SWEETHEART HOLDINGS INC.
STOCKHOLDERS' AGREEMENT
This Stockholders' Agreement (the "Agreement") dated as of March 12,
1998 is made by and among Sweetheart Holdings Inc., a Delaware corporation (the
"Company"), SF Holdings Group, Inc., a Delaware corporation ("SF Holdings"),
American Industrial Partners Capital Fund L.P., a Delaware limited partnership
("AIP"), and the other stockholders of the Company listed on Schedule A hereto
(together with AIP, the "Original Stockholders").
WHEREAS, pursuant to an Investment Agreement dated as of December 29,
1997 among the Original Stockholders and SF Holdings, SF Holdings will
simultaneously herewith acquire 48% of the Class A Common Stock and 100% of the
Class B Common Stock of the Company; and
WHEREAS, the Original Stockholders and SF Holdings (collectively, the
"Stockholders") desire to enter into an agreement with respect to the ownership
and the transfer or other disposition of the securities of the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, the parties hereto agree as follows:
1. Definitions.
"Business Day" shall mean any day that is not a Saturday or
Sunday or a legal holiday on which banks are authorized or required to be
closed in New York, New York.
"Closing Date" shall mean the date first above written.
"Common Stock" shall mean the common stock, par value $.01
per share, of the Company, including the Class A Common Stock and Class B
Common Stock.
"Exchange Date" shall mean the date on which the
Exchange is consummated.
"Sale" or "Sell" shall mean any sale, transfer or other
disposition of any Shares for value.
"Shares" shall mean any shares of the Class A Common Stock or
the Class B Common Stock of the Company held by the Stockholders.
"Transfer" shall mean any Sale, assignment, pledge,
hypothecation or other disposition of any Shares.
"Warrant Purchase Period" shall mean the period from the
Closing Date to and including the fifth anniversary thereof.
2. Corporate Governance.
a. Management of the Company. The Company and its
subsidiaries shall be administered in accordance with the provisions
of the Second Restated Management Services Agreement dated as of the
date hereof, as amended, by and among the Company, Sweetheart Cup
Company Inc., American Industrial Partners Management Company and SF
Holdings, the Amended and Restated Certificate of Incorporation of the
Company, the Amended and Restated By-Laws of the Company, the
certificate of incorporation and by-laws (or other comparable
organizational documents) of the subsidiaries of the Company and the
laws of their respective jurisdictions of incorporation.
b. Board of Directors. The Board of Directors of the Company
shall consist of a total of five (5) directors, three (3) of whom
shall be nominated by the Original Stockholders and two (2) of whom
shall be nominated by SF Holdings. The Stockholders agree to vote all
their shares of Class A Common Stock of the Company (whether in
person, by proxy or by written consent) and take all other necessary
or desirable actions in order to elect a Board of Directors of the
Company in accordance with the provisions of this Section 2(b).
c. Board of Directors of Subsidiaries. The Board of
Directors of each of Sweetheart Cup Company, Inc., Lily-
Canada Holdings, Inc. and Lily Cups, Inc. shall consist of a
total of five (5) directors, each of whom shall also be a
director of the Company.
d. Vacancies. A director nominated by the Original
Stockholders may not be removed without cause except by the
Stockholders at the written request of the Original Stockholders. A
director nominated by SF Holdings may not be removed without cause
except by the Stockholders at the written request of SF Holdings. No
director may be removed for cause except by the vote of the holders of
at least 80% of the shares of Class A Common Stock outstanding. In the
event that a director nominated by the Original Stockholders ceases to
serve or is unable to continue in that capacity for any reason, the
Original Stockholders shall nominate a replacement and the
Stockholders shall vote their shares and take all other necessary or
desirable actions to elect the person so nominated to fill such
vacancy. In the event that a director nominated by SF Holdings ceases
to serve or is unable to continue in that capacity for any reason, SF
Holdings shall nominate a replacement and the Stockholders shall vote
their shares and take all other necessary or
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desirable actions to elect the person so nominated to fill
such vacancy.
3. Restrictions on Transfer of Shares.
a. Transfer of Shares. No Stockholder may Transfer any Shares
except for Transfers in accordance with the provisions of this Section
3. Any Transfer or attempted Transfer of any Shares in violation of
any provision of this Agreement shall be void, and the Company shall
not record such transfer on its books or treat any purported
transferee of such Shares as the owner of such shares for any purpose.
b. Permitted Transfers. Subject to the provisions of
Section 3(c), SF Holdings may Transfer any or all of its Shares at
any time to any person or entity.
c. Tag-Along Rights.
(i) If SF Holdings proposes a transaction or series of
related transactions in which it will Sell Shares (the "Initial
Shares") in an amount in excess of 30% of the then aggregate number of
outstanding Shares to a third party or parties, then, subject to the
provisions hereof, the Original Stockholders shall have the right to
participate in such Sale and sell all or a portion of the Shares owned
by them (determined as provided below) to such third party or parties.
SF Holdings shall deliver to AIP written notice (the "Notice of Sale")
of such proposed Sale, which shall specify the terms and conditions of
such proposed Sale, including the number of Shares to be Sold, the
price at which such Shares will be Sold and the anticipated date of
consummation of such Sale. On or before the date (the "Tag- Along
Date") which is 30 days after the date of the Notice of Sale, by
written notice (the "Tag-Along Notice") AIP may, on behalf of all of
the Original Stockholders, irrevocably elect to Sell an aggregate
number of Shares equal to all or a portion of each Original
Stockholder's Tag-Along Portion (as defined below) as specified in the
Tag-Along Notice on the same terms and conditions in respect of such
Shares as are specified in the Notice of Sale. If AIP does not timely
make such election, AIP may, on behalf of all of the Original
Stockholders, irrevocably elect, subject to concurrent consummation of
the Sale of the Initial Shares, to cause the Exchange (as defined
herein) pursuant to Section 4 hereof.
(ii) For purposes hereof, an Original Stockholder's
"Tag-Along Portion" shall mean a number of Shares equal to the total
number of Initial Shares multiplied by a fraction, the numerator of
which is the number of Shares then held by such Original Stockholder
and the denominator of which is the total number of Shares then
outstanding. If AIP timely makes the election to Sell Shares with SF
Holdings, the
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number of Shares to be Sold by SF Holdings pursuant to this Section
3(c) in respect of such Notice of Sale shall be reduced by the
Tag-Along Portions specified in the Tag-Along Notice unless the
purchaser or purchasers agree to acquire additional Shares pro rata
from SF Holdings and the Original Stockholders participating in such
Sale on the same terms and conditions as are specified in the Notice
of Sale; provided, however, that the Original Stockholders shall not
be required to make any representations or warranties (other than with
respect to their ownership of their Shares) to the purchaser or
purchasers or to agree to indemnify the purchaser or purchasers in
connection with such sale (other than with respect to their ownership
of their Shares).
(iii) Each Original Stockholder agrees to take all steps
necessary to enable it to comply with the provisions of this Section
3(c), including, without limitation, the execution of all documents in
connection with such Sale, the delivery, against payment therefor, of
certificates for all such Shares duly endorsed or accompanied by
appropriate instruments of transfer and free and clear of any liens or
other encumbrances, and, if requested by SF Holdings, the voting of
all Shares owned by such Original Stockholder in the manner requested
by SF Holdings in order to effect such Sale.
(iv) SF Holdings may abandon any such Sale at any time for
any reason or without reason, in which case none of the Original
Stockholders shall have the right to Sell any Shares or to effect the
Exchange with respect to such Sale (unless otherwise able to do so
pursuant to clause (i) of Section 4(a)). If SF Holdings does not
complete the Sale within 90 days after the anticipated date of
consummation set forth in the Notice of Sale (unless such failure to
complete is due to actions, or the failure to act when required to
act, of the Original Stockholders) or proposes to effect the Sale on
terms materially different from those specified in the Notice of Sale,
then the Sale shall remain subject to the provisions of this Section 3
and SF Holdings shall be required to comply with the provisions of
this Section 3(c) with respect to any future Sale.
(v) Upon consummation of a Sale pursuant to this Section
3(c), any rights or obligations pursuant to this Section 3(c) will
terminate with respect to the Shares so Sold and the purchaser of such
Shares.
d. Drag-Along Right. If SF Holdings proposes a transaction or
series of related transactions in which it will Sell Shares for cash
in an amount in excess of 30% of the aggregate number of outstanding
Shares to an unaffiliated third party or parties, then SF Holdings
shall have the right (the "Drag-Along Right") to require each of the
Original Stockholders to Sell all, but not less than
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all, of the Shares owned by such Original Stockholders for the same
per share consideration and otherwise on the same terms and conditions
as SF Holdings. Each Original Stockholder agrees to take all steps
necessary to enable it to comply with the provisions of this Section
3(d), including, without limitation, the execution of all documents in
connection with such Sale, the delivery, against payment therefor, of
certificates for all such Shares duly endorsed or accompanied by
appropriate instruments of transfer and free and clear of any liens or
other encumbrances, and, if requested by SF Holdings, the voting of
all Shares owned by such Original Stockholder in the manner requested
by SF Holdings in order to effect such Sale; provided, however, that
the Original Stockholders shall not be required to make any
representations or warranties (other than with respect to their
ownership of their Shares) to the purchaser or purchasers or to agree
to indemnify the purchaser or purchasers in connection with such sale
(other than with respect to their ownership of their Shares). To
exercise a Drag-Along Right, SF Holdings shall give AIP, on behalf of
all of the Original Stockholders, a written notice (the "Drag-Along
Notice") containing (i) the name and address of the third party or
parties to whom Shares will be Sold and (ii) the proposed purchase
price thereof, terms of payment and other material terms and
conditions of the Sale. Each Original Stockholder shall thereafter be
obligated to Sell its Shares subject to such Drag-Along Notice,
provided that the Sale is consummated within 90 days after the
anticipated date of consummation set forth in the Drag Along Notice.
If the Sale is not consummated, for any reason (including abandonment
of such Sale by SF Holdings), on or before the expiration of such
90-day period, then each Original Stockholder shall no longer be
obligated to Sell such Shares pursuant to that specific Drag-Along
Notice, but each Original Stockholder's Shares shall remain subject to
the provisions of this Section 3. In lieu of selling any Shares
pursuant to the terms specified in the Drag-Along Notice, AIP may, on
behalf of all of the Original Stockholders, within five (5) days after
the date of the Drag-Along Notice, irrevocably elect, subject to the
concurrent consummation of the Sale by SF Holdings, to cause the
Exchange pursuant to Section 4 hereof.
4. The Exchange.
a. Exchange Upon Election of AIP. Following the fifth
anniversary of the Closing Date or an election by AIP pursuant to
Sections 3(c) or 3(d) hereof and the concurrent consummation of the
Sale contemplated thereby, whichever shall first occur, AIP, on behalf
of all of the Original Stockholders, shall have the right to exchange
(the "Exchange") the Shares held by the Original Stockholders for
Warrants (the "Warrants") in the form annexed hereto as
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Annex A to purchase an aggregate of 960,000 shares of Class C Common
Stock, par value $.001 per share, of SF Holdings, subject to
adjustment pursuant to the anti-dilution provisions thereof from and
after the Closing Date and subject to proportionate reduction to the
extent a portion of the Shares held by the Original Stockholders have
been Sold pursuant to Section 3. In connection with the Exchange, each
Original Stockholder shall be entitled to receive Warrants to purchase
a pro rata number of shares of Class C Common Stock based upon the
number of Shares held at such time by such Original Stockholder
relative to the total number of Shares held at such time by all of the
Original Stockholders. In order to cause the Exchange, AIP shall
surrender the certificates representing the Shares of the Original
Stockholders at the principal office of SF Holdings and shall deliver
to SF Holdings at such office written notice of its election to cause
the Exchange; provided, however, that SF Holding shall not be
obligated to issue the Warrants unless either the certificates
representing the Shares are delivered as provided above or AIP
notifies SF Holdings that any of such certificates have been lost,
stolen or destroyed and promptly executes an agreement reasonably
satisfactory to SF Holdings to indemnify SF Holdings from any loss
incurred by it in connection with such Shares. SF Holdings shall issue
and deliver the Warrants to AIP within three (3) Business Days after
delivery to SF Holdings of such election notice and such Shares, or
after receipt of such agreement and indemnification.
b. Exchange Upon Election of SF Holdings. SF Holdings shall
have the right, at any time during the Warrant Purchase Period, to
cause the Exchange, subject to the provisions of this Section 4(b).
Notice of SF Holdings's election to require the Exchange shall be
delivered to AIP not less than ten (10) Business Days prior to the
Exchange Date, which shall be specified in such notice. On the
Exchange Date, SF Holdings shall deliver the Warrants, or cause the
Warrants to be delivered, to AIP, against presentation and surrender
to SF Holdings by AIP on behalf of all of the Original Stockholders of
the certificates representing the Shares of the Original Stockholders,
or after receipt of the agreement and indemnification described in
Section 4(a) above, at the principal office of SF Holdings. From and
after the Exchange Date, the Shares of the Original Stockholders shall
be canceled and all rights of the Original Stockholders as
stockholders of the Company and pursuant to this Agreement shall
cease.
c. Mandatory Exchange. In the event of a merger of the
Company with and into SF Holdings or with and into The Fonda Group,
Inc., SF Holdings shall be required to effect
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the Exchange, concurrently with such merger, in accordance with the
provisions of Section 4(b) hereof.
5. Term. This Agreement shall continue in full force and effect until
the earliest of: (a) the date on which no Shares are held by any of the
Original Stockholders; (b) the date this Agreement is terminated by the
unanimous written consent of the Stockholders; or (c) the tenth anniversary of
the date of this Agreement.
6. Representations and Warranties of the Stockholders. Each
Stockholder (as to itself or himself only) represents and warrants to the other
Stockholders and the Company that:
a. this Agreement has been duly and validly authorized,
executed and delivered by such Stockholder and constitutes a legal and
binding obligation of such Stockholder, enforceable against such
Stockholder in accordance with its terms; and
b. the execution, delivery and performance by such
Stockholder of this Agreement and the consummation by such Stockholder
of the transactions contemplated hereunder will not, with or without
the giving of notice or lapse of time, (i) violate any provision of
law, statute, rule or regulation to which the Stockholder is subject,
(ii) violate any order, judgment or decree applicable to such
Stockholder or (iii) conflict with, or result in a breach or default
under, any term or condition of any agreement or other instrument to
which such Stockholder is a party or by which such Stockholder is
bound, except for such violations, conflicts, breaches or defaults
that would not materially affect the Stockholder's ability to perform
its obligations hereunder.
7. Stock Certificates. A copy of this Agreement shall be filed with
the Secretary of the Company and kept with the records of the Company. The
Stockholders agree to cause each certificate representing Shares to bear the
following legend on the face or reverse side thereof:
"The shares represented by this certificate are subject to
certain transfer and voting restrictions pursuant to a
certain Stockholders' Agreement dated as of March 12, 1998
among the Company and its stockholders. Notice of such
agreement is hereby given and a copy of it is on file at the
principal office of the Company.
8. Notice. All communications under this Agreement shall be in
writing and shall be delivered by hand or by telecopier or mailed by overnight
courier or by registered or certified mail, postage prepaid:
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a. if to SF Holdings, at 115 Stevens Avenue, Valhalla, New York,
10595, Attention: Harvey L. Friedman;
b. if to any of the Original Stockholders, to American Industrial
Partners Capital Fund L.P., One Maritime Plaza, Suite 2525, San
Francisco, California, 94111, Attention: Kim Marvin.
Any notice so addressed shall be deemed to be given: if delivered by hand, on
the date of such delivery; if delivered by telecopier, when receipt is
mechanically acknowledged; if mailed by courier, on the first Business Day
following the date of such mailing; and if mailed by registered or certified
mail, on the third Business Day after the date of such mailing.
9. Entire Agreement. This Agreement is intended by the parties as a
final expression of their agreement and intended to be a complete and exclusive
statement of the agreement and understanding of the parties hereto in respect
of the subject matter contained herein. There are no restrictions, promises,
warranties or undertakings, other than those set forth or referred to herein or
in the Stockholders Agreement (the "Original Stockholders Agreement") dated as
of August 30, 1993 by and among AIP, First Plaza Group Trust, Leeway & Co., and
the parties scheduled thereto. In the event of a conflict or inconsistency
between the provisions hereof and of the Original Stockholders Agreement, the
provisions of this Agreement shall govern.
10. Designation. AIP is hereby irrevocably designated as the
representative of the Original Stockholders for the purposes set forth in this
Agreement. By execution of this Agreement, each of the other Original
Stockholders has duly empowered AIP to act as such representative.
11. Amendment. This Agreement may only be amended or altered in any of
its provisions with the written consent of the Company and the holders of 80%
of the Class A Common Stock of the Company; provided, however, that no such
amendment shall adversely affect any Stockholder in a discriminatory fashion
without the consent of such Stockholder.
12. Specific Performance. Each of the Stockholders acknowledges and
agrees that in the event of any breach of this Agreement, the non-breaching
party or parties would be irreparably harmed and could not be made whole by
monetary damages. The Stockholders hereby agree that, in addition to any other
remedy to which they may be entitled at law or in equity, they shall be
entitled to compel specific performance of this Agreement.
13. Assignment. This Agreement is not assignable except in
connection with a Sale of Shares in accordance with Section 3(c) or 3(d) of
this Agreement. This Agreement shall be binding upon
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and inure to the benefit of the parties and their respective successors, heirs,
and legal representatives. Notwithstanding the foregoing, First Plaza Group
Trust and Leeway & Co. shall have the right to assign this Agreement or
transfer i whole or in part its obligations under this Agreement to one or more
successor trustees, plans or nominees for, or successor(s) by reorganization
of, a qualified pension plan trust.
14. Governing Law. This Agreement shall be governed and construed in
accordance with the laws of the State of New York, without giving effect to
conflicts of laws principles thereof.
15. Headings. The headings in this Agreement are for convenience of
reference only and shall not limit or otherwise affect the meaning hereof.
16. Severability. If any provision of this Agreement shall be
invalid, illegal or unenforceable in any jurisdiction, the validity, legality
and enforceability of the remaining provisions, or of such provision in any
other jurisdiction, shall not in any way be affected or impaired thereby.
17. Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which taken
together shall constitute one and the same instrument.
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IN WITNESS WHEREOF, the undersigned have executed, or have
caused to be executed, this Agreement on the date first written above.
SWEETHEART HOLDINGS INC.
By: /s/ Dan Carson
-------------------------------
Name: Dan Carson
Title: Vice President
SF HOLDINGS GROUP, INC.
By: /s/ Hans Heinsen
-------------------------------
Name: Hans Heinsen
Title: Chief Financial Officer
AMERICAN INDUSTRIAL PARTNERS
CAPITAL FUND L.P.
By: American Industrial Partners
L.P., its general partner
By: American Industrial Partners
Management Company, Inc.
By: /s/ Kenneth Pereira
-------------------------------
Name: Kenneth Pereira
Title: Principal
LEEWAY & CO.
By: State Street Bank and Trust
Company
By: /s/ Kimberly Moynihan
-------------------------------
Name: Kimberly Moynihan
Title: Assistant Secretary
MELLON BANK, N.A., as
Trustee for FIRST PLAZA
GROUP TRUST (as directed
by General Motors
Investment Management
Corporation)
By: Bernadette Rist
-------------------------------
Name: Bernadette Rist
Title: Authorized Signatory
/s/ Donald W. Davis
---------------------------------
Donald W. Davis
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/s/ Robert J. Klein
-------------------------
Robert J. Klein
/s/ Thomas H. Barrett
-------------------------
Thomas H. Barrett
/s/ Kenneth A. Pereira
-------------------------
Kenneth A. Pereira
/s/ Lawrence W. Ward, Jr.
-------------------------
Lawrence W. Ward, Jr.
/s/ William F. McLaughlin
-------------------------
William F. McLaughlin
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