EXHIBIT 2.1
AGREEMENT AND PLAN OF RECAPITALIZATION,
REDEMPTION AND PURCHASE
Dated as of December 18, 1997,
as amended as of January 29, 1998,
by and among
GRAHAM PACKAGING COMPANY,
GRAHAM PACKAGING CORPORATION,
GRAHAM FAMILY GROWTH PARTNERSHIP,
GRAHAM ENGINEERING CORPORATION,
GRAHAM CAPITAL CORPORATION,
GRAHAM RECYCLING CORPORATION,
DONALD C. GRAHAM,
and
BCP/GRAHAM HOLDINGS L.L.C.
and
BMP/GRAHAM HOLDINGS CORPORATION
TABLE OF CONTENTS
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SECTION 1. RECAPITALIZATION, REDEMPTION AND PURCHASE
TRANSACTIONS........................................................ 2
1.1 Recapitalization, Redemption and Purchase Transactions.............. 2
1.2 Adjustments......................................................... 5
SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE GRAHAM
PARTNERS............................................................ 7
2.1 Organization and Good Standing...................................... 7
2.2 Power and Authorization............................................. 7
2.3 No Conflict......................................................... 8
2.4 Title............................................................... 8
2.5 Litigation.......................................................... 9
2.6 DCG Control......................................................... 9
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP................... 9
3.1 Organization........................................................ 9
3.2 Power and Authorization............................................. 9
3.3 No Conflict......................................................... 10
3.4 Subsidiaries........................................................ 10
3.5 Compliance with Laws................................................ 11
3.6 Litigation.......................................................... 11
3.7 Financial Statements................................................ 11
3.8 Inventory........................................................... 12
3.9 Real Property....................................................... 12
3.10 List of Properties, Contracts, etc.................................. 13
3.11 Contracts........................................................... 15
3.12 Insurance........................................................... 15
3.13 Tangible Personal Assets............................................ 15
3.14 Intellectual Property............................................... 15
3.15 Customers and Suppliers............................................. 16
3.16 Taxes............................................................... 16
3.17 Labor Matters....................................................... 16
3.18 Employee Benefits................................................... 17
3.19 Affiliate Agreements................................................ 19
3.20 Environmental Matters............................................... 19
3.21 Absence of Certain Changes and Events............................... 21
3.22 Brokers............................................................. 21
3.23 No Other Warranties................................................. 22
3.24 Partnership's Knowledge............................................. 22
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTORS......................... 22
4.1 Organization and Good Standing...................................... 22
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4.2 Power and Authorization............................................. 22
4.3 No Conflicts........................................................ 23
4.4 Brokers............................................................. 23
4.5 Financing........................................................... 23
4.6 Investigation and Evaluation........................................ 24
SECTION 5. ADDITIONAL AGREEMENTS AND COVENANTS................................. 25
5.1 Organization of Certain Entities; Contribution of Assets to Opco.... 25
5.2 Conduct of Business Pending Closing................................. 25
5.3 Access to Information; Confidentiality.............................. 27
5.4 Public Announcements; Certain Communications........................ 28
5.5 Notification of Certain Matters..................................... 29
5.6 Further Assurances; Best Efforts; Assistance in Financing........... 31
5.7 Consents............................................................ 31
5.8 Costs and Expenses.................................................. 31
5.9 Release of Graham Partners.......................................... 32
5.10 Indemnification of DCG.............................................. 32
5.11 Credit Facilities................................................... 32
5.12 Covenant Not-to-Compete by the Graham Partners...................... 33
5.13 Payoff of Certain Notes............................................. 34
5.14 Partnership Agreement; Certificate of Limited Partnership........... 35
5.15 Consulting Agreement................................................ 35
5.16 Equipment Sales, Services and License Agreement..................... 35
5.17 Conversion of Brazilian Subsidiary.................................. 35
5.18 Contributions by Family Growth, GP Corp and Recycling............... 35
5.19 Contributions by DCG................................................ 35
5.20 New Equity Plan..................................................... 36
5.21 Pension and Welfare Plans........................................... 36
5.22 Tax Matters......................................................... 38
5.23 No Solicitation..................................................... 39
5.24 Litigation.......................................................... 39
5.25 BTNY Warrants....................................................... 40
5.26 Estoppel Certificates............................................... 40
5.27 Transfers of Graham Partner Interests............................... 40
SECTION 6. CONDITIONS TO INVESTORS' OBLIGATIONS................................ 41
6.1 Representations and Warranties and Covenants........................ 41
6.2 Approvals........................................................... 41
6.3 Legal Matters....................................................... 42
6.4 Opinion of Counsel.................................................. 42
6.5 No Material Adverse Effect.......................................... 42
6.6 Solvency Opinion.................................................... 42
6.7 Registration Rights Agreement....................................... 42
6.8 MAC/Market Out...................................................... 42
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SECTION 7. CONDITIONS TO THE PARTNERSHIP'S AND THE GRAHAM
PARTNERS' OBLIGATIONS............................................... 42
7.1 Representations and Warranties and Covenants........................ 43
7.2 Solvency Opinion.................................................... 43
7.3 Approvals........................................................... 43
7.4 Legal Matters....................................................... 43
7.5 Opinion of Counsel.................................................. 43
7.6 Credit Facilities................................................... 43
7.7 Registration Rights Agreement....................................... 43
SECTION 8. CLOSING............................................................. 43
8.1 Time and Place of Closing........................................... 43
SECTION 9. TERMINATION......................................................... 44
9.1 Termination......................................................... 44
9.2 Effect of Termination............................................... 45
SECTION 10. INDEMNIFICATION..................................................... 46
10.1 Indemnification..................................................... 46
10.2 Claims; Defense..................................................... 47
SECTION 11. MISCELLANEOUS....................................................... 48
11.1 Survival of Representations and Warranties.......................... 48
11.2 Notices............................................................. 49
11.3 Assignment; Binding Effect; Benefits................................ 50
11.4 Amendment, Modification and Waiver.................................. 50
11.5 Governing Law; Consent to Jurisdiction; No Jury Trial............... 50
11.6 Enforcement Expenses................................................ 51
11.7 Specific Performance................................................ 51
11.8 Headings, Gender and "Person"....................................... 51
11.9 Counterparts........................................................ 51
11.10 Entire Agreement.................................................... 51
11.11 Third Parties....................................................... 51
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SCHEDULES AND EXHIBITS
Schedule 1.1(d) Percentage and Agreed Value of Partnership Interests
Schedule 1.1(e) Allocation of Fair Market Value
Schedule 1.2 Actual Net Income
Schedule 5.2 Conduct of Business
Schedule 5.11 Financial Debt
Schedule 5.18 Contribution of Interests by Family Growth, GP Corp and Recycling
Schedule 5.19 DCG Real Estate to be Contributed to the Partnership
Disclosure Schedules of the Graham Partners and the Partnership
Exhibit 5.14 Form of Fifth Amended and Restated Agreement of Limited Partnership
Exhibit 5.15 Form of Consulting Agreement
Exhibit 5.16 Form of Equipment Sales, Services and License Agreement
Exhibit 6.7 Form of Registration Rights Agreement
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AGREEMENT AND PLAN OF RECAPITALIZATION,
REDEMPTION AND PURCHASE
THIS AGREEMENT AND PLAN OF RECAPITALIZATION, REDEMPTION AND PURCHASE is
dated as of December 18, 1997 by and among Graham Packaging Company, a
Pennsylvania limited partnership (the "Partnership"), Graham Packaging
Corporation, a Pennsylvania corporation ("GP Corp"), Graham Family Growth
Partnership, a Pennsylvania limited partnership ("Family Growth"), Graham
Engineering Corporation, a Pennsylvania corporation ("Engineering"), Graham
Capital Corporation, a Pennsylvania corporation ("Capital"), Graham Recycling
Corporation, a Pennsylvania corporation ("Recycling"), Donald C. Graham ("DCG"),
BCP/Graham Holdings L.L.C., a Delaware limited liability company ("Investor
GP"), and BMP/Graham Holdings Corporation, a Delaware corporation and an
affiliate of Investor GP ("Investor LP"). Investor GP and Investor LP are also
hereinafter each referred to as an "Investor" and collectively as "Investors."
BACKGROUND
1. The Partnership and its Subsidiaries (as herein defined) are engaged in
the business of the sale and manufacturing of extrusion blow molded rigid
plastic bottles primarily for the food and beverage, household and automotive
business segments (the "Business").
2. At the date hereof, the sole general partner of the Partnership is GP
Corp, and the limited partners of the Partnership are Family Growth,
Engineering, Capital, Recycling and DCG. GP Corp, Family Growth, Engineering,
Capital, Recycling and DCG are also hereinafter each referred to as a "Graham
Partner" and collectively as the "Graham Partners."
3. Upon the terms and subject to the conditions of this Agreement, prior to
the consummation of the transactions contemplated in paragraph 4 below, the
Partnership will contribute to Graham Packaging Holdings I, L.P., a Pennsylvania
limited partnership ("Opco"), substantially all of its assets and liabilities
with the exception of its ownership interests in Opco GP (as herein defined) and
IPO Corp (as herein defined) (the "Opco Contribution") and will organize a
Delaware limited liability company ("Opco GP") to serve as sole general partner
of Opco. The Partnership will be the sole member of Opco GP and the sole limited
partner of Opco. The Partnership will also organize a Delaware "C" corporation
("IPO Corp."), of which the Partnership will hold all of the issued capital
stock. Opco will organize a Delaware limited liability company ("Sub GP"), of
which Opco will be the sole member, and will also organize a Delaware "C"
corporation ("Capital Corp."), of which Opco will hold all of the issued capital
stock. Recycling will transfer to Opco GP a 1% general partner interest in Opco
and Family Growth, GP Corp and Recycling will transfer to Sub GP a 1% ownership
interest in certain entities identified in Schedule 5.18 hereto that are
currently under common control with the Partnership ("Common Control Entities"),
and Family Growth will contribute to Opco all of its then remaining ownership
interests in the Common Control Entities. DCG will make an additional capital
contribution to Opco by contributing to Opco, or causing the contribution to
Opco of, the real estate identified in Schedule 5.19 hereto. All amounts due and
payable to the Partnership under the Promissory Notes (as herein defined) in the
aggregate principal amount of $20,240,000 (plus accrued interest thereon) will
be paid in full. The contributions of interests in
the Common Control Entities, the contribution by DCG of real estate and the
payment of the Promissory Notes, as described above, are herein referred to
collectively as the "Graham Contributions."
4. Upon the terms and subject to the conditions of this Agreement, the
Partnership, the Graham Partners and the Investors will enter into a redemption
and recapitalization transaction pursuant to which, among other things, newly
arranged financings of the Partnership and Opco will be utilized in part to
redeem a portion of the general and limited partner interests in the Partnership
held by the Graham Partners and to repay certain existing indebtedness for
borrowed money of the Partnership and the Subsidiaries as set forth in Schedule
5.11 (the "Repayment"). Investor GP will then purchase from the Graham Partners
a general partner interest in the Partnership and a limited partner interest in
the Partnership which will thereupon be converted into a general partner
interest in the Partnership, and Investor LP will purchase from the Graham
Partners certain of their remaining limited partner interests.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties, covenants and agreements hereinafter contained, and for other
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto, intending to be legally bound, agree as follows:
SECTION 1. RECAPITALIZATION, REDEMPTION AND PURCHASE
TRANSACTIONS
1.1 Recapitalization, Redemption and Purchase Transactions. Subject to the
terms and conditions hereof and on the basis of and in reliance upon the
covenants, agreements and representations and warranties set forth herein, at
the Closing (as herein defined) the Partnership, the Graham Partners and the
Investors shall enter into the following transactions in the order indicated:
(a) the Partnership and Opco (and, to the extent requested by the
Investors, IPO Corp. and Capital Corp.) shall consummate borrowings and/or
note offerings (the "Borrowings") on such terms as shall be specified by
the Investors in an amount sufficient to effect the Repayment and the
redemption described in Section 1.1(b) below (the "Redemption") and to pay
certain costs and expenses associated with the transactions contemplated
hereby, provided the Borrowings shall be without recourse to the Graham
Partners and the Investors. Opco shall distribute to the Partnership such
portion of the net proceeds of such Borrowings as shall be necessary to
enable the Partnership to effect such Repayment and Redemption.
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(b) Partial Redemption of Graham Partners' Interests. Subject to post-
Closing adjustment as provided in Section 1.2 below, the Partnership shall
redeem from the Graham Partners, and the Graham Partners shall transfer to
the Partnership, all or a portion, as the case may be, of the Graham
Partners' general and limited partner interests in the Partnership, as set
forth on Schedule 1.1(c) hereto, in exchange for aggregate cash
consideration equal to the amount determined by the following calculation
(such amount being referred to herein as the "Graham Redemption Value"):
(i) $674,565,840.99 (the agreed equity value ("Agreed Equity
Value") of all of the general and limited partner interests in the
Partnership held by the Graham Partners before the Closing, after
giving effect to the Graham Contributions described above, and after
considering the Closing Payments (as defined in Part I of Schedule
3.18) and long-term cash stay bonuses and/or equity incentives that
shall be paid by or on behalf of the Partnership to senior and middle
level management in connection with the recapitalization as outlined
in Part I of Schedule 3.18 hereto, as well as the equity options to be
granted to management as outlined in Section 5.20); plus
(ii) amounts, if any, payable by the Partnership to the Graham
Partners pursuant to Section 5.24(b)(i) hereto; less
(iii) $208.25 million (the amount paid by Investor LP and
Investor GP for the Partnership interests being acquired by them
pursuant to subparagraph (c) below); less
(iv) $36.75 million (the agreed value of that portion of the
Graham Partners' general partner and limited partner interests in the
Partnership to be retained following (a) the redemption pursuant to
this Section 1.1(b) and (b) the purchase of the general and limited
partner interests in the Partnership described in (iii) above).
The Partnership shall also pay to the Graham Partners, as additional
consideration for the redemption of their Partnership interests, interest on the
Graham Redemption Value (together with the amount described in clause (iii)
above) accruing, beginning February 2, 1998 and ending on the day immediately
preceding the Closing Date, at the rate of 9.5% per annum through February 21,
1998, 10.5% per annum from February 22, 1998 through March 14, 1998 and 11% per
annum from March 15, 1998 (the "Closing Interest"). The Partnership shall
utilize the proceeds of the Credit Facilities (as herein defined) to pay the
Graham Redemption Value and, if applicable, the Closing Interest. The Graham
Redemption Value and the Closing Interest, if applicable, shall be allocated
among the Graham Partners in accordance with instructions to be provided by the
Graham Partners at least two business days prior to Closing. On the Closing
Date, the Graham Redemption Value and, if applicable, the Closing Interest shall
be paid by the Partnership by wire transfer of immediately available funds
pursuant to instructions previously given by the Graham Partners to the
Partnership for that purpose.
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(c) Purchase of Partner Interests by Investors. Immediately following
the partial redemption pursuant to Section 1.1(b), Investor GP shall
purchase from GP Corp a general partner interest of the Partnership and
shall purchase from the other Graham Partners a limited partner interest of
the Partnership, whereupon such limited partner interest shall be converted
into a general partner interest of the Partnership (such purchased general
partner interest and converted limited partner interest are collectively
referred to herein as the "Investor General Partner Interest") of the
Partnership, and Investor LP shall purchase from the Graham Partners
additional limited partner interests of the Partnership (the "Investor
Limited Partner Interest"). The aggregate purchase price for the Investor
General Partner Interest and the Investor Limited Partner Interest shall be
$208.25 million, allocated among the Graham Partners in accordance with
instruction to be provided by the Graham Partners at least two business
days prior to Closing (subject to subparagraphs (d) and (f) below). On the
Closing Date, the aforesaid payments by the Investors to purchase general
and limited partner interests (collectively, the "Investor Purchase
Payments") shall be paid to the Graham Partners by wire transfer of
immediately available funds pursuant to instructions previously given by
the Graham Partners to Investors for that purpose.
(d) Post-Closing Ownership. Upon consummation of the transactions
contemplated by this Section 1.1, the amount and value of the general and
limited partner interests in the Partnership held by Investors and the
Graham Partners shall be as set forth on Schedule 1.1(d) hereto.
(e) Allocation of Fair Market Value and Tax Treatment. The parties
hereto acknowledge that for tax purposes the fair market value of the
Business as of the Closing shall equal the amount set forth on Schedule
1.1(e) hereto, and shall be allocated among the assets of the Partnership
in accordance with Schedule 1.1(e) hereto. The parties shall mutually agree
upon an allocation among specific assets within the groups of assets
described in Schedule 1.1(e). The parties hereto agree to file all tax
returns (including amended returns and claims for refund) and information
reports in a manner consistent with such allocation. This shall constitute
an agreement among the parties hereto pursuant to Section 755 of the
Internal Revenue Code of 1986, as amended, and the Treasury Regulations
promulgated thereunder. The parties shall treat the Redemption as a
tax-free distribution to the Graham Partners. Upon sale, the Graham
Partners shall recognize taxable gain equal to the sum of the proceeds
payable by Investor GP and Investor LP, respectively, plus 85% of the
liabilities of the Partnership less their basis in the Partnership. As the
Partnership shall make a Section 754 election, the step-up in basis
pursuant to Section 743 resulting from the sale shall inure solely to the
benefit of Investor LP and Investor GP.
(f) Allocation of Redemption and Purchase Amounts Among Graham
Partners. Prior to the Closing Date, the Graham Partners may agree among
themselves as to their respective limited partner interests in the
Partnership that are to be redeemed by the Partnership, purchased by
Investor GP and Investor LP or retained by each such Graham Partner,
provided, however, that for each Graham Partner the ratio of the sales
proceeds for such Partner pursuant to Section 1.1(c) to the redemption
proceeds for such Partner pursuant to Section 1.1(b) shall be the same.
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1.2 Adjustments.
(a) Closing Statement. (i) Not later than 30 days after the Closing Date,
the Graham Partners shall prepare and deliver, or cause to be prepared and
delivered, to the Investors, in accordance with United States generally accepted
accounting principles ("GAAP") applied on a basis consistent with the
preparation of the Audited Financial Statements described in Section 3.7 hereof
and otherwise subject to Schedule 1.2, a statement of Actual Net Income (as
herein defined) for the period from November 3, 1997 to, but excluding, the
Closing Date. Such statement prepared and determined as provided in this Section
1.2(a)(i) is referred to herein as the "Closing Statement." The Partnership and
Investors shall cooperate fully with the preparation of the Closing Statement
and use best efforts to cause their respective affiliates to so cooperate. For
the purposes of this Agreement, "Actual Net Income" shall mean the net income of
the Partnership on a pro forma basis (after giving effect to the contributions
by DCG, Family Growth, GP Corp and Recycling to the Partnership or any of its
Subsidiaries pursuant to Sections 5.19 and 5.18 prepared under a pooling of
interests method of accounting) using accounting policies in accordance with
GAAP consistent with those used in preparation of the Audited Financial
Statements, and applied consistently throughout the period, after giving effect
to the matters set forth on Part I of Schedule 1.2 and after giving no effect to
the matters set forth on Part II of Schedule 1.2, but excluding to the extent
otherwise included in such Actual Net Income (i) income or charges outside the
ordinary course of business, (ii) any Settlement Cost (as defined in Section
5.24(c)), (iii) items of income and expense recorded during the period from
November 3, 1997 up to but excluding the Closing Date and where such items are
related to events, occurrences or circumstances existing for the periods prior
to November 3, 1997, and (iv) items of income and expense related to the
recapitalization, redemption and purchase transactions contemplated by this
Agreement.
(ii) The Investors shall have 30 days to review the Closing Statement after
receipt thereof. Unless the Investors deliver written notice to Graham Partners
on or prior to the 30th day after their receipt of the Closing Statement of
their objection to the Closing Statement and specifying in reasonable detail all
disputed items and the reason therefor, the Investors shall be deemed to have
accepted and agreed to the Closing Statement. If the Investors so notify Graham
Partners of their objection to the Closing Statement, Graham Partners and the
Investors shall, within 30 days of such notice (the "Resolution Period"),
attempt to resolve their differences and any resolution by them as to any
disputed amounts shall be final, binding and conclusive.
(iii) If, at the conclusion of the Resolution Period, any amounts remain in
dispute, then all such amounts remaining in dispute shall be submitted to one of
the "big six" accounting firms which shall be mutually agreeable to the Graham
Partners and the Investors (the "Neutral Auditor"). All fees and expenses
relating to the work to be performed by the Neutral Auditor shall be borne 50%
by the Investors and 50% by the Graham Partners. The Neutral Auditor shall
determine, on the basis stipulated in this Agreement and based solely on
presentations by or on behalf of the Investors and Graham Partners, and not by
independent review, only those issues still in dispute. The respective
presentations by or on behalf of the Investors and the Graham Partners shall be
submitted to the Neutral Auditor within 15 days of the appointment of the
Neutral Auditor. The Neutral Auditor's determination shall be made
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within 15 days of the final submission as provided above. The determination of
the Neutral Auditor shall be set forth in a written statement delivered to the
Investors and the Graham Partners and shall be final, binding and conclusive.
The term "Final Statement" shall mean the definitive Closing Statement deemed to
be accepted and agreed by the Investors or agreed to by the Graham Partners and
the Investors in accordance with Section 1.2(a)(ii) or the definitive Closing
Statement resulting from the determinations made by the Neutral Auditor in
accordance with this Section 1.2(a)(iii) (in addition to those items theretofore
agreed to by the Investors and the Graham Partners).
(b) Post-Closing Adjustment. If the Actual Net Income for the period from
November 3, 1997 to, but excluding, the Closing Date as set forth in the Final
Statement as provided herein is less than $0, then the Graham Partners, jointly
and severally, shall pay to the Partnership an amount equal to such deficiency.
Any payment pursuant to this Section shall be made within five business days
following receipt by the parties of the Final Statement. Payments made pursuant
to this Section 1.2(b) shall be made by wire transfer of immediately available
funds to an account or accounts designated by the Partnership.
(c) Post-Closing Graham Tax Adjustment. The Graham Partners shall be
entitled to distributions to cover the Graham Partners' federal and state income
tax liabilities calculated as the product of the taxable income of the
Partnership allocated to the Graham Partners (for the tax years ending December
31, 1997 and for the 1998 tax year ending on the Closing Date) times the highest
combined marginal individual federal and state income tax rate applicable to
Partnership taxable income (the "Tax Distributions"). Within five business days
following receipt by the parties of the Final Statement:
(i) the Partnership shall distribute to the Graham Partners the
excess, if any, of Tax Distributions (as calculated above) over any prior
distributions made to the Graham Partners with respect to taxes (for the
tax years ending December 31, 1997 and for the 1998 tax year ending on the
Closing Date); and
(ii) the Graham Partners shall contribute to the Partnership the
excess, if any, of prior distributions made to the Graham Partners with
respect to taxes (for the tax years ending December 31, 1997 and for the
1998 tax year ending on the Closing Date) over the Tax Distributions (as
calculated above).
For purposes of the calculation of Tax Distributions, taxable income for the
1998 tax year ending on the Closing Date shall not be reduced by the Closing
Payments to management that are to be made immediately prior to Closing in
connection with the transactions contemplated herein, as set forth in Part I of
Schedule 3.18.
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SECTION 2. REPRESENTATIONS AND WARRANTIES OF THE GRAHAM
PARTNERS
Certain information relating to the representations and warranties of the
Graham Partners and the Partnership contained in this Section 2 and Section 3 of
this Agreement is set forth in disclosure schedules hereto (the "Disclosure
Schedules") prepared by the Partnership and delivered to the Investors pursuant
to this Agreement as of the date hereof. The disclosures in the Disclosure
Schedules shall relate only to the representations and warranties to which they
expressly refer and shall be deemed to be representations and warranties as if
made hereunder. All capitalized terms used in the Disclosure Schedules have the
definitions specified in this Agreement. Disclosure of a matter or a document in
the Disclosure Schedules shall not be deemed to be an acknowledgement that such
matter is material, would have a Material Adverse Effect (as herein defined), or
is outside the ordinary course of business of the Partnership or the
Subsidiaries. The Graham Partners and the Partnership may supplement the
Disclosure Schedules from time to time subject to and in accordance with Section
5.5(b) of this Agreement, and from and after any such supplement the term
"Disclosure Schedules" as used in this Agreement shall mean the Disclosure
Schedules as so supplemented. For purposes of this Agreement, the term "Material
Adverse Effect" shall mean any event, condition or contingency that has had or
is reasonably likely to have a material adverse effect on the business,
properties, assets, liabilities, profits or condition (financial or otherwise)
of the Partnership and the Subsidiaries (as defined herein) taken as a whole
(after giving effect to the contributions under Sections 5.18 and 5.19).
Each of the Graham Partners, jointly and severally, hereby represents and
warrants to the Investors as follows:
2.1 Organization and Good Standing. Each of the Graham Partners that is an
entity is validly existing and in good standing under the laws of its
jurisdiction of organization and has all necessary power and authority to carry
on its business as presently conducted.
2.2 Power and Authorization. Each of the Graham Partners has full legal
right, power and authority to enter into and perform its obligations under this
Agreement and all other agreements and documents (the "Partner Transaction
Documents") required to be delivered by it prior to or at the Closing. The
execution, delivery and performance by each of the Graham Partners of this
Agreement and the Partner Transaction Documents have been duly authorized by all
necessary action on the part of each of the Graham Partners. This Agreement has
been duly and validly executed and delivered by the Graham Partners and
constitutes the legal, valid and binding obligation of the Graham Partners,
enforceable against each of them in accordance with its terms, subject to the
effects of bankruptcy, insolvency, moratorium, fraudulent conveyance,
reorganization or other similar laws affecting creditors' rights generally and
except that enforceability of the obligations of the Graham Partners under this
Agreement is subject to the application of equitable principles and the
availability of equitable remedies in any proceeding, whether at law or in
equity. When executed and delivered as contemplated herein, each of the Partner
Transaction Documents to which a Graham Partner is a party shall constitute the
legal, valid and binding obligation of each of the Graham Partners, as
applicable, enforceable against them in accordance with its terms, subject to
the effects of bankruptcy, insolvency, moratorium,
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fraudulent conveyance, reorganization or other similar laws affecting creditors'
rights generally and except that enforceability of the obligations of the Graham
Partners under the Partner Transaction Documents is subject to the application
of equitable principles and the availability of equitable remedies in any
proceeding, whether at law or in equity.
2.3 No Conflict. The execution, delivery and performance of this Agreement
and the Partner Transaction Documents by each of the Graham Partners do not and
will not violate or result in the breach of any material term, condition or
provision of, or require the consent of any other person which has not been
obtained under: (a) any material law, ordinance or governmental rule or
regulation to which such Graham Partner is subject, (b) any judgment, order,
writ, injunction, decree or award of any court, arbitrator or governmental or
regulatory official, body or authority which is applicable to such Graham
Partner, (c) the certificate of incorporation, the certificate of limited
partnership or other organizational documents of such Graham Partner, if
applicable, or (d) any material contract, agreement or commitment to which such
Graham Partner is a party or by which any material asset of such Graham Partner
is bound.
2.4 Title.
(a) Each of the Graham Partners owns the partner interests in the
Partnership and the Subsidiaries ascribed to it in Schedule 2.4 pursuant to
Sections 3.1 and 3.4(b) hereof, beneficially and of record, free and clear of
any restriction, mortgage, deed of trust, pledge, lien, security interest or
other encumbrance (collectively, "Encumbrances"), except for the restrictions on
the transferability of the limited partner interests in the Partnership pursuant
to the Fourth Amended and Restated Agreement of Limited Partnership of the
Partnership dated February 28, 1994.
(b) DCG (or an entity controlled by DCG) has insurable title in fee simple
(insurable at reasonable rates) to the DCG Real Estate free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance, except for (i) liens for current taxes,
assessments and governmental charges and levies not yet due and payable; and
(ii) such easements and restrictions, if any, as do not materially detract from
the value or marketability of the property subject thereto and do not materially
interfere with the current use of such property. To the knowledge of DCG, no
building or structure included in the DCG Real Estate, or any appurtenance
thereto or equipment therein, or the operation or maintenance thereof, violates
any restrictive covenant, or encroaches on any property owned by others, and DCG
has not received any notice of any claim or charge that the DCG Real Estate is
or within the last two (2) years has been in violation of or in default under
any such restrictive covenant. No condemnation proceeding is pending or, to the
knowledge of DCG, threatened, with respect to any of the DCG Real Estate. Except
as set forth in this Agreement, there are no lease agreements, purchase
agreements, rights of first refusal, options or other agreements or commitments
in effect conveying to any person or entity any rights with respect to the DCG
Real Estate.
2.5 Litigation. There are no judicial, administrative or other governmental
actions, proceedings or investigations pending or, to the knowledge of each of
the Graham Partners, threatened against the Graham Partners that question any of
the transactions contemplated by, or
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the validity of, this Agreement or any of the other agreements or instruments
contemplated hereby or which, if adversely determined, would have an adverse
effect upon the ability of the Graham Partners to enter into or perform their
respective obligations under this Agreement or any of the other agreements or
instruments contemplated hereby. The Graham Partners have not received any
request from any governmental agency or instrumentality for information with
respect to the transactions contemplated hereby, except pursuant to the HSR Act.
2.6 DCG Control. All ownership interests in all of the Graham Partners are
held directly or indirectly by DCG or trusts established for the primary benefit
of his children, and each of the Graham Partners is under the unilateral control
of DCG.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE PARTNERSHIP
The Partnership hereby represents and warrants to the Investors, except as
set forth in the Disclosure Schedules, as follows:
3.1 Organization. The Partnership is validly existing and in good standing
under the laws of the Commonwealth of Pennsylvania and has all necessary power
and authority to carry on its business as presently conducted and to own and
lease the assets which it owns and leases. All of the outstanding beneficial
interests of the Partnership are owned of record by the Graham Partners as set
forth in Schedule 1.1(c) hereto.
3.2 Power and Authorization. The Partnership and Opco have full legal
right, power and authority to enter into and perform their obligations under
this Agreement and the Borrowings, as applicable (the transactions contemplated
hereby and in connection with the Borrowings, the "Transactions") and all other
agreements and documents (the "Graham Transaction Documents") required to be
delivered by it in connection with the Transactions prior to or at the Closing.
The execution, delivery and performance by the Partnership of this Agreement and
the Graham Transaction Documents have been duly authorized by all necessary
Partnership action. This Agreement has been duly and validly executed and
delivered by the Partnership and constitutes the legal, valid and binding
obligation of the Partnership, enforceable against it in accordance with its
terms, subject to the effects of bankruptcy, insolvency, moratorium, fraudulent
conveyance, reorganization or other similar laws affecting creditors' rights
generally and except that enforceability of the obligations of the Partnership
under this Agreement is subject to the application of equitable principles and
the availability of equitable remedies in any proceeding, whether at law or in
equity. When executed and delivered as contemplated herein, each of the Graham
Transaction Documents to which the Partnership is a party thereto shall
constitute the legal, valid and binding obligation of the Partnership
enforceable against it in accordance with its terms, subject to the effects of
bankruptcy, insolvency, moratorium, fraudulent conveyance, reorganization or
other similar laws affecting creditors' rights generally and except that
enforceability of the obligations of the Partnership under the Graham
Transaction Documents is subject to the application of equitable principles and
the availability of equitable remedies in any proceeding, whether at law or in
equity.
9
3.3 No Conflict.
(a) Except as caused or required by the Opco Contribution, the execution,
delivery and performance of this Agreement and the Graham Transaction Documents
by the Partnership and the Graham Partners do not and will not violate or result
in the breach of any material term, condition or provision of, result in the
acceleration (whether after the giving of notice or lapse of time or both) of
any material obligation under, permit the termination of, or require the consent
of any other person which has not been obtained under, or result in the creation
of any material Encumbrance upon the assets of the Partnership or its
Subsidiaries under: (i) any material law, ordinance or governmental rule or
regulation to which the Partnership or any Subsidiary is subject; (ii) any
judgment, order, writ, injunction, decree or award of any court, arbitrator or
governmental or regulatory official, body or authority which is applicable to
the Partnership or any Subsidiary; (iii) the certificate of limited partnership
or other organizational documents of the Partnership or any Subsidiary; or (iv)
any material contract, agreement or commitment to which the Partnership or any
Subsidiary is a party or by which any material asset of the Partnership or any
Subsidiary is bound.
(b) No consents or approvals of, or registrations, notifications, filings
and/or declarations with, any court, government or governmental agency or
instrumentality are required to be given or made by the Graham Partners, the
Partnership or any Subsidiary in connection with the execution, delivery and
performance of this Agreement and the other agreements and instruments
contemplated herein, other than in accordance with the requirements of the
Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the "HSR Act") and such as
have been obtained or made.
3.4 Subsidiaries.
(a) Schedule 3.4(a) separately identifies each subsidiary of the
Partnership (the "Subsidiaries") and the jurisdiction of organization and the
type of legal entity thereof. Each Subsidiary is validly existing and in good
standing under the laws of its jurisdiction of organization and has all
necessary power and authority to carry on its business as presently conducted,
and to own or lease the assets which it owns or leases. Each Subsidiary is duly
qualified to do business and is in good standing under the laws of each
jurisdiction identified in Schedule 3.4(a).
(b) The authorized, issued and outstanding capital stock and other
beneficial interests of each Subsidiary and the record and beneficial ownership
thereof are set forth in Schedule 3.4(b). Except as required under applicable
law with respect to foreign Subsidiaries, as set forth on Schedule 3.4(b), no
person has any preemptive or other rights with respect to any such capital stock
or beneficial interests and there are no offers, options, warrants, rights,
agreements or commitments of any kind (contingent or otherwise) relating to the
issuance, voting, conversion, registration, sale or transfer of any such capital
stock or beneficial interests. All of the issued and outstanding shares of
capital stock or other beneficial interests of each Subsidiary have been duly
authorized by such Subsidiary and are validly issued and outstanding, fully paid
and non-assessable.
10
3.5 Compliance with Laws. The Partnership and the Subsidiaries are, and
within all applicable statutes of limitations periods have been, in compliance
in all material respects with all laws, ordinances or governmental or regulatory
rules or regulations (including, without limitation, environmental laws),
whether federal, foreign, state, provincial or local, (collectively, "Laws").
The Partnership and the Subsidiaries own, hold, possess or lawfully use in the
operation of the Business all material franchises, licenses, permits, easements,
rights, registrations and other authorizations which are necessary for them to
conduct the Business (collectively, "Authorizations"). Neither the Partnership
nor any Subsidiary is in default, nor has it received any notice of any claim of
default, with respect to any such Authorization.
3.6 Litigation. There are no material claims, actions, suits, proceedings
(arbitration or otherwise) or, to the knowledge of the Partnership,
investigations involving or affecting the Partnership or the Subsidiaries before
or by any court, government, governmental agency or instrumentality, or before
an arbitrator other than as set forth in Schedule 3.6. Other than with respect
to the litigation set forth in Part I of Schedule 3.6, the matters set forth in
Schedule 3.6, individually or in the aggregate, are not reasonably likely to
have a Material Adverse Effect. To the Partnership's knowledge, (i) no such
claim, action, suit, proceeding or investigation is presently threatened or
contemplated, and (ii) there are no facts which could reasonably serve as a
basis for any such claim, action, suit, proceeding or investigation. Neither the
Partnership nor any Graham Partner is a party to or, to their knowledge,
materially and adversely affected by, any writ, order, injunction or decree of
any court, government, governmental agency or instrumentality.
3.7 Financial Statements.
(a) Schedule 3.7(a) includes: (i) the consolidated balance sheets of the
Partnership and the Subsidiaries as at December 31, 1996 (the "1996 Balance
Sheet") and as at December 31, 1994 and 1995, and the related consolidated
statements of income and cash flows for each of the fiscal years then ended,
together with the reports thereon of Ernst & Young LLP, independent public
accountants, and all applicable notes thereto (collectively, the "Audited
Financial Statements"); and (ii) an unaudited consolidated balance sheet of the
Partnership and the Subsidiaries as of November 2, 1997 (the "Interim Balance
Sheet") and the related unaudited historic consolidated statements of income and
cash flow for the ten months then ended (collectively, the "Interim Financial
Statements"). (The Audited Financial Statements and the Interim Financial
Statements are collectively referred to as the "Financial Statements"). The
Financial Statements present fairly the financial position, results of
operations and cash flows of the Partnership for the periods and dates covered
thereby and, except as disclosed in the Financial Statements, have been prepared
in accordance with GAAP consistently applied, subject, in the case of the
Interim Financial Statements, to (y) recurring year-end adjustments normal in
nature and amount and the absence of notes, and (z) management's best estimates
of accruals and adjustments applied on a basis consistent with management's past
preparation of interim financial statements. The 1996 Balance Sheet and the
Interim Balance Sheet fairly reflect reserves, accruals or other appropriate
provisions at least equal to reasonably anticipated liabilities, losses and
expenses of the Partnership and the Subsidiaries as of the respective dates
thereof required to be accrued by GAAP, including, without limitation, those
with respect to warranty claims, bad debts, unsaleable inventories, product
returns, distributions related to
11
partners' income tax liabilities, salaries, vacation pay and other accrued
compensation, sales allowances and resin pricing adjustments.
(b) The 1996 Balance Sheet (or the notes thereto) and the Interim Balance
Sheet fairly reflect all material liabilities of the Partnership and the
consolidated Subsidiaries, whether absolute, accrued or contingent, as of the
respective dates thereof of the type required to be reflected or disclosed in a
balance sheet prepared in accordance with GAAP. Except as identified in the
notes to the 1996 Balance Sheet or in Schedule 3.7(b), neither the Partnership
nor the Subsidiaries have any liabilities or obligations (whether accrued,
absolute, fixed or contingent) of a nature required to be disclosed by GAAP,
either in a balance sheet or the notes thereto, that are not reflected on the
Interim Balance Sheet, except for liabilities (within the meaning of GAAP) which
have been incurred since the date thereof in the ordinary course of business
consistent in nature and amount with past practice.
(c) The Interim Balance Sheet accurately reflects the cash, cash
equivalents and short-term investments, indebtedness for borrowed money
(including capitalized lease obligations) and accrued interest of the
Partnership and its Subsidiaries as of November 2, 1997, prepared in accordance
with GAAP applied on a basis consistent with the preparation of the Audited
Financial Statements. For purposes of this Agreement, "Net Borrowing Amount"
shall mean indebtedness for borrowed money (including capitalized lease
obligations), plus accrued interest, less cash, cash equivalents and short-term
investments, in each case of the Partnership and its Subsidiaries as of November
2, 1997, determined in accordance with GAAP applied on a basis consistent with
the preparation of the Audited Financial Statements.
3.8 Inventory. The inventory of the Partnership and the Subsidiaries,
except for obsolete items and items of below standard quality, all of which have
been written off or written down to their net realizable value on the books and
records of the Partnership, is usable and saleable in all material respects in
the ordinary course of business.
3.9 Real Property.
(a) Schedule 3.9 lists each interest in real property owned or leased by
the Partnership and the Subsidiaries and used in the Business (including the DCG
Real Estate (as herein defined)), including the location thereof (collectively,
the "Premises"). Except as reflected in the Interim Balance Sheet, the
Partnership and the Subsidiaries have insurable title in fee simple (insurable
at reasonable rates) to the Premises owned by them, free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim, lien or encumbrance except for: (i) liens for current taxes,
assessments and governmental charges and levies not yet due and payable; and
(ii) such easements and restrictions, if any, as do not materially detract from
the value or marketability of the property subject thereto and do not materially
interfere with the current use of such property. To the knowledge of the
Partnership, no building or structure included in the Premises, or any
appurtenance thereto or equipment therein, or the operation or maintenance
thereof, violates any restrictive covenant, or encroaches on any property owned
by others, and the Partnership has not received any notice of any claim or
charge that the Partnership or a Subsidiary is or within the last two (2) years
has been in violation of or in default under any such restrictive covenant,
other instruments of record, agreements
12
affecting real property or Law. No condemnation proceeding is pending or, to the
knowledge of the Partnership, threatened, with respect to any of the Premises.
There are no lease agreements, purchase agreements, rights of first refusal,
options or other agreements or commitments of the Partnership in effect
conveying to any person or entity any rights of the Partnership with respect to
the Premises.
(b) Schedule 3.9 further contains a complete and correct list of all
material documents related to the Partnership's leased property, including any
and all amendments and modifications. A true, correct and complete set of said
documents has been made available to the Investors. Each lease identified in
Schedule 3.9 grants the lessee under the lease the exclusive right to use and
occupy the premises and rights demised thereunder free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or
encumbrance except for: (i) liens for current taxes, assessments and
governmental charges and levies not yet due and payable, and (ii) such easements
and restrictions, if any, as do not materially detract from the value or
marketability of the property subject thereto and do not materially interfere
with the current use for such property. Each of the leases at the Premises vests
good and valid interests in the Partnership or its Subsidiaries and each is in
full force and effect and no notice of default has been received thereunder for
which the default has not been cured.
(c) The Premises constitute all the fee, leasehold and other interests in
real property held by the Partnership and the Subsidiaries, and constitute all
of the fee, leasehold and other interests in real property necessary for the
conduct of, or otherwise material to , the Business as it is currently
conducted.
3.10 List of Properties, Contracts, etc. Schedule 3.10 lists or adequately
describes the following:
(a) Each vehicle, item of machinery, equipment and other tangible asset
(other than real property) relating to the Business and owned, leased, used or
held by the Partnership or any Subsidiary which is capitalized or, if not
currently capitalized, was capitalized and written off the books, as of the date
indicated in Schedule 3.10(a) and had an original cost in excess of $100,000, on
the Partnership's consolidated financial statements;
(b) Each Authorization;
(c) Each (i) registered fictitious business name, registered trademark,
registered service mark and any applications for the foregoing, (ii) patent,
patent right and patent application, and (iii) registered copyright in published
and material unpublished works, computer programs and software (the items
referred to in clauses (i)-(iii) above, together with
all other intellectual property rights, are collectively referred to herein as
"Intellectual Property"), and (iv) license and permit issued or granted by any
person relating to any of the foregoing; in each case owned, leased, used or
held by, granted to or licensed by the Partnership or any Subsidiary and related
to the Business as either licensor or licensee, together with all other
interests therein granted by the Partnership or any Subsidiary to any other
person;
13
(d) Except as otherwise described in this Agreement, each outstanding loan
or advance (which shall not be deemed to include advances in the ordinary course
of business related to expenses to be reimbursed by Affiliates) made (excluding
advances to employees for ordinary and necessary business expenses made in the
ordinary course of business) by the Partnership or any Subsidiary to any
director, officer, employee or shareholder of the Partnership or any Subsidiary;
(e) Except as otherwise described in this Agreement and the agreements to
be executed and delivered at or prior to Closing pursuant hereto, each contract,
agreement or commitment which restricts or purports to restrict any business
activities or freedom of the Partnership or any Subsidiary to engage in the
manufacture, assembly, design, distribution or marketing for sale of rigid
plastic containers for the packaging of consumer products less than ten liters
in volume;
(f) Each material contract, agreement or commitment to which the
Partnership or any Subsidiary is a party or is otherwise bound providing for
payments (contingent or otherwise) to or by any person or entity based on sales,
purchases or profits, other than payments for goods and purchase orders, and
each other agreement, contract or commitment to which the Partnership or any
Subsidiary is a party or by which it or any of its assets are otherwise bound
(i) which involves aggregate payments or receipts in excess of $1,000,000 per
annum and (ii) which is not terminable by the Partnership or such Subsidiary
without payment of penalty or premium on less than sixty (60) days' notice;
(g) Each material policy and binder of insurance (including, without
limitation, property, casualty, liability, life, health, accident, workers'
compensation and disability insurance and bonding arrangements), owned by or
maintained for the benefit of, or respecting which any premiums are paid
directly or indirectly by, the Partnership or any Subsidiary;
(h) Each note, debt instrument, other evidence of indebtedness, letter of
credit and guaranty issued by or for the benefit of the Partnership or any
Subsidiary which involves an outstanding commitment of at least $1,000,000;
(i) Each open purchase order relating to purchases by the Partnership or
any Subsidiary of more than $1,000,000; and
(j) All material commitments or understandings pursuant to which the
Partnership or any Subsidiary has any obligation to any customer to buy back
non-defective products (whether or not products of the Partnership or any
Subsidiary) owned or held by such customer which are not included in the Interim
Balance Sheet.
3.11 Contracts. Except for the transactions contemplated by this Agreement,
no condition exists or event has occurred which (whether with or without notice
or lapse of time or both, or the happening or occurrence of any other event)
would constitute a default by the Partnership or any Subsidiary or, to the
Partnership's knowledge, any other party thereto under, or result in a right in
termination of, any contract or agreement identified in Schedule 3.10.
14
3.12 Insurance. With respect to all insurance policies identified in
Schedule 3.10(g), all premiums due thereon have been paid and the Partnership
and the Subsidiaries have complied in all material respects with the provisions
of such policies and have not received any notice from any of its insurance
brokers or carriers that such broker or carrier will not be willing or able to
renew their existing coverage. All material properties of the Partnership and
the Subsidiaries are covered by insurance in customary scope and amount of
coverage.
3.13 Tangible Personal Assets. On November 2, 1997, the Partnership and the
Subsidiaries had and, except with respect to tangible personal assets disposed
of or acquired in the ordinary course of business and consistent with past
practice since such date, the Partnership and the Subsidiaries now have, good
and valid title to, or holds by valid and existing lease or license, all the
tangible personal assets reflected as assets of the Partnership and the
Subsidiaries on the Interim Balance Sheet or which would have been reflected on
the Interim Balance Sheet if acquired prior to such date, free and clear of all
Encumbrances of any nature except for: (i) Encumbrances which secure
indebtedness or obligations which are properly reflected on the Interim Balance
Sheet; (ii) liens for Taxes not yet payable or being contested in good faith;
(iii) liens arising as a matter of law in the ordinary course of business,
provided that the obligations secured by such liens are not delinquent or are
being contested in good faith; and (iv) such disposal of assets or imperfections
of title and Encumbrances which, individually or in the aggregate, would not
have a Material Adverse Effect. Giving effect to the contributions of assets
anticipated under Section 5.18 and 5.19, the Partnership and the Subsidiaries
own, or have valid leasehold interests in, all material tangible assets
necessary to conduct the Business as conducted on the date of this Agreement.
3.14 Intellectual Property. The Partnership and/or the Subsidiaries are the
owners or have the perpetual right to use without consideration, all material
Intellectual Property, free and clear of any lien, security interest,
restriction, encumbrance, adverse court order or judgment or, to the
Partnership's knowledge, other adverse claim. Except as disclosed in Schedule
3.10, neither the Partnership nor the Subsidiaries have granted or licensed to
any person, other than their Affiliates, any rights with respect to any of their
Intellectual Property. No claim is pending, or, to the Partnership's knowledge,
threatened, alleging that any of the products manufactured or sold by the
Partnership or the Subsidiaries nor any processes or Intellectual Property owned
or used by the Partnership or the Subsidiaries infringe or are alleged to
infringe any trademark, copyright, patent or other proprietary right of any
person, and, to the Partnership's knowledge, no other person is infringing the
material Intellectual Property. The Partnership and its Subsidiaries have taken
reasonable efforts to protect, maintain and safeguard their material
Intellectual Property and the confidentiality thereof, including without
limitation any Intellectual Property for which improper or unauthorized
disclosure would impair its value or validity.
3.15 Customers and Suppliers. No customer that accounted for more than of
2% of the consolidated sales of the Partnership and the Subsidiaries since
December 31, 1996 has terminated or materially reduced or has given notice that
it intends to terminate or materially reduce the amount of business (measured in
terms of resin throughput) done with the Partnership and the Subsidiaries. No
supplier or vendor that accounted for more than 2% of the consolidated purchases
of the Partnership and the Subsidiaries since December 31, 1996 has terminated
or materially reduced or has given notice that it intends to terminate or
materially reduce the
15
amount of business done with the Partnership and the Subsidiaries (other than
with respect to reductions in equipment sales to the Partnership or
Subsidiaries).
3.16 Taxes. All federal, state, local and foreign tax returns and tax, duty
and value added statements and reports (or extensions relating thereto) required
to be filed by the Partnership and the Subsidiaries, including, without
limitation, those relating to or affecting the Business, have been filed on a
timely basis, when initially due or when due upon grant of an extension, with
the appropriate governmental agencies in all jurisdictions in which such returns
and reports are required to be filed and all such returns, statements, and
reports were true and correct in all material respects when filed. All federal,
state, local and foreign income, duties, profits, franchise, sales, use,
payroll, premium, occupancy, property, severance, excise, withholding, value
added and other taxes (including interest and penalties) (collectively, "Taxes")
due from the Partnership and the Subsidiaries, including, without limitation,
those relating to the Business, have been fully and timely paid when initially
due or when due upon grant of an extension, except to the extent not yet due and
payable. There are no levies, liens, or other encumbrances existing, threatened
or pending with respect to any Partnership or Subsidiary asset relating to any
Taxes except for any liens for taxes not yet due and payable. Schedule 3.16
lists all federal, state, local and foreign income and franchise tax returns of,
or covering, the Partnership and the Subsidiaries which have been examined or
which are currently under examination by the Internal Revenue Service or by
other appropriate taxing authorities within the last three years, and, except as
and to the extent provided for on the 1996 Balance Sheet, all deficiencies
asserted or assessments made as a result of such examinations have been fully
paid, and there are no other unpaid deficiencies asserted or assessments made by
any taxing authority against the Partnership or any Subsidiary or otherwise
affecting any of its assets.
3.17 Labor Matters. The Partnership and the Subsidiaries are not parties to
any collective bargaining agreement or other contract or agreement with any
labor organization or other representative of any of the Partnership's or the
Subsidiaries' employees, nor is any such contract or agreement presently being
negotiated. There is no labor strike, slowdown, work stoppage, or lockout in
effect affecting the Partnership and the Subsidiaries and the Partnership and
the Subsidiaries have not experienced any such labor controversy since January
1, 1995. No material action, suit, complaint, charge, arbitration, inquiry
proceeding or investigation by or before any court, governmental agency,
administrative agency or commission brought by or on behalf of any employee,
prospective employee, former employee, retiree, labor organization or other
representative of the Partnership's or the Subsidiaries' employees is pending
or, to the knowledge of the Partnership, threatened against the Partnership or
the Subsidiaries. Since January 1, 1995, the Partnership and the Subsidiaries
have not closed any plant or facility, nor has the Partnership and the
Subsidiaries planned or announced any such action or program for the future. The
Partnership and the Subsidiaries are in compliance with its obligations pursuant
to the Worker Adjustment and Retraining Notification Act of 1988, and all other
notification and bargaining obligations arising under any collective bargaining
agreement, statute or otherwise.
3.18 Employee Benefits.
(a) Schedule 3.18 identifies each employee pension benefit plan ("Pension
Plan"), as defined in section 3(2) of the Employee Retirement Income Security
Act of 1974, as
16
amended ("ERISA"), employee welfare benefit plan ("Welfare Plan"), as defined in
section 3(1) of ERISA, qualified deferred compensation plan, stock purchase,
stock option, severance, employment, change-in-control, fringe benefit,
collective bargaining and all other material employee benefit plans, agreements,
programs, policies or arrangements, whether or not subject to ERISA, whether
formal or informal, oral or written, maintained by or on behalf of the
Partnership or an ERISA Affiliate (as hereinafter defined) and under which any
employee or former employee of the Partnership or its Subsidiaries has any
present or future right to benefits or under which the Partnership or its
Subsidiaries have any present or future liabilities (collectively, "Employee
Benefit Plans").
(b) Neither the Partnership nor any ERISA Affiliate has incurred any
material liability under any provision of ERISA or other applicable Law relating
to any Employee Benefit Plan. Each Employee Benefit Plan has been administered
in material compliance with its terms and is in material compliance with the
applicable provisions of ERISA (including, but not limited to, the funding and
prohibited transactions provisions thereof), the Internal Revenue Code of 1986,
as amended (the "Code"), and other applicable Laws.
(c) There are no inquiries or proceedings regarding a material amount of
assets pending or threatened by the Internal Revenue Service, the U.S.
Department of Labor, the Pension Benefit Guaranty Corporation, or by any
participant or beneficiary, with respect to any Employee Benefit Plan.
(d) Neither the Partnership nor any entity under common control with the
Partnership within the meaning of Section 414(b), 414(c), 414(m), or 414(o) of
the Code, or section 4001(b) of ERISA (an "ERISA Affiliate") has, since
September 2, 1974, contributed or been required to contribute to any
multiemployer plan, as defined in section 3(37) of ERISA ("Multiemployer Plan").
(e) With respect to each Employee Benefit Plan, the Partnership has
delivered to the Investors a current, accurate and complete copy (or, to the
extent no such copy exists, an accurate description) thereof and, to the extent
applicable: (i) any related trust agreement or other funding instrument; (ii)
the most recent determination letter, if applicable; (iii) any summary plan
description or other written communications (or a description of any oral
communications) by the Partnership or its ERISA Affiliates to their employees
concerning the extent of the benefits provided under any Employee Benefit Plan;
and (iv) for the three most recent years, to the extent applicable (A) the Form
5500 and attached schedules, (B) actuarial valuation reports and (C) attorney's
response to an auditor's request for information.
(f) Each Employee Benefit Plan which is intended to be qualified within the
meaning of Code section 401(a) is so qualified and has received a favorable
determination letter as to its qualification, and nothing has occurred, whether
by action or failure to act, that could reasonably be expected to cause the loss
of such qualification. No event has occurred and no condition exists that would
subject the Partnership or its ERISA Affiliates, either directly or by reason of
their affiliation, to any tax, fine, lien, penalty or other liability imposed by
ERISA, the Code or other applicable laws, rules and regulations. For each
Employee Benefit Plan with respect to which a Form 5500 has been filed, no
material change has occurred with respect to the
17
matters covered by the most recent Form since the date thereof. No "reportable
event" (as such term is defined in ERISA section 4043) for which notice has not
been waived by the regulations under such section "prohibited transaction" (as
such term is defined in ERISA section 406 and Code section 4975) or "accumulated
funding deficiency" (as such term is defined in ERISA section 302 and Code
section 412 (whether or not waived)) has occurred that would be reasonably
likely to subject the Partnership or its ERISA Affiliates, either directly or by
reason of their affiliation, to any tax, fine, lien, penalty or other liability
imposed by ERISA, the Code or other applicable laws, rules and regulations. No
Employee Benefit Plan provides retiree welfare benefits and neither the
Partnership nor its ERISA Affiliates have any obligations to provide any retiree
welfare benefits.
(g) With respect to each of the Employee Benefit Plans that is subject to
Title IV of ERISA, as of the Closing Date, the assets of each such Employee
Benefit Plan are at least equal in value to the present value of the accrued
benefits (vested and unvested) of the participants in such Employee Benefit Plan
on an accrued and projected benefit obligation basis, based on the actuarial
methods and assumptions indicated in the most recent actuarial valuation
reports.
(h) With respect to any Employee Benefit Plan, (i) no actions, suits or
claims (other than routine claims for benefits in the ordinary course) are
pending or threatened, (ii) no facts or circumstances exist that could give rise
to any such actions, suits or claims, and (iii) no written or oral communication
has been received from the PBGC in respect of any Employee Benefit Plan subject
to Title IV of ERISA concerning the funded status of any such plan or any
transfer of assets and liabilities from any such plan in connection with the
transactions contemplated herein.
(i) No Employee Benefit Plan exists that could result in the payment to any
present or former employee of the Partnership or its ERISA Affiliates of any
money or other property or accelerate or provide any other rights or benefits to
any present or former employee of the Partnership or its ERISA Affiliates as a
result of the transaction contemplated by this Agreement, whether or not such
payment would constitute a parachute payment within the meaning of Code section
280G.
3.19 Affiliate Agreements. Except for this Agreement and the agreements
contemplated hereby, there are no material contracts, agreements or commitments
between the Partnership or any Subsidiary, on the one hand, and any Graham
Partner or any other of their Affiliates, on the other hand.
3.20 Environmental Matters.
(a) Except as set forth in Schedule 3.20:
(i) To the knowledge of the Partnership and the Subsidiaries,
there are no conditions at, on, beneath or originating from the
Premises or any other location which would, or would reasonably be
expected to, under any Environmental Law (as defined below), (A) give
rise to liability of the Partnership or any Subsidiary or any entity
for which the Partnership or any
18
Subsidiary is or may be liable, or the imposition of a statutory lien
at any of the Premises, or (B) require of the Partnership or any
Subsidiary or any entity for which the Partnership or any Subsidiary
is or may be liable, any "Response," "Removal" or "Remedial Action"
(as those terms are defined below) or any other action, including
without limitation reporting, monitoring, cleanup or contribution;
(ii) To the knowledge of the Partnership, no Hazardous Substances
are present at or have been used, handled, generated, processed,
treated, stored, transported to or from, or released, discharged or
disposed of by the Partnership or any Subsidiary or any third party
at, on, or beneath, the Premises in material violation of, or in a
manner that could reasonably be expected to result in material
liability under, any Environmental Law;
(iii) To the knowledge of the Partnership, during the ownership,
use or lease of any real property which was, but is no longer, owned,
used or leased to or by the Partnership or any Subsidiary or formerly
owned subsidiaries (the "Former Real Property") no Hazardous
Substances were present at or used, handled, generated, processed,
treated, stored, transported to or from, or released, discharged or
disposed of by the Partnership, any Subsidiary or any third party at,
on, or beneath, the Former Real Property in material violation of any
Environmental Law applicable at the time of such ownership, use or
lease or that could reasonably be expected to result in material
liability under any Environmental Law;
(iv) To the knowledge of the Partnership, there are no
aboveground or underground storage tanks or transformers containing or
contaminated with PCBs on, at or beneath the Premises in violation of
any Environmental Law; and during ownership, use or lease of the
Former Real Property by the Partnership or any Subsidiary, there were
no aboveground or underground storage tanks, or transformers
containing or contaminated with PCBs on, at or beneath the Former Real
Property in violation of any Environmental Law applicable at the time
of such ownership use, or lease;
(v) Neither the Partnership nor any Subsidiary has received
written notice of:
(A) any claim, demand, investigation, enforcement, Response,
Removal, Remedial Action, statutory lien or other governmental or
regulatory action instituted or threatened against the
Partnership, a Subsidiary, any entity for any matter with respect
to which the Partnership or any Subsidiary is or may be liable,
the Premises or any Former Real Property pursuant to any of the
Environmental Laws;
(B) any claim, demand, investigation, suit or action, made
or threatened by any person against the Partnership, a
Subsidiary, any entity for any matter with respect to which the
Partnership or any Subsidiary is or may be liable, the Premises
or any Former Real Property relating to (1) any form of damage,
loss or injury resulting from, or claimed to result from, any
Hazardous Substance or (2) any alleged violation of the
Environmental Laws by the Partnership or a Subsidiary; or
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(C) any communication to or from any governmental or
regulatory agency arising out of or in connection with Hazardous
Substances at, on, beneath, or originating from the Premises or
any Former Real Property or any other location, including without
limitation, any notice of violation, citation, complaint, order,
directive, request for information or response thereto, notice
letter, demand letter or compliance schedule for which the
Partnership or any Subsidiary or any entity for which the
Partnership or any Subsidiary is or may be liable.
(b) True and complete copies of all Environmental Reports in the
possession of the Partnership or any Subsidiaries have been provided to the
Investors.
(c) As used in this Agreement:
(i) the term "Environmental Laws" means the Comprehensive
Environmental Response, Compensation and Liability Act of 1980 and the
Resource Conservation and Recovery Act of 1976, each as amended,
together with all other laws (including rules, regulations, codes,
plans, injunctions, judgments, orders, decrees, rulings and charges
thereunder) of federal, state, local, and foreign governments (and all
other agencies thereof) concerning pollution or protection of the
environment.
(ii) The terms "Response," "Removal" and "Remedial Action" shall
have the meanings ascribed to them in Sections 101(23)-101(25) of the
Comprehensive Environmental Response, Compensation and Liability Act,
as amended ("CERCLA").
(iii) The term "Hazardous Substances" or "Hazardous Substance" shall mean
any substance regulated under any of the Environmental Laws including, without
limitation, any substance which is: (A) petroleum, asbestos or
asbestos-containing material or polychlorinated biphenyls; (B) defined,
designated or listed as a "pollutant" or "Hazardous Substance" pursuant to
Sections 307 and 311 of the Clean Water Act, 33 U.S.C. ss.ss. 1317 and 1321 or
Section 101(14) of CERCLA, 42 U.S.C. ss. 9601; (C) listed in the United States
Department of Transportation Hazardous Material Tables, 49 C.F.R. ss. 172.101;
or (D) defined, designated or listed as a "Hazardous Waste" under Section
1004(5) of the Resource and Conservation and Recovery Act, 42 U.S.C. 6903(5) or
any similar definitions, designations or listings of hazardous substances under
the laws of any other governmental authority, including without limitation any
foreign government.
(iv) The term "Environmental Reports" shall mean any report, study,
assessment, audit, or other similar document that addresses any issue of actual
or potential noncompliance with, or actual or potential liability under or cost
arising out of, any Environmental Law that may in any way affect the Partnership
or any Subsidiary.
3.21 Absence of Certain Changes and Events. Since the date of the 1996
Balance Sheet, the Partnership and the Subsidiaries have conducted the Business
only in the usual and ordinary course consistent with past practice and there
has not been any:
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(i) declaration or payment of any distribution or payment in
respect of the beneficial interests of the Partnership or any
Subsidiary, other than any such paid entirely in cash with
respect to partners' income tax liabilities;
(ii) material adverse change in the Business or any event,
condition or contingency that would constitute a Material Adverse
Effect;
(iii) settlement or compromise of any material litigation;
(iv) undertaking or consummation of any transaction with or
payment of any fees or amounts to the Graham Partners or any of
their Affiliates or to Viking Graham other than (A) payments in
amounts consistent with past practice to Engineering, Capital or
Viking Graham for services rendered in the ordinary course of
business and (B) distributions for partners' income tax
liabilities permitted under subparagraph (f) of Section 5.2;
(v) tax election or change in a tax election or the filing
for any change in any material respect of any method of
accounting with the Internal Revenue Service; or
(vi) to the Partnership's knowledge, change in any
accounting policy, except as required by GAAP.
3.22 Brokers. Except for Goldman, Sachs & Co. (the fees and expenses of
which shall be borne by the Graham Partners), no person acting on behalf of the
Partnership or its Affiliates or under the authority of any of the foregoing is
or will be entitled to any brokers' or finders' fee or any other commission or
similar fee from the Partnership or the Graham Partners in connection with any
of the transactions contemplated by this Agreement.
3.23 No Other Warranties. In connection with the transactions contemplated
hereby, except as expressly set forth in this Section 3, THE PARTNERSHIP MAKES
NO REPRESENTATIONS OR WARRANTIES WHATSOEVER, WHETHER EXPRESS OR IMPLIED OR
STATUTORY, OF ANY NATURE WHATEVER WITH RESPECT TO THE PARTNERSHIP, THE
SUBSIDIARIES OR THE BUSINESS.
3.24 Partnership's Knowledge. For purposes of this Section 3, "to the
Partnership's knowledge" or words of similar import shall be conclusively deemed
to be only that knowledge actually possessed by those persons identified in
Schedule 3.24 hereto. The Partnership shall not be deemed to have actual or
constructive knowledge of any fact, circumstance or occurrence known to any
person other than as set forth in the preceding sentence.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF INVESTORS
Each Investor hereby represents and warrants to the Partnership and the
Graham Partners as follows:
4.1 Organization and Good Standing. Investor GP is a limited liability
company and Investor LP is a corporation, in each case duly organized, validly
existing and in good standing
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under the laws of its jurisdiction of organization, and has all necessary power
and authority to carry on its business as presently conducted, to own and lease
the assets which it owns and leases and to perform all its obligations under
each agreement and instrument by which it is bound.
4.2 Power and Authorization. Each Investor has full legal right, power and
authority to enter into and perform its obligations under this Agreement and
under the other agreements and documents (the "Investor Transaction Documents")
required to be delivered by it prior to or at the Closing. The execution,
delivery and performance by each Investor of this Agreement and the Investor
Transaction Documents have been duly authorized by all necessary corporate
action. This Agreement has been duly and validly executed and delivered by each
Investor and constitutes its legal, valid and binding obligation, enforceable
against it in accordance with its terms, subject to the effects of bankruptcy,
insolvency, moratorium, fraudulent conveyance, reorganization or other similar
laws affecting creditors' rights generally and except that enforceability of the
obligations of Investor under this Agreement is subject to the application of
equitable principles or the availability of equitable remedies in any
proceeding, whether at law or in equity. When executed and delivered as
contemplated herein, each of the Investor Transaction Documents shall constitute
the legal, valid and binding obligation of each Investor, enforceable against it
in accordance with its terms, subject to the effects of bankruptcy, insolvency,
moratorium, fraudulent conveyance, reorganization or other similar laws
affecting creditors' rights generally and except that enforceability of the
obligations of Investor under the Investor Transaction Documents is subject to
the application of equitable principles or the availability of equitable
remedies in any proceeding, whether at law or in equity.
4.3 No Conflicts.
(a) The execution, delivery and performance of this Agreement and the
Investor Transaction Documents do not and will not (with or without the passage
of time or the giving of notice):
(i) violate or conflict with either Investor's certificate or articles
of incorporation, bylaws or other organizational document, or any law
binding upon each Investor; or
(ii) violate or conflict with, result in a breach of, or constitute a
default or otherwise cause any loss of benefit under any agreement,
contract, commitment or other obligation to which each Investor is a party.
(b) No consents or approvals of, or registrations, notifications, filings
and/or declarations with, any court, government or governmental agency or
instrumentality, creditor, lessor or other person are required to be given or
made by Investor in connection with the execution, delivery and performance of
this Agreement and the other agreements and instruments contemplated herein,
other than the requirements of the HSR Act and such as have been obtained or
made.
(c) There are no judicial, administrative or other governmental actions,
proceedings or investigations pending or, to the knowledge of each Investor,
threatened against
the Investors, that question any of the transactions contemplated by, or the
validity of, this Agreement or any of the other agreements or instruments
contemplated hereby or which, if adversely determined, would have an adverse
effect upon the ability of Investor to enter into or perform its obligations
under this Agreement or any of the other agreements or instruments contemplated
hereby. Neither Investor has received any request from any governmental agency
or instrumentality for information with respect to the transactions contemplated
hereby, except pursuant to the HSR Act.
4.4 Brokers. Other than Salomon Smith Barney, no person acting on behalf of
Investors or any of their Affiliates or under the authority of any of the
foregoing is or will be entitled to any brokers' or finders' fee or any other
commission or similar fee, directly or indirectly, in connection with any of the
transactions contemplated by this Agreement.
4.5 Financing. Investors have delivered to the Partnership a bank
commitment letter and a bridge financing commitment letter, in each case
attached hereto, (the "Commitment/Bridge Financing Letters") from Bankers Trust
Company (in the case of the commitment letter) and its affiliate Bankers Trust
New York Corporation (in the case of the bridge financing letter) (the
"Lenders") to provide pursuant to the terms detailed in the Commitment/Bridge
Financing Letters (i) long-term loans to Opco at Closing (the "Term Loan"), (ii)
bridge loans to Opco at Closing (the "Opco Bridge Loans") and (iii) a bridge
loan to the Partnership at Closing (the "Partnership Bridge Loan"), all of which
(together with the equity contributions described in the last sentence of this
paragraph) will enable the Partnership to consummate the transactions set forth
in Section 1.1 hereof and to repay certain of Opco's and the Subsidiaries'
financial debt pursuant to Section 5.11(c) hereof, and (iv) immediately
available revolving credit facilities to Opco (the "Revolvers"). All of the
above-described credit facilities shall be nonrecourse to the Graham Partners
and the Investors. As of the date hereof, Investors have no reason to believe
that all conditions precedent to the obligations of the Partnership, Opco and
co-signing Subsidiaries and the Lenders contained therein or in the
Commitment/Bridge Financing Letters will not be satisfied. Blackstone Capital
Partners III Merchant Banking Fund L.P. (the "Fund") has received all approvals
and authorizations necessary to (i) contribute to the Investors the equity to be
utilized by the Investors to purchase from the Graham Partners interests in the
Partnership, subject to the satisfaction of the other terms and conditions set
forth in Section 6.1 here of (ii) provide additional commitments, if needed,
pursuant to the terms of the Partnership Bridge Loan and (iii) to guarantee the
obligations of the Investors pursuant to Section 9.2 hereof.
4.6 Investigation and Evaluation.
(a) Each Investor acknowledges that (i) the Investor and its directors,
officers, attorneys, accountants and advisors have been given the opportunity to
examine to the full extent deemed necessary by Investor all books, records and
other information with respect to the Partnership, the Subsidiaries and the
Business, including without limitation the Financial Statements, (ii) the
Investor has taken full responsibility for determining the scope of its
investigations of the Partnership, the Subsidiaries and the Business, and for
the manner in which such investigations have been conducted, and has examined
the Partnership, the Subsidiaries and the Business to the Investor's full
satisfaction, (iii) the Investor is fully capable of evaluating the
23
adequacy and accuracy of the information and material obtained by the Investor
in the course of such investigations, and (iv) except as otherwise provided in
Section 3 hereof, THE PARTNERSHIP AND THE GRAHAM PARTNERS ARE NOT MAKING ANY
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED OR STATUTORY, OF ANY NATURE
WHATEVER WITH RESPECT TO THE PARTNERSHIP, THE SUBSIDIARIES OR THE BUSINESS.
(b) Each Investor acknowledges that (i) the Investor has taken full
responsibility for evaluating the adequacy, completeness and accuracy of various
forecasts, projections, opinions and similar material heretofore furnished by
the Partnership, its affiliates or their representatives to the Investor in
connection with the Investor's investigations of the Partnership, the
Subsidiaries, and their businesses, assets and liabilities; (ii) there are
uncertainties inherent in attempting to make projections and forecasts and
render opinions, and the Investor is familiar with such uncertainties; and (iii)
neither the Partnership nor any affiliate of the Partnership makes any
representations or warranties concerning any such forecasts or projections.
(c) Each Investor acknowledges that it has been advised by the Partnership
that the Investor General Partner Interest and the Investor Limited Partner
Interest (together, the "Partnership Interests") have not been registered under
the Securities Act of 1933, as amended (the "Act"), that the Partnership
Interests will be issued on the basis of the statutory exemption provided by
Section 4(2) of the Act and/or Regulation D promulgated thereunder ("Regulation
D") relating to transactions by an issuer not involving a public offering, and
that the Partnership's reliance thereon is based in part upon the
representations made by the Investors in this Agreement. Each Investor
acknowledges that it has been informed by the Partnership of, or is otherwise
familiar with, the nature of the limitations imposed by the Act and the rules
and regulations thereunder on the transfer of securities. In particular, each
Investor agrees to be bound by the terms and conditions set forth in this
Agreement and the Amended and Restated Partnership Agreement (as defined herein)
and further agrees that no sale, assignment or transfer of the Partnership
Interests shall be valid or effective, and the Partnership shall not be required
to give any effect to any such sale, assignment or transfer, unless (i) the
sale, assignment or transfer of the Partnership Interests is registered under
the Act, it being understood that the Partnership has no obligation or intention
to so register the Partnership Interests, (ii) the Partnership Interests are
sold, assigned or transferred in accordance with the requirements and
limitations of Rule 144 under the Act, it being understood that Rule 144 is not
available at the present time for the resale of the Partnership Interests and
that there can be no assurance that Rule 144 will be available any time in the
future, or (iii) such sale, assignment, or transfer is otherwise exempt from
registration under the Act.
(d) Each Investor is an Accredited Investor, as that term is defined in
Regulation D. The Partnership Interests will be acquired by it for its own
account, not as a nominee or agent, for investment and without a view to resale
or other distribution within the meaning of the Act, and the rules and
regulations thereunder, and such Investor will not distribute or transfer any
part of the Partnership Interests in violation of the Act.
24
SECTION 5. ADDITIONAL AGREEMENTS AND COVENANTS
5.1 Organization of Certain Entities; Contribution of Assets to Opco.
(a) The Partnership shall organize or cause the organization of Opco GP,
IPO Corp., Sub GP and Capital Corp.
(b) The Partnership shall contribute, immediately prior to the Closing, all
of its assets and liabilities to Opco, except that the Partnership shall not
contribute to Opco its ownership interest in Opco GP and IPO Corp or such other
assets as shall be specified by the Investors.
5.2 Conduct of Business Pending Closing. Except as expressly provided in
this Agreement (including, specifically, the Opco Contribution) or in Schedule
5.2 or as consented to in writing by Investors (and provided that nothing in
this Section 5.2 shall prohibit or limit the Partnership in any respect from
entering into or adopting the compensatory or other employee incentive
agreements that are described in Part I of Schedule 3.18 hereto, and satisfying
its obligations thereunder), between the date hereof and the Closing, the
Partnership shall, and shall cause each Subsidiary to:
(a) maintain its existence, pay and discharge its debts, liabilities
and obligations as they become due, and operate its business solely in the
ordinary course consistent with past practice and the provisions of this
Agreement and in compliance in all material respects with all applicable
laws and agreements to which it is bound;
(b) maintain its facilities and assets in the same state of repair,
order and condition as they were on the date hereof, reasonable wear and
tear excepted;
(c) maintain its books and records in accordance with past practice and use
all reasonable efforts to maintain in full force and effect all material
insurance policies and binders;
(d) use all reasonable efforts to preserve intact its present business
organization and maintain its relations and goodwill with its suppliers,
customers, employees and others having a business relationship with it;
(e) not issue, repurchase or redeem or commit to issue, repurchase or
redeem any partnership interests or shares of capital stock of the Partnership
or any Subsidiary, any options or other rights to acquire such partnership
interests or capital stock or any securities convertible into or exchangeable
for such partnership interests or capital stock;
(f) not, in the case of the Partnership or Opco, declare or pay any
dividend on, or make any other distribution with respect to, outstanding
partnership interests or capital stock of the Partnership and the Subsidiaries
other than with respect to distributions for partners' income tax liabilities
for the period prior to the Closing Date (excluding any deductions with respect
to the payment of the Closing Payments set forth in Part I of Schedule 3.18);
25
(g) not amend its charter or other organizational documents;
(h) not assume, guarantee, or otherwise become responsible for the
obligations of, or make any loans or advances to, any other individual, firm or
corporation, other than between the Partnership and the Subsidiaries;
(i) not waive or release any rights of material value, or cancel,
compromise, release or assign any material indebtedness owed to it or any
material claims held by it;
(j) not settle or compromise any material litigation;
(k) not enter into, nor amend, any collective bargaining agreements;
(l) not (i) increase the compensation or fringe benefits of any present or
former director, officer or employee of the Partnership or its Subsidiaries
(except for increases in salary or wages in the ordinary course of business
consistent with past practice), (ii) loan or advance any money or other property
to any present or former director, officer or employee of the Partnership or its
Subsidiaries, (iii) grant any severance or termination pay to any present or
former director, officer or employee of the Partnership or its Subsidiaries, or
(iv) establish, adopt, enter into, amend or terminate any Employee Benefit Plan
or any plan, agreement, program, policy, trust, fund or other arrangement that
would be an Employee Benefit Plan if it were in existence as of the date of this
Agreement;
(m) not undertake or consummate any transaction with or pay any fees or
other amounts to the Graham Partners or any of their Affiliates or to Viking
Graham other than (i) payments in amounts consistent with past practice to
Graham Engineering, Graham Capital and Viking Graham for services rendered in
the ordinary course of business and (ii) distributions for partners' income tax
liabilities permitted under subparagraph (f) above;
(n) not make, nor change, any tax elections prior to Closing or file for
any change in any material respect any method of accounting with the Internal
Revenue Service;
(o) not, to the Partnership's knowledge, change any accounting policy,
except as required by GAAP;
(p) not merge with or into any other corporation or entity or, except in
the ordinary course of business consistent with past practice, sell, assign,
transfer, pledge or encumber any part of its assets;
(q) not enter into, nor amend in any material respect, any contract,
commitment, agreement or arrangement which requires payments by the Partnership
or any of its Subsidiaries in excess of $5 million in any 12-month period, to
the extent such contract, commitment, agreement or arrangement is not terminable
within 60 days without payment of premium or penalty or is not in the ordinary
course of business; provided that the foregoing shall not restrict the
Partnership from entering into or amending contracts with respect to the
purchase
26
of resin and other materials or the sale of products, in each case in the
ordinary course of business consistent with past practice; or
(r) agree to do any of the foregoing.
5.3 Access to Information; Confidentiality. Prior to the Closing, the
Partnership shall, during ordinary business hours, give Investors and their
authorized representatives, agents, advisors and financing sources reasonable
access to all of its personnel, auditors, books, records, plants, offices and
other facilities and properties, permit Investors to make such inspections
thereof as Investors may reasonably request, and cause its officers and advisors
to furnish Investors and financing sources with such financial, operating and
other information regarding the Partnership's and each Subsidiary's business,
agreements, commitments, liabilities, personnel and properties as Investors may
reasonably request. Investors' access to the foregoing information must be
coordinated through the senior management of the Partnership. Investors agree
that when they exercise their rights under this Section 5.3, they will not
unduly disrupt the business and operations of the Partnership and the
Subsidiaries. Investors acknowledge that certain of the information which may be
made available to them is proprietary and includes confidential information.
Until the Closing, Investors shall hold such information in confidence in
accordance with that certain agreement dated August 12, 1997 between Blackstone
Management Partners III LLC and the Partnership with respect, inter alia, to the
confidentiality of certain information (the "Confidentiality Agreement"). The
Confidentiality Agreement is hereby incorporated herein by this reference and
made a part hereof.
5.4 Public Announcements; Certain Communications.
(a) From and after the date hereof and after the Closing, except as and to
the extent required by law based on the advice of their respective counsel, as
the case may be, without the prior written consent of the other parties (which
shall not be unreasonably withheld), no party hereto shall, and each will direct
its representatives, advisors and financing sources not to, directly or
indirectly, make any public comment, statement or communication with respect to,
or otherwise disclose or permit the disclosure of any of the material terms,
conditions or other aspects of, the transactions (other than the Borrowings)
contemplated hereby other than to limited partners of the Fund and its
Affiliates and the banks or other lenders in the Borrowings (including to all of
their respective advisers); provided that nothing in this Agreement shall
prohibit the disclosure of any information which has been previously publicly
disclosed in accordance with this Section 5.4(a) (through a press release or
other broad public dissemination) by any party hereto or any of its Affiliates.
In the event any party determines that it is required by law, regulation or
legal or judicial process to make any such public comment, statement or
communication, such party shall advise the other parties of that fact as soon as
reasonably practicable so that, to the extent feasible and desired by the other
parties, such public comment, statement or other communication can be made
jointly by the parties. Notwithstanding anything in this Section 5.4(a) to the
contrary, Investors will be permitted to undertake customary marketing
activities associated with the Borrowings and the offering by the Partnership
and Opco of public and/or private debt securities to provide financings for the
Redemption and Repayment or to replace all or a portion of the Credit Facilities
(as herein defined). It is understood that this Agreement will become publicly
available in connection with the anticipated registration of
27
securities of the Partnership and Opco, and it is agreed that any filing in
connection with such registration shall not be made prior to 90 days after the
Closing (or if such day is not a business day, the next preceding business day).
(b) Notwithstanding anything in this Section 5.4 to the contrary, except as
otherwise provided in Section 5.3 hereof or pursuant to the Partnership's prior
written consent, at no time prior to the Closing shall any Investor directly or
indirectly contact or engage in any discussion or other communication with (i)
any employee, consultant, customer or supplier of the Partnership, any Graham
Partner or any of their Affiliates or (ii) any other person or entity which
Investor knows or believes to be in an actual or prospective business
relationship with the Partnership or any Graham Partner, in either case for the
purpose of discussing any matter related to the Partnership, any Graham Partner
or the Business.
5.5 Notification of Certain Matters.
(a) Certain Events. The Partnership shall give prompt notice to Investors,
and Investors shall give prompt notice to the Partnership, of (i) any material
failure of the Partnership, any Graham Partner or any Investor, as the case may
be, or any partner, officer, director, employee or agent thereof, to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder, (ii) any notice or other communication from any governmental or
regulatory agency or authority in connection with the transactions contemplated
by this Agreement, and (iii) any actions, suits, claims, investigations or
proceedings pending or, to the best of its knowledge, threatened against,
relating to or involving or otherwise affecting the Partnership or any Investor,
as the case may be, or any of the transactions contemplated by this Agreement.
(b) Update of Disclosure Schedules. (i) In the event the Partnership or any
Graham Partner discovers any matter which would cause any of the representations
and warranties made herein by the Partnership or any Graham Partner to become
inaccurate or untrue in any material respect as of the date of this Agreement
assuming solely for this purpose that the Partnership and the Graham Partners
had knowledge thereof as of the date of this Agreement (a "Discovery"), or if
any developments should occur between the date of this Agreement and the Closing
Date which, had they occurred before the date of this Agreement, would have
caused any representation or warranty made by the Partnership or any Graham
Partner herein to be inaccurate or untrue in any material respect as of the date
of this Agreement or which would (but for the provisions of subparagraph (ii)
below) cause any such representation or warranty to be inaccurate or untrue in
any material respect as of the Closing Date (in each such case, a
"Development"), then the Partnership and such Graham Partner shall, subject to
subparagraph (ii) below with respect to Discoveries, supplement the Disclosure
Schedules in reasonable detail and specificity to disclose such Discovery or
Development upon notice to the Investors in accordance with Section 11.2 of this
Agreement.
(ii) With respect to a supplement to the Disclosure Schedules relating to a
Discovery, if requested by Investors in writing within ten business days of
notice of the proposed supplement, the Partnership and/or the Graham Partners
and Investors shall meet and discuss any such proposed supplement. If Investors
accept such proposed supplement or the
28
Investors do not make a request to meet with the Partnership and/or the Graham
Partners within ten business days of Investors' receipt of their notice of such
a proposed supplement to the Disclosure Schedules, then the Discovery described
in such notice shall be deemed to be incorporated into and to become a part of
the Disclosure Schedules as of the date of this Agreement. If the Investors
reject such proposed supplement or request a meeting and do not thereafter
accept such proposed supplement, then such Discovery shall not be deemed to be
incorporated into or to become part of the Disclosure Schedules. No approval is
required of the Investors for any supplement to the Disclosure Schedules for a
Development, and the Development described in the notice thereof in accordance
with subparagraph (i) above shall be deemed to be incorporated into and to
become a part of the Disclosure Schedules as of the date of this Agreement.
(iii) With respect to any Discovery or Development of which the Investors
become aware, the Investors shall notify the Partnership and the Graham Partners
within two business days of receiving the supplement in respect of such
Discovery or Development if the Investors believe that such Discovery or
Development (together with all other Developments and all Discoveries not
accepted for inclusion in the Disclosure Schedules) (A) constitutes a Material
Adverse Effect or (B) might constitute a Material Adverse Effect and the
Investors desire additional information to determine if such Discovery or
Development (together with all other Developments and all Discoveries not
accepted for inclusion in the Disclosure Schedules) constitute(s) a Material
Adverse Effect, in which latter case the Graham Partners and the Partnership
shall reasonably comply with any reasonable requests (within two business days
thereof to the extent such information is reasonably available) of the Investors
for information germane to their assessment as to whether a Material Adverse
Effect has occurred. In the case of a notice described in clause (B) above, the
Investors shall notify the Graham Partners and the Partnership in writing by no
later than the fifth (5th) business day following the notice described in clause
(B) above as to whether or not the Investors believe that a Material Adverse
Effect has occurred. In the case of a notice delivered pursuant to clause (A) or
(B) above, the Graham Partners and the Investors shall discuss the relevant
Discovery or Discoveries or Development(s). In the event the Investors have
notified the Graham Partners and the Partnership that they believe that a
Material Adverse Effect has occurred, the parties shall discuss in good faith
whether the parties shall proceed with the transactions contemplated by this
Agreement on the terms of this Agreement or other terms mutually agreeable to
the parties hereto. In a case described in the immediate preceding sentence, if
the parties do not agree to proceed with the transactions contemplated by this
Agreement on the terms contained in this Agreement or other mutually agreeable
terms within five business days after receipt by the Graham Partners of the
Investors' notice pursuant to clause (A) or (B) above, then either party may, on
written notice to the other party, terminate this Agreement pursuant to Section
9.1(c) or (d) hereof, as applicable, unless, prior to such written notice of
termination, the Investors give written notice to the Graham Partners and the
Partnership that they have withdrawn their determination that a Material Adverse
Effect has occurred. The failure by the Investors to provide notice to the
Partnership and the Graham Partners of their determination that a Discovery or
Discoveries or a Development or Developments constitute or might constitute a
Material Adverse Effect within the required two business day period with respect
to clause (A) or (B) above as applicable, or the absence of a determination by
the Investors that a Discovery or Discoveries or a Development or Developments
under consideration under clause (B) above
29
constitutes a Material Adverse Effect within the required five business day
period, or the subsequent withdrawal of a determination that a Material Adverse
Effect has occurred, shall be deemed a waiver of the Investors' right to
terminate this Agreement by reason of any and all Discoveries or Developments
which are the subject of a determination pursuant to clause (A) above or were
under consideration pursuant to clause (B) above pursuant to this Section
5.5(b)(iii), as applicable, provided, no subsequent Discovery or Development
occurs. Upon becoming aware of subsequent Discoveries or Developments, such
waiver shall no longer be in effect, and the provisions of this subparagraph
(iii) (including the provisions relating to the possible waiver of such
subsequent and prior Discovery or Developments) shall apply de novo.
5.6 Further Assurances; Best Efforts; Assistance in Financing.
(a) Each party hereto shall use best efforts to comply with all
requirements imposed hereby on such party and to cause the transactions
contemplated hereby to be consummated as contemplated hereby and shall, from
time to time and without further consideration, either before or after the
Closing, execute such further instruments and take such other actions as any
other party hereto shall reasonably request in order to fulfill its obligations
under this Agreement and to effectuate the purposes of this Agreement. Each
party shall promptly notify the other parties of any event or circumstance known
to such party that could prevent or delay the consummation of the transactions
contemplated hereby or which would indicate a breach or non-compliance with any
of the terms, conditions or agreements of any of the parties to this Agreement.
No party shall take any action to cause any such covenant, agreement,
transaction or condition not to occur, be satisfied or be performed, as the case
may be.
(b) The Partnership and the Subsidiaries will provide reasonable assistance
to the Investors in their efforts to obtain the financing necessary to
consummate the transactions contemplated hereby including facilitating customary
due diligence and arranging for senior officers of the Partnership and the
Subsidiaries, as selected by the Investors, to meet with prospective lenders and
investors in customary "road show" presentations or otherwise. The Partnership
and the Subsidiaries will also cause its accountants and attorneys to provide
reasonable assistance in such financing, including providing audited financial
statements (restated to reflect the transactions described in Sections 5.18 and
5.19 hereof) suitable for inclusion in a registration statement on Form S-l,
customary "comfort letters" and legal opinions. Prior to the Closing, if
requested by the Investors, the Graham Partners shall cause IPO Corp and Capital
Corp to enter into with one or more underwriters purchase agreements with
respect to any note offerings comprising part of the Borrowings that are
anticipated to close on the Closing Date, in such forms as may be reasonably
requested by the Investors, provided there is not liability to the Partnership
or Opco thereunder if the Closing does not occur. The Graham Partners shall
provide such information as is reasonably required in connection with such
registration statement.
5.7 Consents. Prior to the Closing, the Partnership and Investors shall,
and the Partnership shall cause each Subsidiary to, use all reasonable efforts
to obtain (and cooperate with the other parties hereto in obtaining) all
consents, permits, Authorizations, approvals of, and
30
exemptions by, any regulatory authority or third party necessary for the
consummation of the transactions contemplated by this Agreement.
5.8 Costs and Expenses. Except as otherwise provided in this Section 5.8
and Section 9.2 hereof, the Partnership, the Graham Partners and Investors shall
each pay their own respective Fees and Expenses (as herein defined) incurred in
connection with the transactions contemplated by this Agreement; provided that
the fees and expenses of Goldman Sachs and all legal and all other fees and
expenses incurred by the Partnership shall be borne by the Graham Partners
("Graham Fees"). If any Graham Fees are or have been paid by the Partnership,
the Partnership shall send to the Graham Partners and the Investors an itemized
list thereof and the Graham Partners shall reimburse the Partnership for the
amounts set forth on such list within five business days of the receipt of such
list. Notwithstanding the foregoing, if the transactions contemplated by this
Agreement are consummated, the Partnership shall pay or reimburse the following
Fees and Expenses at or immediately after the Closing: (a) transaction-related
fees and expenses (expected to approximate $9.0 million in the aggregate)
incurred by the Investors in connection with the transactions contemplated by
this Agreement; (b) all financing fees and expenses at market rates consistent
with the Commitment/Bridge Financing Letters related to the Credit Facilities
(as herein defined); and (c) a fee of $9.3 million payable to Blackstone
Management Partners III L.L.C. All real estate and other transfer taxes in
connection with the contribution of the DCG Real Estate shall be paid by the
Graham Partners.
5.9 Release of Graham Partners. Effective as of the Closing, the
Partnership hereby releases the Graham Partners and their respective partners,
shareholders, directors, officers, employees, agents and affiliates who served
in such capacity prior to Closing, of and from any and all causes of actions,
claims and demands whatsoever that the Partnership ever had, or now has, or that
it or its successors and assigns hereafter shall or may have against such
persons in such capacities, for, or by reason of, any cause or matter, the basis
for which existed at or prior to the date hereof, except as expressly provided
in this Agreement or the Partnership Agreement; provided, that the capital in
the Partnership of the Continuing Graham Partners shall remain at risk to the
same extent as the capital in the Partnership of the Investors.
5.10 Indemnification of DCG. From and after the Closing, the Partnership
shall indemnify, defend and hold harmless DCG and his Affiliates, agents and
representatives against any and all losses, costs, expenses, claims, damages or
liabilities (collectively, "Damages"), that DCG and his Affiliates, agents and
representatives has suffered, incurred or became subject to, and to reimburse
DCG and his Affiliates, agents and representatives for any legal, audit or other
expenses incurred by them in connection with investigating any claims and
defending any actions, insofar as any such Damages arise out of any matter
related to the DCG Real Estate (as herein defined), including without limitation
any matter related to Environmental Laws, provided, however, that the
Partnership shall not be obligated to indemnify, defend and hold harmless DCG
and his agents and representatives under this Section 5.10 for any matter that
constitutes a material breach of any representation or warranty of the
Partnership or any Graham Partner made or given under this Agreement.
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5.11 Credit Facilities.
(a) Upon the Partnership's request from time to time, Investors shall
report to the Partnership concerning the status of the Borrowings and shall
provide the Partnership with such information, draft documents and other
materials related thereto as the Partnership shall reasonably request from time
to time.
(b) In regard to the bank lending syndicates for the senior and junior debt
securities expected to be issued as part of the Borrowings (the "Credit
Facilities"), the Investors shall use reasonable efforts to obtain the selection
of the Partnership's current agent bank, NationsBank, N.A., as documentation
agent; provided, however, that the selection of such documentation agent shall
be the joint decision of the Investors and Bankers Trust Company. In addition,
Investors acknowledge that it is the strong preference of the Partnership and
the Graham Partners that (i) those other banks that are members of the
Partnership's lending syndicate under the Partnership's $350,000,000 credit
facility be invited to participate as co-agents in the Credit Facility, and (ii)
NationsBank be selected as co-manager with respect to the senior subordinated
and junior subordinated debt securities that are expected to be issued in lieu
of all or a portion of the Opco Bridge Loan and the Partnership Bridge Loan;
provided, however, that the Investors have the unilateral right to select such
co-agents or co-managers and have no obligation whatsoever to select such banks
and Nationsbank as co-agents or co-managers in the Credit Facility or any other
portion of the financing.
(c) Contemporaneously with the Closing, the Partnership shall consummate
the transactions contemplated by the Credit Facilities, and the Partnership
shall repay in full the financial debt of the Partnership and the Subsidiaries
as reflected on Schedule 5.11 hereto that is outstanding on the Closing Date.
5.12 Covenant Not-to-Compete by the Graham Partners.
(a) Except as otherwise provided in Section 5.12(b) below, for a period of
five years from and after the Closing Date, neither the Graham Partners nor any
of their Affiliates (as herein defined) shall, directly or indirectly, (i)
engage in the manufacture, assembly, design, distribution or marketing for sale
of rigid plastic containers for the packaging of consumer products less than ten
liters in volume ("GPC Containers"); (ii) be or become a stockholder, partner,
owner, officer, director or employee of, or a consultant to, any person or
entity engaging in any such activities; (iii) solicit the employment of any
person who is a key employee of the Partnership or any of the Subsidiaries as of
the date hereof; or (iv) hire or employ any person who is a key employee of the
Partnership or any of the Subsidiaries as of the date hereof, except (A) any
such person who, subsequent to the date hereof, is terminated by, or resigns for
good reason from, the Partnership or any of the Subsidiaries, or (B) those
employees set forth on Schedule 5.12(a) (who currently have substantial
responsibilities providing services to Engineering in connection with
Engineering's agreement with Tetra Pak International S.A. and its Affiliates
dated December 12, 1997). Such Schedule 5.12(a) shall be provided on or before
the Closing subject to the approval of the Investors, which shall not be
unreasonably withheld.
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(b) Notwithstanding anything herein to the contrary, nothing herein shall
prohibit the Graham Partners or any of their Affiliates from (i) the design,
manufacture, assembly, distribution, sale or service of any equipment used in
connection with the manufacture or assembly of GPC Containers, including without
limitation providing services in connection therewith, (ii) owning partnership
interests in the Partnership, (iii) owning, as passive investors, in the
aggregate not more than five percent (5%) of the outstanding shares of capital
stock or other beneficial ownership interests of any entity (other than a
successor in interest to the Partnership) engaged in the manufacture, assembly,
design, distribution or marketing for sale of GPC Containers, (iv) owning, as
passive investors, any interest in any private equity investment partnership or
similar investment vehicle, (v) the provision of certain services by Engineering
to Tetra Pak International S.A. and its Affiliates pursuant to agreements dated
December 12, 1997 or (vi) the provision of services (whether as a director,
employee, consultant, partner, advisor or otherwise) to a division or portion of
an entity conducting its business operations in the business described in
Section 5.12(a)(i) above, if such entity is diversified and such Graham Partner
or Affiliate thereof does not render services, directly or indirectly, to the
division or portion of the entity which is conducting its business operations in
the business described in Section 5.12(a)(i) above.
(c) For the purposes of this Agreement, "Affiliate" of any person or entity
means any other person or entity that, directly or indirectly, through one or
more intermediaries, controls or is controlled by or is under common control
with such person or entity. A person shall be deemed to be controlled by another
person if such other person possesses, directly or indirectly, power to direct
or cause the direction of management and policies of such person whether by
ownership of equity or other securities, by contract or otherwise, provided that
any person or entity of which any other person or entity owns beneficially or of
record, either directly or through one or more intermediaries, more than
twenty-five percent (25%) of the ownership interests, shall be conclusively
presumed to be an "Affiliate", provided that Techne Technipack Engineering
Italia SPA shall not be an Affiliate of the Partnership or the Graham Partners
or any Affiliate of the Graham Partners."
(d) Each party expressly acknowledges that damages alone would be an
inadequate remedy for any breach or violation of any of the provisions of this
Section 5.12, and that the non-breaching party, in addition to all other
remedies under this Agreement, shall be entitled as a matter of right to
injunctive relief, including specific performance, with respect to any such
breach or violation, in any court of competent jurisdiction.
(e) The invalidity or unenforceability of any provision or provisions of
this Section 5.12 shall not affect the validity or enforceability of any other
provision of this Section 5.12, which shall remain in full force and effect, and
in the event that any provision of this Section 5.12 shall be determined to be
invalid or unenforceable for any reason, such provision shall be construed by
limiting it so as to be valid and enforceable to the fullest extent compatible
with and possible under applicable law.
5.13 Payoff of Certain Notes. The Graham Partners, jointly and severally,
shall cause all amounts due and payable to the Partnership under those certain
promissory notes (the "Promissory Notes") dated February 28, 1994 of GP Corp
(the "GP Corp Note") and The Steven
33
Conway Graham Growth Trust, The Kristin Ruth Graham Growth Trust, The Kenneth
Alexander Graham Growth Trust, The Richard Arnesen Graham Growth Trust and The
Erik Lambert Graham Growth Trust (collectively, the "Trust Notes") in the
aggregate principal amount of $20,240,000 (and accrued interest thereon) to be
repaid in full at the Closing. Such repayment of the GP Corp Note and the Trust
Notes shall be satisfied in full out of the cash consideration to be paid by the
Partnership to GP Corp and Family Growth, respectively, in connection with the
redemption of their limited partner interests in the Partnership pursuant to
Section 1.1(b) hereof.
5.14 Partnership Agreement; Certificate of Limited Partnership. The Graham
Partners that will hold general and limited partner interests in the Partnership
after the Closing (the "Continuing Graham Partners") and the Investors shall at
the Closing execute and deliver the Fifth Amended and Restated Agreement of
Limited Partnership of the Partnership, in substantially the form attached
hereto as Exhibit 5.14 (the "Amended and Restated Partnership Agreement"), and
the Partnership shall file with the Secretary of State of the Commonwealth of
Pennsylvania an Amended and Restated Certificate of Limited Partnership of the
Partnership.
5.15 Consulting Agreement. Capital and the Partnership shall enter into a
consulting agreement, in substantially the form attached hereto as Exhibit 5.15
(the "Consulting Agreement").
5.16 Equipment Sales, Services and License Agreement. Engineering and the
Partnership shall enter into an Equipment Sales, Services and License Agreement,
in substantially the form attached hereto as Exhibit 5.16 (the "Equipment Sales,
Services and License Agreement").
5.17 Conversion of Brazilian Subsidiary. Immediately following the Closing,
but in no event later than 60 days, the Partnership shall convert Graham
Packaging Do Brasil Industria E Comercio, an indirect subsidiary of the
Partnership (the "Brazilian Subsidiary"), into an entity that will not be
characterized as a corporation for United States income tax purposes. Any
subpart F income relating to such Subsidiary shall be specially allocated to the
Graham Partners.
5.18 Contributions by Family Growth, GP Corp and Recycling. Prior to the
Closing, Family Growth, GP Corp and Recycling shall each contribute to the
Partnership all of its ownership interests in the entities identified on
Schedule 5.18 hereto by transferring to Sub GP a 1% ownership interest in such
entities, other than Recycling's 1% general partner interest in Opco which shall
be transferred to Opco GP, and transferring all of its remaining interests
therein to Opco. The parties hereto acknowledge that Family Growth's, GP Corp's
and Recycling's ownership interests in such entities have the respective values
as set forth on Schedule 5.18 hereto.
5.19 Contributions by DCG.
(a) Prior to Closing, DCG shall contribute, or shall cause to be
contributed, to Opco insurable title, at reasonable rates, to the real estate
identified on Schedule 5.19 hereto (the "DCG Real Estate") free and clear of any
restriction, mortgage, deed of trust, pledge, lien, security interest or other
charge, claim or encumbrance, except for (i) liens for current taxes,
34
assessments and governmental charges and levies not yet due and payable,
interest or other additional charge and (ii) such easements and restrictions, if
any, as do not materially detract from the value or marketability of the
property subject thereto and do not materially interfere with the current use of
such property. The parties hereto acknowledge that the value of the DCG Real
Estate shall be as set forth on Schedule 5.19 hereto.
(b) Real property owned in fee, or its equivalent, shall be transferred by
conveyancing documents reasonably satisfactory to the parties to vest title in
the ultimate transferee intended. The leased properties shall be transferred by
assignment and assumption agreements in form and substance reasonably acceptable
to the parties. The parties shall also execute such reasonable and customary
documents as are further required to effect such transfers and transfers of
appurtenant rights and interests.
(c) All rent payable by the Partnership in respect of the DCG Real Estate
shall terminate effective November 30, 1997.
5.20 New Equity Plan. At or promptly after the Closing, there will be
established an employee stock option plan involving 5% of the total equity of
the Partnership on a fully diluted basis as of the Closing Date (without regard
to any warrants which may be issued in connection with the financing or
refinancing of the Borrowings) with an exercise price per unit equal to the
purchase price per unit being paid by the Investors for equity in connection
with the recapitalization of the Partnership as herein provided. Grants of
options under such plan shall be in addition to the awards contemplated by Part
I of Schedule 3.18 hereto, and neither of such awards shall reduce other
customary compensation for employees.
5.21 Pension and Welfare Plans.
(a) Pension Plan. The Graham Partners shall take such action as is
necessary to transfer assets in cash or marketable securities from the Graham
Companies Pension Plan (the "Pension Plan") to a plan of the Partnership
designated by the Investors ("Designated Pension Plan"). The amount of assets
transferred shall equal the present value of all "benefits on a termination
basis" (as defined in Treas. Reg. ss. 1.414(l)-1(b)(5)), accrued to the Closing
Date for those current, former and retired employees of the Partnership with
benefits held under the Pension Plan as of the Closing Date (including benefits
of those individuals who become employees of the Partnership as of the Closing
Date), whether such benefits are vested or not. Such present value shall be
calculated on the basis of Pension Benefit Guaranty Corporation ("PBGC")
assumptions in effect as of the Closing Date for defined benefit plans
terminated as of the Closing Date.
The Graham Partners shall provide the Investors with a detailed listing of all
of the Members of the Pension Plan who are or who become employees of the
Partnership as of the Closing Date or who are former or retired employees of the
Partnership with benefits held under the Pension Plan. No assets shall be
transferred to the Designated Pension Plan prior to the receipt of a Partnership
Certification reasonably acceptable to the Graham Partners, that the Designated
Pension Plan will be a qualified plan under Section 401(a) of the Code or a
favorable determination letter regarding a Designated Pension Plan from the IRS.
The Graham Partners
35
shall certify in a form reasonably acceptable to the Investors that the Pension
Plan is, as of the date of the asset transfer, qualified under Section 401(a) of
the Code. The Partnership shall apply for a determination from the Internal
Revenue Service that the Designated Pension Plan is such a qualified plan as
soon as practicable and shall take such action, including any retroactive
action, as is or may be necessary to obtain a favorable determination from the
Internal Revenue Service.
The Partnership and the Graham Partners shall prepare and cause to be filed
with the Internal Revenue Service a Form 5310-A for the Pension Plan and for the
Designated Pension Plan, together with supporting actuarial certificates, to
notify the Internal Revenue Service about the transfer of assets. The Graham
Partners shall cause the transfer of assets to the Designated Pension Plan as
soon as practicable after the close of the month in which occurs the later of
(i) the date the opinion of counsel referred to above is obtained, or (ii) the
30th day after the date the Forms 5310-A have been filed. Such payment will
include interest from the Closing Date to the date of transfer (calculated at
the interest rate used by the PBGC to value immediate annuities for defined
benefit plans terminating as of the Closing Date). The Partnership shall
indemnify and hold harmless the Graham Partners and the Pension Plan from and
against any damage, expense, loss, or deficiency (including without limitation
reasonable attorneys' fees and other reasonable costs and expenses paid or
payable to any third party incident to any suit, action, or proceeding) arising
out of or resulting from any claim for benefits payable to any Member with
respect to whom assets have been transferred from the Pension Plan to the
Designated Pension Plan in accordance with this Section. The Graham Partners
shall indemnify and hold harmless the Partnership and the Designated Pension
Plan from and against any damage, expense, loss, or deficiency (including
without limitation reasonable attorneys' fees and other reasonable costs and
expenses paid or payable to any third party incident to any suit, action, or
proceeding) arising out of or resulting from any claim for benefits payable to
any Member with respect to whom assets have not been transferred from the
Pension Plan to the Designated Pension Plan in accordance with this Section.
(b) 401(k) Plan. The Graham Partners shall take such action as is necessary
to transfer assets in cash or marketable securities from the Graham Companies
Retirement Savings Plan (the "401(k) Plan") to a plan designated by the
Investors ("Designated 401(k) Plan"). The amount of assets transferred shall
equal the sum of the account balances as of the Closing Date for those current,
former and retired employees of the Partnership with accounts held under the
401(k) Plan as of the Closing Date (including accounts of those individuals who
become employees of the Partnership as of the Closing Date), whether such
accounts are vested or not. Any outstanding balances of plan loans to such
employees shall be transferred with the underlying accounts.
The Graham Partners shall provide the Investors with a detailed listing of all
of the Members of the 401(k) Plan who are or who become employees of the
Partnership as of the Closing Date or who are former or retired employees of the
Partnership with accounts held under the 401(k) Plan. No assets shall be
transferred to the Designated 401(k) Plan prior to the receipt of a Partnership
Certification, reasonably acceptable to the Graham Partners, that the Designated
401(k) Plan will be a qualified plan under Section 401(a) of the Code or a
favorable determination letter regarding a Designated 401(k) Plan from the IRS.
The Graham Partners shall certify in a form reasonably acceptable to the
Investors that the 401(k) Plan is, as of the date of the asset transfer,
qualified
36
under Section 401(a) of the Code or a favorable determination letter regarding a
Designated 401(k) Plan from the IRS. The Graham Partners shall certify in a form
acceptable to the Partnership that the 401(k) Plan is, as of the date of the
asset transfer, qualified under Section 401(a) of the Code. The Partnership
shall apply for a determination from the Internal Revenue Service that the
Designated 401(k) Plan is such a qualified plan as soon as practicable and shall
take such action, including any retroactive action, as is or may be necessary to
obtain a favorable determination from the Internal Revenue Service.
The Graham Partners shall cause the transfer of assets to the Designated 401(k)
Plan as soon as practicable after the close of the month in which occurs the
date the opinion of counsel referred to above is obtained. Such payment will
include earnings from the Closing Date to the date of transfer credited to the
accounts to be transferred. The Partnership shall indemnify and hold harmless
the Graham Partners and the 401(k) Plan from and against any damage, expense,
loss, or deficiency (including without limitation reasonable attorneys' fees and
other reasonable costs and expenses paid or payable to any third party incident
to any suit, action, or proceeding) arising out of or resulting from any claim
for benefits payable to any Member with respect to whom assets have been
transferred from the 401(k) Plan to the Designated 401(k) Plan in accordance
with this Section. The Graham Partners shall indemnify and hold harmless the
Partnership and the Designated 401(k) Plan from and against any damage, expense,
loss, or deficiency (including without limitation reasonable attorneys' fees and
other reasonable costs and expenses paid or payable to any third party incident
to any suit, action, or proceeding) arising out of or resulting from any claim
for benefits payable to any Member with respect to whom assets have not been
transferred from the 401(k) Plan to the Designated 401(k) Plan in accordance
with this Section.
5.22 Tax Matters.
(a) Certain Operating Conventions and Procedures. For U.S. federal income
tax purposes and (except as otherwise provided under applicable law, if any)
state, local and foreign income tax purposes, the taxable year of the
Partnership shall end as of the close of business on the Closing Date.
(b) Proceedings.
(1) The Partnership shall have responsibility and authority to represent
the interest of the Partnership in any Tax proceeding relating to the
Partnership and to employ counsel of its choice at its expense; provided,
however, that the Graham Partners shall be permitted to participate (at its own
expense) in any such proceedings and all hearings related thereto.
(2) The Graham Partners shall execute and deliver to the Partnership any
power of attorney requested by the Partnership in connection with any Proceeding
described in this Section 5.22(b); provided, however, that such power of
attorney is necessary or appropriate to permit the Partnership to conduct such
proceeding.
37
(c) Elections. The Partnership shall, in its federal income tax return for
the period ending on the Closing Date, make the tax election under Section 754
of the Code, as well as any comparable state and local elections, the Graham
Partners shall join in such Section 754 election, and the increase in basis of
the assets owned by the Partnership shall be allocated among the assets in
accordance with Schedule 1.1(d).
5.23 No Solicitation. The Partnership and the Graham Partners agree that
prior to the earlier of the termination of this Agreement or February 15, 1998,
they will not, and will cause their respective officers, directors, employees
and agents not to, initiate, solicit or encourage, directly or indirectly, any
inquiries or the making of any proposal with respect to, or engage in any
negotiations with, any Person relating to, or provide to any Person confidential
information in connection with, any acquisition, recapitalization, business
combination or purchase of all or a material portion of the equity or assets of
the Partnership or the Subsidiaries other than in the ordinary course of
business with regard to assets of the Partnership or the Subsidiaries. The
Partnership and the Graham Partners shall promptly provide to the Investors
copies of any written proposals that are received in respect of such
acquisition, recapitalization, business combination or purchase.
5.24 Litigation.
(a) The Graham Partners and the Investors agree that with respect to
the litigation described on Part I of Schedule 3.6 hereto (the
"Litigation"), the Partnership shall have the exclusive right to conduct
the defense of or to settle or compromise the Litigation in its sole
discretion, except that any settlement or compromise of the Litigation
prior to the Closing Date shall require the prior consent of the Investors.
(b) In the event of the settlement, compromise, Final Adjudication (as
defined herein) or other resolution of the Litigation (the "Litigation
Termination"), the Partnership shall have the following obligations:
(i) If the Litigation Termination occurs prior to the Closing
Date, the Graham Redemption Value and the aggregate purchase price
under Section 1.1(b) shall be increased by an aggregate amount (the
"Graham Share") equal to one-half of the sum of (A) the amount, if
any, by which the Specified Amount (as set forth in Part I of Schedule
3.6) exceeds the Settlement Cost (as defined herein) and (B) any
amounts paid or payable by or on behalf of the plaintiff in the
Litigation (the "Plaintiff") as a result of the settlement,
compromise, Final Adjudication or other resolution of any counterclaim
by the Partnership against the Plaintiff or its affiliates, successors
or assigns, adjusted to reflect the present value (based upon a
discount rate of 9.5% per annum, calculated from the date of the
Litigation Termination to the date or dates upon which funds are to be
transferred) of any amount that the Plaintiff agrees to pay or cause
to be paid to the Partnership (provided that with respect to any
royalties receivable by the Partnership, the Graham Partners and the
Investors agree to estimate in good faith the present value of such
royalty payments calculated under a methodology consistent with
Section 5.24(c)); and
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(ii) If the Litigation Termination occurs on or after the Closing Date, the
Partnership shall pay to the Graham Partners (in the same proportions as the
payments under Section 1.1(a)), within five business days thereof (or, in the
case of any amount paid by or on behalf of the Plaintiff, within five business
days of the transfer of funds in such amount to the Partnership), the Graham
Share.
(c) For purposes hereof, "Settlement Cost" shall mean, with respect to the
Litigation, all Damages (as defined in Section 10.1 hereof) paid or payable by
or on behalf of the Partnership after the date hereof, including without
limitation any Present Value Royalties (as defined, it being agreed that the
Present Value Royalties shall equal $0 with respect to any royalty-free
cross-licensing arrangement). For purposes hereof, "Present Value Royalties"
shall mean, as of the date of the Litigation Termination, the present value
(based upon a discount rate of 9.5% per annum) of all royalties payable by the
Partnership in connection with future sales of allegedly infringing products, it
being agreed that if such royalty payments are to be based on the Partnership's
revenues from sales or number of units sold of allegedly infringing products,
the amount of such revenues or the number of units sold during each remaining
year of the relevant patent(s) or otherwise applicable royalty period shall be
deemed to equal the actual revenues generated from the Partnership's sales, or
the actual number of units sold (whichever may be applicable), of allegedly
infringing products during the 12-month period ending on the last day of the
second month preceding the date of the Litigation Termination. For purposes
hereof, "Final Adjudication" shall mean an order, judgement, ruling or decree
finally terminating the Litigation issued and entered by any court from time to
time having jurisdiction over the Litigation that has not been reversed, stayed,
modified or amended and as to which the time to appeal or petition for
reargument, rehearing or certiorari has expired, and as to which no appeal,
reargument, petition for certiorari or rehearing is pending or as to which any
right to appeal, reargue, petition for certiorari or seek rehearing has been
waived in writing or, if an appeal, reargument, petition for certiorari or
rehearing thereof has been denied, the time to take any further appeal or to
seek certiorari or further argument or rehearing has expired.
5.25 BTNY Warrants. The parties hereto agree that, in the event that
Investor LP is required pursuant to the terms of the Bridge Commitment Letter to
issue to Bankers Trust New York Corporation (or any of its successors, assignees
or designees) warrants to purchase for nominal consideration common equity of
Investor LP in an aggregate amount representing a percentage (not to exceed
12.5%) of the outstanding common equity of the Partnership (the "Dilution Pool")
(calculated on a fully diluted basis as of the Closing Date), the Continuing
Graham Partners shall issue to the Investors an option to purchase, for nominal
consideration, limited partner interests in the Partnership in an aggregate
amount representing 15% of the Dilution Pool. The issuance of such warrant shall
be considered for tax purposes to be part of the original purchase transaction.
5.26 Estoppel Certificates. If the lessor under any of the leases for the
leased properties is required under the applicable lease to deliver an estoppel
certificate, the Partnership will request that such estoppels be delivered to
the Investors prior to Closing.
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5.27 Transfers of Graham Partner Interests. Prior to the Closing, the
Graham Partners shall not transfer any of their Partnership interests (except
that the limited partner interests of the Graham Partners may be transferred
among the Graham Partners).
SECTION 6. CONDITIONS TO INVESTORS' OBLIGATIONS
The obligation of Investors to consummate the transactions
contemplated by this Agreement is subject to the fulfillment by or at the
Closing of each of the following conditions, any or all of which may be waived
by Investors in their sole discretion:
6.1 Representations and Warranties and Covenants.
(a) The representations and warranties of the Partnership and the Graham
Partners herein contained shall have been true and correct in all material
respects at the date of execution of this Agreement and as of the Closing Date
as though made on and as of the Closing Date, except in the case of
representations and warranties which are expressly made as of a specified date,
which shall be true and correct as of such date (in each case after giving
effect to any supplement to the Disclosure Schedules with respect to
Developments, or with respect to Discoveries accepted or deemed to have been
accepted by Investors, in each case pursuant to Section 5.5(b) hereof as if all
such supplements were included in the Disclosure Schedules delivered by the
Graham Partners and the Partnership on the date hereof), with such exceptions
(i) with respect to Discoveries (A) as would not, in the aggregate, result in
Damages in excess of $15 million or (B) as to which the Graham Partners shall
have entered into an agreement, effective at Closing, to indemnify, consistent
with the indemnification provisions of Sections 10.1(a) and 10.2(b), the
Partnership for Damages arising out of, based upon or otherwise in respect there
of (ii) with respect to Discoveries and Developments that are Identified
Environmental Matters as to which the Graham Partners are not obligated to
indemnify the Partnership or have agreed to indemnify the Partnership pursuant
to Section 10.1(c), and (iii) relating to matters that re not Identified
Environmental matters by solely reason of the $100,000 threshold described in
Section 10.1(a); provided that for purposes of the foregoing, "Damages"
attributable to matters under clauses (i), (ii) and (iii) shall be disregarded
to the extent of the amount taken into account in calculating Actual Net Income)
and provided further, such exceptions, considered together with matters
described in supplements to the Disclosure Schedules after the date hereof, do
not, in light of any indemnification of the Partnerships agreed to by the Graham
Partners, in the aggregate represent a Material Adverse Effect.
(b) The Partnership and the Graham Partners shall have performed or
complied in all material respects with all agreements, undertakings and
covenants required by this Agreement to be performed or complied with by the
Partnership and the Graham Partners at or prior to the Closing Date.
(c) The Partnership and the Graham Partners shall have delivered to
Investors a certificate dated the Closing Date and signed by the President or a
Senior or Executive Vice President of GP Corp, as general partner of the
Partnership, and by the Graham Partners to the effect set forth in this Section
6.1.
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6.2 Approvals. The waiting period under the HSR Act shall have expired or
been terminated without any request by any governmental agency or authority for
any additional information concerning such transactions. The consent or approval
of all persons described in Schedule 3.3 hereof shall have been obtained.
6.3 Legal Matters. The Closing shall not violate any order or decree of any
court or governmental body of competent jurisdiction.
6.4 Opinion of Counsel. Investors shall have received an opinion, in form
and substance reasonably satisfactory to Investors, of Drinker Biddle & Reath
LLP, counsel for the Partnership, dated as of the Closing Date.
6.5 No Material Adverse Effect. There shall not have occurred and be
continuing a Material Adverse Effect (without taking into account any matters as
to which there is in effect a waiver of the Investors' right to claim a Material
Adverse Effect pursuant to Section 5.5(b)).
6.6 Solvency Opinion. An opinion, in form and substance reasonably
satisfactory to the Investors, from Houlihan, Lokey, Howard and Zukin, dated as
of the Closing Date, relating to the solvency of the Partnership after giving
effect to the transactions contemplated hereby, shall have been delivered.
6.7 Registration Rights Agreement. The Partnership shall have executed a
Registration Rights Agreement, in substantially the form attached hereto as
Exhibit 6.7, and proffered same to the Investors.
6.8 MAC/Market Out. Financing for the transactions contemplated by this
Agreement shall not be unavailable due to (a) there being in existence events,
conditions and/or contingencies that have had or are reasonably likely to have a
material adverse effect on the business, operations, properties, assets,
liabilities, profits or condition (financial or otherwise) of the Partnership
and its Subsidiaries taken as a whole or (b) there having occurred a material
disruption of or material adverse change in financial, banking or capital market
conditions that, in the applicable financing source's reasonable judgment, has
materially impaired, or would be reasonably likely to materially impair, the
financing (or syndication thereof) of the transactions contemplated by this
Agreement (collectively, a "MAC/Market Out").
SECTION 7. CONDITIONS TO THE PARTNERSHIP'S AND THE GRAHAM
PARTNERS' OBLIGATIONS
The obligation of the Partnership and the Graham Partners to consummate the
transactions contemplated by this Agreement is subject to the fulfillment by or
at the Closing of each of the following conditions, any or all of which may be
waived by the Partnership and the Graham Partners in their sole discretion:
41
7.1 Representations and Warranties and Covenants.
(a) The representations and warranties of each Investor herein contained
shall have been true and correct in all material respects at the date of
execution of this Agreement and as of the Closing Date as though made on and as
of the Closing Date, except in the case of representations and warranties which
are expressly made as of a specified date, which shall be true and correct as of
such date.
(b) Each Investor shall have performed or complied in all material respects
with all agreements, undertakings and covenants required by this Agreement to be
performed or complied with by Investor at or prior to the Closing Date.
(c) Each Investor shall have delivered to the Partnership a certificate
dated the Closing Date and signed by the President or Vice President of Investor
to the effect set forth in this Section 7.1.
7.2 Solvency Opinion. The Partnership and the Graham Partners shall have
received an opinion in form and substance reasonably satisfactory to each of
them from Houlihan, Lokey, Howard and Zukin, dated as of the Closing Date,
relating to the solvency of the Partnership after giving effect to the
transactions contemplated hereby.
7.3 Approvals. The waiting period under the HSR Act shall have expired or
been terminated without any request by any governmental agency or authority for
additional information concerning such transactions.
7.4 Legal Matters. The Closing shall not violate any order or decree of any
court or governmental body of competent jurisdiction.
7.5 Opinion of Counsel. The Partnership shall have received an opinion,
reasonably satisfactory in form and substance to the Partnership, of Simpson
Thacher & Bartlett, counsel for Investors, dated as of the Closing Date.
7.6 Credit Facilities. There shall be in effect definitive documentation
providing for the financing referred to in the Commitment/Bridge Financing
Letters or such other financings on market terms to the Partnership and the
Subsidiaries.
7.7 Registration Rights Agreement. The Partnership shall have executed a
Registration Rights Agreement, in substantially the form attached hereto as
Exhibit 6.7, and proffered same to the Continuing Graham Partners.
SECTION 8. CLOSING
8.1 Time and Place of Closing. Unless this Agreement shall have been
terminated and the transactions herein contemplated shall have been abandoned
pursuant to Section 9 and subject to the satisfaction or waiver of the
conditions set forth in Sections 6 and 7 hereof, the closing of the transactions
contemplated by this Agreement (the "Closing") will take place at
42
10:00 a.m. local time on the later of (i) the second business day after the
satisfaction or, if permissible, waiver of the conditions set forth in Sections
6 and 7 hereof, or (ii) the date on which the financing sources are prepared to
fund the Borrowings in accordance with this Agreement (or as soon as practicable
thereafter), at the offices of Simpson Thacher & Bartlett New York, New York
unless another date, time or place is agreed to in writing by the parties hereto
(the "Closing Date").
SECTION 9. TERMINATION
9.1 Termination. This Agreement may be terminated and the transactions
contemplated herein may be abandoned at any time prior to the Closing:
(a) by mutual consent of Investors, the Partnership and the Graham
Partners;
(b) by Investors, on the one hand, or by the Partnership and the Graham
Partners, on the other hand, if the Closing has not occurred by March 31, 1998
(the "Outside Date") (unless such Outside Date is extended in writing by the
parties hereto); provided that the parties seeking to terminate shall not be in
willful breach of their respective obligations under this Agreement unless the
non-terminating parties are also in willful breach of their respective
obligations;
(c) by Investors, (i) if the representations and warranties of the
Partnership and the Graham Partners in this Agreement shall not be true and
correct in all material respects as of the date of this Agreement, with such
exceptions as are described in Section 6.1 hereof, or (ii) if there shall have
been a failure of the Partnership or the Graham Partners to perform or comply in
all material respects with their covenants and agreements hereunder, provided
that, with respect to (i) and (ii), the Investors have notified the Partnership
and the Graham Partners as soon as practicable of the breach or failure and that
there is no reasonable prospect that the breach or failure will be cured by the
Partnership or the Graham Partners on or before the Outside Date, or (iii)
pursuant to Section 5.5(b)(iii) hereof provided that a Material Adverse Effect
(without taking into account matters as to which there is in effect a waiver
pursuant to Section 5.5(b) of the Investors' right to claim a Material Adverse
Effect) has occurred or (iv) the financing for the transactions contemplated by
this Agreement shall not have been provided due to there having occurred a
MAC/Market Out; provided that the parties seeking to terminate shall not be in
willful breach of their obligations under this Agreement;
(d) by the Partnership and the Graham Partners, if (i) the representations
and warranties of any of the Investors in this Agreement shall not be true and
correct in all material respects as of the date of this Agreement, or (ii) there
shall have been a failure of the Investors to perform or comply in all material
respects with their covenants and agreements hereunder, provided that, with
respect to (i) and (ii), the Partnership and the Graham Partners have notified
the Investors as soon as practicable of the breach or failure, and that there is
no reasonable prospect that the breach or failure will be cured by the Investors
on or before the Outside Date, or (iii) pursuant to Section 5.5(b)(iii) hereof;
provided that the parties seeking to terminate shall not be in willful breach of
their obligations under this Agreement; or
43
(e) by the Partnership and the Graham Partners, on the one hand, or the
Investors, on the other hand, not earlier than five business days but not later
than ten business days, after the Partnership's and the Graham Partners' receipt
of an Environmental Notice (as herein defined) if such Environmental Notice sets
forth Identified Environmental Matters (as herein defined) and indicates that
such matters will reasonably be likely to result in Damages in excess of $35
million in the aggregate; provided, however, that the Investors shall not have
the right to terminate this Agreement pursuant to this subsection (e) if the
Graham Partners shall have entered into an agreement, effective at Closing, to
cure all such Damages in excess of $35 million by indemnifying the Partnership
with respect thereto, consistent with the indemnification provisions of Sections
10.1(a) and 10.2(b), and/or obtaining at the Graham Partners' expense,
environmental impairment liability insurance for the benefit of the Partnership
as an insured party or named beneficiary on terms reasonably acceptable to the
Investors or otherwise protecting the Partnership against such Damages through
commercially reasonable means acceptable to the Investors.
9.2 Effect of Termination.
(a) Subject to Section 11.7 (other than with respect to a termination
pursuant to Section 5.5(b)(iii)), a party terminating this Agreement pursuant to
Section 9.1 shall give written notice thereof to each other party hereto,
whereupon this Agreement shall terminate. Nothing contained in this Section 9
shall relieve any party from liability for any breach of this Agreement. Section
9.2(b) shall be the sole remedy for the Graham Partners and the Partnership for
any breach of this Agreement by Investors on the basis of which termination
occurs pursuant to Section 9.2(b).
(b) If this Agreement is terminated (i) by either party pursuant to Section
9.1(b) hereof and at the time of such termination the conditions set forth in
Section 6.1 have been satisfied and the Investors have failed (A) (1) to provide
to the Partnership the funding sufficient to accomplish the Repayment and the
Redemption in accordance with this Agreement, or (2) to effect the Investor
Purchase Payments in accordance with this Agreement, or (B) to comply with their
covenants in Section 5.14, or (ii) by the Partnership and the Graham Partners
pursuant to Section 9.1(d)(iii) hereof, provided that at the time of such
termination no Material Adverse Effect which is the subject of a notice
delivered by the Investors to the Graham Partners and the Partnership and not
withdrawn pursuant to Section 5.5(b)(iii) has occurred, then the Investors shall
pay to the Partnership promptly, but in any event within two days after demand
therefor, liquidated damages in the amount of $70,000,000 in the aggregate. Upon
such payment, the Investors and their officers, directors, stockholders, agents
and affiliates (including the partners, officers, employees and agents thereof)
shall be relieved of any further liability hereunder.
SECTION 10. INDEMNIFICATION
10.1 Indemnification.
(a) The Graham Partners shall, jointly and severally, indemnify and hold
the Partnership harmless against and in respect of any and all losses, costs,
expenses, claims,
44
damages, obligations and liabilities, including interest, penalties and
reasonable attorneys' fees and disbursements ("Damages"), which the Partnership
may suffer, incur or become subject to from and after the Closing arising out
of, based upon or otherwise in respect of (i) any inaccuracy of any
representation of any Graham Partner made in Section 2.4(a) hereof, (ii) taxes
from the conversion of the Brazilian subsidiary for periods ending on or before
the date of the conversion provided for in Section 5.17 herein, including, but
not limited to, Taxes attributable to "subpart F income" or gain on the
conversion, (iii) any claims by management with respect to the adequacy of the
compensatory and other employee incentive arrangements that are described in
Part I of Schedule 3.18 hereto (except to the extent that such claim is
attributable to the failure of the Partnership and/or Investor LP and its
Affiliates to perform or cause to be performed any of the obligations under Part
I of Schedule 3.18 (other than clause (i) thereunder)), and (iv) subject to the
limitations set forth in Section 10.1(c) hereof, any claims arising out of an
Identified Environmental Matter (as herein defined). The term "Identified
Environmental Matter" shall mean each matter that is reasonably likely to result
in Damages of at least $100,000 to the Partnership and the Subsidiaries
resulting from a violation of any Environmental Law whether or not such matter
is disclosed or not disclosed on any Disclosure Schedules or constitutes a
Discovery, provided that such matter is disclosed by the Investors in an
Environmental Notice (as herein defined) delivered to the Partnership and the
Graham Partners by January 12, 1998. The term "Environmental Notice" shall mean
any written notice that identifies each Identified Environmental Matter in
reasonable detail, including the Premises or Former Real Property affected, the
Environmental Law at issue, the nature and scope of the environmental condition,
the general nature of action believed to be required to remediate or correct the
condition so as to bring the matter into compliance with Environmental Laws and
a reasonable estimate of such Damages reasonably likely to result from such
matter (supported by reports of qualified environmental engineers or
consultants).
(b) Except as otherwise provided in this Agreement the Partnership shall
indemnify and hold harmless the Graham Partners and each of their affiliates and
their respective directors, officers, employees, agents, stockholders and
partners (each, a "Graham Indemnified Party" and collectively, the "Graham
Indemnified Parties") harmless against and in respect of any and all Damages
which any Graham Indemnified Party may suffer, incur or become subject to from
and after the Closing arising out of, any third party claims in respect of the
assets or the operation of the Business on or before the Closing Date (including
without limitation the Litigation and the Opco Contribution), except where
attributable to the willful misconduct or bad faith of such Graham Indemnified
Party or where relating to a breach by the Graham Indemnified Party of its
obligations as a fiduciary of the Partnership or to a breach by the Graham
Indemnified Party of any of the terms and provisions of the Partnership
Agreement. This Section 10.1(b) is not intended to apply to Damages suffered by,
or loss of value with respect to the capital accounts of, the Partnership
suffered or a ratable basis by all Partners of the Partnership after the
Closing.
(c) Notwithstanding anything to the contrary contained in Section
10.1(a)(iii), except as otherwise provided in this Section 10.1(c), the Graham
Partners shall have no obligation to indemnify the Partnership for any Damages
arising out of, based upon or otherwise in respect of any Identified
Environmental Matter unless and until the aggregate of all such Damages actually
incurred and paid by the Partnership exceeds $5,000,000 (the "Environmental
45
Basket"), in which event the sole obligation of the Graham Partners shall be to
indemnify the Partnership, on a dollar for dollar basis, for 50% of each dollar
of the next $25 million of such Damages in the aggregate actually incurred and
paid by the Partnership in excess of the Environmental Basket. Notwithstanding
anything herein to the contrary, the indemnification obligations of the Graham
Partners set forth in this Section 10.1(c) shall terminate and become null and
void in all respects on the third anniversary of the Closing Date.
10.2 Claims; Defense.
(a) Each party shall promptly notify the other in writing of the assertion
of any claim for indemnification hereunder, specifying the basis of such claim.
In the event of a claim for indemnification by a Graham Indemnified Party, the
Partnership shall thereupon give the Graham Partners reasonable access to the
books, records and assets of the Partnership which evidence or support such
claim or the act, omission or occurrence giving rise to such claim and the
right, upon prior notice during normal business hours, to interview any
appropriate personnel of the Partnership related thereto.
(b) If there occurs an event which a party asserts is an indemnifiable
event pursuant to Section 10.1, the party or parties seeking indemnification
shall notify the other party or parties obligated to provide indemnification
(the "Indemnifying Party") promptly. If such event involves (i) any claim or
(ii) the commencement of any action or proceeding by a third person, the party
seeking indemnification will give such Indemnifying Party prompt written notice
of such claim or the commencement of such action or proceeding; provided,
however, that the failure to provide prompt notice as provided herein will
relieve the Indemnifying Party of its obligations hereunder only to the extent
that such failure prejudices the Indemnifying Party hereunder. In case any such
action shall be brought against any party in respect of which that person is
seeking indemnification and it shall notify the Indemnifying Party of the
commencement thereof, the Indemnifying Party shall be entitled to participate
therein or, following the delivery by the Indemnifying Party to the party or
parties seeking indemnification of the Indemnifying Party's acknowledgement in
writing that the relevant Damage is an indemnified liability hereunder and that
the Indemnifying Party, in its good faith judgement, will be able to pay any
award of money damages against the indemnified party in connection with such
action, to assume the defense thereof, with counsel reasonably satisfactory to
such party or parties seeking indemnification and, after notice form the
Indemnifying Party to such party or parties seeking indemnification of such
election so to assume the defense thereof, the Indemnifying Party shall not be
liable to the party or parties seeking indemnification hereunder for any legal
expenses of other counsel or any other expenses subsequently incurred by such
party or parties in connection with the defense thereof. The Indemnifying Party
and the party seeking indemnification agree to cooperate fully with each other
and their respective counsel in connection with the defense, negotiation or
settlement of any such action or asserted liability. The party or parties
seeking indemnification shall have the right to participate at their own expense
in the defense of such action or asserted liability. If the Indemnifying Party
assumes the defense of an action (a) no settlement or compromise thereof may be
effected (i) by the indemnifying Party without the written consent of the
indemnified party (which consent shall not be unreasonably withheld or delayed)
unless (x) there is no finding or admission of any violation of law or any
violation of the rights of any person by any indemnified party and no adverse
effect
46
on any other claims that may be made against any indemnified party and (y) all
relief provided is paid or satisfied in full by the Indemnified Party or (ii) by
the indemnified party without the written consent of the Indemnifying Party
(which consent shall not be unreasonably withheld or delayed) and (b) the
indemnified party may subsequently assume the defense of such action if a court
of competent jurisdiction determines that the Indemnifying Party is not
vigorously defending such action.
SECTION 11. MISCELLANEOUS
11.1 Survival of Representations and Warranties.
(a) Anything in this Agreement to the contrary notwithstanding, none of the
representations, warranties, covenants and agreements made by each party in this
Agreement or in any attachment, exhibit, certificate, document or list delivered
by any such party pursuant hereto or in connection with the transactions
contemplated hereby shall survive (a) a termination of this Agreement pursuant
to Section 9.1 hereof, except for the obligations of the parties set forth under
Sections 5.3, 5.4, 5.8, 9.2, 11.5 and 11.6 hereof or (b) the Closing, except for
the representations and warranties of the Graham Partners set forth under
Section 2.4(a) hereof and the obligations of the parties set forth under
Sections 5.3, 5.4, 5.6, 5.8, 5.9, 5.10, 5.12, 5.17, 5.20, 5.21, 5.22, 5.24,
5.25, 10, 11.1, 11.2, 11.3, 11.4, 11.5, 11.6 and 11.7 hereof.
(b) Not later than 30 days after the Closing Date, the Graham Partners
shall prepare and deliver, or cause to be prepared and delivered, to the
Partnership a reconciliation of the Net Borrowing Amount as of November 2, 1997,
prepared in accordance with GAAP applied on a basis consistent with the Audited
Financial Statements (the "Reconciliation") together with such supporting
documentation as the Partnership shall reasonably request. The Partnership and
the Investors shall cooperate fully with the preparation of the Reconciliation
and use best efforts to cause their respective affiliates to so cooperate. To
the extent that the Net Borrowing Amount set forth on the Reconciliation exceeds
the Net Borrowing Amount based upon the Interim Balance Sheet, the Graham
Partners shall pay such excess amount to the Partnership; to the extent that the
Net Borrowing Amount set forth on the Reconciliation is less than the Net
Borrowing Amount based upon the Interim Balance Sheet, the Partnership shall pay
the Graham Partners such deficiency. Notwithstanding the foregoing, differences
of less than $500,000 in the aggregate in either direction shall be ignored for
the purposes of such calculation. Any amounts in dispute with respect to the
Reconciliation under this Section 11.1(b) shall be resolved in accordance with
the procedures set forth in Section 1.2(a)(ii) and (iii).
11.2 Notices. All notices, consents or other communications required or
permitted to be given under this Agreement shall be in writing and shall be
deemed to have been duly given when delivered personally, delivery charges
prepaid, or three business days after being sent by registered or certified mail
(return receipt requested), postage prepaid, or one business day after being
sent by a nationally recognized express courier service, postage or delivery
charges prepaid, to the parties at their respective addresses stated below.
Notices may also be given by prepaid telegram or facsimile and shall be
effective on the date transmitted if confirmed within 24 hours thereafter by a
signed original sent in the manner provided in the preceding sentence.
47
Any party may change its address for notice and the address to which copies must
be sent by giving notice of the new address to the other parties in accordance
with this Section 11.2, except that any such change of address notice shall not
be effective unless and until received.
If to Investors, care of:
BCP Graham Holdings LLC
c/o Blackstone Capital Partners III Merchant Banking Fund L.P.
345 Park Avenue
New York, New York 10154
Attention: Howard A. Lipson
Facsimile: (212) 754-8703
With a required copy to:
Simpson Thacher & Bartlett
425 Lexington Avenue
New York, NY 10017-3954
Attention: Wilson S. Neely
Facsimile: (212) 455-2502
If to the Partnership or the Graham Partners to:
Graham Capital Corporation
1420 Sixth Avenue
York, PA 17403
Attention: William H. Kerlin, Jr.
Facsimile: (717) 848-5951
With a required copy to:
Drinker Biddle & Reath LLP
Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, PA 19107-3496
Attention: Robert Mead Jones, Jr.
Facsimile: (215) 988-2757
11.3 Assignment; Binding Effect; Benefits. No party hereto shall assign
this Agreement or any rights hereunder, or delegate any obligations hereunder,
without the prior written consent of the other parties hereto. This Agreement
shall inure to the benefit of the parties hereto, and shall be binding upon the
parties hereto and their respective permitted successors and assigns. Nothing in
this Agreement, express or implied, is intended to confer on any person other
than the parties hereto, or their respective permitted successors and assigns,
any rights, remedies, obligations or liabilities under or by reason of this
Agreement.
48
11.4 Amendment, Modification and Waiver. The parties may amend or modify
this Agreement in any respect, and Investors, on the one hand, and the
Partnership or the Graham Partners on the other hand, may: (a) extend the time
for the performance of any of the obligations of the other, (b) waive any
inaccuracies in representations and warranties by the other, (c) waive
compliance by the other with any of the obligations contained in this Agreement,
or (d) waive the fulfillment of any condition precedent to the performance under
this Agreement of the waiving party. Any such amendment, or modification,
extension or waiver shall be in writing. The waiver by a party of any breach of
any provision of this Agreement shall not constitute or operate as a waiver of
any other breach of such provision or of any other provision hereof, nor shall
any failure to enforce any provision hereof operate as a waiver of such
provision or of any other provision hereof.
11.5 Governing Law; Consent to Jurisdiction; No Jury Trial. This Agreement
is made pursuant to, and shall be construed and enforced in accordance with, the
laws of the Commonwealth of Pennsylvania (and United States federal law, to the
extent applicable), irrespective of the principal place of business, residence
or domicile of the parties hereto, and without giving effect to otherwise
applicable principles of conflicts of law. Any legal action, suit or proceeding
arising out of or relating to this Agreement may be instituted in any federal
court in the Eastern District of Pennsylvania, or in any state court in which
venue would otherwise be proper located in the Eastern District of Pennsylvania,
and each party waives any objection which such party may now or hereafter have
to the laying of the venue of any such action, suit or proceeding, and
irrevocably submits to the jurisdiction of any such court. Any and all service
of process and any other notice in any such action, suit or proceeding shall be
effective against any party if given as provided herein. Nothing herein
contained shall be deemed to affect the right of any party to serve process in
any other manner permitted by law or to commence legal proceedings or otherwise
proceed against any other party in any jurisdiction other than Pennsylvania. The
parties hereby waive trial by jury in any action, suit, proceeding or
counterclaim brought by either of them against the other in any matters arising
out of or in any way connected with this Agreement.
11.6 Enforcement Expenses. In the event of any litigation, arbitration, or
other legal proceeding to enforce, interpret or recover damages for breach of
this Agreement, the prevailing party shall be entitled to recover reasonable
attorneys' fees and costs incurred in the proceeding in addition to any other
relief to which the prevailing party is entitled.
11.7 Specific Performance. The parties hereto agree that if any of the
provisions of this Agreement were not performed by the Graham Partners in
accordance with their specific terms or were otherwise breached by the Graham
Partners, irreparable damage would occur, no adequate remedy at law would exist
and damages would be difficult to determine, and that the Investors shall be
entitled to specific performance of the terms hereof, which, if elected and
awarded, shall constitute the Investors' sole and exclusive remedy under this
Agreement, at law, in equity or otherwise; provided, however, that nothing
herein shall affect the right of any of the parties hereto to seek recovery
against any other party hereto, at law, in equity or otherwise, with respect to
any covenants, agreements or obligations to be performed by such party or
parties after the Closing Date.
49
11.8 Headings, Gender and "Person". All section headings contained in this
Agreement are for convenience of reference only, do not form a part of this
Agreement and shall not affect in any way the meaning or interpretation of this
Agreement. Words used herein, regardless of the number and gender specifically
used, shall be deemed and construed to include any other number, singular or
plural, and any other gender, masculine, feminine, or neuter, as the context
requires. Any reference to a "person" herein shall include an individual, firm,
corporation, partnership, trust, governmental authority or body, association,
unincorporated organization or any other entity.
11.9 Counterparts. This Agreement may be executed in any number of
counterparts and any party hereto may execute any such counterpart, each of
which when executed and delivered shall be deemed to be an original and all of
which counterparts taken together shall constitute but one and the same
instrument. This Agreement shall become binding when one or more counterparts
taken together shall have been executed and delivered by the parties. It shall
not be necessary in making proof of this Agreement or any counterpart hereof to
produce or account for any of the other counterparts.
11.10 Entire Agreement. This Agreement and the Confidentiality Agreement,
together with the agreements, exhibits, schedules and certificates referred to
herein or delivered pursuant hereto, constitute the entire agreement between the
parties hereto with respect to the transactions contemplated herein and
supersede all prior agreements and understandings, oral or written, between the
parties hereto or otherwise with respect to the subject matter hereof.
11.11 Third Parties. Nothing herein expressed or implied is intended or
shall be construed to confer upon or give to any person or corporation, other
than the parties hereto and their permitted successors or assigns, any rights or
remedies under or by reason of this Agreement.
50
IN WITNESS WHEREOF, each of the parties hereto has duly executed this
Agreement, under seal, all as of the date first above written.
GRAHAM PACKAGING COMPANY
By: Graham Packaging Corporation,
its general partner
By: /s/ Steven C. Graham
--------------------
Title: Senior Vice President
---------------------
GRAHAM PACKAGING CORPORATION
By:/s/ Steven C. Graham
--------------------
Title: Senior Vice President
---------------------
GRAHAM FAMILY GROWTH PARTNERSHIP
By: Graham Packaging Corporation,
its general partner
By:/s/ Steven C. Graham
-------------------
Title: Senior Vice President
---------------------
GRAHAM ENGINEERING CORPORATION
By:/s/ William H. Kerlin
-----------------
Title: President
---------
GRAHAM CAPITAL CORPORATION
By:/s/ William H. Kerlin
------------------
Title: President
---------
51
GRAHAM RECYCLING CORPORATION
By:/s/ Steven F. Wood
--------------
Title:Senior Vive President
--------------------
/s/ Donald C. Graham
----------------
DONALD C. GRAHAM
BCP/GRAHAM HOLDINGS L.L.C.
By: BMP/GRAHAM HOLDINGS
CORPORATION, member
By: /s/ Howard A. Lipson
----------------
Title: Member
------
BMP/GRAHAM HOLDINGS CORPORATION
By:/s/ Howard A. Lipson
----------------
Title: Member
------
* * *
Guarantee of Blackstone Capital Partners III Merchant Banking Fund L.P.
The undersigned, an affiliate of the Investors, intending to be legally
bound hereby and in consideration of the execution and delivery of this
Agreement by the Graham Partners, hereby unconditionally guarantees the
performance by the Investors of all of their liabilities and obligations under
Section 9.2(b) of this Agreement.
Blackstone Capital Partners III
Merchant Banking Fund L.P.
By: Blackstone Management Associates III L.L.C,
General Partner
52
By: /s/ Howard A. Lipson
----------------
Howard A. Lipson
Member
Schedule 1.1(d)
Percentage and Agreed Value of Partnership Interests
=====================================================================================================================
Partnership Partnership
Interests as of Interests Agreed Value of Partnership
Partner 12/18/97 After Closing Interests After Closing
- ---------------------------------------------------------------------------------------------------------------------
GP Corp 1.0%(GP) 1.0%(GP) $2,450,000
- ---------------------------------------------------------------------------------------------------------------------
Family Growth 32.0%(LP) 5%(LP) $12,250,000
- ---------------------------------------------------------------------------------------------------------------------
Engineering 23.1%(LP) -- --
- ---------------------------------------------------------------------------------------------------------------------
Capital 38.5%(LP) 9%(LP) $22,050,000
- ---------------------------------------------------------------------------------------------------------------------
Recycling 4.0%(LP) -- --
- ---------------------------------------------------------------------------------------------------------------------
DCG 1.4%(LP) -- --
- ---------------------------------------------------------------------------------------------------------------------
Investor GP -- 4.0%(GP) $9,800,000
- ---------------------------------------------------------------------------------------------------------------------
Investor LP -- 81.0%(LP) $198,450,000
- ---------------------------------------------------------------------------------------------------------------------
Total 100% 100% $245,000,000
=====================================================================================================================
Schedule 1.1(e)
Allocation of Fair Market Value
For the purposes set forth in Section 1.1(e) of the Recapitalization
Agreement, the aggregate fair market value of the Partnership's assets as of the
Closing Date shall be considered to equal the sum of (A) the quotient of (i) the
aggregate proceeds received by the Graham Partners under Section 1.1(b), as
ultimately adjusted, divided by (ii) the aggregate percentage interest of the
Investors in the Partnership as of the end of the Closing Date, plus (B) the
aggregate Liabilities of the Partnership, under Federal income tax accounting
principles, as of the end of the Closing Date. Such fair market value shall be
allocated among such assets as follows:
Tangible Depreciable Property $110,000,000
Real Property $ 30,000,000
Controlled Foreign Ownership Interests $ 80,000,000
Other Assets GAAP Book Value
Goodwill Residual Value
Schedule 1.2
Actual Net Income
Part I. The calculation of Actual Net Income of the Partnership and the
Subsidiaries pursuant to Section 1.2(a) shall give effect to the following:
1. Actual Net Income shall be increased for the full amount of any loss
realized with respect to the sale of the facility located in Lagnieu,
France up to a maximum equivalency of U.S. $1,000,000, to the extent
otherwise deducted in determining Actual Net Income.
2. There shall not be any adjustment for write-downs or write-offs of the
November 2, 1997 fixed, intangible or other long-lived asset balances.
3. For purposes of the Actual Net Income calculation, the contribution of
the DCG Real Estate and the resulting pooling of interests accounting
treatment will be deemed to have occurred effective November 30, 1997.
Part II. The calculation of Actual Net Income of the Partnership and the
Subsidiaries pursuant to Section 1.2(a) shall give no effect to the following:
1. All Fees and Expenses to be paid by the Partnership pursuant to
Section 5.8.
2. All LIFO adjustments.
3. The payment of the Graham Redemption Value.
4. All debt incurred under the Credit Facilities to fund the Graham
Redemption Value.
5. All payments to be made by the Partnership at or immediately prior to
the Closing (or an accrual made therefor) pursuant to the compensatory
and other employee incentive agreements described in Part I of
Schedule 3.18 or Section 5.20, including any payment thereunder that
replaces payment obligations of the Partnership under the
Partnership's existing management incentive plans.
6. Any accrual or expense related to the Existing Management Incentive
Plan that may be required due to the execution of this Agreement or
any other event connected with this Agreement.
7. Any transaction-related accounting adjustment made in connection with
or as a result of the recapitalization, redemption and purchase
transactions contemplated by this Agreement.
8. There shall be no effect given to the provisions of Section 1.1(e)
hereof.
9. No effect shall be given to accrued interest on the Promissory Notes
from November 3, 1997 up to January 31, 1998.
Schedule 3.18
Part I
The Agreed Equity Value of the Graham Partners' interests in the
Partnership as set forth in Section 1.1(b) gives effect to the following $25.0
million of incentive payments and contractual arrangements to be provided by or
on behalf of the Partnership to management:
(i) Closing Payments ($7.0 million). Immediately prior to the Closing,
there will be paid to approximately 12 senior managers and approximately 10
upper middle level members of management of the Partnership, selected by
Capital, cash in an amount aggregating approximately $7.0 million, representing
the aggregate value payable under the Partnership's existing equity appreciation
plan for such Managers plus an additional cash bonus (the "Closing Payments").
(ii) Stay Bonuses for Middle Level Managers ($4.8 million). Pursuant to
arrangements to be entered into between the Partnership and approximately 100
middle level managers (who will be employees of the Partnership immediately
following the Closing) prior to the Closing, effective the day after the
Closing, there will be awarded on the day after the Closing by the Partnership
to such managers stay bonuses aggregating approximately $4.8 million. The
individuals and the amounts of such bonuses have been identified in a separate
schedule dated the date hereof which has been agreed upon by the Investors and
the Partnership. The terms and conditions of such stay bonuses will be as
provided in the form of Retention Incentive Agreement previously agreed upon by
the Investors and the Partnership.
(iii) Additional Long-Term Incentives for Senior Managers and Upper Middle
Level Managers ($13.2 million). Pursuant to arrangements to be entered into
between the Partnership and approximately 15 senior level managers and upper
middle level managers (the "Participants") the day after the Closing, there will
be awarded by or on behalf of the Partnership on the day after the Closing to
the Participants cash stay bonuses with a discounted pre-tax value of $5.11
million (based upon an undiscounted value of $5.94 million) (which cash stay
bonuses shall consist of (a) amounts payable by the Partnership to the relevant
taxing authority, on behalf of such Participants, in respect of withholding
obligations relating to (i) such payments, (ii) the Cash Payments (as defined
below) and (iii) the value of the Directed Shares (as defined below) issued to
such Participants (collectively, "Withholding Obligations"), and (b) cash
distributions) and restricted common equity (based on the purchase price being
paid by Investor LP for common equity of the Partnership at the Closing) with a
discounted value of $6.25 million (based upon an undiscounted value of $7.26
million) ("Restricted Equity"). Such awards shall be made to the persons and in
the amounts identified in a separate schedule dated the date hereof which has
been agreed upon by the Partnership and the Investors (the "Participants
Incentive Schedule"), with the restricted common equity vesting over three
years. The terms and conditions of such awards will be as provided in the form
of Equity Incentive Agreement previously agreed upon by the Investors and the
Partnership.
In order to satisfy the obligations of the Partnership with respect to the
Restricted Equity described above, the Investors shall cause the following
transactions to occur the day after the Closing: (a) Investor LP shall issue (or
shall cause an affiliate of Investor LP to transfer) to the Participants shares
of Investor LP having an aggregate value (based on the purchase price being paid
by Investor LP for common equity of the Partnership at the Closing) of $3.125
million (the "Directed Shares"), allocated among the Participants as set forth
in the Participant's Incentive Schedule; (b) the Partnership shall pay to the
Participants cash payments consisting in the aggregate of $3.125 million (the
"Cash Payments"), allocated among the Participants as set forth in the
Participants Incentive Schedule (subject to the concurrent purchase by the
Participants of the Purchased Shares (as defined below) in accordance with the
following subparagraph (c)); and (c) the Participants shall purchase
from Blackstone Management Partners III L.P. additional shares of Investor LP
having a value (based on the purchase price being paid by Investor LP for common
equity of the Partnership at the Closing) of $3.125 million (the "Purchased
Shares" and, together with the Directed Shares, the "Blocker Shares"). One-third
of any Blocker Shares which are forfeited under the terms of the Equity
Incentive Agreements (or, at Investor LP's election, limited partnership
interests in the Partnership equal to the product of (A) the number of such
forfeited Blocker Shares divided by the aggregate number of all of the then
outstanding Blocker Shares (without giving effect to such forfeiture),
multiplied by (B) 33- 1/3%, multiplied by (C) Investor LP's percentage ownership
interest in the Partnership on the date of forfeiture of the forfeited Blocker
Shares) shall be promptly transferred over to the Graham Partners (in the same
proportions as their share of the Graham Redemption Value and shall constitute
an adjustment to their redemption amounts and sale proceeds under Sections
1.1(a) and (b) of this Agreement).
- ----------
Note: There shall be paid customary annual bonuses to employees of the
Partnership in respect of the year ending December 31, 1997 at the normal time
(approximately March 15, 1998) and otherwise in accordance with past practice,
in an amount equal to less than $3.5 million, which amounts have been reflected
in the projected SG&A for the Partnership for the year ending December 31, 1997
and will be fully accrued on the balance sheet of the Partnership as of December
31, 1997.
Schedule 5.11
Debt Instruments to be Repaid at Closing
Credit Agreement between Graham Packaging Company and certain other Borrowers
and NationsBank, NA and certain Lenders.
Debt amount as of November 2, 1997: $253,050,000
------------
Promissory Note between Graham Packaging Company and York Bank & Trust Company.
Debt amount as of November 2, 1997: $51,000
-------
Pennsylvania RIDA Loan between Graham Recycling Company and the Commonwealth of
Pennsylvania.
Debt amount as of November 2, 1997: $562,000
--------
Credit Facility between Graham Packaging France, S.A. and Societe Generale, Lyon
Branch.
Debt amount as of November 2, 1997: $769,000
--------
Credit Facility between Graham Packaging Italy, Srl and Societe Generale, Milan
Branch.
Debt amount as of November 2, 1997: $5,015,000
----------
Credit Facility between Graham Packaging Italy, Srl and SIP, Srl and Credito
Italiano.
Debt amount as of November 2, 1997: $172,000
--------
Mortgage between Graham Packaging Italy, Srl and Medio Credito.
Debt amount as of November 2, 1997: $86,000
-------
Certain capital leases in France and Italy.
Balance as of November 2, 1997: $1,751,000
----------
Accrued interest on amounts disclosed above.
Schedule 5.18
Ownership Interests to be Contributed by Family Growth, GP Corp
and Recycling to the Partnership
===========================================================================================================
Graham Partners' Ownership Interest (and agreed value)
in each of the Following Entities
- -----------------------------------------------------------------------------------------------------------
Graham Packaging Graham Packaging LIDO Plast- Graham Packaging Graham Packaging
France Partners Italy Graham Latin America Poland
Partner (Ownership/Value) (Ownership/Value) (Ownership/Value) (Ownership/Value) (Ownership/Value)
- ------------------------------------------------------------------------------------------------------------
Family 40%/$40,000 40%/$1,120,000 80%/$2,400 80%/$80,000 --
Growth
- ------------------------------------------------------------------------------------------------------------
-- -- -- -- 1%/$37,800
Recycling
- ------------------------------------------------------------------------------------------------------------
-- -- -- --
GP Corp
============================================================================================================
Graham
Brazil
Graham Packaging Participacoes Graham Recycling
Holdings I (Ownership/ Company
Partner (Ownership/Value) Value) (Ownership/Value)
- ---------------------------------------------------------------------------
Family -- 1%/$22,200 --
Growth
- ---------------------------------------------------------------------------
1%/$23,600 -- 1%/$62,300
Recycling
- ---------------------------------------------------------------------------
-- -- --
GP Corp
===========================================================================
Schedule 5.19
DCG Real Estate to be Contributed to the Partnership
1. LOCATION: 500 Windsor Street
York, Pennsylvania
DESCRIPTION: 395,554 Sq. Ft. Plant/Warehouse and Office Space
RECORD OWNER: Donald C. Graham
AGREED VALUE: $2,621,208
2. LOCATION: 505 Windsor Street
York, Pennsylvania
DESCRIPTION: 44,416 Sq. Ft. Plant/Warehouse and Office Space
RECORD OWNER: Donald C. Graham
AGREED VALUE: $792,139
3. LOCATION: 8921 Latty Road
Berkely, Missouri
DESCRIPTION: Approximately 7.16 acres/vacant land
RECORD OWNER: York Transportation & Leasing, Inc.
AGREED VALUE: $192,000
4. LOCATION: 8942 Latty Road
Berkeley, Missouri
DESCRIPTION: 80,100 Sq. Ft. Plant/Warehouse and Office Space
RECORD OWNER: Donald C. Graham
AGREED VALUE: $1,363,300
5. LOCATION: 8966 Latty Road
Berkeley, Missouri
DESCRIPTION: 75,000 Sq. Ft. Plant/Warehouse Space
RECORD OWNER: Donald C. Graham
AGREED VALUE: $1,300,762
6. LOCATION: 4041 North Service Road
Burlington, Ontario, Canada
DESCRIPTION: 150,000 Sq. Ft. Plant/Warehouse and Office Space
RECORD OWNER: York Transportation & Leasing, Inc.
AGREED VALUE: $1,850,165
7. LOCATION: 3174 Mavis Road
Mississauga, Ontario, Canada
DESCRIPTION: 78,416 Sq. Ft. Plant/Warehouse Space
RECORD OWNER: York Transportation & Leasing, Inc.
AGREED VALUE: $751,593
8. LOCATION: 10551 Ray Lawson Boulevard
Anjou, Quebec, Canada
DESCRIPTION: 44,875 Sq. Ft. Plant/Warehouse Space
RECORD OWNER: York Transportation & Leasing, Inc.
AGREED VALUE: $686,007