units shall be valued at the lower of (a) the
lowest price per share of Polyair Common Stock paid by PPK LP to acquire such
shares or (b) the average closing market price of a share of Polyair Common
Stock based on the average closing market price of the Polyair Common Stock on
its principal exchange for the five (5) trading days preceding the business day
prior to the date such capital call is due. If the principal stock exchange
(determined based on volume traded) is in Canada, the market price will be
converted in US dollars on the basis of the Bank of Canada noon rate of exchange
on the date such capital call is due.
4.9 Actions Requiring Approval. Except as otherwise provided in this
Agreement, GSH and CMI shall cause PPK LP not to engage in any of the following
transactions:
(a) Payment of fees to GSH, unless approved by Xxxxxx or CMI;
(b) Payment of fees to CMI, Xxxxxx or any entities related to Xxxxxx or
CMI, unless approved by GSH;
(c) Payment of fees to advisors (legal, financial or accounting), unless
approved by both CMI and GSH; and
(d) Amendment of its limited partnership agreement, unless approved by GSH
and CMI.
ARTICLE V
TERM
This Agreement shall commence on the date first written above and shall
remain in effect until terminated by mutual consent of GSH and CMI. If
Schnurbach is no longer the president of Polyair, he may, at his option,
terminate his participation in this Agreement and cease to be a party hereto;
provided, however, that any such termination shall constitute the automatic
forfeiture (without payment of any consideration therefor) of all limited
partnership interests and all other rights in or with respect to PPK LP. For
greater certainty, upon any termination of Schnurbach, any Polyair Shares owned
or controlled by him will be released from any restrictions on transfer under
the terms of this Agreement.
ARTICLE VI
MISCELLANEOUS
6.1 CMI Consolidated Financial Statements. The Shareholders hereby
acknowledge and consent to CMI's continued consolidation of the accounts of
Polyair with those of CMI in its financial statement presentation.
6.2 No Third-Party Beneficiaries. This Agreement shall not confer any
rights or remedies upon any person other than the Shareholders and their
respective successors, permitted assigns and Permitted Transferees.
6.3 Entire Agreement. This Agreement constitutes the entire agreement among
the Shareholders with respect to the subject matter hereof and supersedes any
other prior understandings, agreements, or representations by or among the
Shareholders, written or oral, with respect to the subject matter hereof,
including the 1996 Agreement, subject to Section 1.10.
6.4 Succession and Assignment. This Agreement shall be binding upon and
inure to the benefit of the Shareholders named herein and their respective
successors, permitted assigns and Permitted Transferees. No Shareholder may
assign either this Agreement or any of its rights, interests or obligations
hereunder without the prior written approval of both CMI and GSH.
6.5 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original but all of which
together will constitute one and the same instrument.
6.6 Headings. The section headings contained in this Agreement are inserted
for convenience only and shall not affect in any way the meaning or
interpretation of this Agreement.
6.7 Notices. All notices, requests, demands, claims, and other
communications hereunder shall be in writing and shall be deemed to have been
sufficiently given and received for all purposes when delivered by hand or
facsimile or two (2) business days after being sent by guaranteed receipted
overnight delivery (provided, that any facsimile transmission shall be confirmed
by receipted guaranteed overnight delivery) to the following addresses and
facsimile numbers (or to such other addresses or facsimile numbers which such
party shall designate in writing to the other parties):
(a) if to GSH to:
c/o Glencoe Capital, LLC
000 Xxxx Xxxxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxxxxx 00000
Attention: G. Xxxxxxx Xxxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
XxXxxxxxx, Will & Xxxxx
000 Xxxx Xxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxx, Xx.
Facsimile: (000) 000-0000
(b) if to CMI or Xxxxxx to:
Consolidated Mercantile Incorporated
c/o Forum Financial Corp
000 Xxxxxx Xxxx
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxx Xxxxxx
Facsimile: (000) 000-0000
with a copy to:
Lang Xxxxxxxx LLP
BCE Place
000 Xxx Xxxxxx
Xxxxx 0000
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxxxxx Xxxxxx
Facsimile: (000) 000-0000
(c) if to Schnurbach to:
00 Xxxxxxxxx Xxxx.
Xxxxxxx, Xxxxxxx X0X 0X0
Attention: Xxxxx Xxxxxxxxxx
Facsimile: (416)
6.8 Governing Law and Consent to Jurisdiction. This Agreement shall be
governed by and construed in accordance with the internal substantive laws of
the state of New York without giving effect to any choice or conflict of law
provision or rule. Each party submits to the exclusive jurisdiction of any
federal court sitting in the State of New York, in any action or proceeding
arising out of or relating to this Agreement (which, for greater certainty,
shall not extend, insofar as Schnurbach is concerned, to the terms of his
employment agreement with Polyair) and agrees that all claims in respect of the
action or proceeding may be heard and determined in any such court. Each party
waives any defense of inconvenient forum to the maintenance of any action or
proceeding so brought. Each party may make service on the other party by sending
or delivering a copy of the process to the party to be served at the address and
in the manner provided for the giving of notices in Section 6.7 above. Each
party agrees that a final and non-appealable judgment in any action or
proceeding so brought shall be conclusive and may be enforced by suit on the
judgment or in any other manner provided by law or at equity.
6.9 Specific Performance. The parties hereto agree that irreparable damage
would occur in the event that any of the provisions of this Agreement were not
performed in accordance with its specific terms or were otherwise breached and
that money damages would not provide an adequate remedy. It is accordingly
agreed that the parties shall be entitled to an injunction to prevent breaches
of this Agreement and to enforce specifically the terms and provisions hereof in
any court of the state of New York having jurisdiction, this being in addition
to any other remedy to which they are entitled at law or in equity.
6.10 Amendments. No amendment of any provision of this Agreement shall be
valid unless the same shall be in writing and signed by both GSH and CMI;
provided, however, that the last sentence of Article V and the provisions of
this Agreement which relate to the Polyair Shares owned or controlled by
Schnurbach shall not be amended without the written consent of Schnurbach. No
course of dealing between the Shareholders and no delay in exercising any right,
power or remedy conferred hereby or now or hereafter existing at law, in equity,
by statute or otherwise, shall operate as a waiver of, or otherwise prejudice,
any such right, power or remedy.
6.11 Severability. Any term or provision of this Agreement that is invalid
or unenforceable in any situation in any jurisdiction shall not affect the
validity or enforceability of the remaining terms and provisions hereof or the
validity or enforceability of the offending term or provision in any other
situation or in any other jurisdiction.
6.12 Expenses. Each of the parties will bear its own costs and expenses
(including legal fees and expenses) incurred in connection with this Agreement
and the transactions contemplated hereby.
6.13 Incorporation of Exhibits and Schedules. The Exhibits and Schedules
identified in this Agreement are incorporated herein by reference and made a
part hereof.
* * *
IN WITNESS WHEREOF, each of the undersigned has executed this Agreement
effective as of the date first above written.
CONSOLIDATED MERCANTILE
Xxxxx Xxxxxxxxxx INCORPORATED
By:
Xxxx X. Xxxxxx Name:
Title:
GLENCOE SKYDOME HOLDINGS, L.P.
By: Glencoe Skydome GP, Inc.,
its general partner
By:
G. Xxxxxxx Xxxxxxxxx,
Vice President
EXHIBIT A
Form of Joinder Agreement
The undersigned hereby agrees, effective as of the date hereof, to become a
party to that certain Shareholders Agreement, dated as of March 3, 2004 and as
may be amended from time to time (the "Agreement") by and among certain
Shareholder of Polyair Inter Pack, Inc. For all purposes of the Agreement, the
undersigned shall be included within the term "Shareholder" (as defined in the
Agreement). The address and facsimile number to which notices may be sent to the
undersigned is as follows:
Name: __________________________
Address: __________________________
__________________________
__________________________
Facsimile No: __________________________
IN WITNESS WHEREOF, the undersigned has executed this Joinder Agreement as of
this day of , .
Schedule 1.2
1. PXL Cross Linked Foam Corporation (the "Corporation"), a corporation in
which Polyair Cross Linked Technologies Inc. (a wholly owned subsidiary of
Polyair) ("PCL") owns a 50.1% interest in, and Palziv BV ("Palziv") owns
the remaining 49.9% interest in, is subject to a shareholders agreement
dated the 7th day of November 2001, as amended, among the Corporation, PCL
and Plaziv (the "PCL Shareholders' Agreement"). In accordance with the PCL
Shareholders' Agreement the composition of the board of directors of the
Corporation shall be four directors; two directors nominated by PCL and two
directors nominated by Palziv.
2. Cantar/Polyair Corporation, a subsidiary of Polyair Inter Pack Inc., is a
party to a shareholders' agreement (the "FIPCo Shareholders Agreement")
made as of September 16, 2003 in respect of an entity known as "Foam In
Place Co.", incorporated or to be incorporated under the laws of Israel.
The FIPCo Shareholders Agreement contains provisions relating to the
composition of the board of directors, meetings of directors, pre-emptive
rights, shareholder proceedings, financing and shareholder contributions
and advances, marketing and distribution, management and share transfers,
among other matters.
3. Polyair Inter Pack Inc is a party to an agreement with the other two
shareholders of P.S.C. Moulding Corporation dated July 31, 1999. Such
agreement contain provisions dealing with various inter-company
transactions, indebtedness and fees, among other matters. The parties to
that agreement are currently negotiating a more detailed shareholder
agreement in respect of P.S.C. Moulding Corporation, which agreement is
expected to contain provisions addressing share capital, operations,
employment and share transfers among other matters.
Schedule 2.1
Permitted Transfers to Xxxxxx Xxxxxx and Schnurbach
Option to acquire Option to acquire
Polyair Common Stock Polyair Common Stock
From CMI From Polyair
Xxxxxx Xxxxxx 143,325
Schnurbach 60,000 320,000
