-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Ci8E2FY/d6mB36XJKzJPnmVlq8N0w1ksy5VbOgwvzgona7CC/Y56JmSBjhEJrOcN LzyEvUeG2wxs+MLKxznd9w== 0000919463-03-000022.txt : 20031205 0000919463-03-000022.hdr.sgml : 20031205 20031205152256 ACCESSION NUMBER: 0000919463-03-000022 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20031205 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20031205 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BPC HOLDING CORP CENTRAL INDEX KEY: 0000919465 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351814673 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-75706-01 FILM NUMBER: 031040261 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 FILER: COMPANY DATA: COMPANY CONFORMED NAME: BERRY PLASTICS CORP CENTRAL INDEX KEY: 0000919463 STANDARD INDUSTRIAL CLASSIFICATION: PLASTICS PRODUCTS, NEC [3089] IRS NUMBER: 351813706 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 033-75706 FILM NUMBER: 031040260 BUSINESS ADDRESS: STREET 1: 101 OAKLEY ST STREET 2: P O BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47710 BUSINESS PHONE: 8124242904 MAIL ADDRESS: STREET 1: PO BOX 959 CITY: EVANSVILLE STATE: IN ZIP: 47706-0959 8-K 1 sg8k.txt 8-K SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------------------------------------------- FORM 8-K CURRENT REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 --------------------------------------------------------------- DATE OF REPORT: DECEMBER 5, 2003 DATE OF EARLIEST EVENT REPORTED: NOVEMBER 20, 2003 BERRY PLASTICS COPRORATION (Exact name of registrant as specified in charter) Delaware 33-75706 35-1813706 (State or other (Commission File Number) (I.R.S. Employer jurisdiction of Identification Number) incorporation) 101 Oakley Street, Evansville, Indiana 47710 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code: (812) 424-2904 None (Former name or former address, if changed since last report) Item 2. Acquisition or Disposition of Assets. On November 20, 2003, Berry Plastics Corporation ("the Company") completed its previously announced acquisition (the "Landis Acquisition") of Landis Plastics, Inc. ("Landis"), pursuant to the Agreement and Plan of Merger, dated as of October 15, 2003, pursuant to which Berry Plastics Acquisition Corporation IV, a wholly-owned subsidiary of the Company, merged with and into Landis. The Company acquired Landis for $228 million, which amount is subject to post-closing adjustments related to capital expenditures at the time of closing. In connection with the Landis Acquisition, the Company amended and restated its senior secured credit facility. The amended and restated senior secured credit facility consists of the Company's previous $100 million revolving credit facility, a new $330 million term loan and a new $50 million term loan. On November 10, 2003, the Company used $325.9 million of the new $330 million term loan to refinance in full the balance outstanding under its prior term loan. The remaining $4.1 million was used to fund a portion of the purchase price for the Landis Acquisition. The new $50 million term loan was also used to pay a portion of the purchase price for the Landis Acquisition and was funded concurrently with the closing of the Landis Acquisition. As used in this report, "Transactions" refers to the acquisition of Landis, the amendment and restatement of the Company's senior secured credit facility, the borrowings under the Company's revolving credit facility and the Company's new term loan facility and certain common equity contributions. The Transactions were funded through: (1) the issuance by the Company of $85,000,000 aggregate principal amount of its 10 3/4 % Senior Subordinated Notes due 2012 under an indenture dated as of July 22, 2002, which resulted in gross proceeds of $95.2 million, (2) $25 million of cash on hand, (3) $3.7 million of borrowings under the Company's revolving credit facility and $380 million of borrowings under the Company's new term loan, and (4) an aggregate common equity contribution of $62 million, consisting of contributions of $35.4 million by GS Capital Partners 2000, L.P. and its affiliates, $16.1 million by J.P. Morgan Partners Global Investors, L.P. and its affiliates, and an aggregate of $10.5 million from Landis shareholders. These funds were used for (1) the Landis Acquisition consideration of $228 million, (2) refinancing of the Company's prior term loan of $325.9 million, and (3) transaction fees and expenses of $12 million. In connection with the offering of the notes, the Company and the guarantors of the notes also entered into a registration rights agreement dated as of November 20, 2003, pursuant to which they are obligated to file with the Securities and Exchange Commission a registration statement with respect to an offer to exchange the notes for substantially similar notes that are registered under the Securities Act of 1933. Alternatively, if the exchange offer is not available or cannot be completed or some holders are not able to participate in the exchange offer, they are required to file a shelf registration statement to cover resales of the notes under the Securities Act of 1933. If they do not comply with these obligations, they will be required to pay additional interest on the notes under specified circumstances. The property, plant and equipment acquired has been and will continue to be used primarily for the manufacture of plastic products. At the time of the Landis Acquisition, there were no material relationships between the Company, or any of its affiliates, any directors or officers, or any associate of such director or officer, on the one hand, and Landis, on the other hand. Item 7. Financial Statements and Exhibits (a) Financial statements of business acquired INDEPENDENT AUDITOR'S REPORT Board of Directors Landis Plastics, Inc. Gentlemen: We have audited the accompanying balance sheets of Landis Plastics, Inc. (an Illinois Corporation), as of December 31, 2002 and 2001, and the related statements of income and retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Landis Plastics, Inc., as of December 31, 2002 and 2001, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. /s/ Roche, Scholz, Roche & Walsh, Ltd. February 14, 2003 LANDIS PLASTICS, INC. BALANCE SHEETS
DECEMBER 31, 2002 AND 2001 2002 2001 -------------------------------------------------------- ----------------- ---------------- ASSETS Current assets: Cash and cash equivalents-unrestricted................ $ 10,028,817 $ 7,613,855 Restricted cash for accrued EEOC settlements.......... - 707,493 ---------------- ---------------- Total cash and cash equivalents.................... 10,028,817 8,321,348 Receivables: Trade accounts..................................... 17,605,401 14,255,703 Short-term notes................................... 133,698 105,924 Current portion of long-term notes................. 631,935 348,752 Inventory............................................. 19,990,143 18,233,350 Other current assets.................................. 2,401,038 1,873,065 ---------------- ---------------- Total current assets............................... 50,791,032 43,138,142 ---------------- ---------------- Property, plant and equipment: Land and improvements................................. 848,776 848,776 Buildings and improvements............................ 13,219,540 12,959,854 Machinery and equipment............................... 156,996,769 150,903,651 Less: accumulated depreciation........................ (99,539,537) (87,129,592) ---------------- ---------------- Total property, plant and equipment, net........... 71,525,548 77,582,689 ---------------- ---------------- Other assets: Long-term notes receivable, net of current portion.... 2,690,062 3,250,096 Other receivables..................................... 684,521 489,864 Deposits.............................................. 1,259,788 1,046,922 Other assets.......................................... 360,392 506,403 ---------------- ---------------- Total other assets................................. 4,994,763 5,293,285 ---------------- ---------------- Total assets............................................. $ 127,311,343 $ 126,014,116 ---------------- ---------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable...................................... $ 6,169,359 $ 6,623,046 Short-term borrowings................................. 746,762 1,546,586 Current portion of long-term debt..................... 2,200,000 2,200,000 Customer deposits..................................... 108,999 484,334 Accrued payroll and vacation.......................... 4,000,774 3,801,105 Accrued property taxes................................ 1,241,500 1,196,500 Other current liabilities............................. 4,098,844 4,804,296 ---------------- ---------------- Total current liabilities.......................... 18,566,238 20,655,867 ---------------- ---------------- Long-term liabilities: Long-term debt, net of current portion................ 32,036,504 35,636,504 Other long-term liabilities........................... 83,195 - ---------------- ---------------- Total long-term liabilities............................ 32,119,699 35,636,504 ---------------- ---------------- Stockholders' equity: Common stock.......................................... 53,600 53,600 Additional paid-in capital............................ 253,976 98,540 Retained earnings..................................... 76,317,830 69,569,605 ---------------- ---------------- Total stockholders' equity......................... 76,625,406 69,721,745 ---------------- ---------------- Total liabilities and stockholders' equity............... $ 127,311,343 $ 126,014,116 ---------------- ---------------- See accompanying notes to financial statements
LANDIS PLASTICS, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 2002 2001 ----------------------------------------------- ---------------- ---------------- Revenue Product sales............................... $ 207,824,698 $ 199,575,739 Other sales................................. 3,787,896 1,602,902 ---------------- ---------------- Total revenue............................ 211,612,594 201,178,641 ---------------- ---------------- Cost of goods sold Materials................................... 74,392,010 70,899,138 Direct labor................................ 20,771,431 20,226,641 Manufacturing overhead...................... 71,813,423 66,463,619 ---------------- ---------------- Total cost of goods sold................. 166,976,864 157,589,398 ---------------- ---------------- Gross profit................................... 44,635,730 43,589,243 ---------------- ---------------- General expenses Selling and marketing....................... 5,015,742 4,629,641 Administrative.............................. 12,554,492 12,712,399 Transportation.............................. 3,094,584 3,149,317 Warehousing................................. 10,382,683 10,486,478 Asset impairment loss....................... - 531,557 ---------------- ---------------- Total general expenses................... 31,047,501 31,509,392 ---------------- ---------------- Operating income............................... 13,588,229 12,079,851 Other income (expense) Interest income............................. 417,965 598,968 Interest expense............................ (3,111,649) (3,688,284) Loss on derivative valuation................ (128,517) - Miscellaneous income (expense).............. 47,296 (65,393) ---------------- ---------------- Net income before income taxes................. 10,813,324 8,925,142 Provision for state income taxes............... 22,887 6,980 ---------------- ---------------- Net income..................................... 10,790,437 8,918,162 Retained earnings--beginning of year............ 69,569,605 65,926,224 Stockholder distributions...................... (4,042,212) (5,274,781) ---------------- ---------------- Retained earnings--end of year.................. $ 76,317,830 $ 69,569,605 ---------------- ---------------- See accompanying notes to financial statements.
LANDIS PLASTICS, INC. STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2001 2002 2001 ---------------------------------------------------------------- --------------- --------------- Cash flows from operating activities: Net income................................................... $ 10,790,437 $ 8,918,162 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.............................................. 12,561,305 12,303,665 Amortization.............................................. - 142,871 Non-cash interest on related party loans.................. 34,630 - Employee stock-based compensation......................... 155,436 - Asset impairment loss..................................... - 531,557 (Gain) loss on sale of equipment.......................... (18,755) 19,922 Loss on derivative valuation.............................. 128,517 - Change in provision for losses on accounts receivable............................................. 73,003 4,491 (Increase) decrease in: Accounts receivable.................................... (3,422,701) 3,175,379 Inventory.............................................. (1,756,793) (1,496,619) Other assets........................................... (381,962) 583,469 Increase (decrease) in: Accounts payable....................................... (453,684) 277,146 Customer deposits...................................... (375,335) 74,267 Other current liabilities.............................. (676,701) 145,516 -------------- --------------- Net cash provided by operating activities........... 16,657,397 24,679,826 -------------- --------------- Cash flows from investing activities: Capital acquisitions and equipment deposits.................. (6,579,245) (9,805,814) Proceeds from sale of equipment.............................. 51,563 11,450 Net short-term loans to related parties...................... (22,929) 12,421 Long-term loan to related parties............................ (71,901) (171,820) Principal payments from related parties on long-term loans...................................................... 348,752 353,712 Increase in other receivables................................ (194,657) (195,463) -------------- --------------- Net cash used in investing activities............... (6,468,417) (9,795,514) -------------- --------------- Cash flows from financing activities: Net short-term borrowings from related parties............... (839,299) (528,240) Principal payments on long-term debt......................... (3,600,000) (8,114,059) Stockholder distributions.................................... (4,042,212) (5,274,781) -------------- --------------- Net cash used in financing activities............... (8,481,511) (13,917,080) -------------- --------------- Net increase in cash............................................ 1,707,469 967,232 Cash and cash equivalents at beginning of year.................. 8,321,348 7,354,116 -------------- --------------- Cash and cash equivalents at end of year........................ $ 10,028,817 $ 8,321,348 -------------- --------------- See accompanying notes to financial statements.
LANDIS PLASTICS, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2002 AND 2001 NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Landis Plastics, Inc. is a closely held corporation that manufactures plastic products. Offices and plants are located in Chicago Ridge and Alsip, Illinois; Monticello and Richmond, Indiana; Solvay, New York; and Tolleson, Arizona. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ACCOUNTS RECEIVABLE Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a charge to earnings and a credit to a valuation allowance based on its assessments of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to trade accounts receivable. Accounts receivable are reduced by an allowance for doubtful accounts of $114,400 at December 31, 2002, and $41,397 at December 31, 2001. INVENTORIES The Company values substantially all of its inventories at cost determined on a last-in, first-out (LIFO) basis. The LIFO method resulted in a valuation below cost of $1,759,388 at December 31, 2002, and $144,201 at December 31, 2001. PROPERTY, PLANT AND EQUIPMENT Land, buildings and equipment are stated at cost. Depreciation is computed on the straight-line basis for financial statement purposes over the estimated useful lives of the assets as follows: Machinery....................... 10 Years Transportation equipment........ 5-10 Years Other equipment and fixtures.... 5-10 Years Land improvements............... 20 Years Leasehold improvements.......... 10-40 Years Buildings....................... 40 Years ASSET IMPAIRMENT LOSS As required by Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the impairment of long-lived assets and for long-lived assets to be disposed of," the Company recorded losses on long-lived assets. The total impairment of long-lived assets in 2001 was $531,557 related to a robotic parts handling system that did not meet performance criteria. The impairment charge was the difference between the carrying value and the estimated fair value of the assets. The Company estimated fair values based on discounted future cash flows. AMORTIZATION The discounts relating to the non-interest bearing notes will be amortized over the two year terms of the notes using the interest expense method. CASH AND CASH EQUIVALENT For financial statement presentation purposes, the Company considers all highly liquid investments purchased with an original maturity of three months or less to be cash equivalents. The carrying value of cash equivalents approximates fair value due to the short term, highly liquid nature of cash equivalents. CASH FLOW STATEMENT Cash used by operating activities included payments for interest and income taxes as follows: 2002 2001 ------------- ------------- Interest paid........ $ 3,130,273 $ 3,554,208 Income taxes paid.... 16,271 35,539 Supplemental disclosures of noncash investing and financing activities: Noncash investing and financing transactions consisting of the cost of acquiring machinery and equipment and the related obligations have been included in fixed assets and notes payable, respectively, in the accompanying financial statements at a discounted value. Amortization of the loan discount increased the note payable by $142,871 during 2001. Additional noncash investing and financing activities consist of the following:
2002 2001 ----------- ----------- Capital expenditures included in other accrued liabilities............................... $ 170,596 $ 552,698 Stock-based compensation and related credit to additional paid-in capital..................... 155,436 --
DERIVATIVE FINANCIAL INSTRUMENTS In accordance with SFAS No. 133, derivative financial instruments are reported on the balance sheet at fair value, and changes in the derivative's fair value are recognized currently in earnings. The derivative financial instruments are not designated as hedging instruments. Derivatives are utilized by the Company in the management of its interest rate exposures. The Company does not use derivative financial instruments for trading or speculative purposes. The Company enters into interest rate swap agreements, which effectively exchange variable interest rate debt for fixed interest rate debt. The agreements are used to reduce the exposure to possible increases in interest rates. The Company enters into these swap agreements with a major financial institution on a portion of its long-term borrowings. The interest rate swap agreements involve the periodic exchange of payments without the exchange of the notional amount upon which the payments are based. The differential to be received or paid is accrued, as interest rates change, and recognized currently in the statement of income and retained earnings. INCOME TAXES Landis Plastics, Inc. has elected by unanimous consent of its stockholders to be taxed as an "S" corporation under Section 1362 of the Internal Revenue Code. Accordingly, no provision or liability for federal income taxes is reflected in the accompanying statements. Instead, the stockholders are liable for individual federal income taxes on their respective share of the Company's taxable income. However, the Company is liable for certain state income taxes. General investment and employment tax credit carryforwards are available in various states of approximately $900,000. These credits expire between 2004 and 2017. NOTE 2. RETIREMENT PLAN The Company provides a qualified 401(k) savings plan. Eligible employees may defer between 2% and 10% of compensation each year, not to exceed the maximum allowed by law. The. Company will match the employee contribution on a 50% basis up to 6% contributed. In addition, for non-highly compensated employees, the Company will match the employee contribution 100% for compensation deferrals between 6% and 8%. No matching contributions will be made for compensation deferrals in excess of 8%. Company contributions to the plan were $884,763 for 2002, and $854,530 for 2001. NOTE 3. NOTES RECEIVABLE Short-Term notes receivable are as follows at December 31:
2002 2001 Due from officers of the Company and beneficiaries of qualified stockholders' trusts, interest at 4.0% in 2002 and 4.0% in 2001, due on demand, unsecured............... $ 133,698 $ 105,924 ----------- ----------- Total short-term notes receivable........................... $ 133,698 $ 105,924 ----------- -----------
Long-Term notes receivable from related parties are as follows at December 31:
2002 2001 -------------- -------------- Duefrom beneficiaries of qualified stockholders' trusts; interest at 6.5%; annual principal payments of $176,792 plus interest until maturity in December, 2006; secured by stock certificates of Landis Plastics, Inc.................. $ 707,167 $ 883,958 Due from various trusts with common beneficiaries as the qualified stockholders' trusts; interest at 9.0%; payments including principal and interest of $143,809 in 2003 and $143,809 annually thereafter until maturity in January, 2006; unsecured, security in real estate is optional to the company........................................ 465,901 559,367 Due from a trust whose trustee is an officer of the company; interest at 9.0%; principal payments of $90,543 in arrears at December 31, 2002; entire balance classified as short-term as of December 31, 2002; unsecured, security in real estate is optional to the company............. 218,353 218,353 Due from a trust whose trustee is an officer of the Company; interest at 6.0%; principal payments of $40,260 in arrears at December 31, 2002; entire balance classified as short-term as of December 31, 2002; unsecured, security in real estate is optional to the Company............. 50,325 50,325 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.5%; payments including principal and interest of 18,112 monthly until maturity in 2016, unsecured...................................................... 1,808,350 1,886,845 Due from beneficiaries of qualified stockholders' trusts; interest at 4.0%; principal due on demand; unsecured........... 71,901 - ------------- ------------- Total notes receivable............................................ 3,321,997 3,598,848 Less: current portion............................................. (631,935) (348,752) ------------- ------------- Notes Receivable, Long-Term....................................... $ 2,690,062 $ 3,250,096 ------------- -------------
NOTE 4. OTHER RECEIVABLES On November 30, 1999, the Company entered into a certain Split Dollar Life Insurance Agreement to fund an irrevocable insurance trust of an officer of the Company. In addition, a Collateral Assignment Agreement was simultaneously executed, providing the Company a security interest in the cash surrender value of the policy upon its surrender, or, if not surrendered, in the proceeds payable upon the death of the second to die under the terms of the policy. The annual premium due under the terms of the policy currently approximates $202,500. The Company, at the option of the owner of the policy, can be called upon each year to pay all or a portion of this premium. The Company is prohibited from borrowing against the cash surrender value, and cannot assign its security interest in the policy to anyone except the policy owner or the owner's nominee. The owner of the policy is the trustee of the irrevocable trust. The premium balance owed to the Company on December 31, 2002 and 2001, was $684,521 and $489,864, respectively, and is presented as other receivables on the balance sheet. NOTE 5. SHORT-TERM BORROWINGS Short-Term borrowings at December 31, 2002 and 2001, consist of the following:
2002 2001 ----------- ------------- Due to officers of the Company and beneficiaries of qualified stockholders' trusts, interest at 4.0% in 2002 and 4.0% in 2001, due on demand, unsecured............... $ 746,762 $ 1,546,586 ----------- ------------- Total Short-Term Borrowings................................. $ 746,762 $ 1,546,586 ----------- -------------
NOTE 6. LONG-TERM DEBT Notes payable as of December 31, 2002 and 2001, are as follows:
2002 2001 --------------- --------------- Bank One, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $83,333 plus interest, due in 2005, secured by equipment................................... $ 2,836,504 $ 3,836,504 Bank One, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $100,000 plus interest, due March 1, 2004, secured by equipment............................. 1,400,000 2,600,000 Due to officer/stockholder of Landis Plastics, Inc.; interest at 7.0%, semi-annual interest payments of $49,000, due May 1, 2004, retired in 2002 before maturity, unsecured............................................. - 1,400,000 C.M. Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $371,429 beginning in March of 2004 until maturity in March of 2010, unsecured............................ 2,600,000 2,600,000 Massachusetts Mutual Life Insurance Company, semi-annual interest payments at 8.88% on three separate senior notes until maturity, annual principal payments of $2,485,714 beginning in March of 2004 until maturity in March of 2010, unsecured................................................. 17,400,000 17,400,000 Northern Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $571,429 beginning in March of 2004 until maturity in March of 2010, unsecured...................... 4,000,000 4,000,000 Reliastar Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $428,571 beginning in March of 2004 until maturity in March of 2010, unsecured...................... 3,000,000 3,000,000 Sigler and Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $428,571 beginning in March of 2004 until maturity in March 2010, unsecured........................................... 3,000,000 3,000,000 -------------- -------------- Total Notes Payable................................................ 34,236,504 37,836,504 Less: Current Portion.............................................. (2,200,000) (2,200,000) -------------- -------------- Long-Term Debt..................................................... $ 32,036,504 $ 35,636,504 -------------- --------------
Maturities of long-term debt for the next five years are as follows: 2003 2004 2005 2006 2007 - -------------- ------------- ------------- ------------- ------------- $ 2,200,000 $ 5,485,714 $ 5,122,218 $ 4,285,714 $ 4,285,714 - ------------- ------------- ------------- ------------- ------------- The provisions of the Company's loan and credit agreements with Bank One require the maintenance of at least $5,500,000 of working capital, and at each calendar quarter end a ratio of current assets to current liabilities of not less than 1.22 to 1.0, a ratio of indebtedness to tangible net worth of not greater than 1.0 to 1.0, and a debt service ratio equal or greater than 1.2 to 1.0. The Company is also required to maintain minimum tangible net worth of at least $59,000,000 in 2002 and $61,500,000 in 2003. The Company was in compliance with the aforementioned covenants as of December 31, 2002. The provisions of the senior notes under the private placement agreement requires the Company to maintain specified levels of consolidated net worth and certain financial performance ratios. The covenants also stipulate certain limitations on additional indebtedness, mergers or consolidations, asset sales, investments, and transactions with affiliates. At December 31, 2002, the Company was in compliance with all of these provisions. NOTE 7. BANK LINE OF CREDIT Under terms of an unsecured revolving credit agreement with Bank One, the Company may borrow up to $10,000,000. The agreement expires March 27, 2003. All borrowings under this agreement will be evidenced by one or more demand notes of the Company and will bear interest at the lesser of prime or LIBOR +1.5%. Nothing was borrowed against this agreement as of December 31, 2002 and 2001. NOTE 8. COMMON STOCK AND ADDITIONAL PAID-IN CAPITAL The aggregate number of shares which the Company is authorized to issue is 100,000, divided into two classes of no par value shares. The designation of each class and the number of shares of each class are as follows:
SHARES 2001 SHARES 2002 SHARES SHARES OUTSTANDING SHARES OUTSTANDING SHARES OUTSTANDING CLASS SERIES AUTHORIZED 12-31-00 ISSUED 12-31-01 ISSUED 12-31-02 --------- ------- ---------- ----------- -------- ----------- -------- ----------- Common........ A 50,000 536.00 - 536.00 - 536.00 Common........ B 50,000 4,846.43 79.00 4,925.43 66.00 4,991.43 ---------- ----------- -------- ----------- -------- ----------- 100,000 5,382.43 79.00 5,461.43 66.00 5,527.43 ---------- ----------- -------- ----------- -------- -----------
The Common A and Common B stock are collectively referred to as common stock. Except for exclusive voting rights and powers, all shares of Common A and Common B stock are identical in all respects and entitle the holders thereof to the same rights and privileges. The holders of Common A stock issued and outstanding possess the exclusive right to notice of stockholders' meetings and the exclusive voting rights and powers. The holders of Common B stock issued and outstanding are not entitled to any notice of stockholders' meetings or to vote upon any question affecting the affairs of the Company. Changes in additional paid-in capital for the years ended December 31, 2002 and 2001, are as follows: Additional paid-in capital at December 31, 2000 and 2001....................................... $ 98,540 Stock-based compensation award to employees in 2002............................................. 155,436 ----------- Additional paid-in capital at December 31, 2002....... $ 253,976 ----------- NOTE 9. RESTRICTED STOCK PLAN AND STOCK-BASED COMPENSATION In May of 2000 the Company adopted a restricted stock plan under which it may grant shares of non-voting common stock to certain executive employees. The plan is administered by the Compensation Committee of the Board of Directors and covers the period from January 1, 2000, to December 31, 2005. The maximum number of shares of non-voting common stock which may be subject to restricted stock awards under the plan is 5,000. However, no individual recipient is entitled to receive an aggregate total of more than ten percent of the shares available under the plan. The shares awarded pursuant to this plan are subject to certain restrictions on transfer. Such restrictions will lapse with respect to one-fourth of the shares awarded during each of the four consecutive calendar years beginning one year after the date of issuance, but only if on the date the restrictions are to lapse the recipient has been an employee of the Company continuously from the time of the restricted stock award to such date of lapse. For the years ended December 31, 2002 and 2001, the Company awarded shares of non-voting common stock to various executive employees subject to the terms of the restricted stock plan. A total of 66 shares were issued pursuant to the plan in 2002, and 79 shares were issued in 2001. The weighted-average grant-date fair value of the awarded stock amounted to $7,809 and $6,406 per share for 2002 and 2001, respectively. Compensation cost was not recognized for stock-based employer compensation awards in 2001 because of the vesting restrictions. Such compensation cost will be recognized in subsequent years as the restrictions lapse. Compensation cost of $155,436 was recognized in 2002 for stock-based employer compensation awards related to the shares on which restrictions lapsed. NOTE 10. FINANCIAL INSTRUMENTS The Company has a number of financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at December 31, 2002, except as noted in the following paragraph, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. Based on the borrowing rates currently available to the Company for long-term debt with similar terms and average maturities, the fair value of long-term debt is approximately $1.75 million greater than the carrying value as of December 31, 2002. The Company has entered into an interest rate swap contract with the intent of managing its exposure to interest rate risk. The contract fixes the interest rate on approximately $2.84 million and $3.83 million of the Company's floating rate obligations at December 31, 2002 and 2001, respectively, at an average base rate of 4.97% per annum until expiration in 2005. Gains and losses from interest rate swaps are recognized currently in the statement of income and retained earnings. The fair value of the interest rate swap agreement is provided to the Company by a bank known to be a high volume participant in this market. The value represents the estimated amount the Company would receive or pay to terminate the agreement taking into consideration current interest rates. In the unlikely event that the counterparty fails to perform under the contract, the Company bears the credit risk that payments due to the Company may not be collected. NOTE 11. CONCENTRATIONS OF CREDIT RISK The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and trade receivables. The Company maintains cash and cash equivalent balances at several financial institutions located in the Chicago area. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. The Company's uninsured cash and cash equivalent balances total $11,753,654 and $11,739,636 at December 31, 2002 and 2001, respectively. Concentrations of credit risk with respect to trade accounts receivable are limited due to the Company's routine assessments of the financial strength of its customers. The Company maintains a provision for potential credit losses based upon collectibility of all accounts receivable. The Company's historical experience in collection of accounts receivable falls within the recorded allowances. Two major customers in the food industry accounted for approximately 49% of the Company's product sales in 2002, and 44% of the Company's product sales in 2001. Also, two major suppliers accounted for approximately 83% of the Company's raw material purchases in 2002, and 87% of the Company's raw material purchases in 2001. NOTE 12. SELF INSURANCE Landis Plastics, Inc. maintains outside insurance coverage for worker's compensation claims in the states of Indiana and Arizona, but is self insured in the states of Illinois and New York. The Company does, however, maintain outside insurance coverage for Illinois and New York claims that exceed $300,000 per occurrence, and $778,819 in aggregate for all claims in a policy year. In accordance with Illinois state requirements, the Company maintains an irrevocable standby letter of credit in the amount of $250,000 from Bank One for the benefit of the Industrial Commission of Illinois. In accordance with New York state requirements, the Company maintains an irrevocable standby letter of credit in the amount of $1,010,613 from Bank One for the benefit of the state of New York Workmen's Compensation Board. No funds were drawn under either letter of credit in 2002 or 2001. All approved claims of approximately $519,000 and $487,000 were paid by the Company in 2002 and 2001, respectively. The Company has recorded an accrued liability of $719,266 for pending claims as of December 31, 2002. NOTE 13. LEASE COMMITMENTS The plants in Chicago Ridge and Alsip, Illinois, are owned by related parties and leased to the Company under annual agreements expiring December 31, 2003. The annual rental is $289,000 for the Chicago Ridge facility and $2,810,100 for the Alsip facility. The Company is liable for property taxes and insurance. The plants in Indiana are owned by the Company. The facility in Solvay, New York, is owned by related parties and leased to the Company under a ten year lease expiring in June, 2004. The annual rental is $600,000 and the Company is also liable for property taxes and insurance. The lease provides an option to the Company for two renewal terms for successive periods of five years each with annual rentals remaining the same. The facility in Tolleson, Arizona, is owned by related parties and leased to the Company under an annual agreement expiring December 31, 2003. The annual rental is $1,200,000 and the Company is also liable for property taxes and insurance. Minimum future rental payments under noncancelable operating leases having remaining terms in excess of one year as of December 31, 2002, for each of the next five years are as follows: YEAR AMOUNT 2003................. $ 600,000 2004................. 300,000 2005................. - 2006................. - 2007................. - The Company also leases warehouses under several operating leases on a month to month basis. Total rent expense for all operating leases approximated $6 million for 2002, and $6 million for 2001. NOTE 14. STOCKHOLDERS' AGREEMENT The stockholders of the Company have an agreement stipulating, among other things, the terms under which the Company's stock can be sold or transferred. The agreement provides that a stockholder intending to dispose of an interest in the Company must first obtain written consent of the Company and all other stockholders. The Company has the option to redeem shares upon the death, disability, or termination of employment of a stockholder if certain other stockholders do not exercise their options to purchase. The Company is not required to redeem shares under any circumstances. NOTE 15. OTHER COMMITMENTS AND CONTINGENCIES The Company was a party to several related claims involving employment matters. In December of 2000, the Company entered into a Consent Decree with the Equal Employment Opportunity Commission (EEOC) to settle the claims. Under the Consent Decree, the Company established a claims settlement fund at a bank for $782,000 for the benefit of various claimants. The interest bearing bank account had a balance of $0 and $707,493 as of December 31, 2002 and 2001, respectively. The balance in the account is reflected in the financial statements as of December 31, 2002 and 2001, as "restricted cash for accrued EEOC settlements" and the related current liability is included in "other accrued expenses." The Company was also a defendant in a third party action arising out of an injury to an employee. The parties reached a settlement in February of 2002, and liability was apportioned to an equipment manufacturer and the Company. Landis Plastics, Inc. agreed to contribute $140,000 to the total settlement of $425,000. This liability of $140,000 was properly accrued for in the financial statements as of December 31, 2001, and paid in 2002. Other claims, suits, and complaints arising in the ordinary course of operations have been filed or are pending against the Company. In the opinion of management, such matters are without merit or are of such kind, or involve such amounts, as would not have a significant effect on the financial position or results of operations of the Company if disposed of unfavorably. NOTE 16. RECLASSIFICATIONS Certain amounts for 2001 have been reclassified to conform with 2002 classifications. Such reclassifications had no effect on reported net income. INDEPENDENT AUDITOR'S REPORT Board of Directors Landis Plastics, Inc. Gentlemen: We have audited the accompanying balance sheets of Landis Plastics, Inc. (an Illinois Corporation), as of December 31, 2000 and 1999, and the related statements of income and retained earnings, and cash flows for the years then ended. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Landis Plastics, Inc., as of December 31, 2000 and 1999, and the results of its operations and its cash flows for the years then ended in conformity with generally accepted accounting principles. /s/ ROCHE, SCHOLZ, ROCHE & WALSH, LTD. February 21, 2001 LANDIS PLASTICS, INC. BALANCE SHEETS
DECEMBER 31, 2000 AND 1999 2000 1999 --------------------------------------------------------- ---------------- ---------------- ASSETS Current assets: Cash and cash equivalents--unrestricted............... $ 6,672,749 $ 1,877,886 Restricted cash for accrued EEOC Settlements.......... 681,367 - ---------------- ---------------- Total cash and cash equivalents.................... 7,354,116 1,877,886 Receivables: Trade accounts........................................ 17,435,573 12,734,681 Short-term notes...................................... 118,345 321,917 Current portion of long-term notes.................... 365,703 325,035 Inventory............................................. 16,736,731 19,138,563 Other current assets.................................. 2,681,187 1,843,650 ---------------- ---------------- Total current assets............................... 44,691,655 36,241,732 ---------------- ---------------- Property, plant and equipment: Land and improvements................................. 828,926 947,014 Buildings and improvements............................ 12,835,190 11,836,436 Machinery and equipment............................... 140,392,672 122,882,230 Less: accumulated depreciation........................ (75,877,431) (65,192,708) ---------------- ---------------- Total property plant and equipment, net............ 78,179,357 70,472,972 ---------------- ---------------- Other assets: Long-term notes receivable, net of current portion.... 3,415,035 3,569,229 Other receivables..................................... 294,401 101,239 Deposits.............................................. 2,958,338 5,608,594 Other assets.......................................... 281,750 5,902 ---------------- ---------------- Total other assets................................. 6,949,524 9,284,964 ---------------- ---------------- Total assets............................................. $ 129,820,536 $ 115,999,668 ---------------- ---------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable...................................... $ 6,345,900 $ 8,198,108 Short-term borrowings................................. 2,074,826 1,894,073 Current portion of long-term debt..................... 7,371,188 6,036,198 Customer deposits..................................... 410,067 2,783,605 Accrued payroll and vacation.......................... 3,059,246 2,988,201 Accrued property taxes................................ 1,281,500 1,136,770 Other accrued expenses................................ 4,762,941 2,814,957 ---------------- ---------------- Total current liabilities.......................... 25,305,668 25,851,912 ---------------- ---------------- Long-term liabilities: Bank line of credit................................... - 4,000,000 Long-term debt, net of current portion................ 38,436,504 26,416,685 ---------------- ---------------- Total long-term liabilities........................ 38,436,504 30,416,685 ---------------- ---------------- Stockholders' equity: Common stock.......................................... 53,600 53,600 Additional paid-in capital............................ 98,540 3,213 Retained earnings..................................... 65,926,224 59,674,258 ---------------- ---------------- Total stockholders' equity......................... 66,078,364 59,731,071 ---------------- ---------------- Total liabilities and stockholders' equity............... $ 129,820,536 $ 115,999,668 ---------------- ---------------- See accompanying notes to financial statements.
LANDIS PLASTICS, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 2000 1999 ----------------------------------------------- ----------------- ---------------- Revenue Product sales............................... $ 185,967,238 $ 157,412,421 Other sales................................. 8,340,428 10,614,003 ---------------- ---------------- Total revenue............................ 194,307,666 168,026,424 ---------------- ---------------- Cost of goods sold Materials................................... 72,795,045 56,964,595 Direct labor................................ 18,635,870 17,532,696 Manufacturing overhead...................... 63,653,075 59,356,910 ---------------- ---------------- Total cost of goods sold................. 155,083,990 133,854,201 ---------------- ---------------- Gross profit................................... 39,223,676 34,172,223 ---------------- ---------------- General expenses Selling and marketing....................... 4,107,158 3,907,364 Administrative.............................. 11,361,379 10,526,110 Transportation.............................. 2,324,249 2,483,610 Warehousing................................. 8,286,324 7,290,601 Asset impairment loss....................... 425,556 - ---------------- ---------------- Total general expenses................... 26,504,666 24,207,685 ---------------- ---------------- Operating income............................... 12,719,010 9,964,538 Other income (expense) Interest income............................. 847,980 466,981 Interest expense............................ (3,974,909) (2,245,476) Miscellaneous............................... 5,291 - Gain (loss) on sale of equipment............ 936,990 (4,993) ---------------- ---------------- Net income before income taxes................. 10,534,362 8,181,050 Provision for state income taxes............... 12,348 155,400 ---------------- ---------------- Net income..................................... 10,522,014 8,025,650 Retained earnings--beginning of year........... 59,674,258 55,258,608 Stockholder distributions...................... (4,270,048) (3,610,000) ---------------- ---------------- Retained earnings--end of year................. $ 65,926,224 $ 59,674,258 ---------------- ---------------- See accompanying notes to financial statements.
LANDIS PLASTICS, INC. STATEMENTS OF CASH FLOWS
FOR THE YEARS ENDED DECEMBER 31, 2000 AND 1999 2000 1999 ---------------------------------------------------------------- ---------------- --------------- Cash flows from operating activities: Net income................................................... $ 10,522,014 $ 8,025,650 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation.............................................. 11,267,089 9,407,211 Amortization.............................................. 504,594 672,539 Employee stock-based compensation......................... 95,327 - Asset impairment loss..................................... 425,556 - (Gain) loss on sale of equipment.......................... (936,990) 4,993 Loss on disposal of intangible asset...................... 10,942 - Reduction in provision for losses on accounts receivable............................................. (11,714) (5,433) (Increase) decrease in: Accounts receivable....................................... (4,689,178) (1,136,098) Inventory................................................. 2,401,832 (1,970,101) Other assets.............................................. (1,113,385) (1,046,396) Other receivables......................................... (193,162) (101,239) Increase (decrease) in: Accounts payable.......................................... (3,171,873) (904,814) Customer deposits......................................... (2,373,538) 329,445 Other current liabilities................................. 2,163,759 1,100,841 --------------- --------------- Net cash provided by operating activities.............. 14,901,273 14,376,598 --------------- --------------- Cash flows from investing activities: Capital acquisitions and equipment deposits.................. (16,632,800) (15,631,896) Proceeds from sale of equipment.............................. 1,187,770 5,350 Long-term loan to related parties............................ (150,000) (1,632,000) Principal payments from related parties on long-term loans..................................................... 263,526 1,966,187 --------------- --------------- Net cash used in investing activities.................. (15,331,504) (15,292,359) --------------- --------------- Cash flows from financing activities: Net short-term borrowings from related parties............... 384,325 818,755 Proceeds from long-term debt................................. 30,000,000 18,000,000 Net proceeds or repayment on line of credit.................. (4,000,000) 3,000,000 Principal payments on long-term debt......................... (16,207,816) (9,983,953) Principal payments on short-term debt........................ - (413,232) Stockholder distributions.................................... (4,270,048) (3,610,000) Redemption of common stock................................... - (6,604,780) --------------- --------------- Net cash provided by financing activities.............. 5,906,461 1,206,790 --------------- --------------- Net increase in cash............................................ 5,476,230 291,029 Cash and cash equivalents at beginning of year.................. 1,877,886 1,586,857 --------------- --------------- Cash and cash equivalents at end of year........................ $ 7,354,116 $ 1,877,886 --------------- --------------- See accompanying notes to financial statements.
LANDIS PLASTICS, INC. NOTES TO THE FINANCIAL STATEMENTS DECEMBER 31, 2000 AND 1999 NOTE 1. NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES NATURE OF BUSINESS Landis Plastics, Inc. is a closely held corporation that manufactures plastic products. Offices and plants are located in Chicago Ridge and Alsip, Illinois; Monticello and Richmond, Indiana; Solvay, New York; and Tolleson, Arizona. Two major customers in the food industry accounted for approximately 41% of the Company's product sales in 2000 and 37% of the Company's product sales in 1999. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES USE OF ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ACCOUNTS RECEIVABLE Accounts receivable are reduced by an allowance for doubtful accounts of $36,906 at December 31, 2000, and $48,620 at December 31, 1999. INVENTORIES The Company values substantially all of its inventories at cost determined on a last-in, first-out (LIFO) basis. The LIFO method resulted in a valuation below cost of $1,245,042 at December 31, 2000 and $1,907,495 at December 31, 1999. PROPERTY, PLANT AND EQUIPMENT Land, buildings and equipment are stated at cost. Depreciation is computed on the straight-line basis for financial statement purposes over the estimated useful lives of the assets as follows: Machinery....................... 10 Years Transportation equipment........ 5-10 Years Other equipment and fixtures.... 5-10 Years Land improvements............... 20 Years Leasehold improvements.......... 10-40 Years Buildings....................... 40 Years ASSET IMPAIRMENT LOSS In 2000, as required by Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the impairment of long-lived assets and for long-lived assets to be disposed of," the Company recorded losses on long-lived assets. The total impairment of long-lived assets was $425,556 related to stacking and handling equipment that did not meet performance criteria. The impairment charge was the difference between the carrying value and the estimated fair value of the assets. The Company estimated fair values based on discounted future cash flows. AMORTIZATION The discounts relating to the non-interest bearing notes will be amortized over the two year terms of the notes using the interest expense method. CASH AND CASH EQUIVALENTS For financial statement presentation purposes, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. They may include cash, money market funds, and short-term investments in commercial paper. CASH FLOW STATEMENT Cash used by operating activities included payments for interest and income taxes as follows: 2000 1999 ------------- ------------- Interest paid............ $ 2,673,667 $ 1,565,318 Income taxes paid........ 2,348 35,885 Supplemental disclosures of noncash investing and financing activities: Noncash investing and financing transactions consisting of the cost of acquiring machinery and equipment and the related obligations have been included in fixed assets and notes payable, respectively, in the accompanying financial statements at a discounted value of $4,648,032 at December 31, 1999. Amortization of the loan discount increased the note payable by $504,594 during 2000, and $672,539 during 1999. Additional noncash investing and financing activities consist of the following:
2000 1999 ------------- -------------- Capital expenditures included in accounts payable........ $ 1,319,665 $ 2,431,743 Long-term debt retired from sale of assets............... 941,969 - Stock-based compensation costs and related credit to additional paid-in-capital............................ 95,327 -
RETIREMENT PLAN The Company provides a qualified 401(k) savings plan. Eligible employees may defer between 2% and 10% of compensation each year, not to exceed the maximum allowed by law. The Company will match the employee contribution on a 50% basis up to 6% contributed. In addition, for non-highly compensated employees, the Company will match the employee contribution 100% for compensation deferrals between 6% and 8%. No matching contributions will be made for compensation deferrals in excess of 8%. Company contributions to the plan were $815,835 for 2000, and $743,254 for 1999. INCOME TAXES Landis Plastics, Inc. has elected by unanimous consent of its stockholders to be taxed as an "S" corporation under Section 1362 of the Internal Revenue Code for years beginning after December 31, 1986. Accordingly, no provision or liability for federal income taxes is reflected in the accompanying statements. Instead, the stockholders are liable for individual federal income taxes on their respective share of the Company's taxable income. However, the Company is liable for certain state income taxes. General investment and employment tax credit carryforwards are available in various states of approximately $760,000. These credits expire between 2003 and 2014. NOTE 2. NOTES RECEIVABLE Short-Term notes receivable are as follows at December 31:
2000 1999 ----------- ----------- Due from officers of the company and beneficiaries of qualified stockholders' trusts, interest at 7.0%, due on demand, unsecured........................................ $ 118,345 $ 321,917 ----------- ----------- Total short-term notes receivable........................... $ 118,345 $ 321,917 ----------- -----------
Long-Term notes receivable from related parties are as follows at December 31:
2000 1999 -------------- -------------- Due from beneficiaries of qualified stockholders' trusts; interest at 6.5%; annual principal payments of $176,792 plus interest until maturity in December, 2006; secured by stock certificates of Landis Plastics, Inc............... $ 1,060,750 $ 1,237,542 Due from various trusts with common beneficiaries as the qualified stockholders' trusts; interest at 9.0%; payments including principal and interest of $262,161 in 2001 and $183,260 annually thereafter until maturity in January, 2006; unsecured, security in real estate is optional to the company..................................... 863,468 942,137 Due from various trusts with common beneficiaries as the qualified stockholders' trusts; interest at 6.0%; principal payments of $38,260 plus interest due in 2001 and $18,130 plus interest annually thereafter until maturity in March, 2003; unsecured, security in real estate is optional to the company........................... 74,520 82,585 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................... 29,000 29,000 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................... 116,000 116,000 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................... 1,044,000 1,044,000 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................... 243,000 243,000 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................... 200,000 200,000 Due from a partnership comprised of trusts with common beneficiaries as the qualified stockholders' trusts; interest at 7.0%; principal due on January 1, 2002; unsecured................................................... 150,000 - ------------- ------------- Total notes receivable......................................... 3,780,738 3,894,264 Less: current portion.......................................... (365,703) (325,035) ------------- ------------- Notes receivable, long-term.................................... $ 3,415,035 $ 3,569,229 ------------- -------------
NOTE 3. OTHER RECEIVABLES On November 30, 1999, the Company entered into a certain Split Dollar Life Insurance Agreement to fund an irrevocable insurance trust of an officer of the Company. In addition, a Collateral Assignment Agreement was simultaneously executed, providing the Company a security interest in the cash surrender value of the policy upon its surrender, or, if not surrendered, in the proceeds payable upon the death of the second to die under the terms of the policy. The annual premium due under the terms of the policy currently approximates $202,500. The Company, at the option of the owner of the policy, can be called upon each year to pay all or a portion of this premium. The Company is prohibited from borrowing against the cash surrender value, and cannot assign its security interest in the policy to anyone except the policy owner or the owner's nominee. The owner of the policy is the trustee of the irrevocable trust. The premium balance owed to the Company on December 31, 2000 and 1999, was $294,401 and $101,239, respectively, and is presented as other receivables on the balance sheet. NOTE 4. SHORT-TERM BORROWINGS Short-Term borrowings at December 31, 2000 and 1999, consist of the following:
2000 1999 ------------- ------------- Due to officers of the company and beneficiaries of qualified stockholders' trusts, interest at 7.0%, due on demand, unsecured........................................ $ 2,074,826 $ 1,894,073 ------------- ------------- Total short-term borrowings................................. $ 2,074,826 $ 1,894,073 ------------- -------------
NOTE 5. LONG-TERM DEBT Notes payable as of December 31, 2000 and 1999, are as follows:
2000 1999 --------------- --------------- American National Bank and Trust Company of Chicago, interest at the lesser of prime or LIBOR + 1.5%, quarterly principal payments of $125,000, retired in 2000 before maturity, secured by equipment; the 1999 outstanding principal balance was classified as non-current pursuant to the Company's intention and ability to refinance this obligation on a long-term basis................................. $ - $ 720,086 American National Bank and Trust Company of Chicago, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $83,333 plus interest, due in 2004, secured by equipment............................................ 4,836,504 5,823,282 Export Development Corporation, imputed interest on ten separate notes ranging from 6.9375% to 7.44%, principal balance is due at maturity ranging from February of 1999 to January of 2000, net of unamortized discounts of $0 and $2,000 at December 31, 2000 and 1999, respectively, unsecured....................................................... - 651,536 Export Development Corporation, imputed interest on four separate notes ranging from 6.9975% to 7.3250%, principal balance is due at maturity ranging from February of 2000 to December of 2000, net of unamortized discounts of $0 and $125,736 at December 31, 2000 and 1999, respectively, unsecured....................................................... - 2,951,466 Cessna Finance Corporation, interest at prime less 1.25% included in monthly payments of $6,085.70, retired in 2000 before maturity, secured by equipment...................... - 945,441 Export Development Corporation, imputed interest on eight separate notes ranging from 6.6575% to 7.6675%, principal balance is due at maturity ranging from January of 2001 to September of 2001, net of unamortized discounts of $142,871 and $476,797 at December 31, 2000 and 1999, respectively, unsecured......................................... 5,171,188 4,837,262 American National Bank and Trust Company of Chicago, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $119,048 plus interest, retired in 2000 before maturity, secured by equipment; $5,000,000 of the 1999 outstanding principal balance was classified as non-current pursuant to the Company's intention and ability to refinance this obligation on a long-term basis.................. - 9,523,810 American National Bank and Trust Company of Chicago, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $100,000 plus interest, due March 1, 2004, secured by equipment................................... 3,800,000 5,000,000 Due to officer/stockholder of Landis Plastics, Inc.; interest at 7.0%, semi-annual interest payments of $49,000, due May 1, 2004, unsecured............................. 1,400,000 1,400,000 Due to officer/stockholder of Landis Plastics, Inc.; interest at 7.0%, semi-annual interest payments of $21,000, due May 1, 2004, unsecured............................. 600,000 600,000 C.M. Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $371,429 beginning in March of 2004 until maturity in March of 2010, unsecured............................ 2,600,000 - Massachusetts Mutual Life Insurance company, semi-annual interest payments at 8.88% on three separate senior notes until maturity, annual principal payments of $2,485,714 beginning in March of 2004 until maturity in March of 2010, unsecured................................................. 17,400,000 - Northern Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $571,429 beginning in March of 2004 until maturity in March of 2010, unsecured...................... 4,000,000 - Reliastar Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $428,571 beginning in March of 2004 until maturity in March of 2010, unsecured...................... 3,000,000 - Sigler and Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $428,571 beginning in March of 2004 until maturity in March of 2010, unsecured........................................ 3,000,000 - -------------- -------------- Total notes payable................................................ 45,807,692 32,452,883 Less: current portion.............................................. (7,371,188) (6,036,198) -------------- -------------- Long-term debt..................................................... $ 38,436,504 $ 26,416,685 -------------- --------------
Maturities of long-term debt for the next five years are as follows: 2001 2002 2003 2004 2005 - -------------- ------------- ------------- ------------- ------------- $ 7,371,188 $ 2,200,000 $ 2,200,000 $ 7,485,714 $ 5,122,218 The provisions of the Company's loan and credit agreements with American National Bank and Trust Company of Chicago require the maintenance of at least $5,500,000 of working capital, and at each calendar quarter end a ratio of current assets to current liabilities of not less than 1.22 to 1.0, a ratio of indebtedness to tangible net worth of not greater than 1.0 to 1.0, and a debt service ratio equal or greater than 1.2 to 1.0. The Company is also required to maintain minimum tangible net worth of at least $54,000,000 in 2000 and $56,500,000 in 2001. The Company was in compliance with the aforementioned covenants as of December 31, 2000. The provisions of the senior notes under the private placement agreement requires the Company to maintain specified levels of consolidated net worth and certain financial performance ratios. The covenants also stipulate certain limitations on additional indebtedness, mergers or consolidations, asset sales, investments, and transactions with affiliates. At December 31, 2000, the Company was in compliance with all of these provisions. NOTE 6. BANK LINE OF CREDIT Under terms of an unsecured revolving credit agreement with American National Bank and Trust Company of Chicago, the Company may borrow up to $5,000,000. The agreement has no expiration date. All borrowings under this agreement will be evidenced by one or more demand notes of the Company and will bear interest at the bank's prime rate. Nothing was borrowed against this agreement as of December 31, 2000. $4,000,000 was borrowed as of December 31, 1999, and was classified as non-current pursuant to the Company's intention and ability to refinance this obligation on a long-term basis. NOTE 7. COMMON STOCK AND ADDITIONAL PAID-IN-CAPITAL The aggregate number of shares which the Company is authorized to issue is 100,000, divided into two classes. The designation of each class, the number of shares of each class, and the par value, if any, are as follows: SHARES NEW SHARES SHARES OUTSTANDING SHARES OUTSTANDING CLASS SERIES PAR VALUE AUTHORIZED 12-31-99 ISSUED 12-31-00 - --------- ------ ----------- ---------- ----------- ------ ---------- Common A No par 50,000 536.00 - 536.00 value Common B No par 50,000 4,824.00 22.43 4,846.43 value ---------- ----------- ------ ---------- 100,000 5,360.00 22.43 5,382.43 ---------- ----------- ------ ---------- The Common A and Common B stock are collectively referred to as common stock. Except for exclusive voting rights and powers, all shares of Common A and Common B stock are identical in all respects and entitle the holders thereof to the same rights and privileges. The holders of Common A stock issued and outstanding possess the exclusive right to notice of stockholders' meetings and the exclusive voting rights and powers. The holders of Common B stock issued and outstanding are not entitled to any notice of stockholders' meetings or to vote upon any question affecting the affairs of the Company. Changes in additional paid-in-capital for the years ended December 31, 2000 and 1999, are as follows: Additional paid-in capital at December 31, 1998 and 1999.................................... $ 3,213 Stock-based compensation award to an employee...... 95,327 ---------- Additional paid-in capital at December 31, 2000.... $ 98,540 ---------- NOTE 8. RESTRICTED STOCK PLAN AND STOCK-BASED COMPENSATION In May of 2000 the Company adopted a restricted stock plan under which it may grant shares of non-voting common stock to certain executive employees. The plan is administered by the Compensation Committee of the Board of Directors and covers the period from January 1, 2000, to December 31, 2005. The maximum number of shares of non-voting common stock which may be subject to restricted stock awards under the plan is 5,000. However, no individual recipient is entitled to receive an aggregate total of more than ten percent of the shares available under the plan. The shares awarded pursuant to this plan are subject to certain restrictions on transfer. Such restrictions will lapse with respect to one-fourth of the shares awarded on April 30 during each of the four consecutive calendar years beginning with the first April 30th following the calendar year during which the award is made, but only if on the date the restrictions are to lapse the recipient has been an employee of the Company continuously from the time of the restricted stock award to such date of lapse. For the year ended December 31, 2000, there were no stock awards subject to the terms and restrictions of this plan. However, the Company issued 22.43 shares of non-voting common stock to an executive employee during 2000 which was not subject to the restricted stock plan. This transaction was recorded in accordance with SEAS No. 123, "Accounting for Stock-Based Compensation," which encourages entities to account for various equity instruments using a fair value approach. An independent appraisal of the Company was utilized to determine fair value. The total compensation cost recognized for stock-based employee compensation awards in 2000 was $95,327. NOTE 9. FAIR VALUES OF FINANCIAL INSTRUMENTS The Company has a number of financial instruments, none of which are held for trading purposes. The Company estimates that the fair value of all financial instruments at December 31, 2000, does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying balance sheet. The estimated fair value amounts have been determined by the Company using available market information and appropriate valuation methodologies. Considerable judgment is necessarily required in interpreting market data to develop the estimates of fair value, and, accordingly, the estimates are not necessarily indicative of the amounts that the Company could realize in a current market exchange. NOTE 10. CONCENTRATIONS OF CREDIT RISK The Company's financial instruments that are exposed to concentrations of credit risk consist primarily of cash and cash equivalents and trade receivables. The Company maintains cash and cash equivalent balances at several financial institutions located in the Chicago area. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $100,000. The Company's uninsured cash and cash equivalent balances total $10,503,189 at December 31, 2000. Concentrations of credit risk with respect to trade accounts receivable are limited due to the Company's routine assessments of the financial strength of its customers. The Company's historical experience in collection of accounts receivable falls within the recorded allowances. NOTE 11. SELF INSURANCE Landis Plastics, Inc. maintains outside insurance coverage for worker's compensation claims in the states of Indiana and Arizona, but is self insured in the states of Illinois and New York. The company does, however, maintain outside insurance coverage for Illinois and New York claims that exceed $300,000 per occurrence, and $778,819 in aggregate for all claims in a policy year. In accordance with Illinois state requirements, the Company maintains an irrevocable standby letter of credit in the amount of $250,000 from American National Bank and Trust Company of Chicago for the benefit of the Industrial Commission of Illinois. In accordance with New York state requirements, the Company maintains an irrevocable standby letter of credit in the amount of $1,010,613 from American National Bank and Trust Company of Chicago for the benefit of the state of New York Workmen's Compensation Board. No funds were drawn under either letter of credit in 2000 or 1999. All approved claims of approximately $504,000 and $563,300 were paid by the Company in 2000 and 1999, respectively. The Company has recorded an accrued liability of $548,091 for pending claims as of December 31, 2000. NOTE 12. LEASE COMMITMENTS The plants in Chicago Ridge and Alsip, Illinois, are owned by related parties and leased to the Company under annual agreements expiring December 31, 2001. The annual rental is $289,000 for the Chicago Ridge facility and $2,810,100 for the Alsip facility. The Company is liable for property taxes and insurance. The plants in Indiana are owned by the Company. The facility in Solvay, New York, is owned by related parties and leased to the Company under a ten year lease expiring in June, 2004. The annual rental is $600,000 and the Company is also liable for property taxes and insurance. The lease provides an option to the Company for two renewal terms for successive periods of five years each with annual rentals remaining the same. The facility in Tolleson, Arizona, is owned by related parties and leased to the Company under an annual agreement expiring December 31, 2001. The annual rental is $1,200,000 and the Company is also liable for property taxes and insurance. Minimum future rental payments under noncancelable operating leases having remaining terms in excess of one year as of December 31, 2000, for each of the next five years are as follows: YEAR AMOUNT ---- ----------- 2001.................. $ 600,000 2002.................. 600,000 2003.................. 600,000 2004.................. 300,000 2005.................. -- The Company also leases warehouses under several operating leases on a month to month basis. Total rent expense for all operating leases amounted to $4,732,454 and $4,177,775 for 2000 and 1999, respectively. NOTE 13. STOCKHOLDERS' AGREEMENT The stockholders of the Company have an agreement stipulating, among other things, the terms under which the Company's stock can be sold or transferred. The agreement provides that a stockholder intending to dispose of an interest in the Company must first obtain written consent of the Company and all other stockholders. The Company has the option to redeem shares upon the death, disability, or termination of employment of a stockholder if certain other stockholders do not exercise their options to purchase. The Company is not required to redeem shares under any circumstances. NOTE 14. OTHER COMMITMENTS AND CONTINGENCIES In addition to the standby letters of credit required for self insurance purposes as identified in Note 11, the Company is contingently liable for performance under standby letters of credit to collateralize its obligations to a third party for the purchase of equipment. These irrevocable standby letters of credit in the amount of $1,381,230 from American National Bank and Trust Company of Chicago as of December 31, 2000, are for the benefit of an equipment manufacturing vendor. Management does not expect any material losses to result from these off-balance-sheet instruments and, therefore, is of the opinion that the fair value of these instruments is zero. The Company was a party to several related claims involving employment matters. In December of 2000, the Company entered into a Consent Decree with the Equal Employment Opportunity Commission (EEOC) to settle the claims. Under the Consent Decree, the Company established a claims settlement fund for $782,000, of which, $681,367 remained in the fund as of December 31, 2000, for the benefit of various claimants. The $681,367 is reflected in the financial statements as of December 31, 2000, as "restricted cash for accrued EEOC settlements" and the related current liability is included in "other accrued expenses." The Company is also a defendant in a third party action arising out of an injury to an employee. The plaintiff is seeking $3,000,000 in damages, but the Company denies any liability for the accident. However, there is a reasonable possibility that liability would be apportioned to an equipment manufacturer and the Company. Management believes its potential exposure to be in the range of $200,000 to $250,000. Other claims, suits, and complaints arising in the ordinary course of operations have been filed or are pending against the Company. In the opinion of management, such matters are without merit or are of such kind, or involve such amounts, as would not have a significant effect on the financial position or results of operations of the Company if disposed of unfavorably. LANDIS PLASTICS, INC. BALANCE SHEETS
(IN THOUSANDS OF DOLLARS) SEPTEMBER 28, DECEMBER 31, ---------------------------------------------- --------------- -------------- 2003 2002 --------------- -------------- (UNAUDITED) ASSETS Current assets: Cash and cash equivalents................... $ 6,903 $ 10,029 Accounts receivable and short-term notes.... 24,868 18,371 Inventories................................. 22,299 19,990 Other current assets........................ 2,106 2,401 ----------- ---------- Total current assets..................... 56,176 50,791 Property and equipment; net................... 64,681 71,526 Other assets.................................. 10,369 4,994 ----------- ---------- Total assets.................................. $ 131,226 $ 127,311 ----------- ---------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable............................ $ 10,113 $ 6,169 Accrued interest............................ 105 792 Other current liabilities................... 12,505 9,405 Current portion of long-term debt........... 5,786 2,200 ----------- ---------- Total current liabilities................ 28,509 18,566 Long-term liabilities: Long-term debt, net of current portion...... 26,801 32,037 Other long-term liabilities................. 83 83 ----------- ---------- Total liabilities............................. 55,393 50,686 ----------- ---------- Stockholders' equity: Preferred stock............................. - - Common stock................................ 54 54 Additional paid-in capital.................. 1,258 253 Retained earnings........................... 74,521 76,318 ----------- ---------- Total stockholders' equity.................... 75,833 76,625 ----------- ---------- Total liabilities and stockholders' equity.... $ 131,226 $ 127,311 ----------- ---------- See accompanying notes to financial statements
LANDIS PLASTICS, INC. STATEMENTS OF INCOME AND RETAINED EARNINGS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 28, SEPTEMBER 29, ----------------- ---------------- (IN THOUSANDS OF DOLLARS) 2003 2002 ------------------------------------------ ----------------- ---------------- (UNAUDITED) REVENUE Product sales......................... $ 161,010 $ 152,964 Other sales........................... 3,515 2,658 ----------- ----------- Total revenue...................... 164,525 155,622 ----------- ----------- COST OF GOODS SOLD Materials............................. 63,931 54,994 Labor and overhead.................... 70,440 68,235 ----------- ----------- Total cost of goods sold........... 134,371 123,229 ----------- ----------- Gross profit............................. 30,154 32,393 ----------- ----------- GENERAL EXPENSES Selling and marketing................. 4,451 3,524 Administrative........................ 10,155 8,825 Transportation........................ 2,618 2,290 Warehousing........................... 8,424 7,682 ----------- ----------- Total general expenses............. 25,648 22,321 ----------- ----------- Operating income......................... 4,506 10,072 Other income (expense) Interest income....................... 277 411 Interest expense...................... (2,163) (2,297) ----------- ----------- Net income before income taxes........... 2,620 8,186 Provision for state income taxes......... 77 82 ----------- ----------- Net income............................... 2,543 8,104 Retained earnings--beginning of year...... 76,318 69,570 Stockholder distributions................ (4,340) (4,043) ----------- ----------- Retained earnings--end of period.......... $ 74,521 $ 73,631 ----------- ----------- See accompanying notes to financial statements
LANDIS PLASTICS, INC. STATEMENTS OF CASH FLOWS
FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 28, SEPTEMBER 29, ----------------- ---------------- (IN THOUSANDS OF DOLLARS) 2003 2002 ------------------------------------------ ----------------- ---------------- (UNAUDITED) Cash flows from operating activities: Net income......................................... $ 2,543 $ 8,104 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation....................................... 9,586 9,224 Gain on sale of equipment.......................... - (37) (Increase) decrease in: Accounts receivable............................. (6,914) (4,562) Inventory....................................... (2,309) (5,318) Other assets.................................... 187 (675) Increase (decrease) in: Accounts payable................................ 7,549 4,417 Other current liabilities....................... (631) (631) --------- --------- Net cash provided by operating activities.... 10,011 10,522 --------- --------- Cash flows from investing activities: Capital acquisitions and equipment deposits........ (7,718) (4,199) Proceeds from sale of equipment.................... 7 35 Receipts from long term investments................ (15) 46 --------- --------- Net cash used in investing activities........... (7,726) (4,118) --------- --------- Cash flows from financing activities: Net borrowings from related parties................ (427) (736) Equity compensation................................ 1,006 - Principal payments on long-term debt............... (1,650) (3,050) Stockholder distributions.......................... (4,340) (4,042) --------- --------- Net cash used in financing activities.......... (5,411) (7,828) --------- --------- Net decrease in cash.................................. (3,126) (1,424) Cash and cash equivalents at beginning of year........ 10,029 8,321 --------- --------- Cash and cash equivalents at end of period............ $ 6,903 $ 6,897 --------- --------- See accompanying notes to financial statements
LANDIS PLASTICS, INC. NOTES TO THE FINANCIAL STATEMENTS (DOLLARS IN THOUSANDS, EXCEPT AS OTHERWISE NOTED) (UNAUDITED) 1. BASIS OF PRESENTATION The accompanying unaudited consolidated financial statements of Landis Plastics, Inc. have been prepared in accordance with accounting principles generally accepted in the United States ("GAAP") for interim financial information. Accordingly, they do not include all of the information and footnotes required by GAAP for complete financial statements. In the opinion of management, all adjustments (consisting of normal recurring adjustments) considered necessary for a fair presentation have been included. Operating results for the periods presented are not necessarily indicative of the results that may be expected for the full fiscal year. 2. LONG-TERM DEBT Notes payable as of September 28, 2003 and December 31, 2002, are as follows:
9/28/03 12/31/02 ---------- ----------- Bank One, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $83 plus interest, due in 2005, secured by equipment........................................ $ 2,087 $ 2,837 Bank One, interest at the lesser of prime or LIBOR + 1.5%, monthly principal payments of $100 plus interest, due March 1, 2004, secured by equipment..................................... 500 1,400 C.M. Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $371 beginning in March of 2004 until maturity in March of 2010, unsecured....................................... 2,600 2,600 Massachusetts Mutual Life Insurance Company, semi-annual interest payments at 8.88% on three separate senior notes until maturity, annual principal payments of $2,486 beginning in March of 2004 until maturity in March of 2010, unsecured......................................................... 17,400 17,400 Northern Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $571 beginning in March of 2004 until maturity in March of 2010, unsecured.............................. 4,000 4,000 Reliastar Life Insurance Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $429 beginning in March of 2004 until maturity in March of 2010, unsecured.............................. 3,000 3,000 Sigler and Company, semi-annual interest payments at 8.88% on senior note until maturity, annual principal payments of $429 beginning in March of 2004 until maturity in March 2010, unsecured................................................... 3,000 3,000 ---------- ---------- Total notes payable............................................... 32,587 34,237 Less: current portion............................................. (5,786) (2,200) ---------- ---------- Long-term debt.................................................... $ 26,801 $ 32,037 ---------- ----------
Maturities of long-term debt for the next five years are as follows: 2003 2004 2005 2006 2007 ------- --------- --------- --------- --------- $ 550 $ 5,486 $ 5,122 $ 4,286 $ 4,286 ------- --------- -------- --------- --------- The provisions of the Company's loan and credit agreements with Bank One require the maintenance of at least $5.5 million of working capital, and at each calendar quarter end a ratio of current assets to current liabilities of not less than 1.22 to 1.0, a ratio of indebtedness to tangible net worth of not greater than 1.0 to 1.0, and a debt service ratio equal or greater than 1.2 to 1.0. The Company is also required to maintain minimum tangible net worth of at least $61.5 million in 2003. The Company was in compliance with the aforementioned covenants as of September 28, 2003. The provisions of the senior notes under the private placement agreement requires the Company to maintain specified levels of consolidated net worth and certain financial performance ratios. The covenants also stipulate certain limitations on additional indebtedness, mergers or consolidations, asset sales, investments, and transactions with affiliates. At September 28, 2003, the Company was in compliance with all of these provisions. 3. RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS In April 2002, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards No. 145, Rescission of FASB Statements No. 4, 44 and 64, Amendment of FASB Statement No. 13 and Technical Corrections ("SFAS No. 145"). Upon the adoption of SFAS No. 145, all gains and losses on the extinguishment of debt for periods presented in the financial statements will be classified as extraordinary items only if they meet the criteria in APB Opinion No. 30, Reporting the Results of Operations--Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions ("APB No. 30"). The provisions of SFAS No. 145 related to the rescission of FASB Statement No. 4 and FASB Statement No. 64 shall be applied for fiscal years beginning after May 15, 2002. Any gain or loss on extinguishment of debt that was classified as an extraordinary item in prior periods presented that does not meet the criteria in Opinion 30 for classification as an extraordinary item must be reclassified. The provisions of SFAS No. 145 related to the rescission of FASB Statement No. 44, the amendment of FASB Statement No. 13 and Technical Corrections became effective as of May 15, 2002 and did not have a material impact on the Company. In June 2002, the FASB issued Statement of Financial Accounting Standards No. 146, Accounting for Costs Associated with Exit or Disposal Activities ("SFAS No. 146"). SFAS No. 146 nullifies Emerging Issues Task Force Issue No. 94-3, Liability Recognition for Certain Employee Termination Benefits and Other Costs to Exit an Activity (including Certain Costs Incurred in a Restructuring). SFAS No. 146 generally requires companies to recognize costs associated with exit activities when they are incurred rather than at the date of a commitment to an exit or disposal plan and is to be applied prospectively to exit or disposal activities initiated after December 31, 2002. The initial adoption of this statement did not have a material impact on the Company. In January 2003, the FASB issued Interpretation No. 46, Consolidation of Variable Interest Entities ("FIN No. 46"). FIN No. 46 clarifies the application of Accounting Research Bulletin No. 51, Consolidated Financial Statements, in determining whether a reporting entity should consolidate certain legal entities, including partnerships, limited liability companies, or trusts, among others, collectively defined as variable interest entities ("VIEs"). This interpretation applies to VIEs created or obtained after January 31, 2003, and as of July 1, 2003, to VIEs in which an enterprise holds a variable interest that it acquired before February 1, 2003. The initial adoption of this statement did not have a material impact on the Company. In April 2003, the FASB issued Statement of Financial Accounting Standards No. 149, Amendment of Statement 133 on Derivative Instruments and Hedging Activities ("SFAS No. 149"). SFAS No. 149 amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement 133 and is to be applied prospectively to contracts entered into or modified after June 30, 2003. Initial adoption of this statement did not have a material impact on the Company. In May 2003, the FASB issued Statement of Financial Accounting Standards No. 150, Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity ("SFAS No. 150"). This statement establishes standards for how an issuer classifies and measures certain financial instruments with characteristics of both liabilities and equity. SFAS No. 150 is effective for financial instruments entered into or modified after May 31, 2003. The adoption of this statement does not result in any material change to the Company's existing reporting. 4. SUBSEQUENT EVENT On October 15, 2003, Berry Plastics Corporation ("Berry") announced that it has entered into a definitive agreement to acquire Landis Plastics, Inc. ("Landis") for $228.0 million, including repayment of existing indebtedness. The purchase price will be funded with a combination of debt, an equity investment from Berry's existing investors and Landis management, and cash on Berry's balance sheet. The transaction is scheduled to close in the fourth quarter of 2003 and is subject to customary closing conditions. Berry has also agreed to acquire four facilities currently leased by Landis from affiliates of Landis. Berry currently intends to assign its right to purchase these facilities to a third party and lease them from that third party. (b) Pro forma financial information UNAUDITED PRO FORMA COMBINED FINANCIAL INFORMATION As used in this report, "BPC Holding" or "Holding" refers to BPC Holding Corporation, "we," "our" or "us" refers to BPC Holding corporation together with its consolidated subsidiaries (not including Landis, unless the context otherwise requires), "Berry Plastics" or "the Company" refers to Berry Plastics Corporation, a wholly-owned subsidiary of BPC Holding, "Predecessor" refers to Holding's prior ownership and "Buyout" refers to the merger of GS Berry Acquisition with and into BPC Holding on July 22, 2002. Set forth below are the unaudited pro forma combined balance sheet of BPC Holding as of September 27, 2003 and Landis as of September 28, 2003, assuming the Transactions occurred on September 27, 2003 (with respect to BPC Holding) and September 28, 2003 (with respect to Landis), and the unaudited pro forma combined statements of operations of BPC Holding for the year ended December 28, 2002 and the thirty-nine weeks ended September 27, 2003 and of Landis for the year ended December 31, 2002 and the thirty-nine weeks ended September 28, 2003, assuming the Transactions occurred at the beginning of the respective period. The unaudited pro forma combined statement of operations for the year ended December 28, 2002 has been prepared assuming the Buyout occurred at the beginning of the period. The pro forma statements of operations do not reflect transaction costs that will be expensed in connection with the Transactions and any write-offs that may result from the Transactions as a result of entering into the amended and restated senior secured credit facility. We do not believe that any write-offs will be material to the Company unless we are required under accounting principles to write-off deferred financing fees resulting from the amended and restated senior secured credit facility. For presentation purposes, the results of Predecessor for periods prior to the Buyout have been combined with results of the Company subsequent to the Buyout. The unaudited pro forma combined financial information is presented for informational purposes only and does not purport to represent the financial condition of BPC Holding had the Transactions occurred on September 27, 2003 or the results of operations of us for the year ended December 28, 2002, or the thirty-nine weeks ended September 27, 2003 had the Transactions occurred at the beginning of such period, or to project the results for any future date or period. PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 27, 2003
BPC HOLDING LANDIS AS OF AS OF ADJUSTMENTS PRO FORMA SEPTEMBER 27, SEPTEMBER 28, FOR THE FOR THE (DOLLARS IN THOUSANDS) 2003 2003 TRANSACTIONS TRANSACTIONS - ----------------------------------- -------------- ------------- ------------------ ------------- ASSETS Current assets: Cash and cash equivalents $ 26,452 $ 6,903 $ (28,730)(1) $ 4,625 Accounts receivable 67,854 24,868 (261)(2) 92,461 Inventories 57,819 22,299 3,259 (3) 83,377 Other current assets 8,502 2,106 - 10,608 ----------- ----------- ------------------ ------------- Total current assets 160,627 56,176 (25,732) 191,071 Property and equipment, net 190,835 64,681 10,846 (2)(5) 266,362 Intangible assets 413,041 - 134,129 (4) 547,170 Other assets 102 10,369 (9,986)(2)(5) 485 ----------- ----------- ------------------ ------------- Total assets $ 764,605 $ 131,226 $ 109,257 $ 1,005,088 ----------- ----------- ------------------ ------------- LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable $ 33,266 $ 10,113 $ - $ 43,379 Accrued interest 6,623 105 3,068 (6) 9,796 Other current liabilities 28,483 12,505 (391)(2) 40,597 Current portion of long-term Debt 9,000 5,786 (5,286)(7) 9,500 ----------- ----------- ------------------ ------------- Total current liabilities 77,372 28,509 (2,609) 103,272 Long-term debt (less current portion) 595,435 26,801 125,699 (7) 747,935 Other liabilities 4,696 83 - 4,779 ----------- ----------- ------------------ ------------- Total liabilities 677,503 55,393 123,090 855,986 ----------- ----------- ------------------ ------------- Stockholders' equity: Preferred stock - - - - Common stock 28 54 (48)(8) 34 Additional paid-in capital 282,370 1,258 60,736 (8) 344,364 Adjustment of the carryover basis of continuing stockholders (196,603) - - (196,603) Notes receivable-common Stock (13,966) - - (13,966) Treasury stock (1,972) - - (1,972) Retained earnings 15,018 74,521 (74,521)(2)(8) 15,018 Accumulated other comprehensive income 2,227 - - 2,227 ----------- ----------- ------------------ ------------- Total stockholders' equity 87,102 75,833 (13,833) 149,102 ----------- ----------- ------------------ ------------- Total liabilities and stockholders' equity $ 764,605 $ 131,226 $ 109,257 $ 1,005,088 ----------- ----------- ------------------ -------------
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED BALANCE SHEET AS OF SEPTEMBER 27, 2003 (DOLLARS IN THOUSANDS) (1) This adjustment reflects the elimination of Landis cash of ($6,903) not being acquired in the Landis Acquisition, the Company's estimated use of cash of ($25,000) in connection with the purchase price, and assumed accrued interest received of $3,173 on the notes issued hereby. (2) This adjustment reflects the elimination of transactions with related parties on Landis' balance sheet that will be terminated prior to the Landis Acquisition. See notes 2, 3, 4 and 5 of Landis' audited financial statements for the years ended December 31, 2002 and 2001, included elsewhere in this offering memorandum. The detail by account is as follows: Accounts receivable............ $ (261) Property and equipment, net.... (43) Other assets................... (4,766) ---------- $ (5,070) Other current liabilities...... (391) Retained earnings.............. (4,679) ---------- $ (5,070) (3) This adjustment reflects Landis changing its accounting policy for its inventory from a LIFO basis to a FIFO basis, consistent with Berry's accounting policy. (4) The Landis Acquisition will be accounted for as a purchase. Preliminarily, we have allocated the excess of the purchase price over the net assets acquired to goodwill (included in intangible assets). Under generally accepted accounting principles, goodwill is not amortized but is reviewed for impairment annually. We have not begun the process of reviewing our assets to determine the amount of any write-up or write-down to fair value of our net assets in connection with the Landis Acquisition. Accordingly, the allocation described below is subject to change when we determine the purchase price allocation. If our non-goodwill assets are written up to fair value in connection with the Landis Acquisition, our expenses in the future will be higher as a result of increased depreciation and amortization of our assets. Similarly, if our non-goodwill assets are written down to fair value, our depreciation and amortization will decrease in the future. Purchase price................ $ 228,000 Estimated transaction costs... 12,000 ----------- Total consideration........... 240,000 Less: Net assets acquired..... 105,871 ----------- Net adjustment................ $ 134,129 ----------- (5) This adjustment reclassifies Landis' assets in progress of $5,220 from other assets to property and equipment, net and capitalization of Landis tooling costs of $5,669 in each case to be consistent with Berry's presentation. (6) This adjustment reflects the elimination of Landis accrued interest of ($105) and the assumed accrued interest received from investors upon the issuance of the notes of $3,173. (7) This adjustment reflects the retirement of Landis debt and the financings in connection with the Transactions. CURRENT LONG-TERM PORTION DEBT ---------- ------------ Retirement of Landis debt.... $ (5,786) $ (26,801) Notes issued hereby.......... - 95,200(a) Revolving line of credit..... - 4,500 Existing term loan........... (3,300) (323,400) New term loan................ 3,800 376,200 --------- ------------ Net adjustments.............. $ (5,286) $ 125,699 --------- ------------ (a) Includes unamortized bond premium. (8) This adjustment reflects the elimination of Landis stockholders' equity and the issuance of common stock in connection with the Landis Acquisition, including the after-tax reinvestment of approximately $10.5 million by Landis management. ADDITIONAL COMMON PAID-IN RETAINED STOCK CAPITAL EARNINGS -------- ----------- -------------- Landis equity..... $ (54) $ (1,258) $ (69,842) New equity........ 6 61,994 - -------- ---------- -------------- Net adjustments... $ (48) $ 60,736 $ (69,842) -------- ---------- -------------- PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE FISCAL YEAR ENDED DECEMBER 28, 2002
COMPANY ADJUSTMENTS PRO FORMA PREDECESSOR PERIOD LANDIS FOR THE FOR THE PERIOD FROM FROM COMBINED YEAR ENDED BUYOUT BUYOUT 12/30/01- 7/22/02- COMPANY & DECEMBER 31, AND THE AND THE (DOLLARS IN THOUSANDS) 7/21/02 12/28/02 PREDECESSOR 2002 TRANSACTIONS TRANSACTIONS - ---------------------- ----------- ----------- ----------- ------------ -------------- ------------ Net sales............ $ 280,677 $ 213,626 $ 494,303 $ 211,613 $ - $ 705,916 Cost of goods sold... 207,458 163,815 371,273 166,977 (2,572)(1) 535,678 --------- ---------- ---------- --------- --------- --------- Gross profit......... 73,219 49,811 123,030 44,636 2,572 170,238 Operating expenses... 33,321 23,159 56,480 31,048 (235)(3) 87,293 Merger expenses...... 20,987 - 20,987 - (20,987)(2) - --------- ---------- ---------- --------- --------- --------- Operating income..... 18,911 26,652 45,563 13,588 23,794 82,945 Other expenses....... 291 8 299 81 - 380 Loss on extinguished Debt.............. 25,328 - 25,328 - (25,328)(6) - Interest expense, Net............... 28,742 20,512 49,254 2,694 4,680 (4) 56,628 --------- ---------- ---------- --------- --------- --------- Income (loss) before income taxes...... (35,450) 6,132 (29,318) 10,813 44,442 25,937 Income taxes......... 345 2,953 3,298 23 7,718 (5) 11,039 --------- ---------- ---------- --------- --------- --------- Net income (loss).... (35,795) 3,179 (32,616) 10,790 36,724 14,898 Preferred stock dividends......... 6,468 - 6,468 - (6,468)(7) - Amortization of preferred stock dividends......... 574 - 574 - (574)(8) - --------- ---------- ---------- --------- --------- --------- Net income (loss) attributable to common stockholders...... $ (42,837) $ 3,179 $ (39,658) $ 10,790 $ 43,766 $ 14,898 --------- ---------- ---------- --------- --------- --------- OTHER DATA: Depreciation and amortization...... $ 24,775 $ 17,190 $ 41,965 $ 12,561 $ 2,085 (1) $ 56,611 --------- ---------- ---------- --------- --------- ---------
PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENT OF OPERATIONS FOR THE THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 2003
BPC HOLDING LANDIS THIRTY-NINE THIRTY-NINE WEEKS ENDED WEEKS ENDED ADJUSTMENTS PRO FORMA SEPTEMBER 27, SEPTEMBER 28, FOR THE FOR THE (DOLLARS IN THOUSANDS) 2003 2003 TRANSACTIONS TRANSACTIONS - ------------------------------------- ------------- ------------- ------------ ------------ Net sales............................ $ 411,555 $ 164,525 $ - $ 576,080 Cost of goods sold................... 313,221 134,371 (2,735)(1) 444,857 ----------- ----------- ---------- ----------- Gross profit......................... 98,334 30,154 2,735 131,223 Operating expenses................... 43,176 25,648 (176)(3) 68,648 ----------- ----------- ---------- ----------- Operating income..................... 55,158 4,506 2,911 62,575 Interest expense, net................ 33,794 1,886 4,994(4) 40,674 ----------- ----------- ---------- ----------- Income (loss) before income taxes.... 21,364 2,620 (2,083) 21,902 Income taxes......................... 9,525 77 127(5) 9,729 ----------- ----------- ---------- ----------- Net income (loss).................... $ 11,839 $ 2,543 $ (2,210) 12,172 ----------- ----------- ---------- ----------- OTHER DATA: Depreciation and amortization........ $ 31,054 $ 9,586 $ 1,519(1) $ 42,159 ----------- ----------- ---------- -----------
NOTES TO PRO FORMA COMBINED CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (DOLLARS IN THOUSANDS) (1) This adjustment reflects Landis changing its accounting policy for its inventory from a LIFO basis to a FIFO basis and capitalization and related depreciation of tooling costs in order to be consistent with Berry's accounting policies, the elimination of operating leases that are not being assumed in the Landis Acquisition, and new operating leases consummated. THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 2002 2003 ----------- ------------- LIFO adjustment to FIFO................. $ (1,615) $ (1,499) Tooling costs to be capitalized......... (1,392) (1,525) Depreciation on capitalized tooling..... 2,085 1,519 Operating leases not part of purchase... (4,610) (3,450) New operating leases.................... 2,960 2,220 ---------- ------------- Net adjustments......................... $ (2,572) $ (2,735) ---------- ------------- (2) This adjustment reflects the elimination of Buyout expenses of ($20,987) in the period from December 30, 2001 to July 21, 2002. (3) This adjustment reflects the elimination of an operating lease of ($235) in the year ended December 31, 2002 and ($176) in the thirty-nine weeks ended September 27, 2003, that is not being assumed in the Landis Acquisition. (4) This adjustment reflects the elimination of Landis interest expense, changes in interest expense resulting from the financing of the Landis Acquisition and an adjustment to interest expense resulting from the financing of the Buyout as if it was in place at the beginning of 2002. THIRTY-NINE WEEKS ENDED SEPTEMBER 27, 2002 2003 ----------- ------------- Landis existing interest................. $ (2,694) $ (1,886) Notes offered hereby: Interest.............................. 9,138 6,853 Amortization of bond premium.......... (1,166) (874) Amortization of deferred financing costs.............................. 343 257 Amendment of credit agreement: Interest.............................. 563 422 Amortization of deferred financing.... 295 222 Adjustment for Buyout financing.......... (1,799) - ----------- ------------ Net adjustments.......................... $ 4,680 $ 4,994 ----------- ------------ (5) This adjustment represents the income tax change as a result of the other items reflected in these notes to pro forma combined condensed consolidated statement of operations and the conversion of Landis from an S corporation to a C corporation. (6) This adjustment eliminates the expense incurred with the extinguishment of debt in connection with the Buyout. (7) This adjustment reflects the elimination of preferred stock dividends on the preferred stock of the Company redeemed in connection with the Buyout. (8) This adjustment reflects the elimination of the amortization of preferred stock discount on the preferred stock of the Company redeemed in connection with the Buyout. (c) Exhibits 2.1 Agreement and Plan of Merger, dated as of October 15, 2003, between Berry and Landis. 4.1 Registration Rights Agreement, dated as of November 20, 2003, among Berry, J.P. Morgan Securities Inc. and Goldman, Sachs & Co. or their respective affiliates as the initial purchasers, BPC Holding, and some subsidiaries of Berry as guarantors. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. Dated: December 5, 2003 BERRY PLASTICS CORPORATION By:/s/ James M. Kratochvil -------------------------------------- James M. Kratochvil Executive Vice President, Chief Financial Officer, Treasurer and Secretary EX-2.1 3 ex21.txt EX 2.1 AGREEMENT & PLAN OF MERGER Exhibit 2.1 ---------------------------- EXECUTION COPY ---------------------------- AGREEMENT AND PLAN OF MERGER by and among BERRY PLASTICS CORPORATION, BERRY PLASTICS ACQUISITION CORPORATION IV, LANDIS PLASTICS, INC. and THE PARTIES LISTED ON THE SIGNATURE PAGE HERETO Dated as of October 15, 2003 TABLE OF CONTENTS PAGE ---- ARTICLE I DEFINITIONS......................................................1 1.1 Definitions.......................................................1 ARTICLE II PURCHASE AND SALE OF BUSINESS..................................14 2.1 The Merger.......................................................14 2.2 Effective Time...................................................14 2.3 Certificate of Incorporation and Bylaws..........................14 2.4 Directors and Officers of the Surviving Corporation..............15 2.5 Effects of the Merger............................................15 2.6 Subsequent Actions...............................................15 2.7 Purchase and Sale of Transferred Real Properties.................16 2.8 Payments at Closing..............................................16 2.9 Working Capital Adjustment.......................................16 ARTICLE III CLOSING.......................................................19 3.1 Closing Date.....................................................19 3.2 Payment of Per Share Merger Consideration........................19 3.3 Buyer's and Sub's Deliveries.....................................19 3.4 The Company's and Shareholders' Deliveries.......................20 3.5 Stock Transfer Books.............................................21 ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS......22 4.1 Authority of Shareholder.........................................22 4.2 Ownership of Company Securities..................................22 4.3 Consents and Approvals; No Violations............................22 4.4 No Finder........................................................23 4.5 Insolvency.......................................................23 ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY............23 5.1 Organization of the Company......................................23 5.2 Subsidiaries and Investments.....................................24 5.3 Authority of the Company.........................................24 5.4 Capitalization...................................................25 5.5 Shareholders of the Company......................................25 5.6 Records..........................................................25 5.7 Financial Statements.............................................26 5.8 Company Debt.....................................................26 5.9 Operations Since the Balance Sheet Date..........................26 5.10 No Undisclosed Liabilities.......................................26 5.11 Inventories......................................................27 5.12 Receivables and Payables.........................................27 5.13 Compliance with Laws and Governmental Permits....................27 5.14 Assets...........................................................28 5.15 Personal Property Leases.........................................28 5.16 Intellectual Property............................................28 5.17 Real Property and Real Property Leases...........................29 5.18 Employees and Related Agreements; ERISA..........................31 5.19 Labor and Employment Matters.....................................33 5.20 Insurance........................................................34 5.21 Contracts........................................................34 5.22 Taxes............................................................36 5.23 Litigation or Regulatory Action..................................37 5.24 Environmental and Health/Safety Matters..........................37 5.25 Product Warranty and Product Liability...........................38 5.26 Bank Accounts....................................................38 5.27 Customers and Suppliers..........................................39 5.28 Disclosure.......................................................39 5.29 No Finder........................................................40 ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB................40 6.1 Organization of Buyer and Sub....................................41 6.2 Authority of Buyer...............................................41 6.3 Securities Laws Representations..................................41 6.4 Available Funds..................................................42 6.5 Litigation.......................................................42 6.6 No Finder........................................................42 6.7 No Activities....................................................42 ARTICLE VII CONDUCT OF BUSINESS PENDING THE CLOSING.......................43 7.1 Investigation of the Business by Buyer...........................43 7.2 Preserve Accuracy of Representations and Warranties..............43 7.3 Governmental Approvals...........................................43 7.4 Operations Prior to the Closing Date.............................44 7.5 No Solicitations.................................................47 7.6 Notification of Changes; Disclosure Schedule Update..............47 7.7 Further Assurances...............................................48 7.8 Antitrust Law Compliance.........................................48 7.9 Transfer of Transferred Real Properties..........................49 7.10 Title and Survey Matters, Title Commitments......................49 7.11 Leases...........................................................49 7.12 Excluded Assets..................................................50 7.13 Monticello Environmental Permits.................................50 7.14 Financing........................................................50 7.15 FIRPTA Certificate...............................................51 7.16 Transfer.........................................................51 7.17 Owned Real Properties............................................51 7.18 Shareholder Approval.............................................51 7.19 Plas-Tool License................................................51 ARTICLE VIII ADDITIONAL AGREEMENTS........................................52 8.1 Transfer Taxes...................................................52 8.2 Tax Matters......................................................52 8.3 WARN Act.........................................................55 8.4 Confidentiality..................................................55 8.5 Prohibited Marks.................................................55 8.6 Appointment of Shareholder Representative........................55 8.7 Severance Costs..................................................56 ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF BUYER AND SUB.................56 9.1 No Misrepresentation or Breach of Covenants and Warranties.......56 9.2 No Restraint of Litigation.......................................57 9.3 Necessary Consents...............................................57 9.4 Purchase of Transferred Real Properties..........................57 9.5 Documents........................................................57 9.6 Funding..........................................................57 9.7 Non-Competition Agreements.......................................57 9.8 Related Party Agreements.........................................57 ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND SHAREHOLDERS....................................................58 10.1 No Misrepresentation or Breach of Covenants and Warranties.......58 10.2 No Restraint or Litigation.......................................58 10.3 Purchase of Transferred Real Properties..........................58 10.4 Documents........................................................58 ARTICLE XI INDEMNIFICATION................................................58 11.1 Indemnification for Company Matters..............................58 11.2 Indemnification for Shareholder Matters..........................61 11.3 Indemnification for Solvay Environmental Matters.................61 11.4 Indemnification by Buyer.........................................62 11.5 Notice of Claims.................................................63 11.6 Third Party Claims...............................................64 11.7 Exclusivity of Indemnification...................................65 11.8 Knowledge of Breach..............................................65 ARTICLE XII TERMINATION...................................................65 12.1 Termination......................................................65 12.2 Notice of Termination............................................66 12.3 Effect of Termination............................................66 ARTICLE XIII GENERAL PROVISIONS...........................................67 13.1 Survival of Obligations..........................................67 13.2 Confidential Nature of Information...............................67 13.3 No Public Announcement...........................................67 13.4 Notices..........................................................67 13.5 Successors and Assigns...........................................69 13.6 Entire Agreement; Amendments.....................................69 13.7 Interpretation...................................................69 13.8 Waivers..........................................................69 13.9 Expenses.........................................................70 13.10 Partial Invalidity...............................................70 13.11 Execution in Counterparts........................................70 13.12 Specific Performance.............................................70 13.13 Governing Law....................................................70 13.14 Submission to Jurisdiction.......................................71 INDEX OF EXHIBITS Exhibit A Bridge Financing Commitment Letter Exhibit B Escrow Agreement Exhibit C Non-Competition Agreement Exhibit D Shareholders Representative Agreement Exhibit E-1 Certificate of Incorporation of Surviving Corporation Exhibit E-2 By-laws of Surviving Corporation Exhibit F Real Estate Purchase Agreement Exhibit G Transition Lease Exhibit H Shop Lease Exhibit I Equity Commitment Letters Exhibit J Lease Termination Agreement AGREEMENT AND PLAN OF MERGER ---------------------------- This Agreement and Plan of Merger (the "AGREEMENT") is entered into effective as of October 15, 2003, by and among Berry Plastics Corporation, a Delaware corporation ("BUYER"), Berry Plastics Acquisition Corporation IV, a Delaware corporation ("SUB"), Landis Plastics, Inc., an Illinois corporation (the "COMPANY"), all of the shareholders of the Company as set forth on the signature page hereto (collectively the "SHAREHOLDERS," and individually, a "SHAREHOLDER"), the Real Estate Sellers (as defined below) and Gregory J. Landis, as the Shareholder Representative (as defined below). RECITALS A. The Company is engaged in the business of manufacturing plastic containers and lids for yogurt, cultured dairy, margarine and certain other food products, as well as other industrial purposes (the "BUSINESS"); B. The Shareholders own, and until the Closing (as defined herein) will own, all of the issued and outstanding shares of capital stock of the Company (the "COMPANY SECURITIES"); C. The Board of Directors of each of Buyer, Sub and the Company has approved, and deems it advisable and in the best interests of its stockholders to consummate, the acquisition of the Company by Buyer, which acquisition is to be effected by the merger of Sub with and into the Company, with the Company being the surviving entity (the "MERGER"), upon the terms and subject to the conditions set forth in this Agreement; and D. As a condition to the Merger, Buyer shall (or shall cause its designee to) purchase, and the Real Estate Sellers shall sell, certain real property containing certain of the Company's operation facilities currently leased by the Company from such Affiliates. NOW, THEREFORE, in consideration of the mutual representations, warranties, covenants and agreements contained herein, it is hereby agreed among the parties hereto as follows: ARTICLE I DEFINITIONS 1.1 Definitions. In this Agreement, the following terms have the meanings specified or referred to in this Section 1.1 and such meanings shall be equally applicable to both the singular and plural forms. Any agreement referred to below shall mean such agreement as amended, supplemented and modified from time to time to the extent permitted by the applicable provisions thereof and by this Agreement. "AFFILIATE" means, with respect to any Person, any other Person which, directly or indirectly, through one or more intermediaries, controls, is controlled by, or is under common control with, such Person. "AGGREGATE PURCHASE PRICE" means the Total Enterprise Value, less the Funded Obligations as of the Closing, less the Transaction Costs. As of the Closing, the Company shall furnish to Buyer a schedule (the "FUNDED OBLIGATIONS SCHEDULE") setting forth the amount of each component of Funded Obligations (i.e., Funded Indebtedness, Capital Lease Amount, Related Party Receivable Amount and Unused Cap Ex Amount) and as of the Closing, the amount of Transaction Costs and setting forth in reasonable detail the basis for such amounts. "ANTITRUST IMPROVEMENTS ACT" means the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder. "BALANCE SHEET" means the audited balance sheet of the Company as of December 31, 2002 included in Schedule 5.7. "BALANCE SHEET DATE" means December 31, 2002. "BANK ONE" means Bank One, N.A., a national banking association. "BANK ONE INDEBTEDNESS AMOUNT" means the amount, as of the Closing, necessary to pay off in full and extinguish all loans, advances, indebtedness, obligations, fees, penalties and liabilities of the Company owed under the Bank One Loan Documents. "BANK ONE LOAN DOCUMENTS" means that certain Second Amended and Restated Loan Agreement dated March 28, 2001, as amended, by and between the Company and American National Bank and Trust Company of Chicago (which was subsequently acquired by Bank One who is the successor-in-interest to the Bank One Loan Documents) and all other documents relating thereto. "BASIS" means any past or present fact, situation, circumstance, status, condition, activity, practice, plan, occurrence, event, incidence, action, failure to act, or transaction that forms or is reasonably likely to form the basis for any specified consequence. "BRIDGE FINANCING" means the financing contemplated by the Commitment Letter dated as of the date hereof and the term sheet attached thereto, a copy of which is attached hereto as Exhibit A. "BUSINESS DAY" means a day other than Saturday, Sunday or any day on which the principal commercial banks located in the State of Illinois are authorized or obligated to close under the laws of such state. "BUYER ANCILLARY AGREEMENTS" means all agreements, instruments, and documents being or to be executed and delivered by Buyer or its Affiliates under this Agreement or in connection herewith, including each Real Estate Purchase Agreement and the Buyer Funding Documents. "BUYER FUNDING DOCUMENTS" means all of the agreements, notes, certificates, instruments, and other documents being or to be executed and delivered by Buyer or its Affiliates necessary to effect the Financing contemplated by the Commitment Letters. "CAPITAL LEASE" means a lease of property by the Company which, in conformity with GAAP, is required to be accounted for as a capital lease. "CAPITAL LEASE AMOUNT" means the aggregate amount required to be accounted for as Capital Leases in accordance with GAAP as of the Closing. "CHICAGO RIDGE CORPORATE OFFICE" means that real property located at 10800 South Central Avenue, Chicago Ridge, Illinois 60415. "CHICAGO RIDGE TOOL SHOP" means the real property located at 5632 Pleasant Boulevard, Chicago Ridge, Illinois 60415. "CODE" means the Internal Revenue Code of 1986, as amended. "COMPANY ANCILLARY AGREEMENTS" means all agreements, instruments, and documents being or to be executed and delivered by the Company under this Agreement or in connection herewith. "COMPANY ASSETS" means all of the properties and assets of the Company, other than the Leased Assets, whether personal, real or mixed, tangible or intangible, wherever located. "COMPANY BENEFIT PLAN" means each plan, program, contract, agreement or other arrangement providing for compensation, severance, termination pay, retirement benefits, performance awards, stock or stock-related awards, fringe benefits or other employee benefits of any kind, whether formal or informal, funded or unfunded, written or oral, including, without limitation, each "employee benefit plan," within the meaning of Section 3(3) of ERISA (other than an Employee Agreement) which is now or previously has been sponsored, maintained, contributed to, or required to be contributed to, by the Company for the benefit of any Employee, or pursuant to which the Company has any liability, contingent or otherwise. "COMPANY INTELLECTUAL PROPERTY" means all Intellectual Property that is currently used or has been used in the Business as presently conducted. "CONFIDENTIAL INFORMATION" means all information (whether or not reduced to written, electronic, magnetic or other tangible form) acquired by the Company or any Shareholder, concerning the products, services, projects, activities, business or affairs of the Company or its customers or suppliers, including (a) all information concerning Company Intellectual Property, including computer programs, system documentation, special hardware, product hardware, related software development, manuals, formulae, processes, methods, machines, compositions, ideas, improvements or inventions, (b) all sales and financial information, (c) all independent contractor, client, customer and supplier lists, (d) all information concerning services, clients, customers, cases, projects or marketing plans for any of those services, clients, customers, cases or projects, and (e) all information relating to the transactions contemplated by this Agreement, including the terms and conditions hereof. Notwithstanding the foregoing, the term Confidential Information shall not include information that is generally available to the public or becomes generally available to the public other than as a result of a breach of Section 8.4. "CONFIDENTIALITY AGREEMENT" means the Confidentiality Agreement between Buyer and the Company. "CONTRACT" means any contract, agreement, commitment, undertaking or arrangement (whether written or oral). "COURT ORDER" means any judgment, order, award or decree of any federal, state, local or other court or tribunal and any award in any arbitration proceeding. "DE MINIMIS LOSSES" means any Losses resulting from a single set of facts and circumstances that do not exceed $50,000 in the aggregate. "DGCL" means the General Corporation Law of the State of Delaware. "DROP DEAD DATE" means January 15, 2004. "EMPLOYEE" means each current, former, or retired employee, officer, consultant, independent contractor, agent or director of the Company. "EMPLOYEE AGREEMENT" means each management, employment, bonus, loan or other extension of credit, change in control, retention, severance, consulting, non-compete, confidentiality, or similar agreement or contract between the Company and any Employee pursuant to which the Company has any liability, contingent or otherwise. "ENCUMBRANCE" means any encumbrance, lien, claim, charge, security interest, mortgage, pledge, easement, conditional sale or other title retention agreement, defect in title, covenant, option, proxy, voting trust, voting agreement or other restriction of any kind. "ENVIRONMENTAL LAW" means all Requirements of Law derived from or relating to the environment, health or safety, including but not limited to, the Comprehensive Environmental Response, Compensation and Liability Act of 1980, as amended by the Superfund Amendment and Reauthorization Act of 1986, 42 U.S.C. ss.9601, et seq.; the Solid Waste Disposal Act, as amended by the Resource Conservation and Recovery Act of 1976 and subsequent Hazardous and Solid Waste Amendments of 1984, 42 U.S.C. ss.6901 et seq. ("SARA") (hereinafter, collectively "RCRA"); the Hazardous Materials Transportation Act, as amended, 49 U.S.C. ss.1801, et seq.; the Clean Water Act, as amended, 33 U.S.C. ss.1311, et seq.; the Clean Air Act, as amended (42 U.S.C. ss.7401-7642); Toxic Substances Control Act, as amended, 15 U.S.C. ss.2601 et seq.; the Federal Insecticide, Fungicide, and Rodenticide Act as amended, 7 U.S.C. ss.136-136y; the Emergency Planning and Community Right-to-Know Act of 1986 as amended, 42 U.S.C. ss.11001, et seq. (Title III of SARA); the Occupational Safety and Health Act of 1970, as amended, 29 U.S.C. ss.651, et seq. "ERISA" means the Employee Retirement Income Security Act of 1974, as amended. "ESCROW ACCOUNT," "ESCROW AGENT" and "ESCROW AGREEMENT" have the meanings set forth under the definition of "Holdback Amount." "EXPENSES" means any and all reasonable expenses incurred in connection with investigating, defending or asserting any claim, action, suit or proceeding incident to any matter indemnified against hereunder (including, without limitation, court filing fees, court costs, arbitration fees or costs, witness fees, and reasonable fees and disbursements of legal counsel (whether such legal fees and disbursements are incurred in connection with a claim against a party hereto or in connection with a Third Party Claim), investigators, expert witnesses, consultants, accountants and other professionals). "FIRST ESCROW RELEASE DATE" means the 10 month anniversary of the Closing Date, on which the amount equal to (a) fifty percent (50%) of the Indemnification Holdback Amount less (b) the sum of (i) the Reserved Amount and (ii) any indemnification payments previously made to any Buyer Indemnitee pursuant to Sections 8.2, 11.1 and 11.2 hereof shall be released (such amount, the "FIRST ESCROW RELEASE AMOUNT"). "FIRST SOLVAY ENVIRONMENTAL ESCROW RELEASE DATE" means the five year anniversary of the Closing Date, on which the amount equal to the difference, if any, between (a) the amount then remaining in the Solvay Environmental Indemnification Holdback Amount and (b) the sum of (i) $2,000,000 and (ii) the Reserved Solvay Amount shall be released (such amount, the "FIRST SOLVAY ESCROW RELEASE AMOUNT"). "FIRST SOLVAY ESCROW RELEASE AMOUNT" has the meaning set forth under the definition of "First Solvay Environmental Escrow Release Date." "FUNDED INDEBTEDNESS" means the amount, as of the Closing, necessary to pay off in full and extinguish all Indebtedness of the Company (including, but not limited to, the Bank One Indebtedness Amount and the Senior Note Indebtedness Amount) and all related obligations, fees, penalties and liabilities owed by the Company, as such amount may be reduced by amounts paid by the Company immediately prior to Closing. "FUNDED OBLIGATIONS" means, without duplication, the sum of the Funded Indebtedness, the Capital Lease Amount, the Related Party Receivable Amount and the Unused Cap Ex Amount. "GAAP" means United States generally accepted accounting principles as in effect from time to time applied on a consistent basis. "GOVERNMENTAL BODY" means any federal, state, local, foreign or other governmental authority of any nature (including any governmental agency, branch, department, official, or entity and any court or other tribunal) or any body exercising, or entitled to exercise, any administrative, executive, judicial, legislative, police, regulatory, or taxing authority power of any nature. "HAZARDOUS SUBSTANCES" means any substance, chemical or waste that is listed, or contains amounts of one or more components that are defined, designated, classified, considered or listed, as hazardous, toxic or radioactive or are otherwise regulated or subject to imposition of liability under any Environmental Law; as well as any asbestos or asbestos-containing material, petroleum, petroleum product or by-product, crude oil or any fraction thereof, natural gas, natural gas liquids, liquefied natural gas, synthetic gas usable as fuel, or polychlorinated biphenyls ("PCBS"). "HOLDBACK AMOUNT" means the sum of the Working Capital Holdback Amount, the Indemnification Holdback Amount and the Solvay Environmental Indemnification Holdback Amount, which shall be deposited into an escrow account (the "ESCROW ACCOUNT") to be established with Bank One (the "ESCROW AGENT") pursuant to the terms of an escrow agreement in the form attached hereto as Exhibit B (the "ESCROW AGREEMENT"). "IBCA" means the Illinois Business Corporation Act. "INDEBTEDNESS" means (a) all indebtedness for borrowed money or for the deferred purchase price of property or services (other than current trade liabilities incurred in the ordinary course of business and payable in accordance with customary practices), (b) any other indebtedness that is evidenced by a note, bond, debenture or similar instrument, (c) all obligations under financing leases and Capital Leases, (d) all obligations in respect of acceptances issued or created, (e) all liabilities secured by any lien on any Company Asset, and (f) all guarantee obligations. "INDEMNIFICATION HOLDBACK AMOUNT" means $19,500,000, which will be used to fund indemnification payments, if any, made pursuant to Sections 8.2, 11.1 and 11.2 hereof and in accordance with the Escrow Agreement. "INTELLECTUAL PROPERTY" means (i) all names, brands, logos and slogans embodying business or product goodwill or indications of origin, and all trademarks, corporate names, trade names, service marks, trade dress, domain names and universal resource locators, together with all translations, adaptations, derivations and combinations thereof and all applications, registrations and renewals in connection therewith, and all of the goodwill associated therewith; (ii) all patents, patent applications, patent disclosures, inventions (whether patentable or unpatentable and whether or not reduced to practice) and all improvements thereof, including, but not limited to, any provisional, utility, continuation, continuation-in-part or divisional applications filed in the U.S. or other jurisdictions and all reissues, revisions and extensions thereof and all reexamination certificates issuing therefrom; (iii) all websites, copyrights, and copyrightable works both published and unpublished, including all registrations, applications and renewals in connection therewith; (iv) all computer and electronic data processing programs and software programs (in both source code and object code form), data, databases and related documentation; (v) all inventions, improvements, developments, modifications, derivative works, know-how, trade secrets, and confidential information (including research and development, know-how formulas, compositions, manufacturing and production processes and techniques, methods, schematics, technology, technical data, designs, drawings, flowcharts, block diagrams, specifications, customer and supplier lists, pricing and cost information and business and marketing plans and proposals); (vi) all licenses, sublicenses, permissions and other agreements relating to any of the foregoing; and (vii) all other intellectual property rights (in whatever form or medium) relating to any of the foregoing (including remedies and recoveries against infringement hereof and rights of protection of interest therein under the laws of all jurisdictions). "IRS" means the Internal Revenue Service. "KNOWLEDGE," "TO THE COMPANY'S KNOWLEDGE," or words to that effect as used herein refer to the actual or constructive knowledge of H. Richard Landis, Gregory J. Landis, William VanMeter, John Sabey, Bimal Kalvani and Steven Pace after reasonable inquiry. "LEASED ASSETS" collectively refers to the machinery, equipment and other personal property the Company leases to carry on its operations as set forth on Schedule 5.15, and the Leased Real Properties. "LOSSES" means any loss, cost, obligation, liability, settlement payment, award, judgment, fine, penalty, damage, expense, deficiency or other charge, but not including Expenses. "MATERIAL ADVERSE EFFECT" means any condition, circumstance, change in or effect on the Company that, individually or in the aggregate with any other condition, circumstance, change in or effect on the Company, has or would reasonably be expected to have a material adverse effect on the assets, properties, business, operations, prospects, financial condition, or results of operations of the Company; provided, however, that none of the following, to the extent arising after the date of this Agreement, shall be deemed to have a Material Adverse Effect: (i) events affecting the United States or the economy generally; or (ii) events affecting the plastic container industry generally, but, in each case, only to the extent that the events discussed in (i) and (ii) do not have a disproportionate adverse effect on the assets, properties, business, operations, prospects, financial condition, or results of operations of the Company relative to other companies engaged in businesses similar to the Business. "NON-COMPETITION AGREEMENT" means a non-competition agreement in the form attached as Exhibit C hereto. "NOTE HOLDERS" means with respect to any Senior Note the Person in whose name such Senior Note is registered and maintained by the Company pursuant to Section 13.1 of the Note Purchase Agreement. "NOTE PURCHASE AGREEMENT" means that certain Note Purchase Agreement dated as of March 1, 2000, as amended, between the Company and each of the Persons listed as "Purchasers" on Schedule A thereto, providing for, among other things, the sale by the Company of the Senior Notes. "OWNERSHIP PERCENTAGE" of any Shareholder, shall mean the percentage for such Shareholder set forth on Schedule 5.5. "PCBS" has the meaning set forth under the definition of "Hazardous Substances". "PERMITTED ENCUMBRANCES" means (i) liens for taxes and other governmental charges and assessments which are not yet due and payable, (ii) liens of landlords and liens of carriers, warehousemen, mechanics and materialmen and other like liens arising in the ordinary course of business for sums not yet due and payable and (iii) other liens or imperfections on property which are not material in amount and do not materially detract from the value of or materially impair the existing use of the property affected by such lien or imperfection. "PER SHARE MERGER CONSIDERATION" means the quotient obtained by dividing (i) the Aggregate Purchase Price less the Transferred Real Property Purchase Price, by (ii) the total number of shares of the Company's capital stock outstanding on the Closing Date. "PER SHARE PAID OUT MERGER CONSIDERATION" means the quotient obtained by dividing (i) the Aggregate Purchase Price, less the sum of (a) the Transferred Real Properties Purchase Price and (b) the Holdback Amount, by (ii) the total number of shares of the Company's capital stock outstanding on the Closing Date. "PERSON" means any individual, corporation, partnership, limited liability company, joint venture, association, joint-stock company, trust, unincorporated organization or Governmental Body. "PROPERTY" means any real or personal property, plant, building, facility, structure, underground storage tank, equipment, furniture, inventory, building system or unit, or other asset owned, leased, operated or erected by the Company, any Shareholder, Real Estate Seller, or any Affiliate thereof, on or prior to the Closing Date (including any surface water thereon or adjacent thereto, and any soil minerals, oil and gas rights, air rights, water or development rights or groundwater thereunder). "RCRA" has the meaning set forth under the definition of "Environmental Law." "REAL ESTATE SELLERS" means the Persons designated as such and set forth on the signature page hereto. "REAL PROPERTIES" collectively refers to the parcels of real property, and any and all easements, rights of way, reservations, privileges, appurtenances, strips, gores and alleys adjoining or pertaining thereto constituting the Owned Real Properties and the Leased Real Properties. "RELATED PARTY RECEIVABLE AMOUNT" means the aggregate amount of Indebtedness owed to the Company by any Shareholder, Affiliate of any Shareholder or Affiliate of the Company. "RELEASE" means release, spill, emission, leaking, pumping, injection, deposit, disposal, discharge, dispersal, leaching or migration of a Hazardous Substance into the indoor or outdoor environment or into or out of any Property, including the movement of Hazardous Substances through or in the air, soil, surface water, groundwater or Property. "REMEDIAL ACTION" means actions to (i) clean up, remove, treat or in any other way address Hazardous Substances in the indoor or outdoor environment; (ii) prevent the Release or threatened Release or minimize the further Release of Hazardous Substances; or (iii) investigate and determine if a remedial response is needed and to design such a response and post-remedial investigation, monitoring, operation and maintenance and care. "REPRESENTATIVES" means, as to any Person, such Person's affiliates, partners, officers, directors, employees, agents, advisors (legal, accounting and financial), consultants, financing sources and financing sources' advisors. "REQUIREMENTS OF LAWS" means any federal, state and local laws, statutes, regulations, judgments, writs, orders, injunctions, rules, codes or ordinances or other legal requirements enacted, adopted, issued or promulgated by any Governmental Body (including, without limitation, those pertaining to building, zoning, environmental, Tax and occupational safety and health requirements) or common law. "RESERVED AMOUNT" means, as of each of the First Escrow Release Date and the Second Escrow Release Date, the aggregate amount of all unresolved and/or unpaid indemnification claims made by any Buyer Indemnitee pursuant to Sections 8.2, 11.1 and 11.2 as of such date. "RESERVED SOLVAY AMOUNT" means, as of each of the First Solvay Environmental Escrow Release Date and the Second Solvay Environmental Escrow Release Date, the aggregate amount of all unresolved and/or unpaid indemnification claims made by any Buyer Indemnitee pursuant to Section 11.3 hereof as of such date. "SARA" has the meaning set forth under the definition of "Environmental Law". "SECOND ESCROW RELEASE DATE" means the 19 month anniversary of the Closing Date, on which the balance of the Indemnification Holdback Amount then remaining in the Escrow Account, less the Reserved Amount, shall be released. "SECOND SOLVAY ENVIRONMENTAL ESCROW RELEASE DATE" means the ten year anniversary of the Closing Date, on which the balance of the Solvay Environmental Indemnification Holdback Amount then remaining in the Escrow Account, less the Reserved Solvay Amount, shall be released. "SECTION 338(h)(10) ELECTION" means an election by the Shareholders and Buyer under section 338(h)(10) of the Code (and under any applicable similar provision of state, local or foreign law) with respect to the acquisition of the Company Securities pursuant to the Merger. "SENIOR NOTE INDEBTEDNESS AMOUNT" means the amount, as of the Closing Date, necessary to pay off in full and extinguish all loans, advances, indebtedness, obligations, fees, penalties and liabilities of the Company owed to the Note Holders under the Senior Notes. "SENIOR NOTES" means those certain 8.8% Senior Notes in the aggregate original principal amount of $30,000,000 which mature on March 15, 2010 and were issued by the Company to certain Persons pursuant to terms and conditions of the Note Purchase Agreement. "SHAREHOLDER ANCILLARY AGREEMENTS" means all agreements, instruments, and documents being or to be executed and delivered by any Shareholder or his, her or its Affiliate under this Agreement or in connection herewith, including any Real Estate Purchase Agreement. "SHAREHOLDERS REPRESENTATIVE AGREEMENT" means the Shareholders' Representative Agreement dated as of the date hereof, attached hereto as Exhibit D. "SOLVAY ENVIRONMENTAL INDEMNIFICATION HOLDBACK ACCOUNT" means the portion of the Escrow Account in which the Solvay Environmental Indemnification Holdback Amount is deposited. "SOLVAY ENVIRONMENTAL INDEMNIFICATION HOLDBACK AMOUNT" means $3,000,000 which will be used to fund indemnification payments, if any, made pursuant to Section 11.3 hereof and in accordance with the Escrow Agreement. "SOLVAY FACILITY PROPERTY" means the real property located at 1500 Milton Avenue, Solvay, New York 13209. "TARGET WORKING CAPITAL" means $27,016,199, plus the aggregate amount of accrued customer rebates as of Closing (currently estimated to be $2,700,000), less the aggregate amount of accrued supplier rebates as of the Closing (currently estimated to be $1,200,000). A hypothetical calculation of (A) Closing Working Capital (using an example balance sheet as of Closing), (B) Target Working Capital (using accrued customer and supplier rebates as of Closing from the example balance sheet) and (C) the Working Capital Shortfall is attached hereto as Schedule A. "TAX" means any tax (including without limitation, income, gross receipts, license, payroll, employment, excise, severance, stamp, occupation, premium, windfall profits, environmental (including taxes under Code Section 59A), capital stock, franchise, profits, withholding, social security (or similar), unemployment, disability, real property, personal property, sales, use, transfer, registration, value added, alternative, estimated or add-on minimum tax, or other tax of any kind whatsoever, or levies or other like assessments, customs duties, escheat or unclaimed property taxes, imposts, charges or fees with respect thereto) and any related fine, interest, penalty, or addition thereto, whether disputed or not, imposed, assessed or collected by or under the authority of any Governmental Body. "TAX RETURN" means any return, report, notice, form or similar statement required to be filed with respect to any Tax (including any attached schedules), including, without limitation, any information return, claim for refund, amended return and declaration of estimated Tax. "TITLE COMMITMENTS" means the commitment letters or binders set forth on Schedule B from the Title Company to issue to Buyer (or its designee) Title Policies insuring good and marketable fee title to each of the Transferred Real Properties and the Owned Real Properties. "TITLE COMPANY" means Chicago Title Insurance Company and/or any of its Affiliates, or such other reputable, nationally-recognized and financially sound title company as shall be acceptable to the Company and Buyer. "TOTAL ENTERPRISE VALUE" means $260,000,000. "TRANSACTION COSTS" means all the out-of-pocket costs and expenses of the Shareholders and the Company relating to the transactions contemplated by this Agreement and the Real Estate Purchase Agreements, which categories of items are set forth in Schedule 1.1 of the Company Disclosure Schedules (which schedules will be updated on the Closing Date), but specifically excluding any costs and expenses (i) included in the definition of "Funded Obligations," or (ii) allocated to Buyer pursuant to the terms of this Agreement or any Real Estate Purchase Agreement; provided that any item set forth on such schedule or allocated to Buyer shall not be included on the Closing Working Capital Statement. "TRANSFERRED REAL PROPERTIES" means the real properties located at the following addresses: (a) 8400 West Washington Street, Tolleson, Arizona 85353, (b) 5750-5751 118 Street, Alsip, Illinois 60482, (c) 11600 South Central Avenue, Alsip, Illinois 60658 and (d) 1500 Milton Avenue, Solvay, New York 13209. "UNUSED CAP EX AMOUNT" means the excess of (i) the budgeted amount of capital expenditures of the Company and the Real Estate Sellers for the period from January 1, 2003 to and including the Closing Date (with budgeted capital expenditures prorated based upon the number of days in 2003 actually elapsed as of and including the Closing Date based on a full year budget of $14.2 million) over (ii) the actual capital expenditures of the Company and the Real Estate Sellers for the period beginning January 1, 2003 and ending on the Closing Date. In each case, "capital expenditures" shall be determined in accordance with GAAP and consistent with the historical practices of the Company and the Real Estate Sellers; provided, however, that the parties agree that new molds and tooling that have been expensed by the Company during 2003 have been included in the 2003 budget of $14.2 million and shall be included in the calculation of actual capital expenditures as of the Closing Date. "WORKING CAPITAL HOLDBACK AMOUNT" means $2,000,000, which will be used to fund payments made by the Shareholders, if any, pursuant to the working capital adjustment set forth in Section 2.9 hereof and the Escrow Agreement. INDEX OF TERMS DEFINED IN OTHER SECTIONS ---------------------------------------- 1933 Act Section 6.3(a) Acquisition Transaction Section 7.5 Agreement Preamble Alternative Financing Section 7.14(a) Articles of Merger Section 2.2 Audited Financial Statements Section 5.7 Business Recital A Buyer Preamble Buyer Indemnitees Section 11.1(a) Certificate of Merger Section 2.2 Claim Notice Section 11.5(a) Closing Section 3.1 Closing Date Section 3.1 Closing Working Capital Section 2.9(a) Closing Working Capital Statement Section 2.9(a) Commitment Letters Section 6.4 Company Preamble Company Disclosure Schedules Section 4.2 Company Securities Recital B Compliance Costs Section 7.13 Deductible Section 11.1(b) Designated Contracts Section 5.21 Disclosure Schedule Update Section 7.6(a) Effective Time Section 2.2 Equipment Lease Section 5.15 Equity Commitment Letters Section 6.4 Final Closing Working Capital Section 2.9(c) Financial Statements Section 5.7 Financing Section 6.4 First Escrow Release Amount Definition of "First Escrow Release Date" Funded Obligations Schedule Definition of Aggregate Purchase Price Governmental Permits Section 5.13(b) Indemnified Party Section 11.5(a) Indemnitor Section 11.5(a) Insurance Contracts Section 5.20 Interim Financial Statements Section 5.7 Leased Real Properties Section 5.17(a) Lease Termination Agreement Section 7.11 Licensed Intellectual Property Rights Section 5.16(b) Material Customer Section 5.27(a) Merger Recitals Neutral Auditors Section 2.9(c) Owned Intellectual Property Section 5.16(a) Owned Real Properties Section 5.17(b) Plas-Tool License Section 7.19 Prohibited Marks Section 8.5 PT Section 7.19 Real Estate Purchase Agreement Section 2.7 Real Property Leases Section 5.17(a) Resolution Period Section 2.9(b) Shareholder Indemnitees Section 11.4 Shareholder(s) Preamble Shareholders' Agreement Section 4.2 Shareholder Representative Section 8.6(a) Shop Lease Section 3.3(e) Surviving Corporation Section 2.1 Tax Package Section 8.2(a)(v) Third Party Claim Section 11.5(a) Transferred Real Properties Purchase Price Section 2.7 Transition Lease Section 3.3(d) Termination Fee Section 12.1(d) WARN Act Section 5.19(c) Working Capital Shortfall Section 2.9(d)(ii) ARTICLE II PURCHASE AND SALE OF BUSINESS 2.1 The Merger. Upon the terms and subject to the conditions set forth in this Agreement, and in accordance with the IBCA and the DGCL, the Merger shall be effected and Sub shall be merged with and into the Company at the Effective Time with the separate corporate existence of Sub ceasing and the Company continuing as the surviving corporation. The surviving corporation of the Merger shall be herein referred to as the "SURVIVING CORPORATION". The Surviving Corporation shall become a direct wholly-owned subsidiary of Buyer and shall succeed to and assume all the rights and obligations of Sub and the Company in accordance with the IBCA and the DGCL. 2.2 Effective Time. Subject to the provisions of this Agreement, as soon as practicable on the Closing Date, the parties shall file concurrently (a) articles of merger (the "ARTICLES OF MERGER") with the Secretary of State of the State of Illinois in accordance with the relevant provisions of the IBCA and (b) a certificate of merger (the "CERTIFICATE OF MERGER") with the Secretary of State of the State of Delaware in accordance with the relevant provisions of the DGCL and shall make all other filings or recordings required under the IBCA and the DGCL (the time of such filings, or such later time as may be agreed in writing by the Company and Buyer and specified in the Articles of Merger and Certificate of Merger, being the "EFFECTIVE TIME"). 2.3 Certificate of Incorporation and Bylaws. (a) The Certificate of Incorporation set forth on Exhibit E-1 shall be the Certificate of Incorporation of the Surviving Corporation until thereafter amended as provided therein or by applicable law. (b) The Bylaws set forth on Exhibit E-2, shall be the Bylaws of the Surviving Corporation until thereafter amended as provided therein or by applicable law. 2.4 Directors and Officers of the Surviving Corporation. (a) The directors of Sub immediately prior to the Effective Time shall be the directors of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. (b) The officers of Sub immediately prior to the Effective Time shall be the officers of the Surviving Corporation, until the earlier of their resignation or removal or until their respective successors are duly elected and qualified, as the case may be. 2.5 Effects of the Merger. (a) At and after the Effective Time, the Merger shall have the effects set forth in the IBCA and DGCL. Without limiting the generality of the foregoing, and subject thereto, at the Effective Time all the property, rights, privileges, powers and franchises of the Company and Sub shall be vested in the Surviving Corporation, and all debts, liabilities and duties of the Company and Sub shall become the debts, liabilities and duties of the Surviving Corporation. (b) As of the Effective Time, by virtue of the Merger and without any action on the part of the holder of any Company Securities or any shares of capital stock of Sub: (i) each issued and outstanding share of capital stock of Sub shall be converted into and become one validly issued, fully paid and non-assessable share of common stock of the Surviving Corporation; (ii) each Company Security that is owned by the Company, Buyer or Sub shall automatically be canceled and retired and shall cease to exist, and no consideration shall be delivered in exchange therefor; and (iii) each Company Security issued and outstanding immediately prior to the Effective Time (other than Company Securities to be canceled in accordance with Section 2.5(b)(ii)) shall be converted into the right to receive the Per Share Merger Consideration. 2.6 Subsequent Actions. If, at any time after the Effective Time, any deeds, bills of sale, assignments, assurances or any other actions or things are reasonably necessary to vest, perfect or confirm of record or otherwise in the Surviving Corporation its right, title or interest in, to or under any of the rights, properties or assets of either of the Company or Sub acquired or to be acquired by the Surviving Corporation as a result of, or in connection with, the Merger, then the officers and directors of the Surviving Corporation shall be authorized to execute and deliver, in the name and on behalf of either the Company or Sub, all such deeds, bills of sale, instruments of conveyance, assignments and assurances and to take and do, in the name and on behalf of each such corporation or otherwise, all such other actions and things as may be necessary or desirable to vest, perfect or confirm any and all right, title or interest in, to and under such rights, properties or assets in the Surviving Corporation. 2.7 Purchase and Sale of Transferred Real Properties. Subject to the terms and conditions of the Real Estate Purchase Agreements, each in the form attached hereto as Exhibit F (each, a "REAL ESTATE PURCHASE AGREEMENT"), Buyer (or its designee) agrees to purchase, and the Real Estate Sellers agree to sell, transfer and convey, the Transferred Real Properties. In consideration for the Transferred Real Properties, Buyer (or its designee) shall pay to the Real Estate Sellers U.S. $32,000,000 (the "TRANSFERRED REAL PROPERTIES PURCHASE PRICE"), allocated as set forth on Schedule 2.7. 2.8 Payments at Closing. At the Closing: (a) The Company will deliver to the holders of the Funded Indebtedness an amount sufficient to repay all Funded Indebtedness, with the result that following the Closing there will be no further monetary obligations of the Company with respect to the Funded Indebtedness. On or prior to the Closing Date, the Company shall provide Buyer with customary pay-off letters from all holders of such Funded Indebtedness and make arrangements reasonably satisfactory to Buyer for such holders to provide Buyer recordable form mortgage and lien releases, cancelled notes and other documents reasonably requested by Buyer prior to Closing. If the Closing occurs, Buyer shall provide the Company with sufficient funds to repay the Funded Indebtedness at the Closing. (b) Buyer shall pay to each Shareholder an amount equal to the product of (i) the Per Share Paid Out Merger Consideration and (ii) the number of shares of capital stock held by such Shareholder immediately prior to the Effective Time (as set forth on Schedule 5.5) by wire transfer of immediately available funds to accounts designated by the Shareholders in writing not later than two days prior to the Closing Date. (c) The Transferred Real Properties Purchase Price shall be payable at Closing as provided for in the Real Estate Purchase Agreements with respect to each of the Transferred Real Properties. (d) Buyer will deposit the Holdback Amount in the Escrow Account. 2.9 Working Capital Adjustment. (a) As soon as practicable, but in no event later than 45 days following the Closing, Buyer shall prepare a calculation of Closing Working Capital of the Company as of the Closing Date (the "CLOSING WORKING CAPITAL STATEMENT"). The Closing Working Capital Statement shall be prepared in accordance with GAAP applied consistently with the application thereof in the Financial Statements (to the extent that such Financial Statements complied with GAAP). The term "CLOSING WORKING CAPITAL" means, as of the Closing Date, the difference between (A) the Company's current assets less (i) cash and cash equivalents, (ii) interest receivables and (iii) current portion of notes, and (B) the Company's current liabilities less (i) short term notes payable, (ii) current portion of long term debt, (iii) current portion of long term leases, (iv) notes payable to Shareholders and (v) accrued interest. (b) Buyer shall deliver a copy of the Closing Working Capital Statement to the Shareholder Representative promptly after it has been prepared. After receipt of the Closing Working Capital Statement, the Shareholder Representative shall have 30 days to review the Closing Working Capital Statement, together with the work papers used in the preparation thereof. Buyer shall (i) provide the Shareholder Representative and its Representatives reasonable access during normal business hours to all relevant work papers, trial balances and other financial information to the extent necessary or useful to complete their review of the Closing Working Capital Statement, and (ii) cooperate with the Shareholder Representative's and its Representatives' reasonable requests with respect to the review of the Closing Working Capital Statement, including by providing on a timely basis all information necessary or useful in reviewing the Closing Working Capital Statement. Unless the Shareholder Representative delivers written notice to Buyer on or prior to the 30th day after the Shareholder Representative's receipt of the Closing Working Capital Statement specifying in reasonable detail the amount, nature and basis of all disputed items, the Shareholder Representative shall be deemed to have accepted and agreed to the calculation of the Closing Working Capital on behalf of all Shareholders. If the Shareholder Representative (or one of its Representatives) notifies Buyer of an objection to the calculation of the Closing Working Capital, the Shareholder Representative and Buyer shall, within 20 days (or such longer period as the parties may agree in writing) following 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 (other than as a result of manifest error or fraud). (c) If, at the conclusion of the Resolution Period, there are any amounts remaining in dispute, then such amounts remaining in dispute shall be submitted to the Chicago, Illinois office of Deloitte & Touche or another nationally recognized public accounting firm agreed by Buyer and the Shareholder Representative (the "NEUTRAL AUDITORS"). Buyer and the Shareholder Representative (on behalf of all Shareholders) shall execute, if requested by the Neutral Auditors, a reasonable engagement letter, including customary indemnities. The Neutral Auditors shall act as an arbitrator to determine, based solely on the provisions of this Section 2.9 and the presentations by the Shareholder Representative and Buyer, and not by independent review, only those issues still in dispute. The Neutral Auditors' determination shall be made within 30 days of the dispute being submitted for their determination, shall be set forth in a written statement delivered to the Shareholder Representative and Buyer and shall be final, non-appealable and binding on the parties hereto, absent manifest error or fraud. A judgment of a court of competent jurisdiction may be entered upon the Neutral Auditors' determination. The Neutral Auditors shall have exclusive jurisdiction over, and resort to the Neutral Auditors as provided in this Section 2.9(c) shall be the only recourse and remedy of the parties against one another with respect to, any disputes arising out of or relating to the adjustments pursuant to this Section 2.9(c). The fees, costs and expenses of the Neutral Auditors shall be borne by Buyer, on the one hand, and by the Shareholder Representative, on the other, based upon the percentage which the portion of the contested amount not awarded to each party bears to the amount actually contested by such party. For example, if the Shareholder Representative claims that the Closing Working Capital is $1,000 greater than the amount determined by Buyer, and Buyer contests only $500 of the amount claimed by the Shareholder Representative, and if the Neutral Auditors ultimately resolve the dispute by awarding the Shareholders $300 of the $500 contested, then the costs and expenses of the Neutral Auditors will be allocated 60% (i.e., 300 -- 500) to Buyer and 40% (i.e., 200 +/- 500) to the Shareholders. The term "FINAL CLOSING WORKING CAPITAL" shall mean the definitive Closing Working Capital agreed to (or deemed to be agreed to) by Buyer and the Shareholder Representative in accordance with Section 2.9(b) hereof or resulting from the determinations made by the Neutral Auditors in accordance with this Section 2.9(c) (in addition to those items theretofore agreed to by the Shareholder Representative and Buyer). (d) In the event the Final Closing Working Capital (i) exceeds the Target Working Capital, the Company shall pay the excess to the Shareholders pro rata based upon each Shareholder's Ownership Percentage and the Escrow Agent shall pay the Working Capital Holdback Amount out of the Escrow Account to the Shareholders pro rata based upon each Shareholder's Ownership Percentage; (ii) is less than the Target Working Capital (the difference between the Target Working Capital and the Final Closing Working Capital, the "WORKING CAPITAL SHORTFALL") and the Working Capital Shortfall is less than or equal to the Working Capital Holdback Amount, the Working Capital Shortfall shall be paid to the Company by the Escrow Agent out of the Escrow Account and the balance of the Working Capital Holdback Amount, if any, shall be paid to the Shareholders, pro rata based on each Shareholder's Ownership Percentage, by the Escrow Agent out of the Escrow Account; or (iii) is less than the Target Working Capital and the Working Capital Shortfall is greater than the Working Capital Holdback Amount, the Working Capital Holdback Amount shall be paid to the Company by the Escrow Agent out of the Escrow Account and the Shareholders shall pay the difference between the Working Capital Shortfall and the Working Capital Holdback Amount to the Company pro rata based upon each Shareholder's Ownership Percentage. All payments made pursuant to this Section 2.9 shall be made by wire transfer of immediately available funds within five (5) days of the determination of the Final Closing Working Capital to accounts previously designated in writing by Buyer and the Shareholder Representative, and shall include interest at a rate equal to the rate at which interest accrues on the Working Capital Holdback Amount in the Escrow Account between the Closing Date and the date of payment. In no event shall any portion of the Indemnification Holdback Amount or the Solvay Environmental Indemnification Holdback Amount be applied toward the satisfaction, in whole or in part, of the Working Capital Shortfall. ARTICLE III CLOSING 3.1 Closing Date. The closing (the "CLOSING") of the transactions contemplated by this Agreement shall be consummated at 10:00 A.M., local time, two Business Days after the conditions set forth in Articles IX and X have been satisfied or waived, or such later time or date as may be agreed upon by Buyer and the Shareholder Representative, at the offices of Fried, Frank, Harris, Shriver & Jacobson, One New York Plaza, New York, New York 10004 or at such other place as shall be agreed upon by Buyer and the Shareholder Representative; provided, however, that the parties hereto will use their commercially reasonable efforts to take, or cause to be taken, all actions necessary to make effective and consummate the transactions contemplated by this Agreement on or prior to November 14, 2003; provided, further, that nothing in this Agreement shall obligate (x) Buyer to draw down the Bridge Financing prior to December 23, 2003 or (y) any party to waive any condition to the obligation of such party under this Agreement. The time and date on which the Closing is actually held is sometimes referred to herein as the "CLOSING DATE." 3.2 Payment of Per Share Merger Consideration. Subject to fulfillment or waiver of the conditions set forth in Article IX, at Closing, Buyer shall pay the Per Share Paid Out Merger Consideration with respect to all of the Company Securities. 3.3 Buyer's and Sub's Deliveries. Subject to fulfillment or waiver of the conditions set forth in Article IX, at Closing, each of Buyer and Sub shall (or, in the case of the Real Estate Purchase Agreements, shall cause its designees to) deliver to the Shareholder Representative all the following: (a) A certificate of good standing for each of Buyer and Sub issued as of a recent date by the Secretary of State of the State of Delaware; (b) A certificate of the secretary of each of Buyer and Sub, dated the Closing Date, in form and substance reasonably satisfactory to the Company, as to (i) no amendments to the certificate of incorporation of Buyer or Sub since a specified date; (ii) the bylaws of Buyer and Sub; (iii) the resolutions of the Board of Directors of Buyer and Sub authorizing the execution and performance of this Agreement and the Buyer Ancillary Agreements and the transactions contemplated hereby and thereby; and (iv) incumbency and signatures of the officers of Buyer and Sub executing this Agreement and any Buyer Ancillary Agreement; (c) The certificate contemplated by Section 10.1, duly executed by an officer of each of Buyer and Sub; (d) An amendment in the form attached hereto as Exhibit G, amending the existing lease of the Chicago Ridge Corporate Office, to extend the term thereunder for a period of six months after the Closing Date (the "TRANSITION LEASE"), duly executed by Buyer; (e) A lease in the form attached hereto as Exhibit H relating to the Chicago Ridge Tool Shop (the "SHOP LEASE"), duly executed by Buyer; (f) A Real Estate Purchase Agreement with respect to each of the Transferred Real Properties, duly executed by Buyer (or its designees) as contemplated by Section 7.9; (g) The Escrow Agreement, duly executed by Buyer; and (h) Such other documents and instruments as may be required by any other provision of this Agreement or as may be reasonably requested by counsel to the Shareholders to consummate the transactions contemplated by this Agreement and any Buyer Ancillary Agreement. 3.4 The Company's and Shareholders' Deliveries. Subject to fulfillment or waiver of the conditions set forth in Article X, at Closing, the Company, the Shareholders and the Real Estate Sellers, as the case may be, shall deliver to Buyer and Sub all the following: (a) Stock certificates evidencing the Company Securities; (b) A certificate of good standing of the Company issued as of a recent date by the Secretary of State of the State of Illinois and each state in which the Company is required to do business as a foreign corporation; (c) A certificate of the secretary of the Company, dated the Closing Date, in form and substance reasonably satisfactory to Buyer, as to: (i) no amendments to the articles of incorporation of the Company since a specified date; (ii) the bylaws of the Company; (iii) the resolutions of the Board of Directors of the Company authorizing the execution and performance of this Agreement, the Company Ancillary Agreements, and the transactions contemplated hereby and thereby; and (iv) incumbency and signatures of the officers of the Company executing this Agreement and any Company Ancillary Agreement; (d) The certificate contemplated by Section 9.1, duly executed by the authorized officer of the Company; (e) The resignations of all of the directors and officers of the Company effective as of the Closing Date. (f) The stock books, stock ledgers, minute books, corporate seal and other books and records of the Company; (g) The Transition Lease, duly executed by the lessor thereunder; (h) The Shop Lease, duly executed by the lessor thereunder; (i) Agreements terminating the leases to the Leased Real Properties as contemplated by Section 7.11, duly executed by the Company and the lessor thereunder; (j) A Real Estate Purchase Agreement with respect to each Transferred Real Property as contemplated by Section 7.9 and any and all deeds, assignments, bills of sale, transfer forms, transfer tax forms and all other documents in connection with the sales and conveyances as contemplated by the Real Estate Purchase Agreements executed by the Real Estate Sellers thereunder; (k) Pay-off letters with respect to the Funded Indebtedness as contemplated by Section 2.8(a); (l) The Funded Obligations Schedule; (m) Cancelled notes with respect to the Related Party Receivable Amount; (n) Forms 8023 and 8883 and any other form or document required to give effect to the Section 338(h)(l0) Election, executed by all of the Shareholders; (o) The Escrow Agreement, duly executed by the Shareholder Representative; and (p) Such other documents and instruments as may be required by any other provision of this Agreement or as may reasonably be requested by counsel to Buyer to consummate the transactions contemplated by this Agreement and any Company Ancillary Agreement or Shareholder Ancillary Agreement. 3.5 Stock Transfer Books. The stock transfer books of the Company shall be closed immediately upon the Effective Time and there shall be no further registration of transfers of Company Securities thereafter on the records of the Company. ARTICLE IV REPRESENTATIONS AND WARRANTIES REGARDING THE SHAREHOLDERS As an inducement to Buyer and Sub to enter into this Agreement and the Real Estate Purchase Agreements, and to consummate the transactions contemplated hereby and thereby, each Shareholder, with respect to himself, herself, or itself only, severally, and not jointly, represents and warrants to Buyer and Sub that all of the statements contained in this Article IV are true as of the date of this Agreement and as of the Closing Date (or, if made as of a specific date, as of such date): 4.1 Authority of Shareholder. Such Shareholder has full legal right, power, capacity and authority to enter into this Agreement and each Shareholder Ancillary Agreement to which he, she or it is a party, and perform his, her or its obligations hereunder and each of the Shareholder Ancillary Agreements to which he, she or it is a party, and to consummate the transactions contemplated hereby and thereby. This Agreement and each of the Shareholder Ancillary Agreements to which such Shareholder is a party has been, or at Closing will be, duly executed and delivered by such Shareholder and does constitute, or at Closing will constitute, a valid and binding obligation of such Shareholder, enforceable against such Shareholder in accordance with its terms. The execution and delivery of this Agreement and each Shareholder Ancillary Agreement to which such Shareholder is a party will not (i) violate or conflict with any Requirements of Law or Court Order which is applicable to, binding upon or enforceable against such Shareholder or (ii) violate or constitute a default, or require a notice and/or consent under, any mortgage, lease, contract or agreement to which such Shareholder is a party or by which such Shareholder's assets or properties are bound. 4.2 Ownership of Company Securities. The shares of Company Securities listed on Schedule 5.5 of the schedules to this Agreement (the "COMPANY DISCLOSURE SCHEDULES") opposite such Shareholder's name: (i) are owned on the date of this Agreement legally, beneficially and of record by such Shareholder, and such Shareholder has good and marketable title to such shares, free and clear of any Encumbrances, and (ii) will be owned legally, beneficially and of record immediately prior to the Closing by such Shareholder, free and clear of any Encumbrance. Except for the Shareholders' Agreement dated April 1, 2003 (the "SHAREHOLDERS' AGREEMENT"), such Shareholder has not granted to any Person any rights (including without limitation proxy rights or options with respect to any Company Securities) and such Shareholder is not a party to any voting trust or other agreement or understanding with respect to such shares of Company Securities. Such Shareholder has no claim against the Company or any of its officers, directors, the other Shareholders or any other Person with respect to the issuance of any shares of capital stock of the Company. 4.3 Consents and Approvals; No Violations. Neither the execution and delivery of this Agreement by such Shareholder or each of the Shareholder Ancillary Agreements to which he, she or it is a party nor delivery and performance of this Agreement or each of the Shareholder Ancillary Agreements to which he, she or it is a party, nor the consummation of any of the transactions contemplated hereby or thereby, nor compliance by such Shareholder with or fulfillment by such Shareholder of the terms, conditions and provisions hereof or thereof will conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights, or result in the creation or imposition of any Encumbrance, under (1) the charter or bylaws or other governing instruments of such Shareholder, if applicable, (2) any of the terms, conditions or provisions of any contract, agreement, commitment, undertaking, or understanding or arrangement (whether written or oral) to which such Shareholder is a party, (3) any Court Order to which such Shareholder is a party or by which such Shareholder or any of its assets or properties are bound, or (4) any Requirements of Laws affecting such shareholder or any of its assets or properties, except in the cases of clauses (2)-(4) above as would not have or be reasonably expected to have a material adverse effect on the ability of such Shareholder to perform its obligations under this Agreement and each Shareholder Ancillary Agreement to which such Shareholder is a party. 4.4 No Finder. Except for Robert W. Baird & Co., whose fees will be paid by the Shareholders, neither such Shareholder nor any Person acting on its behalf has paid, become obligated to pay or will become obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement. 4.5 Insolvency. Such Shareholder has not (i) commenced a voluntary case, or had entered against it a petition for relief under any federal bankruptcy act or similar petition order or decree under any federal or state law or statute relative to bankruptcy, insolvency or other relief for debtors, (ii) caused, suffered or consented to the appointment of a receiver, trustee, administrator, conservator, liquidator, or similar official in any federal, state or foreign judicial or nonjudicial proceeding, to hold, administer and/or liquidate all or substantially all of its asset, or (iii) made an assignment for the benefit of creditors. ARTICLE V REPRESENTATIONS AND WARRANTIES REGARDING THE COMPANY As an inducement to Buyer and Sub to enter into this Agreement and the Real Estate Purchase Agreements and to consummate the transactions contemplated hereby and thereby, the Company, on behalf of the Shareholders and the Real Estate Sellers, represents and warrants to Buyer and Sub that all of the statements contained in this Article V, as modified by the disclosures and exceptions set forth in the Company Disclosure Schedules, are true as of the date of this Agreement and as of the Closing Date (or, if made as of a specific date, as of such date): 5.1 Organization of the Company. The Company is a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois. The Company has been duly qualified as a foreign corporation for the transaction of business in, and is in good standing in, each jurisdiction in which it owns or leases property or conducts any business so as to require such qualification, except where the failure to so qualify has not had and would not reasonably be expected to have a Material Adverse Effect and the Company can become so qualified in such jurisdiction without the occurrence of a Material Adverse Effect. Schedule 5.1 lists all of the states or other jurisdictions where the Company is qualified or licensed as a foreign corporation. The Company has full power and authority to own or lease and to operate its assets and properties and to carry on its business as now conducted. 5.2 Subsidiaries and Investments. The Company does not, directly or indirectly, (i) own, of record or beneficially, any outstanding voting securities or other equity interests in any corporation, partnership, joint venture or other entity or (ii) control any corporation, partnership, joint venture or other entity. 5.3 Authority of the Company. The Company has full corporate power and authority to execute, deliver and perform this Agreement and the Company Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Company Ancillary Agreements by the Company and the transactions contemplated hereby and thereby have been duly authorized and approved by all necessary corporate action of the Company and do not require any further authorization or consent of the Company or the Shareholders, subject to the approval of this Agreement by the Shareholders. This Agreement has been duly authorized, executed and delivered by the Company and is the legal, valid and binding obligation of the Company enforceable in accordance with its terms and each of the Company Ancillary Agreements has been duly authorized by the Company and upon execution and delivery by the Company will be a legal, valid and binding obligation of the Company enforceable in accordance with its terms. Except as set forth in Schedule 5.3 neither the execution and delivery of this Agreement by the Company or the Shareholders or any Company Ancillary Agreement by the Company, nor delivery and performance of this Agreement or any Company Ancillary Agreement, nor the consummation of any of the transactions contemplated hereby or thereby, nor compliance by the Company or Shareholders with or fulfillment by any of them of the terms, conditions and provisions hereof or thereof will: (a) Conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance, under (1) the charter or bylaws of the Company, (2) any Designated Contract, (3) any Court Order to which the Company is a party or by which the Company or any of its assets or properties are bound, or (4) any Requirements of Laws affecting the Company or any of its assets or properties, except in the cases of clauses (2)-(4) above as would not have or be reasonably expected to have a Material Adverse Effect; or (b) Except for any applicable requirements under the Antitrust Improvements Act, require the approval, consent, authorization or act of, or the making by the Company of any declaration, filing or registration with, any Governmental Body, the failure to obtain or make which would not prevent or materially alter or delay any of the transactions contemplated by this Agreement. 5.4 Capitalization. The authorized capital stock of the Company consists of: (i) 50,000 shares of Class A Common Stock, of which 536 shares are issued and outstanding; and (ii) 50,000 shares of Class B Common Stock, of which 5,007.03 shares are issued and outstanding. All of the issued and outstanding shares of capital stock of the Company (i) have been duly authorized and validly issued and are fully paid and non-assessable, (ii) were issued in compliance with all applicable state and federal securities laws, and (iii) were not issued in violation of any preemptive rights or rights of first refusal. No rights of first refusal exist with respect to the shares of capital stock of the Company, and no such rights arise by virtue of or in connection with the transactions contemplated hereby. Except as set forth above, as of the date hereof, (x) there are no shares of capital stock of the Company authorized, issued or outstanding and (y) there are no outstanding or authorized rights, options, warrants, convertible securities, subscription rights, conversion rights, exchange rights or other agreements or commitments of any kind that could require the Company to issue or sell any shares of its capital stock (or securities convertible into or exchangeable for shares of its capital stock). There are no outstanding stock appreciation, phantom stock, profit participation or other similar rights pursuant to any agreement of the Company. Except for the Shareholders' Agreement and the Restricted Stock Plan dated May 1, 2000, there are no proxies, voting rights or other agreements or understandings with respect to the voting or transfer of the capital stock of the Company. The Company is not obligated to redeem or otherwise acquire any of its outstanding shares of capital stock. 5.5 Shareholders of the Company. Schedule 5.5 sets forth, with respect to the Company, (i) the name, address and federal taxpayer identification number of, and the number of outstanding shares of each class of its capital stock owned by, each shareholder of record as of the close of business on the date of this Agreement; and (ii) the name, address and federal taxpayer identification number of, and number of shares of each class of its capital stock beneficially owned by, each beneficial owner of outstanding shares of capital stock (to the extent that record and beneficial ownership of any such shares are different). The Shareholders are the holders of 100% of the issued and outstanding shares of capital stock of the Company. Except as set forth on Schedule 5.5, such shares are not subject to any voting trust agreement, proxy or other Contract. 5.6 Records. Copies of the articles of incorporation and bylaws of the Company have been provided to Buyer and such copies are true, accurate and complete and reflect all amendments made through the date of this Agreement. The stock ledgers of the Company have been provided to Buyer and contain accurate and complete records of all issuances, transfers and cancellations of shares of the capital stock of the Company. 5.7 Financial Statements. Schedule 5.7 contains (i) the balance sheet of the Company as of December 31, 2001 and December 31, 2002 and the related statements of income and retained earnings and cash flows for the years then ended audited by the independent certified public accounting firm regularly engaged by the Company to prepare its year-end financial statement (the "AUDITED FINANCIAL STATEMENTS"); and (ii) the unaudited balance sheet as of August 24, 2003 and the related statement of income for the fiscal eight months then ended (the "INTERIM FINANCIAL STATEMENTS" and together with the Audited Financial Statements, the "FINANCIAL STATEMENTS"). Except as set forth therein or in the notes thereto and, in the case of the Interim Financial Statements, except for normal year end accruals, the Financial Statements have been prepared in conformity with GAAP consistently applied, and the Financial Statements present fairly the financial position and results of operations of the Company as of the dates and for the periods covered thereby. 5.8 Company Debt. (a) No Indebtedness of the Company contains any material restriction upon (i) the prepayment of Indebtedness of the Company, (ii) the incurrence of Indebtedness by the Company or (iii) the ability of the Company to grant any material lien on the properties or assets of the Company. Schedule 5.8 sets forth, as of August 24, 2003, the amount of principal and unpaid interest outstanding under each instrument evidencing Indebtedness, including any Capital Lease, of the Company. (b) As of the Closing, and immediately prior to any repayment of the Funded Indebtedness, the Company will not have any Indebtedness other than the Funded Indebtedness and the Capital Leases. 5.9 Operations Since the Balance Sheet Date. Except as (a) set forth in Schedule 5.9(a), or (b) in the case of clause (ii) only, expressly required by this Agreement, since the Balance Sheet Date, (i) no event, circumstance, or condition has occurred that individually or in the aggregate with other events, circumstances and conditions, has had or would reasonably be expected to have a Material Adverse Effect and, since August 24, 2003, (ii) the Company has not taken action that, if taken after the date hereof, would constitute a violation of Section 7.4. 5.10 No Undisclosed Liabilities. Except as set forth in Schedule 5.10, and for the liabilities and obligations (i) for which adequate reserves have been recorded on the Balance Sheet or which are reflected in the footnotes thereto and for which reserves are not required under GAAP, or (ii) incurred in the ordinary course of business since the Balance Sheet Date which do not, and would not reasonably be expected to, individually or in the aggregate, have a Material Adverse Effect, the Company has not incurred any liabilities or obligations, whether absolute or contingent, matured or unmatured, or otherwise. 5.11 Inventories. The inventories of the Company (including raw materials, supplies, work-in-process, finished goods and other materials) are of a quality and quantity usable and/or saleable in the ordinary course of business of the Company. The values of the inventory are reflected in the Balance Sheet, reflect the normal inventory valuation policies of the Company, and were determined at the lower of cost or market in accordance with the LIFO method of accounting pursuant to GAAP, consistently applied. 5.12 Receivables and Payables. Except for receivables constituting the Related Party Receivable Amount, all notes and accounts receivable and accounts payable of the Company have arisen from bona fide transactions in the ordinary course of business consistent with past practice. All notes and accounts receivable of the Company are reflected properly on its books and records. 5.13 Compliance with Laws and Governmental Permits. (a) The Company has complied in a timely manner and is currently in compliance in all respects with all Requirements of Laws and Court Orders that apply to the business, properties or assets of the Company, except such instances of non-compliance that, individually or in the aggregate, have not had, and would not reasonably be expected to have, a Material Adverse Effect. (b) The Company owns, holds or possesses all licenses, franchises, permits, privileges, immunities, approvals and other authorizations from a Governmental Body which are necessary to entitle it to own or lease, operate and use the Company Assets and the Leased Assets and to carry on and conduct its business as currently conducted (herein collectively called "GOVERNMENTAL PERMITS"), except for such Governmental Permits as to which the failure to own, hold or possess would not have or be reasonably expected to have a Material Adverse Effect. Schedule 5.13 sets forth a list and brief description of each Governmental Permit, except for such incidental licenses, permits and other authorizations which would be readily obtainable by any qualified applicant without undue burden in the event of any lapse, termination, cancellation or forfeiture thereof. (c) The Company has performed its obligations under each Governmental Permit, and no Basis exists by reason of any action or omission by or on behalf of the Company or, to the Company's knowledge, by reason of any action or omission by or on behalf of any third party, which constitutes or, after notice or lapse of time or both, would constitute, a breach or default under any such Governmental Permit or which permits or, after notice or lapse of time or both, would permit, revocation or termination of any such Governmental Permit, or which would have or be reasonably expected to have a material adverse effect on the rights of the Company under any such Governmental Permit. No notice of cancellation, of default or of any dispute concerning any Governmental Permit, or of any event, condition or state of facts described in the preceding sentence, has been received by, or is known to, the Company, including notice of any proceeding in respect thereof. Each Governmental Permit is valid, subsisting and in full force and effect and the consummation of the transactions contemplated hereby will not result in the occurrence of any breach, default or forfeiture of rights thereunder, or require the consent, approval, or act of, or the making of any filing with, any Governmental Body. 5.14 Assets. The Company's machinery, equipment and other Company Assets and Leased Assets used in the Business are in good working order and repair in all material respects, ordinary wear and tear and ordinary course maintenance and replacement excepted. The Company has good and marketable title to all of the Company's tangible personal property, free and clear of any Encumbrances except for Permitted Encumbrances. The Company Assets, including the Company Intellectual Property, and the Leased Assets constitute, in the aggregate, all of the assets and properties necessary for the conduct of the business of the Company in the manner in which and to the extent to which such business is currently being conducted. 5.15 Personal Property Leases. Schedule 5.15 contains a brief description of each lease or other Contract with an annual rent exceeding $100,000 (including in each case the annual rent, the expiration date thereof and a brief description of the property covered), under which the Company is lessee of, or holds or operates, any machinery, equipment, vehicle or other tangible personal property owned by a third Person and used in or relating to the Company's business (an "EQUIPMENT LEASE"). The assets being leased pursuant to the Equipment Leases are in good working order and repair in all material respects, ordinary wear and tear and ordinary course maintenance and replacement excepted. The Company has complied in all material respects with the terms and conditions of each Equipment Lease and, to the Company's knowledge, all of the covenants to be performed by any other party thereto have been fully performed and there are no claims for breach or indemnification or notice of default or termination under any Equipment Lease. The Company is not, nor will it be, as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in breach of any Equipment Lease. 5.16 Intellectual Property. (a) The Company owns all right, title, and interest in (free and clear of all Encumbrances) ("OWNED INTELLECTUAL PROPERTY"), or is licensed or otherwise possesses legally enforceable and unencumbered rights to use in the manner in which it is using it, all Company Intellectual Property, and the Company Intellectual Property is sufficient to enable the Company to conduct its business as currently conducted and proposed to be conducted and the consummation of the transactions contemplated hereby will not alter or impair such rights. (b) Schedule 5.16(b) lists (i) all patents and patent applications and all registered and material unregistered trademarks, trade names and service marks, registered and material unregistered copyrights, and mask works included in the Company Intellectual Property, including the jurisdictions in which each such Intellectual Property right has been issued or registered or in which any application for such issuance and registration has been filed; (ii) all licenses, sublicenses and other agreements to which the Company is a party pursuant to which any Person is authorized to use any Company Intellectual Property (excluding commercially available, off-the-shelf software); and (iii) all licenses, sublicenses and other agreements to which the Company is a party pursuant to which the Company is authorized to use any third-party (including without limitation for the purposes of this Section 5.16 any Employees) Company Intellectual Property which is not Owned Intellectual Property, or which is incorporated in, is, or forms a part of, any product, process or service of the Company (excluding commercially available, off-the-shelf software, including, for each such item, an identification of the Intellectual Property that the Company is authorized to use and the product, process, or service in which it is used or is currently proposed to be used) ("LICENSED INTELLECTUAL PROPERTY RIGHTS"). No royalties or other continuing payment obligations are due in respect of Licensed Intellectual Property Rights. All patents and registrations or applications therefor included in Company Intellectual Property are valid and subsisting and in full force and effect and are applied for and owned in the name of the Company. (c) The Company is not, nor will it be, as a result of the execution and delivery of this Agreement or the performance of its obligations under this Agreement, in breach of any license, sublicense or other agreement relating to Licensed Intellectual Property Rights or other Company Intellectual Property. (d) The Company and the operation of the Business as presently conducted and proposed to be conducted, does not dilute, misuse, infringe, misappropriate or otherwise come into conflict with any Intellectual Property of any other Person (including without limitation any Employee), except for such dilutions, misuses, infringements, misappropriations or other conflicts which, individually or in the aggregate, would not have or be reasonably expected to have a Material Adverse Effect. No charge, complaint, demand, notice or claim is pending or has been made to such effect and the Company has not received written notice so alleging (including any claim that the Company must license or refrain from using any Intellectual Property of any other such Person). No action, suit, proceeding, hearing, investigation, charge, complaint, claim or demand is pending or, to the Company's knowledge, threatened, that challenges the legality, validity, enforceability, use or ownership of any item of Company Intellectual Property, nor is any Company Intellectual Property subject to any outstanding injunction, judgment, order, decree, ruling or charge. (e) To the Company's knowledge, no third party has interfered with, infringed upon, misappropriated, misused, diluted or otherwise come into conflict with any Company Intellectual Property. 5.17 Real Property and Real Property Leases. (a) Schedule 5.17(a) contains a true, complete and correct list (designating the relevant owners) of all real property (other than the Owned Real Properties) leased, subleased or occupied by the Company in connection with the operation of the Business as tenant (the "LEASED REAL PROPERTIES") and the Company has delivered to Buyer true, correct and complete copies of the leases for all of the Leased Real Properties (the "REAL PROPERTY LEASES"). Except for the Transition Lease, all of the Real Property Leases will be terminated as of the Closing Date, and any and all liability under the Real Property Leases will be extinguished except as provided in the Lease Termination Agreements. Except for the Transition Lease and the Shop Lease, all of the real property that is the subject of the Real Property Leases will be conveyed to Buyer or its designees pursuant to the Real Estate Purchase Agreements. (b) Schedule 5.17(b) contains a true, complete and correct list of all real property legally or beneficially owned by the Company (the "OWNED REAL PROPERTIES"). (c) Except as set forth on Schedule 5.17(c), with respect to each parcel constituting the Real Properties: (i) The Company, the Shareholders and the Real Estate Sellers have not received written notice of any pending or threatened condemnation, eminent domain or similar proceedings with respect to the Real Properties and have no knowledge that any such proceedings are threatened or contemplated. (ii) Except for Permitted Encumbrances, there are no Contracts granting to any party or parties (other than the Company) the right of use or occupancy of any portion of the Real Properties. There are no outstanding options or rights of first refusal to purchase any parcel of the Real Properties. (iii) All improvements and buildings on the Real Properties are in good repair, ordinary wear and tear excepted; and the structural components and systems (including plumbing, electrical, air conditioning/heating and sprinklers) are in good working order in all material respects, ordinary wear and tear and ordinary course maintenance and replacement excepted. (iv) The Company has title to the Owned Real Properties, free and clear of all liens, encumbrances, security interests and adverse claims of any kind or character, other than the Permitted Encumbrances. (v) Neither the Company nor any Real Estate Seller or Affiliate thereof has requested, and, to the knowledge of the Company, there is no pending request for, rezoning of the Owned Real Properties or any other zoning variance for the Owned Real Properties. (vi) Schedule 5.17(c)(vi) sets forth a list of all material work in progress at the Real Properties. (vii) There are no material pending tax certiorari proceedings with respect to the Real Properties, or any tax abatements or exemptions affecting the Real Properties. Neither the Company, nor any Real Estate Seller nor any Affiliate has received in the twelve months prior to the Closing Date any notice of, or has any knowledge of, any proposed increase in the assessed valuation of the Real Properties or of any proposed public improvement assessment. (viii) Within the past two years, no casualty has occurred at the Real Properties. 5.18 Employees and Related Agreements; ERISA. (a) List of Plans. Schedule 5.18(a) contains a true and complete list of each Company Benefit Plan and each Employee Agreement. The Company has no plan or commitment, whether legally binding or not, to establish any new Company Benefit Plan, to enter into any Employee Agreement or to modify or to terminate any Company Benefit Plan or Employee Agreement (except to the extent required by law as previously disclosed to Buyer, or as required by this Agreement), nor has any intention to do any of the foregoing been communicated to Employees. (b) Documents. The Company has provided to Buyer (i) current, accurate and complete copies of all documents embodying each Company Benefit Plan and each Employee Agreement, including all amendments thereto, and trust or funding agreements with respect thereto; (ii) the two most recent annual actuarial valuations, if any, prepared for each Company Benefit Plan; (iii) the two most recent annual reports (Series 5500 and all schedules thereto), if any, required under ERISA in connection with each Company Benefit Plan or related trust; (iv) a statement of alternative form of compliance pursuant to Department of Labor Regulation ss.2520.104-23, if any, filed for each Company Benefit Plan which is an "employee pension benefit plan" as defined in Section 3(2) of ERISA for a select group of management or highly compensated employees; (v) the most recent determination letter received from the IRS, if any, for each Company Benefit Plan and related trust which is intended to satisfy the requirements of Section 401(a) of the Code; (vi) if the Company Benefit Plan is funded, the most recent annual and periodic accounting of Company Benefit Plan assets; (vii) the most recent summary plan description together with the most recent summary of material modifications, if any, required under ERISA with respect to each Company Benefit Plan; and (viii) all material communications to any Employee or Employees relating to each Company Benefit Plan. (c) Compliance. (i) The Company has performed in all material respects all obligations required to be performed by it under each Company Benefit Plan and Employee Agreement and is not in default under or in violation of any Company Benefit Plan or Employee Agreement; (ii) each Company Benefit Plan has been established and maintained in all material respects in accordance with its terms and in compliance with all Requirements of Law; (iii) each Company Benefit Plan intended to qualify under Section 401 of the Code is, and since its inception has been, so qualified and a determination letter has been issued by the IRS to the effect that each such Company Benefit Plan is so qualified and that each trust forming a part of any such Company Benefit Plan is exempt from tax pursuant to Section 501(a) of the Code and, to the Company's knowledge, no circumstances exist which could reasonably be expected to adversely affect this qualification or exemption; (iv) no "prohibited transaction," within the meaning of Section 4975 of the Code or Section 406 of ERISA, has occurred with respect to any Company Benefit Plan; (v) there are no actions, proceedings, arbitrations, suits or claims pending or, to the knowledge of the Company, threatened or anticipated (other than routine claims for benefits), with respect to any Company Benefit Plan or Employee Agreement; (vi) no event or transaction has occurred with respect to any Company Benefit Plan that would result in the imposition of any tax under Chapter 43 of Subtitle D of the Code; (vii) each Company Benefit Plan can be amended, terminated or otherwise discontinued without liability to the Company, other than for accrued benefits; (viii) no Company Benefit Plan is under audit or investigation by the IRS, the Department of Labor or other governmental authority and, to the knowledge of the Company, no such audit or investigation is pending or threatened; (ix) no liability under any Company Benefit Plan has been funded nor has any such obligation been satisfied with the purchase of a contract from an insurance company as to which the Company has received notice that such insurance company is insolvent or is in rehabilitation or any similar proceeding; (x) the Company has timely deposited and transmitted all amounts withheld from Employees for contributions or premium payments for each Company Benefit Plan into the appropriate trusts or accounts; (xi) each Company Benefit Plan that allows loans to plan participants has been operated in all material respects in accordance with the plan's written loan policy; in addition, all outstanding loans from such Company Benefit Plans are current as of the Closing Date, and there are no loans in default; and (xii) the Company has either amended each Company Benefit Plan intended to be qualified under Section 401(a) of the Code for new GUST law changes within the remedial amendment period under Code Section 401(b) or by December 31, 2001, certified its intention to adopt a GUST plan. (d) Pension Plans. The Company does not presently sponsor, maintain, contribute to, is not required to contribute to, has no liability in respect of, and has never sponsored, maintained, contributed to, nor had any liability in respect of, or been required to contribute to, an "employee pension benefit plan" within the meaning of Section 3(2) of ERISA that is subject to Title IV of ERISA, or a "multiple employer plan" (within the meaning of Section 413 of the Code). (e) No Post-Employment Obligations. The Company (i) does not maintain or contribute to any Company Benefit Plan that provides, or has any liability to provide, life insurance, medical, severance or other employee welfare benefits to any Employee upon his retirement or termination of employment, except as may be required by Section 4980B of the Code; and (ii) does not have any obligation or agreement (whether in oral or written form) to any Employee (either individually or to Employees as a group) that such Employee(s) would be provided with life insurance, medical, severance or other employee welfare benefits upon their retirement or termination of employment, except to the extent required by Section 49 of the Code. (f) Effect of Transaction. The execution of, and performance of the transactions contemplated in, this Agreement will not (either alone or upon the occurrence of any additional or subsequent events) constitute an event under any Company Benefit Plan, Employee Agreement, trust or loan or otherwise that will or may result in any payment (whether of severance pay or otherwise), acceleration, forgiveness of indebtedness, vesting, distribution, increase in benefits or obligation to fund benefits with respect to any Employee. No payment or benefit which will or may be made by the Company, Buyer or any of their respective Affiliates with respect to any Employee will be characterized as an "excess parachute payment," within the meaning of Section 280G(b)(1) of the Code. (g) 501(c)(9) Trust. No Company Benefit Plan or Employee Agreement is funded by a trust described in Section 501(c)(9) of the Code. (h) Controlled Group Liability. The Company is not and has never been (i) a member of a "controlled group of corporations," or an "affiliated service group" within the meanings of Sections 414 (b) or (m) of the Code, (ii) required to be aggregated with any Person under Section 414(o) of the Code; or (iii) under "common control," with any Person within the meaning of Section 4001(a)(14) of ERISA or Section 414(c) of the Code. (i) HIPAA. The Company has complied in all material respects with the requirements of the HIPAA Medical Privacy Regulations with respect to each Company Benefit Plan that is subject to such requirements and with respect to the Company's status as a "covered entity" as defined therein. 5.19 Labor and Employment Matters. (a) Except as set forth in Schedule 5.19(a), the Company has complied in all material respects with all Requirements of Law which relate to employment, prices, wages, hours, discrimination in employment and collective bargaining and is not liable for any arrears of wages or any Taxes or penalties for failure to comply with any of the foregoing, including, but not limited to, the Civil Rights Act of 1964, the Fair Labor Standards Act, the Workers Adjustment and Retraining Notification Act of 1988, the Americans with Disability Act, the Age Discrimination in Employment Act of 1967, the Family and Medical Leave Act, and the Pregnancy Discrimination Act (each act, as amended). To the Company's knowledge, the Company does not employ any un-documented non-United States citizens. The Company believes that its relations with its employees are satisfactory. No work stoppage or labor strike against the Company is pending or threatened. No Employees are currently represented by any labor union for purposes of collective bargaining and no activities the purpose of which is to achieve such representation of all or some of such Employees are ongoing or, to the Company's knowledge, threatened. (b) Except as set forth in Schedule 5.19(b), (i) to the Company's knowledge, neither the Company nor any of the Shareholders is involved in any transaction or other situation with any Employees or Affiliates of the Company which may be generally characterized as a conflict of interest including, but not limited to, direct or indirect interests in the business of competitors, suppliers or customers of the Company, and (ii) there is no situation which involved or involves (A) the use of any corporate funds for unlawful contributions, gifts, entertainment or other unlawful expenses related to political activity, (B) the making of any direct or indirect unlawful payments to government officials or others from corporate funds or the establishment or maintenance of any unlawful or unrecorded funds, (C) the violation of any of the provisions of The Foreign Corrupt Practices Act of 1977, or any rules or regulations promulgated thereunder, (D) the receipt of any illegal discounts or rebates or any other violation of the antitrust laws, or (E) any investigation by the Securities and Exchange Commission or any other federal, foreign, state or local government agency or authority. (c) Schedule 5.19(c) contains a complete list of each Employee who has experienced an "employment loss" within the meaning of the Worker Adjustment and Retraining Notification Act (the "WARN ACT") during the last 90 days. (d) The Company has not classified any individual as an "independent contractor" or of similar status who, according to a Company Benefit Plan or the law of the jurisdiction, should have been classified as an employee or of similar status. The Company has no liability, actual or contingent, by reason of any individual who provides or provided services to the Company or any of its Affiliates, in any capacity, who was improperly excluded from participating in any Company Benefit Plan. 5.20 Insurance. Schedule 5.20 contains a complete and accurate list of all liability, property, workers' compensation, directors' and officers' liability, "key man" life and other insurance policies in effect that are owned by the Company or under which the Company is a named insured (the "INSURANCE CONTRACTS"). The Company previously has delivered or otherwise made available to Buyer all Insurance Contracts. There is no claim pending under any such policies or bonds as to which coverage has been questioned, denied or disputed by the underwriters of such policies or bonds. All premiums due and payable under all such policies and bonds have been paid and the Company is otherwise in compliance in all material respects with the terms of such policies and bonds and such policies and bonds and the coverages thereunder are in full force and effect. The Company has no knowledge of any threatened termination of, or premium increase with respect to, any of such policies. 5.21 Contracts. Schedule 5.21 sets forth a complete and correct list of the following Contracts (the "DESIGNATED CONTRACTS") to which the Company is a party or under which it is otherwise bound by the terms thereof: (a) loan agreements, indentures, mortgages, pledges, hypothecations, deeds of trust, conditional sale or title retention agreements, security agreements, equipment financing obligations or guarantees, indemnification agreements or other sources of liability (whether or not contingent) in respect of any indebtedness or obligations to any other Person, or letters of intent or commitment letters with respect to same; (b) agreements pursuant to which the Company is purchasing or selling products or services in excess of $500,000 annually; (c) distribution, sales agency or franchise or similar agreements, or agreements providing for an independent contractor's services, or letters of intent with respect to same involving payments in excess of $100,000 annually; (d) the Equipment Leases; (e) any Contract relating to pending capital expenditures by the Company in excess of $100,000; (f) any Contract with a Shareholder or Affiliate of the Company; (g) any agreement that restricts the Company from engaging in the Business anywhere in the world; (h) any powers of attorney (other than a power of attorney given in the ordinary course of business with respect to routine Tax matters); (i) any Contract that relates to any material acquisition, divestiture, merger or similar transaction that has not been consummated or that has been consummated, but contains representations, warranties, covenants, indemnities or other obligations that are still in effect; and (j) other Contracts, not entered into in the ordinary course of business by the Company and not otherwise disclosed on the Company Disclosure Schedules and involving payments in excess of $100,000 individually. Except as set forth on Schedule 5.21, the Company has complied in all material respects with the terms and conditions of each Designated Contract and, to the Company's knowledge, the other party thereto has complied in all material respects with the terms and conditions of the Designated Contracts, and there are no claims for breach or indemnification or notice of default or termination under any Designated Contract. Except as set forth on Schedule 5.21, no event has occurred which constitutes, or, after notice or the passage of time, or both, would constitute, a material default by the Company under any Designated Contract and, to the Company's knowledge, no such event has occurred which constitutes or would constitute a material default by any other party. 5.22 Taxes. The Company has properly elected to be an S corporation pursuant to Section 1362 of the Code and for federal income tax purposes, is and has been properly classified as an "S Corporation" under Section 1361(a) of the Code and the Treasury Regulations promulgated thereunder (and any applicable predecessor provisions) for all periods ended on or after January 1, 1987, and has been so classified for state and local purposes pursuant to analogous state and local provisions for the periods and the jurisdictions listed on Schedule 5.22. Except as set forth in Schedule 5.22 hereto, all Tax Returns required to be filed with respect to the Company, or any of its income, properties, franchises or operations have been timely filed, each such Tax Return has been prepared in compliance in all material respects with all applicable laws and regulations, and all such Tax Returns are true, complete and accurate in all material respects. All Taxes due and payable by or with respect to the Company have been paid or accrued on its books and records as of the Closing. Except as set forth in Schedule 5.22 hereto: (i) with respect to each taxable period of the Company, no taxable period has been audited by the relevant taxing authority; (ii) no deficiency or proposed adjustment which has not been settled or otherwise resolved for any amount of Taxes has been asserted or assessed by any taxing authority; (iii) the Company has not consented to extend the time in which any Taxes may be assessed or collected by any taxing authority; (iv) the Company has not requested or been granted an extension of the time for filing any Tax Return to a date later than the Closing Date; (v) there is no action, suit, taxing authority proceeding, or audit or claim for refund now in progress, pending or, to the Company's knowledge, threatened against or with respect to the Company regarding Taxes; (vi) there are no Encumbrances for Taxes (other than for current Taxes not yet due and payable) upon the assets of the Company; (vii) no claim has ever been made by a taxing authority in a jurisdiction where the Company does not file Tax Returns that it is or may be subject to Taxes assessed by such jurisdiction, except for any claim which has been fully resolved; (viii) the Company will not be subject to any Taxes for the period ending at the Closing Date for any period for which a Tax Return has not been filed that are imposed pursuant to Section 1374 or Section 1375 of the Code (or any corresponding provision of state, local or foreign law); (ix) prior to the date hereof, the Company has made available to Buyer complete copies of all Tax Returns filed by the Company, revenue agent's reports and other written assertions of deficiencies or other liabilities for Taxes of the Company, and tax rulings, requests for rulings, or closing agreements relating to the Company; (x) all amounts required to be collected or withheld by the Company with respect to Taxes have been duly collected or withheld and any such amounts that are required to be remitted to any taxing authority have been duly remitted; (xi) the Company has not been a party to any Tax sharing agreement, has not taken any deduction or received any Tax benefit arising from participation in a tax shelter as defined for purposes of Section 6111(c) of the Code, and has not participated in a reportable transaction as defined in Treasury Regulation Section 1.6011 - 4(b) and (c)(3) or Treasury Regulation Section 1.6011-4T(a) and (b) (as promulgated in T.D. 8877); (xii) the Company is not, nor has it ever been, a United States real property holding company within the meaning of Section 897(c)(2) of the Code; (xiii) the Company will not be required as a result of any adjustment under Section 481 of the Code, or any "closing agreement" as described in Section 7121 of the Code (or any similar provision of state, local or foreign law), to include any item of income in, or exclude any item of deduction from, any Tax period ending on or after the Closing Date; and (xiv) the Company has not made any consent under Section 341 of the Code and has not taken a deduction for Tax purposes that is subject to disallowance by reason of Section 163(e)(5) of the Code or any analogous provision of state, local or foreign law. 5.23 Litigation or Regulatory Action. Except as set forth in Schedule 5.23: (a) There are no lawsuits, claims, suits, proceedings or investigations pending or, to the knowledge of the Company, threatened against or affecting the Company in respect of the Company Assets, the Leased Assets, its properties or the Business nor, to the knowledge of the Company, is there any Basis for the same, and there is no lawsuit, suit or proceeding pending in which the Company is the plaintiff or claimant which relates to any Company Assets, Leased Assets or the Business; and (b) There is no action, lawsuit, claim, suit, inquiry or proceeding, pending or, to the knowledge of the Company, threatened which questions the legality, validity or propriety of this Agreement or the transactions contemplated by this Agreement. 5.24 Environmental and Health/Safety Matters. (a) The operations of the Company are and have at all times been in compliance in all material respects with all applicable Environmental Laws. Neither the Company nor any of the Shareholders has received notice of any violation of, or liability under, any Environmental Laws or Court Orders applicable to the Company Assets, Leased Assets, the Real Properties or the Business; (b) The Company has in all material respects obtained, maintained and complied with all Governmental Permits required by Environmental Laws and necessary for the operation of the Business; (c) No Hazardous Substances have been generated, transported, stored, treated, recycled or otherwise handled in any way in the operation of the Company's business, except for inventories of raw materials and supplies used or to be used in the ordinary and normal course of operating the business (all of which were or are stored in all material respects in accordance with applicable Environmental Laws); (d) There are no locations not owned or operated by the Company where Hazardous Substances generated by the Company have been stored, treated, recycled or disposed of; (e) No Hazardous Substances generated by the Company are located on, contained in or otherwise form a part of the Property of the Company, except for inventories of raw materials and supplies used or to be used in the ordinary and normal course of operating the Business (all of which were or are stored in all material respects in accordance with applicable Environmental Laws); (f) There is no past or ongoing Release (except for federally permitted Releases) or condition of contamination by Hazardous Substances at, beneath or from any of the Properties, or at, beneath or from other locations where Hazardous Substances associated with the operation of the Business have been or are located; (g) The Company has not treated, stored for more than ninety (90) days, or disposed of any hazardous waste (as such term is used within the meaning of the RCRA or similar applicable state or municipal law) associated with the operation of the Business; (h) The Company has not received any notice from any Governmental Body or other Person advising that any of them is potentially responsible for Remedial Action (or costs thereof) with respect to a Release or threatened Release; (i) No underground storage tanks are or, to the Company's knowledge, ever were located on any properties owned or leased by the Company; (j) No Court Order, litigation, settlement or citation with respect to Hazardous Substances exists with respect to or in connection with the operation of the Company's business; (k) (i) To the Company's knowledge, there has been no environmental investigation conducted by any Governmental Body or with respect to the Properties or the operation of the Company's business; and (ii) the Company has furnished to Buyer copies of all environmental reports, audits or studies with respect to the Real Properties which are in its possession or under its reasonable control; and (l) There are no PCBs or asbestos which are located on, contained in or otherwise form a part of any of the Company Assets, the Leased Assets or the Real Properties, and no Basis exists for the imposition of liability with respect to asbestos containing material in any product of the Company or at or upon any Property or with respect to the Business. 5.25 Product Warranty and Product Liability. Except as set forth on Schedule 5.25, there are no product warranty or product liability claims pending or, to the Company's knowledge, threatened, against the Company and, to the Company's knowledge, there is no Basis for any such product warranty or product liability or other tort claim. Schedule 5.25 sets forth a complete and accurate list of all product liability and product warranty claims made against the Company within the past three (3) years. 5.26 Bank Accounts. Schedule 5.26 contains a complete and accurate list of (a) all bank accounts, lock boxes and safe deposit boxes relating to the business and operations of the Company (including the name of the bank or other institution where such account or box is located and the name of each authorized signatory thereto), (b) all outstanding letters of credit issued by financial institutions for the account of the Company (setting forth, in each case, the financial institution issuing such letter of credit, the maximum amount available under such letter of credit, the terms (including the expiration date) of such letter of credit and the party or parties in whose favor such letter of credit was issued), and (c) the name and address of each Person who has a power of attorney to act on behalf of the Company, and who is authorized to draw on such accounts, or make withdrawals on such accounts or have access to such accounts or boxes. 5.27 Customers and Suppliers. (a) Except as set forth on Schedule 5.27(a), since January 1, 2003, there has not been any material adverse change in the business relationship of the Company with any customer or customers who, individually or in the aggregate, accounted for more than 3.5% of the Company's net sales (on a consolidated basis) during (y) the year 2002 or (z) the period from January 1, 2003 to the date of this Agreement (a "MATERIAL Customer"). No Material Customer has advised the Company that it is (i) terminating or considering terminating its business relationship with the Company, (ii) materially reducing or planning to materially reduce, its future purchases from the Company (on a net basis taking into account any purchases of the Company's other existing products but not including purchases of newly developed products), or (iii) taking or considering taking any action or planning to take any action that would materially lower the Company's margin with respect to such Material Customer. Except as set forth on Schedule 5.27(a), (i) since January 1, 2003, the Company has not received actual notice that, and (ii) since August 24, 2003 the Company has not, to its knowledge, received notice that, any material customer is soliciting or considering soliciting bids from third parties for any material amount of goods or services currently purchased from the Company. No Material Customer has advised the Company that it intends to materially alter the terms of its business relationship with the Company. The Company currently maintains sufficient resin inventory to conduct its business as it has been, and is presently proposed to be, conducted. The Company has access to sufficient amounts of resin supply, purchasable at then prevailing market prices, necessary to conduct its business as it has been, and is presently proposed to be, conducted. (b) The Company has previously disclosed in writing to Buyer the current terms of any rebates or similar provisions with certain Material Customers and there is no current agreement or understanding to modify any of such terms. 5.28 Disclosure. (a) None of (i) the representations or warranties of the Company contained herein, (ii) the information contained in the Company Disclosure Schedules referred to in Article V, or (iii) the certificate furnished by the Company pursuant to Section 3.4 of this Agreement, is false or misleading in any material respect or omits to state a fact herein or therein necessary to make the statements herein or therein not misleading in any material respect. (b) In connection with Buyer's investigation of the Company, Buyer may have received from the Company and its advisors certain projections and other forecasts. Buyer acknowledges that there are uncertainties inherent in attempting to make such projections and other forecasts, that Buyer is familiar with such uncertainties, that Buyer is taking full responsibility for making its own evaluation of the adequacy and accuracy of all projections and other forecasts so furnished to it, and that Buyer shall have no claim against the Company or its advisors with respect thereto. (c) NONE OF THE COMPANY, THE SHAREHOLDERS, THE REAL ESTATE SELLERS OR THEIR ADVISORS MAKES ANY REPRESENTATION OR WARRANTY TO BUYER, EXPRESS OR IMPLIED, WITH RESPECT TO THE COMPANY, INCLUDING WITHOUT LIMITATION, ANY REPRESENTATION OR WARRANTY AS TO TITLE, OWNERSHIP, USE, POSSESSION, MERCHANTABILITY, FITNESS FOR A PARTICULAR PURPOSE, QUANTITY, VALUE, CONDITION, LIABILITIES, OPERATION, CAPACITY, FUTURE RESULTS OR OTHERWISE, OTHER THAN AS EXPRESSLY PROVIDED IN THIS AGREEMENT, THE REAL ESTATE PURCHASE AGREEMENTS AND THE OTHER COMPANY ANCILLARY AGREEMENTS AND THE SHAREHOLDER ANCILLARY AGREEMENTS. WITHOUT LIMITING THE FOREGOING, OTHER THAN AS EXPRESSLY PROVIDED IN THIS AGREEMENT, NONE OF THE COMPANY OR SHAREHOLDERS MAKES ANY REPRESENTATION OR WARRANTY TO BUYER, EXPRESS OR IMPLIED, WITH RESPECT TO (A) THE INFORMATION SET FORTH IN THE CONFIDENTIAL MEMORANDUM DISTRIBUTED BY OR ON BEHALF OF THE COMPANY IN CONNECTION WITH THE SALE OF THE COMPANY AND THE TRANSFERRED REAL PROPERTIES OR (B) ANY FINANCIAL PROJECTION OR FORECAST RELATING TO THE COMPANY OR (C) INFORMATION COMMUNICATED OR PRESENTED IN ANY MANAGEMENT PRESENTATION TO BUYER. 5.29 No Finder. Except for Robert W. Baird & Co., whose fees will be paid by the Shareholders, neither the Company nor any Person acting on its behalf has paid or become obligated to pay to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement. ARTICLE VI REPRESENTATIONS AND WARRANTIES OF BUYER AND SUB As an inducement to the Company, the Shareholders, and the Real Estate Sellers to enter into this Agreement and to consummate the transactions contemplated hereby, Buyer and Sub hereby jointly and severally represent and warrant to the Company that all of the statements contained in this Article VI are true as of the date of this Agreement and as of the Closing Date (or, if made as of a specific date, as of such date): 6.1 Organization of Buyer and Sub. Each of Buyer and Sub is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware and has full power and authority to own or lease and to operate and use its properties and assets and to carry on its business as now conducted. 6.2 Authority of Buyer. Each of Buyer and Sub has full power and authority to execute, deliver and perform this Agreement and Buyer Ancillary Agreements and to consummate the transactions contemplated hereby and thereby. The execution, delivery and performance of this Agreement and the Buyer Ancillary Agreements and the transactions contemplated hereby and thereby have been duly authorized and approved by all necessary corporate action of Buyer and Sub and do not require any further authorization or consent of Buyer, Sub or their respective stockholders. This Agreement has been duly authorized, executed and delivered by each of Buyer and Sub and is the legal, valid and binding agreement of Buyer and Sub enforceable in accordance with its terms and each of the Buyer Ancillary Agreements has been duly authorized by Buyer and upon execution and delivery by Buyer will be a legal, valid and binding obligation of Buyer enforceable in accordance with its terms. Neither the execution and delivery of this Agreement or of any Buyer Ancillary Agreements, nor delivery and performance of this Agreement or any Buyer Ancillary Agreements nor the consummation of any of the transactions contemplated hereby or thereby nor compliance with or fulfillment of the terms, conditions and provisions hereof or thereof will: (a) Conflict with, result in a breach of the terms, conditions or provisions of, or constitute a default, an event of default or an event creating rights of acceleration, termination or cancellation or a loss of rights under, or result in the creation or imposition of any Encumbrance upon any of Buyer's or Sub's assets, under (1) Buyer's or Sub's bylaws or articles of incorporation, (2) any material note, instrument, agreement, mortgage, lease, license, franchise, permit or other authorization, right, restriction or obligation to which Buyer or Sub is a party or any of Buyer's or Sub's assets is subject or by which Buyer or Sub is bound, (3) any Court Order to which Buyer or Sub is a party or any of its assets is subject or by which Buyer or Sub is bound, or (4) any Requirements of Laws affecting Buyer, Sub or their respective assets, except in the cases of clauses (2)-(4) as would not have or be reasonably expected to have a material adverse effect on Buyer's or Sub's ability to consummate the transactions contemplated by this Agreement and the Buyer Ancillary Agreements; or (b) Except for any applicable requirements under the Antitrust Improvements Act, require the approval, consent, authorization or act of, or the making by Buyer or Sub of any declaration, filing or registration with, any Person. 6.3 Securities Laws Representations. (a) Buyer is acquiring the Company Securities in good faith solely for its own account with the present intention of holding such Company Securities for purposes of investment, and Buyer is not acquiring the Company Securities with a view to or for subdivision, distribution, fractionalization or distribution thereof, in whole or in part, or as an underwriter or conduit to other beneficial owners or subsequent purchasers. Buyer is an "accredited investor" as defined in Regulation D of the Securities Act of 1933, as amended (the "1933 ACT"). Buyer has such knowledge and experience in financial and business matters in general, and in investments in the Company Securities in particular, that it is capable of evaluating the merits, risks and other facets of the transactions contemplated by this Agreement. (b) Restricted. Buyer acknowledges and understands that (i) the Company Securities have not been registered under the 1933 Act, or qualified under the securities or "blue sky" laws of applicable states in reliance upon exemptions from registration or qualification thereunder, and (ii) the Company Securities may not be sold, offered, transferred, assigned, pledged, hypothecated or otherwise disposed of or encumbered, except in compliance with the 1933 Act and such laws. 6.4 Available Funds. Buyer has received debt and equity financing commitments that, when funded and together with funds provided by Buyer and the committed and undrawn funds under Buyer's current credit facilities, are sufficient to enable it to consummate the transactions contemplated by this Agreement and Buyer Ancillary Agreements. True and correct copies of the equity commitments are attached hereto as Exhibit I (the "EQUITY COMMITMENT LETTERS" and, together with the Bridge Financing Commitment Letter, the "COMMITMENT LETTERS") (such financing, the "FINANCING"). The Commitment Letters are not subject to any conditions other than as set forth therein, have been duly executed by all parties thereto, and are in full force and effect on the date hereof. Buyer is not aware of and does not anticipate any Basis upon which the conditions set forth in the Commitment Letters will not be fully satisfied on the Closing Date. 6.5 Litigation. There is no action, suit or proceeding, at law or in equity, by any Person or any arbitration or any administrative or other proceeding before any Governmental Body, pending or, to the knowledge of Buyer, threatened in writing, which is reasonably likely to materially affect Buyer's or Sub's ability to consummate the transactions contemplated by this Agreement. 6.6 No Finder. Except for Goldman, Sachs & Co. and J.P. Morgan Securities Co., and their respective affiliates, whose fees and expenses will be paid by Buyer, neither Buyer, Sub nor any Person acting on Buyer's or Sub's behalf has paid or become obligated to pay any fee or commission to any broker, finder or intermediary for or on account of the transactions contemplated by this Agreement. 6.7 No Activities. Sub was formed solely for the purpose of engaging in a merger. Except for obligations or liabilities incurred in connection with its organization and the transactions contemplated by this Agreement, Sub has no obligations or liabilities of any nature (whether accrued, absolute, contingent or otherwise) and has not engaged in any business activities of any type or kind whatsoever or entered into any agreements or arrangements with any person (other than this Agreement). ARTICLE VII CONDUCT OF BUSINESS PENDING THE CLOSING 7.1 Investigation of the Business by Buyer. (a) The Company shall (i) afford to the officers, employees and authorized representatives of Buyer (including, without limitation, independent public accountants and attorneys) reasonable access to the offices, properties, employees and business and financial records (including computer files, retrieval programs and similar documentation) of the Company and shall cause its auditors to give Buyer access to the audit work papers relating to the years ended December 31, 2001 and 2002, to the extent reasonably obtainable, (ii) furnish to Buyer all information in the possession of the Company or any of the Shareholders concerning the Business as Buyer may reasonably request, (iii) instruct its Representatives to cooperate with Buyer in its investigation of the Business and (iv) afford access to the Real Properties for inspection, testing and other matters as set forth in the Real Estate Purchase Agreements; provided that Buyer and its Representatives shall not conduct any environmental sampling of the soil, groundwater and/or other environmental media of the sort commonly referred to as Phase II environmental work without the prior written consent of the Company. Buyer shall coordinate any requests for information and access to the Company through Robert W. Baird & Co., and any investigation or access shall be conducted in a manner and at times as mutually agreed by the Company and Buyer. (b) Each of Buyer and Sub will hold, and shall cause its Affiliates and their agents to hold, all documents and information concerning the Company furnished to them by the Company and its agents in connection with its investigation in accordance with Section 13.2. 7.2 Preserve Accuracy of Representations and Warranties. The Company and the Shareholders shall refrain from taking any action which would render any representation or warranty contained in Articles IV or V of this Agreement inaccurate in any material respect as of the Closing Date. The Company or the Shareholders, as the case may be, shall promptly notify Buyer and Sub of any action, suit or proceeding that shall be instituted or threatened against the Company or the Shareholders to restrain, prohibit or otherwise challenge the legality of any transaction contemplated by this Agreement. The Company shall promptly notify Buyer and Sub of any lawsuit, claim, proceeding or investigation that may be threatened, brought, asserted or commenced against the Company which would have been listed in Schedule 5.22 if such lawsuit, claim, proceeding or investigation had arisen prior to the date hereof. 7.3 Governmental Approvals. During the period prior to the Closing Date, the Company, the Shareholder Representative, Buyer and Sub shall act diligently and reasonably, and shall cooperate with each other, to secure any consents and approvals of any Governmental Body required to consummate the transactions contemplated by this Agreement, or to otherwise satisfy the conditions set forth in Section 9.3; provided that the Company shall not make any agreement or understanding affecting its assets, property or business as a condition for obtaining any such consents or approvals except with the prior written consent of Buyer and Sub. 7.4 Operations Prior to the Closing Date. (a) The Company shall operate and carry on its business only in the ordinary course and substantially as presently operated. Consistent with the foregoing, the Company shall keep and maintain the Company Assets and the Leased Assets in good operating condition and repair and shall use its commercially reasonable efforts consistent with good business practice to (i) preserve the goodwill of and existing relationships with the suppliers, contractors, licensors, employees, customers and others having business relations with the Company, (ii) preserve intact its business organization, goodwill and ongoing operations, (iii) make capital expenditures substantially in compliance with its 2003 budget, (iv) retain the services of its key employees and (v) perform in all material respects its obligations under the Designated Contracts. (b) Notwithstanding Section 7.4(a), except as expressly contemplated by this Agreement or except with the express written approval of Buyer, which approval shall not be unreasonably withheld, the Company shall not: (i) make any capital expenditure or enter into any Contract or commitment therefor other than as previously budgeted in the Company's 2003 budget; (ii) enter into any Contract other than in the ordinary course of business consistent with past practice, or any Contract which is not terminable by the Company on no more than 30 days prior notice without payment or premium; (iii) enter into any Contract for the purchase or lease of real property or the sale of any Real Properties; (iv) sell, lease (as lessor), transfer or otherwise dispose of, or mortgage or pledge, or impose or suffer to be imposed any Encumbrance on, any of the Company's Assets, other than (1) inventory and minor amounts of personal property sold or otherwise disposed of for fair value in the ordinary course of business consistent with past practice, (2) Permitted Encumbrances, and (3) as contemplated by Section 7.11; (v) cancel any debts owed to or claims held by the Company (including the settlement of any claims or litigation) other than in the ordinary course of business consistent with past practice; (vi) create, incur or assume, or modify the terms of, or agree to create, incur, assume, or modify the terms of, any Indebtedness in an amount in excess of $100,000; (vii) delay or accelerate payment of any account payable or other liability of the Company beyond or in advance of its due date or the date when such liability would have been paid in the ordinary course of business consistent with past practice; (viii) maintain the levels of raw materials, supplies, work-in-process or other material included in the inventory of the Company other than in accordance with historical business practices; (ix) institute any increase in compensation or benefits to Employees other than salary or wage increases to non-executive employees in the ordinary course of business consistent with past practice, or adopt, award or terminate any Company Benefit Plan or enter into any Employee Agreement; (x) amend or otherwise change its articles of incorporation or bylaws; (xi) issue, sell, pledge, dispose of, grant, encumber, or authorize the issuance, sale, pledge, disposition, grant or encumbrance of (i) any shares of its capital stock of any class, or any options, warrants, convertible securities or other rights of any kind to acquire any shares of such capital stock, or any other ownership interest, of it, or, (ii) any of its assets, tangible or intangible, except in the ordinary course of business consistent with past practice; (xii) declare, set aside, make or pay any dividend or other distribution, payable in cash, stock, property or otherwise, with respect to any of its capital stock other than for distributions to pay taxes attributable to (i) the Company's income and/or (ii) the rental income related to the Leased Real Properties and as contemplated by Section 7.11; (xiii) reclassify, combine, split, subdivide or redeem, purchase or otherwise acquire, directly or indirectly, any of its capital stock; (xiv) (1) acquire (including, without limitation, for cash or shares of stock, by merger, consolidation, or acquisition of stock or assets) any interest in any corporation, partnership or other business organization or division thereof or any assets, or make any investment either by purchase of stock or securities, contributions of capital or property transfer, or, except in the ordinary course of business, consistent with past practice, purchase any property or assets of any other Person, or (2) incur any Indebtedness or issue any debt securities or assume, guarantee or endorse or otherwise, as an accommodation, become responsible for, the obligations of any Person, or make any loans or advances except in the ordinary course of business; (xv) increase or accelerate the compensation payable or to become payable to its respective officers or directors, except as presently bound to do, or establish, adopt or enter into any collective bargaining agreement; (xvi) take any action other than in the ordinary course of business and in a manner consistent with past practice with respect to accounting policies or procedures; (xvii) pay, discharge or satisfy any existing claims, liabilities or obligations (absolute, accrued, asserted or unasserted, contingent or otherwise), other than the payment, discharge or satisfaction in the ordinary course of business and consistent with past practice of due and payable liabilities reflected or reserved against in its financial statements, as appropriate, or liabilities incurred after the date hereof in the ordinary course of business and consistent with past practice; (xviii) increase or decrease prices charged to its respective customers, except for previously announced price changes or except in the ordinary course of business, or take any other action which might reasonably result in any material increase in the loss of customers through non-renewal or termination of contracts or other causes; (xix) voluntarily permit any insurance policy naming the Company as a beneficiary or a loss payable payee to be cancelled or terminated prior to the Closing Date, except policies providing coverage for losses not in excess of $1,000,000 which are replaced without diminution of or gaps in coverage; (xx) adopt a plan of complete or partial liquidation, dissolution, merger, consolidation, restructuring, recapitalization or other reorganization of the Company; (xxi) file any Tax Return or make any Tax election other than in a manner consistent with past practice or settle any audit with respect to a material amount of Taxes; (xxii) make any loan to, or enter into any Contract with, any officer, director, employee, consultant or Shareholder (other than advances to such persons in the ordinary course of business in connection with salary, wages, travel and travel related expenses or other customary expenses); (xxiii) enter into any transaction or Contract (other than in the ordinary course of business or pursuant to any Contract existing as of the date of this Agreement) that provides for aggregate future payments to or by the Company of more than $250,000 with respect to any particular transaction or Contract or more than $500,000 in the aggregate with respect to all such transactions and Contracts entered into by the Company after the date of this Agreement (or any material amendment to or termination of any material Contract), or fail to renew (to the extent such Contract can be unilaterally renewed by the Company) any material Contract, including, but not limited to, customer, supplier, distributor, licensing, or other material Contracts, to which the Company is a party (other than amendments or terminations of Contracts pursuant to or contemplated by this Agreement); (xxiv) make or rescind any express or deemed election or take any other discretionary position relating to Taxes, settle or compromise any claim, action, suit, litigation, proceeding, arbitration, investigation, audit or controversy relating to Taxes, or change any of their methods of reporting income or deductions for Tax purposes, in each case, if such action could affect the Company's Taxes after the Closing Date; or (xxv) agree, in writing or otherwise, to take or authorize any of the foregoing actions. 7.5 No Solicitations. None of the Shareholders or the Company, or any of their respective Affiliates shall, nor shall they authorize or permit any Representative retained by or acting for or on behalf of the Shareholders, the Company or any of their respective Affiliates to, directly or indirectly, initiate, solicit, encourage, take any action to facilitate or participate in any discussions or negotiations regarding, furnish any information in connection with, afford any access to the properties, books or records of the Company, endorse or otherwise cooperate with, assist, participate in or facilitate the making of any proposal or offer for, or which may reasonably be expected to lead to, an Acquisition Transaction (as defined below), by any Person or group. The Company or the applicable Shareholder shall promptly inform Buyer and Sub, orally and in writing, of the material terms and conditions of any proposal or offer for, or which may reasonably be expected to lead to, an Acquisition Transaction that it receives. The Company will immediately cease and cause to be terminated any existing activities, discussions or negotiations with any parties conducted on or prior to the date of this Agreement heretofore with respect to any Acquisition Transaction. As used in this Agreement, "ACQUISITION TRANSACTION" means any merger, consolidation, business combination, recapitalization, liquidation, dissolution or similar transaction involving the Company, or any direct or indirect acquisition in any manner of all or a portion of the equity of, or all or a substantial portion of the assets of, the Company, whether for cash, securities or any other consideration or combination thereof, other than pursuant to the transactions contemplated by this Agreement. 7.6 Notification of Changes; Disclosure Schedule Update. (a) The Company or the Shareholder Representative may promptly notify Buyer and Sub in writing by an update to the Company's Disclosure Schedules of any event or circumstance arising after the date of this Agreement which results in, or will result in, the representations and warranties set forth in Articles IV and V of this Agreement ceasing to be true and correct (each written notification and such additional written disclosure being hereafter referred to as a "DISCLOSURE SCHEDULE UPDATE"); provided, however, that Buyer shall have the right, following receipt of any Disclosure Schedule Update, to terminate this Agreement pursuant to Section 12.1(b)(ii). (b) The Company or the Shareholder Representative shall promptly notify Buyer and Sub in writing of the existence or happening or failure to occur of any fact, event circumstance or condition which causes or could reasonably be expected to cause a failure of any of the conditions set forth in Article IX. The Company or the Shareholder Representative shall notify Buyer and Sub of any notice or other communication from any third Person alleging that the consent of such Person is or may be required in connection with the transactions contemplated by this Agreement. (c) The Company shall promptly notify Buyer and Sub of the Company's breach of any of its covenants in this Agreement or the occurrence of any event that may reasonably be expected to make the satisfaction of the conditions in Article IX impossible or unlikely. (d) Each of the Company and the Shareholders shall make commercially reasonable efforts to cure, before the Closing, any breach of a representation or warranty (prior to giving effect to any Disclosure Schedule Update), covenant or agreement made by it, whether occurring or arising prior to, on or after the date of this Agreement. 7.7 Further Assurances. Subject to the terms and conditions of this Agreement, each of Buyer, Sub, the Company and the Shareholders will take or cause to be taken all commercially reasonable steps necessary or desirable and proceed diligently and in good faith and cooperate with each other in order to satisfy each condition to the other's obligations contained in this Agreement as promptly as practicable, including the preparation and filing of all forms, registrations and notices required to be filed to consummate the transactions contemplated by this Agreement, the taking of such actions as are necessary to obtain any requisite approvals, authorizations, consents, orders, licenses, permits, qualifications, exemptions or waivers by any third party or Governmental Body and the seeking of the vacation or reversal of any preliminary injunction, temporary restraining order, stay or other legal restraint or prohibition entered or imposed by any court or other Governmental Body that is not yet final and nonappealable. In addition, no party hereto shall take any action after the date hereof that could reasonably be expected to materially delay the obtaining of, or result in not obtaining any permission, approval or consent from any Governmental Body or other Person required to be obtained prior to Closing. Each of the parties hereto shall execute such documents and other instruments and take such further actions as may be reasonably required or desirable to carry out the provisions hereof and consummate the transactions contemplated hereby. 7.8 Antitrust Law Compliance. In addition to and without limiting the agreements of the parties contained in Section 7.7, as promptly as practicable after the date hereof, Buyer, Sub and the Company shall each file or consent to be filed with the Federal Trade Commission and the Antitrust Division of the United States Department of Justice any notifications or other information required to be filed by their respective "ultimate parent" companies under the Antitrust Improvements Act with respect to the transactions contemplated herein. Each of Buyer, Sub and the Company warrants that all such filings by it will be, as of the date filed, true and accurate and in accordance with the requirements of the Antitrust Improvements Act and any such rules and regulations. Each of the Company, Buyer and Sub agree to make available to the other such information as each of them may reasonably request relative to their business, assets and property as may be required of each of them to file any additional information requested by such agencies under the Antitrust Improvements Act. 7.9 Transfer of Transferred Real Properties. The Company and the Real Estate Sellers shall take all action necessary to cause the Transferred Real Properties to be conveyed to Buyer (or its designee). Each of the Transferred Real Properties shall be conveyed to Buyer (or its designee) pursuant to a Real Estate Purchase Agreement. 7.10 Title and Survey Matters, Title Commitments. Concurrently with the execution of this Agreement, the Company has delivered to Buyer: (i) the Title Commitments; (ii) copies of all documents recorded with respect to the Transferred Real Properties and the Owned Real Properties which appear on the Title Commitments certified by the Title Company; and (iii) a survey for each of the Transferred Real Properties and the Owned Real Properties, prepared by a registered land surveyor, licensed where such Transferred Real Properties and the Owned Real Properties are located; provided, however, with respect to the Title Commitments, Buyer shall be liable for and shall pay all costs and expenses related to extended coverage (other than costs and expenses relating to deleting all "standard exceptions" to coverage, which the Company shall pay). The Company shall pay the title insurance premium, one-half of the closing escrow fee, one-half of the "New York" closing fee, and the costs of obtaining and recording any releases. Buyer shall pay one-half of the closing escrow fee, one-half of the "New York" closing fee, the lenders' escrow fee, the lenders' insurance policy, and the recording fees other than releases. The Company and the Shareholders shall clear, at their sole cost and expense, all Encumbrances in the title (other than Permitted Encumbrances) disclosed by the Title Commitments. 7.11 Leases. The Company and the Shareholders shall cause the Real Property Leases (except the Transition Lease) to be terminated and all liabilities and claims thereunder waived and released, pursuant termination agreements, in the form attached hereto as Exhibit J (each a "LEASE TERMINATION AGREEMENT"). With respect to the Chicago Ridge Corporate Office and the Chicago Ridge Tool Shop, Buyer and the Shareholders shall cause the owners of such properties to enter into the Transition Lease and the Shop Lease in the forms attached hereto as Exhibits G and H, respectively. 7.12 Excluded Assets. (a) On or prior to Closing Date, the Company shall transfer to certain Shareholders, for no consideration, the personal items listed on Schedule 7.12(a). (b) On or prior to the Closing Date, the Company shall transfer the life insurance policy identified on Schedule 7.12(b) to H. Richard Landis, and shall forgive the receivable for premiums paid by the Company with respect thereto. (c) On or prior to the Closing Date, the Company will assign and the applicable Shareholder shall assume the automobile leases identified on Schedule 7.12(c). 7.13 Monticello Environmental Permits. The Company shall use its commercially reasonable efforts to either obtain governmental permits authorizing current discharges of stormwater and wastewater from the Monticello, Indiana facility or otherwise attain compliance with legal requirements applicable to such discharges in a manner acceptable to Buyer (in its reasonable discretion). The Company shall be responsible for, and shall pay, the fees and costs of obtaining such permits and any governmental fines or penalties accruing prior to the obtaining such permits or otherwise attaining such compliance (collectively, the "COMPLIANCE COSTS"). To the extent that the Compliance Costs have not been paid prior to Closing or reflected in the Closing Working Capital Statement, then the Shareholders shall indemnify the Surviving Corporation for the Compliance Costs. 7.14 Financing. (a) Buyer shall use its reasonable best efforts to obtain the proceeds of the Financing. To the extent that any portion of the Financing is unavailable for any reason, Buyer shall use its reasonable best efforts to obtain alternative financing (the "ALTERNATIVE FINANCING") as necessary to effect the transactions contemplated by this Agreement; provided, that such Alternative Financing shall have a capital structure and be in an amount that is comparable to that set forth in the Commitment Letters and shall be on terms and conditions no less favorable to Buyer than those provided in the Commitment Letters, or otherwise on terms and conditions reasonably acceptable to Buyer. If Buyer is unable to issue senior subordinated notes such that the Closing occurs on or prior to December 23, 2003, Buyer shall be required to utilize the Bridge Financing so that the Closing occurs on or prior to the Drop Dead Date. (b) In order to assist with Buyer's financing, the Company shall provide such assistance and cooperation as Buyer may reasonably request, including, but not limited to, cooperation in the preparation of any offering memorandum or similar document, using its best efforts to obtain customary "comfort" letters, accountant's consents and legal opinions, cooperating with initial purchasers or placements agents, entering into customary agreements with underwriters, and initial purchasers or placement agents, and making senior management of the Company available for customary "roadshow" presentations; provided, however, that the foregoing assistance and cooperation shall be at the Buyer's sole cost and expense, and subject to the Company and its Representatives receiving indemnity and hold harmless agreements with respect to any liability or potential liability relating thereto as they may reasonably request; provided that no such indemnity or hold harmless agreement shall apply to any matter for which the Buyer Indemnitees are entitled to indemnification under Article XI or would be so entitled but for the limitations in paragraphs (b) or (c) of Section 11.1. 7.15 FIRPTA Certificate. At the Closing, the Company shall deliver to Buyer, in a form reasonably satisfactory to Buyer, an affidavit of the Company, issued pursuant to and in compliance with Treasury Regulations 1.897-2(h) and 1.1445-2(c)(3) and dated as of the Closing Date, certifying that an interest in the Company is not a U.S. real property interest within the meaning of Section 897 of the Code. 7.16 Transfer. Each Shareholder agrees that from the date hereof until the Closing, he, she or it will not, directly or indirectly, offer, sell, transfer, assign, pledge, hypothecate or otherwise dispose of beneficial ownership of any Company Securities owned by him, her or it. 7.17 Owned Real Properties. If requested by Buyer, the Company shall immediately prior to the Closing, sell any or all of the Owned Real Properties to such third persons as Buyer may designate for a price to be agreed upon between Buyer and such third party. The sale of the Owned Real Properties shall be made pursuant to the form of Real Estate Purchase Agreement attached hereto as Exhibit F. The Total Enterprise Value will be reduced by the amount of the proceeds of such sale of Owned Real Properties and such proceeds will be applied against the Funded Obligations. 7.18 Shareholder Approval. Each Shareholder hereby irrevocably commits to vote in favor of the approval and adoption of this Agreement and the Merger contemplated hereby. The Company shall call and hold a meeting of stockholders as promptly as reasonably practicable following the date of this Agreement for the purpose of voting on this Agreement and the Merger contemplated hereby. 7.19 Plas-Tool License. The Company will use its reasonable best efforts to obtain prior to the Closing the written agreement of the Plas-Tool Co. and John Von Holdt or any of their applicable successors or assigns (together, "PT") confirming that (1) the Plas-Tool License will continue in effect after the Closing, and (2) the Company is permitted to sublicense after the Closing all of the Company's rights under the Plas-Tool License to Buyer and any of Buyer's or the Company's Affiliates. For the purposes of this Section 7.19, the "PLAS-TOOL LICENSE" shall mean the royalty-free license granted by PT to the Company granting the Company the right to produce or manufacture products, and sell and offer to sell such products, from molds sold by the Plas-Tool Co. to the Company that incorporate any embodiments of, or are otherwise covered by, U.S. Patent No. 4,735,337 (including all patents of PT embodied in such molds), so long as the lid is also covered by at least one claim of the Company's U.S. Patent No. 5,238,135. ARTICLE VIII ADDITIONAL AGREEMENTS 8.1 Transfer Taxes. Any Taxes solely relating to the transfer and conveyance of the Company Securities from the Shareholders to Buyer pursuant to the Merger (including documentary stamps or transfer taxes) shall be paid by Buyer. 8.2 Tax Matters. (a) Tax Returns. (i) Subject to Section 8.1 and paragraph (a)(iv) of this Section 8.2, the Shareholder Representative shall prepare and file or cause to be filed when due (taking into account all extensions properly obtained) all Tax Returns that are required to be filed by or with respect to the Company for taxable years or periods ending on or before the Closing Date and the Shareholders shall remit or cause to be remitted any Taxes due in respect of such Tax Returns, and Buyer shall prepare and file or cause to be filed when due (taking into account all extensions properly obtained) all Tax Returns that are required to be filed by or with respect to the Surviving Corporation for taxable years or periods ending after the Closing Date and Buyer shall remit or cause to be remitted any Taxes due in respect of such Tax Returns. (ii) From and after the Closing, the Shareholders shall be jointly and severally liable for and shall indemnify Buyer for all (a) Taxes imposed on the Company for any taxable year or period, or portion thereof, that ends on or before the Closing Date and (b) Taxes of any Person (other than the Company) imposed on the Company as a transferee or successor, by contract or pursuant to any Requirement of Laws, which Taxes relate to a fact, event or transaction occurring before the Closing Date. In the case of any taxable period that includes (but does not end on) the Closing Date, the Taxes of the Company (or Taxes for which the Company is liable) for the portion of the period ending on the Closing Date (for which the Shareholders are liable) shall be determined based on an interim closing of the books as of the close of business on the Closing Date (and for such purpose, the taxable period of any partnership or other pass-through entity in which the Company holds a beneficial interest shall be deemed to terminate at such time), except that the amount of any such Taxes that are imposed on a periodic basis and are not based on or measured by income or receipts shall be determined by reference to the percentage that the number of days in the portion of such period ending on the Closing Date bears to the total number of days in such period beginning after the Closing Date. (iii) The Shareholders (pro rata based on their Ownership Percentages) shall reimburse Buyer for any Taxes of the Company which are the responsibility of the Shareholders pursuant to this Section 8.2(a) within 15 days after payment of such Taxes by the Surviving Corporation. At the election of Buyer or the Surviving Corporation, either Buyer or the Surviving Corporation may seek reimbursement for any Taxes owed pursuant to this Section 8.2(a) from the Indemnification Holdback Amount. (iv) Except to the extent required by applicable Requirements of Laws, none of Buyer, the Surviving Corporation or any Affiliate of either shall (or shall cause or permit the Surviving Corporation to) amend, refile or otherwise modify (or grant an extension of any statute of limitation with respect to) any Tax Return relating in whole or in part to the Company with respect to any taxable year or period ending on or before the Closing Date without the prior written consent of Shareholder Representative, which consent shall not be unreasonably withheld. (v) Buyer shall promptly cause the Surviving Corporation to prepare and provide to the Shareholder Representative a package of Tax information materials, including, without limitation, schedules and work papers (the "TAX PACKAGE") required by the Shareholder Representative to enable the Shareholder Representative to prepare and file all Tax Returns required to be prepared and filed by it pursuant to paragraph (a)(i) of this Section 8.2. The Tax Package shall be completed in accordance with past practice, including past practice as to providing such information and as to the method of computation of separate taxable income or other relevant measure of income of the Company. Buyer and the Surviving Corporation shall cause the Tax Package to be delivered to the Shareholder Representative within 60 days after the Closing Date. (b) Contest Provisions. (i) Buyer shall promptly notify the Shareholder Representative in writing upon receipt by Buyer, the Surviving Corporation or any of their respective Affiliates of notice of any pending or threatened federal, state, local or foreign Tax audits, examinations or assessments which might affect the Tax liabilities for which the Shareholders may be liable pursuant to paragraph (a)(i) of this Section 8.2. (ii) The Shareholder Representative shall have the sole right to represent the Company's interests in any Tax audit or administrative or court proceeding relating to taxable periods ending on or before the Closing Date or otherwise relating to Taxes for which the Shareholders may be liable pursuant to paragraph (a)(i) of this Section 8.2, and to employ counsel of its choice at its expense. The Surviving Corporation and its Representatives shall have the right to fully participate in any such audit or proceeding and to consent to any settlement which affects a Tax period (or portion of a period) ending after the Closing Date. None of Buyer, any of Buyer's Affiliates, or the Surviving Corporation may settle any Tax claim for any Taxes for which the Shareholders may be liable pursuant to paragraph (a)(i) of this Section 8.2, without the prior written consent of the Shareholder Representative, which consent may not be unreasonably withheld or delayed, to the extent such settlement would be reasonably expected to trigger indemnification by the Shareholders pursuant to Section 8.2 or Article XI of this Agreement. (c) Assistance and Cooperation. After the Closing Date, each of the Shareholder Representative, Buyer and the Surviving Corporation shall (and cause their respective Affiliates to): (i) assist the other party in preparing any Tax Returns which such other party is responsible for preparing and filing in accordance with paragraph (a) of this Section 8.2; (ii) cooperate fully in preparing for any audits of, or disputes with taxing authorities regarding, any Tax Returns of the Company; (iii) make available to the other and to any taxing authority as reasonably requested all information, records, and documents relating to Taxes of the Company; (iv) provide timely notice to the other in writing of any pending or threatened Tax audits or assessments of the Company for taxable periods for which the other may have a liability under this Section 8.2; (v) furnish the other with copies of all correspondence received from any taxing authority in connection with any Tax audit or information request with respect to any such taxable period; (vi) timely sign and deliver such certificates or forms as may be necessary or appropriate to establish an exemption from (or otherwise reduce), or file Tax Returns or other reports with respect to, Taxes relating to sales, transfer and similar Taxes; and (vii) timely provide to the other powers of attorney or similar authorizations necessary to carry out the purposes of this Section 8.2. (d) Section 338(h)(10) Election. The Shareholders, Buyer and Sub shall make a Section 338(h)(10) Election and Forms 8023 and 8883 shall be completed and filed in the forms as set forth on Schedule 8.2(d). (e) S Corporation. The Company and the Shareholders shall not revoke the Company's election to be taxed as an S Corporation within the meaning of Code Sections 1361 and 1362. The Company and the Shareholders shall not take or allow any action that would result in the termination of the Company's status as a validly electing S Corporation within the meaning of Code Sections 1361 and 1362. 8.3 WARN Act. Buyer and the Company shall indemnify and hold each of the Shareholders harmless from any Losses and Expenses relating to the failure or alleged failure to provide any required notice under the WARN Act and any similar state or local statute, and to otherwise comply with the WARN Act and similar state or local statute with respect to any "plant closing" or "mass layoff" (as defined in the WARN Act) or similar event affecting the Company's employees and occurring on or after the Closing Date. 8.4 Confidentiality. Each of the Shareholders agrees that it will hold in confidence the Confidential Information and will not, directly or indirectly, disclose, publish, or otherwise make available any of the Confidential Information to the public or to any Person or use any of the Confidential Information for its own benefit or for the benefit of any other Person, other than Buyer, Sub and their respective Affiliates; provided that a Shareholder may disclose Confidential Information if, but only to the extent, required by a Requirement of Law or Court Order; provided, however that in such case, such Shareholder will provide Buyer and Sub with prompt written notice thereof so that Buyer or Sub may seek an appropriate protective order and/or waive such Shareholder's compliance with the provisions of this Agreement in respect thereof. 8.5 Prohibited Marks. On and after the Closing Date, the Shareholders shall not, and shall not assist others to, in any way adopt, use, seek to use, apply to register or register the name, service mark or trademark "Landis" whether alone or in combination with other words or designs, or any combinations, derivations, translations or adaptations thereof (the "PROHIBITED MARKS") on or in connection with any product, service, corporate name, trade name, or domain name, or otherwise as a trademark or service mark, in any business (or products or services thereof) which is the same as, similar to or competitive with the Business as currently conducted or as proposed to be conducted or the business of Buyer as currently conducted or as proposed to be conducted, or otherwise infringe the rights of Buyer and its Affiliates in the Prohibited Marks. On and after the Closing Date, the Shareholders further shall not challenge, and shall not assist any other party in challenging, by cancellation, opposition or otherwise, the validity of the Prohibited Marks or any Company Intellectual Property which are trademarks or service marks, or any current or future applications for registration or registrations thereof or Buyer's, the Surviving Corporation's or any of their respective Affiliates' ownership thereof or title thereto. 8.6 Appointment of Shareholder Representative. (a) Each of the Shareholders hereby irrevocably appoints Gregory J. Landis as its true and lawful attorney(s)-in-fact, to act as its representatives (the "SHAREHOLDER REPRESENTATIVE") under this Agreement and, as such, to act, as such Shareholder's agent (with full power of substitution), to take such action on such Shareholder's behalf with respect to all matters relating to this Agreement and the Shareholder Ancillary Agreements, including without limitation, to make all determinations, agreements and settlements relating to Closing Working Capital, to initiate, negotiate, settle, file suit with respect to and compromise indemnification claims made pursuant to Article XI and the terms of the Escrow Agreement, to sign receipts, consents and other documents to effect any of the transactions contemplated by this Agreement or the Shareholder Ancillary Agreements and to take all actions necessary or appropriate in connection with the foregoing. All such determinations, agreements, settlements and compromises made by the Shareholder Representative shall be binding on all of the Shareholders. Mr. Landis accepts his appointment as initial Shareholder Representative and the authorization set forth above. (b) Buyer and the Escrow Agent shall be entitled to conclusively rely on the instructions, decisions and acts of the Shareholder Representative required, permitted or contemplated to be taken by the Shareholder Representative hereunder or under the Escrow Agreement, and the Escrow Agent and Buyer are hereby relieved from any liability to any Person for any acts done by them in accordance with any instructions, decisions or acts of the Shareholder Representative. Buyer and the Escrow Agent shall be entitled to treat as genuine, and as the document it purports to be, any letter, paper or other document furnished to it by or on behalf of the Shareholder Representative, and reasonably believed by Buyer or the Escrow Agent to be genuine and to have been signed and presented by the proper party or parties. (c) The Shareholder Representative shall be entitled to rely, and shall be fully protected in relying, upon any statements furnished to it by Buyer or any Shareholder, or any other evidence deemed by the Shareholder Representative to be reliable, and the Shareholder Representative shall be entitled to act on the advice of counsel selected by it. 8.7 Severance Costs. The Company and the Shareholders hereby agree that (a) prior to the Closing, the Company shall pay all severance costs relating to Employees who are terminated or resign prior to the Closing (to the extent that such severance costs are not included in Final Closing Working Capital) and (b) the Shareholders shall be responsible and shall indemnify and hold harmless Buyer and the Surviving Corporation for all severance costs incurred by Buyer or the Surviving Corporation from and after the Closing relating to Employees who are given notice of termination prior to the Closing or who give notice of resignation prior to the Closing (to the extent that such severance costs are not included in Final Closing Working Capital). ARTICLE IX CONDITIONS TO THE OBLIGATIONS OF BUYER AND SUB The obligations of Buyer and Sub hereunder shall be subject to the fulfillment at or prior to the Closing of the following conditions, any or all of which may be waived in whole or in part by Buyer: 9.1 No Misrepresentation or Breach of Covenants and Warranties. There shall have been no breach by the Company, any of the Shareholders or any Real Estate Sellers in any material respect in the performance of any of their respective covenants and agreements herein; each of the representations and warranties of the Company, the Shareholders and any Real Estate Sellers contained or referred to herein shall be true and correct in all material respects (if not qualified by materiality or reference to a Material Adverse Effect) and in all respects (if qualified by materiality or by reference to a Material Adverse Effect) on the Closing Date as though made on the Closing Date (in each case without giving effect to any Disclosure Schedule Update), except for changes therein specifically permitted by this Agreement or resulting from any transaction expressly consented to in writing by Buyer and Sub and there shall have been delivered to Buyer and Sub a certificate or certificates to such effect, dated the Closing Date, signed on behalf of the Company by the President or any Vice President of the Company and the Shareholder Representative. 9.2 No Restraint of Litigation. No temporary restraining order, preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or Governmental Body preventing the consummation of the transactions contemplated by this Agreement shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other Governmental Body seeking any of the foregoing be pending; nor shall there be any action taken, or Requirements of Laws or orders enacted, entered, enforced or deemed applicable to the transactions contemplated by this Agreement, which prevents or prohibits the consummation of the transactions contemplated by this Agreement. In addition, the waiting period under the Antitrust Improvements Act shall have expired or been terminated. 9.3 Necessary Consents. The parties shall have received all approvals and actions of or by all Governmental Bodies which are necessary to consummate the transactions contemplated hereby, which are either specified in Schedule 5.3 or 5.13 or otherwise required to be obtained prior to the Closing by applicable Requirements of Law or which are necessary to prevent a Material Adverse Effect. 9.4 Purchase of Transferred Real Properties. The sale of each Transferred Real Properties shall been consummated in accordance with the terms of each Real Estate Purchase Agreement. 9.5 Documents. Buyer and Sub shall have received all of the agreements, documents and items specified in Section 3.4. 9.6 Funding. Buyer shall have received the proceeds of the Financing. 9.7 Non-Competition Agreements. The Company shall have entered into a Non- Competition Agreement with each of the persons listed on Schedule 9.7. 9.8 Related Party Agreements. Except as otherwise expressly contemplated by this Agreement, the Company shall have terminated, without further liability to the Company, all Contracts with any Shareholder, Affiliate of the Company or Affiliate of any Shareholder. ARTICLE X CONDITIONS PRECEDENT TO OBLIGATIONS OF THE COMPANY AND SHAREHOLDERS The obligations of the Company and the Shareholders under this Agreement shall be subject to the fulfillment, at or prior to the Closing, of the following conditions, any or all of which may be waived in whole or in part by the Company and the Shareholder Representative: 10.1 No Misrepresentation or Breach of Covenants and Warranties. There shall have been no material breach by Buyer or Sub in the performance of any of their covenants and agreements herein; each of the representations and warranties of Buyer and Sub contained or referred to in this Agreement shall be true and correct in all material respects on the Closing Date as though made on the Closing Date, except for changes therein specifically permitted by this Agreement or resulting from any transaction expressly consented to in writing by the Company or the Shareholders; and there shall have been delivered to the Company or Shareholders a certificate or certificates to such effect, dated the Closing Date and signed by Buyer. 10.2 No Restraint or Litigation. No temporary restraining order, preliminary or permanent injunction or other order, decree or ruling issued by a court of competent jurisdiction or Government Body preventing the consummation of the transactions contemplated by this Agreement shall be in effect, nor shall any proceeding brought by an administrative agency or commission or other Governmental Body seeking any of the foregoing be pending; nor shall there be any action taken, or Requirements of Laws or orders enacted, entered, enforced or deemed applicable to the transactions contemplated by this Agreement, which prevents or prohibits the consummation of the transactions contemplated by this Agreement. In addition, the waiting period under the Antitrust Improvements Act shall have expired or been terminated. 10.3 Purchase of Transferred Real Properties. The sale of each of the Transferred Real Properties shall been consummated in accordance with the terms of the Real Estate Purchase Agreements. 10.4 Documents. The Shareholders shall have received all of the agreements, documents and items specified in Section 3.3. ARTICLE XI INDEMNIFICATION 11.1 Indemnification for Company Matters. (a) Except as otherwise provided by this Article XI, and subject to the limitations set forth herein, from and after the Closing Date, the Shareholders, jointly and severally, shall indemnify and hold harmless Buyer, the Surviving Corporation, their Affiliates, directors, officers, employees and agents (the "BUYER INDEMNITEES") from and against any and all Losses and Expenses incurred by such Buyer Indemnitees in connection with or arising from: (i) Any breach by the Company of any of its covenants in this Agreement or in any Company Ancillary Agreement, or any failure of the Company to perform any of its obligations in this Agreement or in any Company Ancillary Agreement; (ii) Any breach of any warranty or the inaccuracy of any representation of the Company contained or referred to in this Agreement, any Company Ancillary Agreement or any certificate or schedule delivered by or on behalf of the Company pursuant hereto or thereto; (iii) Any agreement whereby the Company has agreed to indemnify any trustees of (A) any trust that is a Shareholder or (B) any trust the beneficiaries of which are (x) Shareholders or (y) relatives of (1) any Shareholder or (2) any beneficiary of any trust that is a Shareholder; (iv) Any breach by any Real Estate Seller of its covenants in any Real Estate Purchase Agreement, or any failure of any Real Estate Seller, to perform any of its obligations in this Agreement or any Real Estate Purchase Agreement; (v) Any breach of any warranty or the inaccuracy of any representation of any Real Estate Seller contained or referred to in any Real Estate Purchase Agreement or any certificate or schedule delivered by or on behalf of the Real Estate Seller pursuant thereto; and (vi) The encroachment of the railroad spur track at the Solvay Facility Property onto any adjacent real property. Each Shareholder's liability in respect of any claim for indemnification under this Section 11.1(a) shall equal the product of (x) its respective Ownership Percentage and (y) the aggregate amount of Losses and Expenses incurred in respect of such claim for which the Buyer Indemnitees are entitled to indemnification under this Section 11.1(a); provided, however, each Shareholder's liability under this Section 11.1 (and together with any of such Shareholder's liability under Sections 8.2 and 11.2) shall not exceed such Shareholder's Ownership Percentage of the Aggregate Purchase Price. (b) Notwithstanding anything contained in paragraph (a) of this Section 11.1, the Buyer Indemnitees shall have no right to be indemnified with respect to any item disclosed in any Disclosure Schedule Update or any breach of a covenant to be performed by the Company or any Real Estate Seller prior to the Closing which is waived in writing by Buyer as provided in Article IX of this Agreement on or prior to the Closing; provided, further, that the Buyer Indemnitees shall only be entitled to indemnification under clauses (ii) and (v) of paragraph (a) of this Section 11.1 with respect to Losses and Expenses incurred by the Buyer Indemnitees, if the aggregate amount of such Losses and Expenses exceeds $2,600,000 in the aggregate (the "DEDUCTIBLE"), in which case the Buyer Indemnitees shall be entitled to be indemnified for only the amount in excess thereof; provided, further, that the aggregate maximum amount for which the Buyer Indemnitees shall be entitled to indemnification pursuant to clauses (ii) and (v) of paragraph (a) of this Section 11.1 shall not exceed $19,500,000 in the aggregate. Each Shareholder's liability in respect of any claim for indemnification under this Section 11.1 shall equal the product of (x) its respective Ownership Percentage and (y) the aggregate amount of Losses and Expenses incurred in respect of such claim for which the Buyer Indemnitees are entitled to indemnification under this Section 11.1. In addition, the Buyer Indemnitees shall have no right to be indemnified pursuant to clauses (ii) and (v) of paragraph (a) of this Section 11.1 with respect to De Minimis Losses unless and until the aggregate amount of all De Minimis Losses exceeds $500,000, in which case the aggregate amount of all De Minimis Losses shall count towards the Deductible. For purposes of this Section 11.1, the breach of any warranty or the inaccuracy of any representation of the Company, any Shareholder or any Real Estate Seller contained in this Agreement or any Real Estate Purchase Agreement shall be determined without regard to any "Material Adverse Effect" or any other "materiality" qualifications set forth in such representation or warranty. Notwithstanding the foregoing, the limitations set forth in this paragraph (b) shall not apply to any indemnification with respect to breaches of any warranty or inaccuracies in any representation set forth in (i) Section 5.18(e)(ii), 5.18(h) or 5.22 of this Agreement or (ii) the Funded Obligations Schedule. (c) The indemnification provided for in clauses (a)(ii) and (v) of this Section 11.1 shall terminate on the 19 month anniversary of the Closing Date (and no claims shall be made by the Buyer Indemnitees under clauses (a)(ii) or (v) of this Section 11.1 thereafter); except that the indemnification shall continue as to: (i) (A) the representations and warranties set forth in Sections 5.1, 5.3, 5.4 and 5.18(h) of this Agreement, which shall survive indefinitely, (B) the representations and warranties set forth in Section 5.24, which shall survive until the third anniversary of the Closing Date, and (C) the representations and warranties set forth in Section 5.22, which shall survive for 60 days following the expiration of the applicable statute of limitations; and (ii) any claim for indemnification of which any Buyer Indemnitee has notified the Shareholder Representative in accordance with the requirements of Section 11.5 on or prior to the date such indemnification would otherwise terminate in accordance with this Section 11.1 shall continue until the amount of the indemnification, if any, shall have been determined pursuant to this Article XI and Buyer Indemnitee shall have been reimbursed for the full amount of all Losses and Expenses relating thereto in accordance with, and subject to, this Article XI. (d) In the event that the Surviving Corporation actually recovers any amounts under insurance policies with third parties (i.e. actual insurance policies and not self insurance or retention policies), including title insurance, for any Loss or Expense for which Buyer is claiming or has received, indemnification pursuant to this Article XI, the amount of such insurance recovery (subject to offset for any increase in premiums or other costs attributable to such Losses or other Expenses incurred in collection of such amounts) shall (i) reduce the amount of Loss and Expense the Buyer Indemnitees are entitled to recover hereunder if the insurance proceeds are received prior to the Buyer Indemnitees being reimbursed for such Loss and Expense hereunder, and (ii) be paid to the Shareholder Representative for the Shareholders' benefit if the insurance proceeds are received after the Buyer Indemnitees have been reimbursed for such Loss and Expense. Buyer and the Surviving Corporation shall use their commercially reasonable efforts to make the appropriate claims and collect any such proceeds due under the applicable insurance policies. (e) As set forth in the Escrow Agreement, on the First Escrow Release Date the First Escrow Release Amount shall be released and the balance remaining in said Escrow Account, less the Reserved Amount, shall be released on the Second Escrow Release Date. 11.2 Indemnification for Shareholder Matters. Each Shareholder severally, and not jointly, agrees to indemnify and hold harmless the Buyer Indemnitees from and against any and all Losses and Expenses incurred by such Buyer Indemnitees in connection with or arising from: (a) Any breach by such Shareholder or Shareholder's Affiliates of any of the covenants of such Shareholder in this Agreement or in any Shareholder Ancillary Agreement to which such Shareholder or Shareholder's Affiliate is a party, or any failure of such Shareholder or Shareholder's Affiliates to perform any of his, her or its obligations in this Agreement or in any Shareholder Ancillary Agreement; and (b) Any breach of any warranty or the inaccuracy of any representation of such Shareholder or Shareholder's Affiliate contained in Article IV of this Agreement, any certificate or schedule delivered by or on behalf of such Shareholder pursuant hereto, any Real Estate Purchase Agreement, or any other Shareholder Ancillary Agreement to which such Shareholder or Shareholder's Affiliate is a party; provided; however; each Shareholder's liability under this Section 11.2 (and together with any of Shareholder's liability under Sections 8.2 and 11.1) shall not exceed such Shareholder's Ownership Percentage of the Aggregate Purchase Price. The indemnification provided for in this Section 11.2 shall survive indefinitely. Any Losses or Expenses for which the Buyer Indemnitees are entitled to indemnification under this Section 11.2 shall be either credited against such Shareholder's portion of the Indemnification Holdback Amount then held in the Escrow Account or paid directly from such Shareholder. 11.3 Indemnification for Solvay Environmental Matters. (a) Subject to the limitations set forth in herein, from and after the Closing Date, the Shareholders, jointly and severally, shall indemnify and hold harmless the Buyer Indemnitees from and against any and all Losses and Expenses incurred by such Buyer Indemnitees in connection with or arising from any releases of, or conditions of contamination by, Hazardous Substances at or affecting the Solvay Facility Property, except for any such Losses or Expenses arising from any such releases or contamination first caused or occurring as a result of the operations of the Company after March 16, 1993; (b) The Buyer Indemnitees shall only be entitled to indemnification under paragraph (a) of this Section 11.3 with respect to Losses and Expenses incurred by the Buyer Indemnitees, if the aggregate amount of such Losses and Expenses exceeds $300,000 in the aggregate, in which case the Buyer Indemnitees shall be entitled to be indemnified for only the amount in excess thereof; provided, further, that the maximum amount for which the Buyer Indemnitees shall be entitled to indemnification to pursuant to paragraph (a) of this Section 11.3 shall be, at any time, the balance remaining in the Solvay Environmental Indemnification Holdback Account. (c) The indemnification provided for in this Section 11.3 shall terminate on the ten (10) year anniversary of the Closing Date (and no claims shall be made by the Buyer Indemnitees under this Section 11.3 thereafter); except that the indemnification shall continue as to any claim for indemnification of which any Buyer Indemnitee has notified the Shareholder Representative in accordance with the requirements of Section 11.5 on or prior to the date such indemnification would otherwise terminate in accordance with this Section 11.3, as to which the obligation of the Shareholders shall continue until the amount of the indemnification, if any, shall have been determined pursuant to this Article XI and the Buyer Indemnitees shall have been reimbursed for the full amount of all Losses and Expenses relating thereto in accordance with, and subject to, this Article XI. (d) As set forth in the Escrow Agreement, on the First Solvay Environmental Escrow Release Date the First Solvay Environmental Escrow Release Amount shall be released and the balance remaining in said Escrow Account, less the Reserved Solvay Amount, shall be released on the Second Solvay Environmental Escrow Release Date. 11.4 Indemnification by Buyer. Buyer agrees to indemnify and hold harmless each of the Shareholders, the Real Estate Sellers, and their respective Affiliates, heirs, personal representatives, assigns and agents (the "SHAREHOLDER INDEMNITEES") from and against any and all Losses and Expenses incurred by such Shareholder Indemnitees in connection with or arising from: (a) Any breach by Buyer, Sub or their respective Affiliates of any of their covenants or agreements in this Agreement or any Buyer Ancillary Agreement or any failure by Buyer, Sub or their respective Affiliates to perform any of their obligations in this Agreement or in any Buyer Ancillary Agreement; and (b) Any breach of any warranty or the inaccuracy of any representation of Buyer, Sub or their respective Affiliates contained or referred to in this Agreement, in any certificate delivered by or on behalf of Buyer or Sub pursuant hereto, or in any Buyer Ancillary Agreement. The indemnification provided for in this Section 11.4 shall terminate on the 19 month anniversary of the Closing Date (and no claims shall be made by the Shareholder Indemnitees under this Section 11.4 thereafter), except that the indemnification by Buyer shall continue as to any Loss or Expense of which Shareholder Indemnitees have notified Buyer in accordance with the requirements of Section 11.5 on or prior to the date such indemnification would otherwise terminate in accordance with this Section 11.4, as to which the obligation of Buyer and Sub shall continue until the liability of Buyer or Sub shall have been determined pursuant to this Article XI, and Buyer and Sub shall have reimbursed all the Shareholder Indemnitees for the full amount of such Loss and Expense in accordance with this Article XI. 11.5 Notice of Claims. (a) Any Buyer Indemnitee or Shareholder Indemnitee (the "INDEMNIFIED PARTY") seeking indemnification shall give the party obligated to provide indemnification the ("INDEMNITOR") to such Indemnified Party a notice (a "CLAIM NOTICE") (provided that, in the case of a claim for which the Shareholders are the Indemnitors, this Claim Notice shall be given to the Shareholder Representative) describing in reasonable detail the facts giving rise to any claim for indemnification and shall include in such Claim Notice (if then known) the amount or the method of computation of the amount of such claim, and a reference to the provision upon which such claim is based; provided, that a Claim Notice in respect of any action at law or suit in equity by or against a third Person (a "THIRD PARTY CLAIM") as to which indemnification will be sought shall be given promptly after the action or suit is commenced; provided further that failure to give such notice shall not relieve the Indemnitor of its obligations under this Agreement except to the extent it shall have been prejudiced by such failure. (b) After the Indemnified Party gives a Claim Notice, the amount of indemnification to which an Indemnified Party shall be entitled under this Article XI shall be determined: (i) by the written agreement between the Indemnified Party and the Indemnitor; or (ii) by a final judgment or decree of any court of competent jurisdiction. The Indemnified Party shall have the burden of proof in establishing the amount of Loss and Expense suffered by it. (c) If a Buyer Indemnitee is entitled to indemnification under Section 11.1 or Section 11.2 and the amount of indemnification to which the Buyer Indemnitee is entitled has been determined as provided for in Section 11.5(b), the Buyer Indemnitee shall first seek reimbursement of such amount from the Indemnification Holdback Amount in accordance with the procedures set forth in the Escrow Agreement, and then, following the Second Escrow Release Date or to the extent that the amount the Buyer Indemnitee is entitled to receive exceeds the Indemnification Holdback Amount, the Buyer Indemnitee may require the Shareholders and/or the Real Estate Sellers to directly pay the Buyer Indemnitee in accordance with Section 11.1 and Section 11.2. If a Buyer Indemnitee is entitled to indemnification under Section 11.2, and the amount of indemnification to which the Buyer Indemnitee is entitled has been determined as provided for in Section 11.5(b), the Buyer Indemnitee may either seek reimbursement of such amount from the Indemnification Holdback Amount then held in the Escrow Account in accordance with the procedures set forth in the Escrow Agreement, or require such Shareholder to directly pay the Buyer Indemnitee such amount promptly after it has been determined. If a Shareholder Indemnitee is entitled to indemnification hereunder, Buyer shall pay to the Shareholder Indemnitee the amount of indemnification to which the Shareholder Indemnitee is entitled promptly after it has been determined as provided for in Section 11.5(b). (d) If a Buyer Indemnitee is entitled to indemnification under Section 11.3, and the amount of indemnification to which the Buyer Indemnitee is entitled has been determined as provided for in Section 11.5(b), the Buyer Indemnitee shall seek reimbursement of such amount from the Solvay Environmental Indemnification Holdback Amount in accordance with the procedures set forth in the Escrow Agreement 11.6 Third Party Claims. The Indemnitor shall have the right to conduct and control, through counsel of its choosing reasonably acceptable to the indemnified party, the defense, compromise or settlement of any Third Party Claim, action or suit against the Indemnified Party as to which indemnification will be sought by any Indemnified Party if the Indemnitor has acknowledged and agreed in writing that the Indemnitor has an obligation to provide indemnification if the claim is adversely determined so long as the Indemnitor (a) gives the Indemnified Party written notice of its intention to assume the defense of such Third Party Claim and (b) assumes the defense of such Third Party Claim, in each case within 30 days after receiving notice of such Third Party Claim. In any such case, the Indemnified Party shall cooperate in connection with such claim and shall furnish at the Indemnitor's cost and expense, such records, information and testimony and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested by the Indemnitor. The Indemnified Party may participate, through counsel chosen by it and at its own expense, in the defense of any such claim, action or suit. Notwithstanding the foregoing, if (a) the Indemnitor shall not have taken any action to defend such Third Party Claim within 30 days after being notified by the Indemnified Party of such Third Party Claim, or (b) the Indemnified Party shall have received the advice of counsel that there is a conflict of interest between the Indemnified Party and the Indemnitor in the conduct of the defense of such Third Party Claim, the Indemnified Party shall be entitled to conduct and control the defense thereof and the reasonable fees and disbursements of such Indemnified Party's counsel shall be at the expense of the Indemnitor. The Indemnitor, if it has assumed the defense of any Third Party Claim as provided in this Section 11.6, shall not consent to a settlement of, or the entry of any judgment arising from, any such Third Party Claim without the Indemnified Party's prior written consent (which consent shall not be unreasonably withheld or delayed) unless such settlement or judgment (a) relates solely to monetary damages for which the Indemnitor shall be responsible, (b) includes as an unconditional term thereof the release of the Indemnified Party from all liability with respect to such Third Party Claim and (c) will not otherwise have a material effect on the Indemnified Party. 11.7 Exclusivity of Indemnification. Indemnification under Sections 11.1, 11.2, and 11.3 of this Agreement shall be the sole post-closing remedy available to Buyer, the Surviving Corporation Company, the Real Estate Sellers and Shareholders or any of their Affiliates in respect of any Losses and Expenses incurred by Buyer, the Shareholders, the Real Estate Sellers or the Surviving Corporation arising out of, resulting from or incurred in connection with any breach of any warranty or the inaccuracy of any representation made by the Company, the Shareholders, the Real Estate Sellers, Buyer or Sub in this Agreement, any Real Estate Purchase Agreement or any certificate or schedule or delivered pursuant hereto; provided, however, that nothing contained in this Agreement or the Real Estate Purchase Agreements shall preclude a party from bringing an action for fraud or willful misconduct. 11.8 Knowledge of Breach. Except as set forth in this Agreement, regardless of whether any party or any of its Affiliates or any of their respective representatives had or should have had knowledge or notice of any facts or circumstances which would result in the breach of, or inaccuracy in, any representation or warranty of the other parties or the failure of any condition for its benefit to be satisfied or the breach of any covenants for its benefit, for purposes of this Agreement, such party shall not be deemed to have waived such breach or inaccuracy or condition. Actual or constructive knowledge, diligence investigations, access to information of the party seeking indemnification hereunder, sophistication, experience, notices and any other actual or deemed sources of information outside the express provisions of this Agreement shall in no way limit the scope of any representation, warranty or condition or heighten any materiality or Material Adverse Effect threshold herein. ARTICLE XII TERMINATION 12.1 Termination. Anything contained in this Agreement to the contrary notwithstanding, this Agreement may be terminated at any time prior to the Closing Date: (a) By the mutual written consent of Buyer, the Shareholder Representative and the Company; (b) By Buyer (i) in the event of any material breach by the Company or any of the Shareholders of any of the Company's or the Shareholders' agreements, representations, or warranties contained herein and the failure of the Company or the Shareholders to cure such breach within ten (10) days after receipt of notice from Buyer requesting such breach to be cured or (ii) within ten (10) days following the receipt of any Disclosure Schedule Update delivered to Buyer by the Company or the Shareholder Representative pursuant to Section 7.6(a); (c) By the Company or the Shareholder Representative in the event of any material breach by Buyer or Sub of any of Buyer's or Sub's agreements, representations, or warranties contained herein and the failure of Buyer or Sub to cure such breach within ten (10) days after receipt of notice from the Company requesting such breach to be cured; (d) By Buyer, on the one hand, or the Company or the Shareholder Representative, on the other, if the Closing shall not have occurred on or prior to the Drop Dead Date (or such later date as may be mutually agreed to by Buyer and the Company); provided however, the right to terminate this Agreement under this Section 12.1(d) shall not be available to (a) the Company or any of the Shareholders if the failure by the Company or any Shareholder to fulfill any obligation under this Agreement has been the cause of or resulted in, the failure of the Closing to occur on or prior to such date and (b) Buyer if the failure by Buyer to fulfill any obligation under this Agreement has been the cause of or resulted in, the failure of the Closing to occur on or prior to such date; provided, further, if this Agreement is terminated pursuant to this Section 12.1(d), and at the time of such termination, all conditions to the obligations of Buyer under this Agreement other than the conditions set forth in Section 9.6 were satisfied, Buyer shall pay the Company the amount of $2,000,000 (the "TERMINATION FEE") within two Business Days of the notice of termination; or (e) By Buyer, on the one hand, or the Company or the Shareholder Representative, on the other hand, if any Governmental Body shall have issued an order, decree or ruling or taken any other action (which order, decree, ruling or other action the parties hereto shall use all commercially reasonable efforts to lift) which permanently restrains, enjoins or otherwise prohibits the transactions contemplated by this Agreement and such order, decree, ruling or other action shall have become final and non-appealable. 12.2 Notice of Termination. Any party desiring to terminate this Agreement pursuant to Section 12.1 shall give notice of such termination to the other party to this Agreement. 12.3 Effect of Termination. In the event that this Agreement shall be terminated pursuant to this Article XII all further obligations of the parties under this Agreement (other than Sections 12.1(d), 13.2, 13.9, 13.13 and 13.14) shall be terminated without further liability of any party to the other; provided, however, that nothing herein shall relieve any party from liability for its intentional misrepresentation or intentional breach of its obligations hereunder; provided further, that Buyer and Sub shall have no further obligation under this Agreement or liability whatsoever to the Company, the Shareholder Representative, the Shareholders or the Real Estate Sellers if this Agreement is terminated by the Company or the Shareholder Representative pursuant to Section 12.1(d) and Buyer has paid the Termination Fee to the Company. ARTICLE XIII GENERAL PROVISIONS 13.1 Survival of Obligations. All representations, and warranties, contained in this Agreement shall survive for such time as the indemnity for the breach thereof shall survive as set forth in Sections 11.1, 11.2 and 11.3. All covenants and obligations contained in this Agreement to be fully performed or complied with at or prior to Closing shall not survive Closing. All covenants and obligations contained in this Agreement to be performed or complied with after Closing (and any right to indemnification for breach thereof) shall survive for the periods specified therein, or if no such period is specified, indefinitely 13.2 Confidential Nature of Information. The provisions of the Confidentiality Agreement shall remain binding and in full force and effect. The information contained herein, in the Company Disclosure Schedules or delivered to Buyer or its authorized Representatives pursuant hereto shall be deemed to be Evaluation Material (as defined and subject to the exceptions contained in the Confidentiality Agreement) until the Closing. Notwithstanding anything in this Agreement, the Confidentiality Agreement or in each Real Estate Purchase Agreement to the contrary, beginning on the earliest of (i) the date of the public announcement of discussions relating to the transaction contemplated by this Agreement, (ii) the date of public announcement of such transaction, or (iii) the date of the execution of this Agreement, the parties (and each Representative of the parties) may disclose to any and all persons, without limitation of any kind, the purported or claimed Federal income tax treatment of the transaction contemplated by, or undertaken pursuant to, this Agreement, any facts that may be relevant to understanding such tax treatment, and all materials of any kind (including opinions or other tax analyses) relating to such tax treatment or facts. 13.3 No Public Announcement. From the date hereof through the day after the Closing Date, neither Buyer, Sub or the Company nor any Shareholder shall, without the approval of the other (which approval shall not be unreasonably withheld), make any press release or other public announcement concerning the transactions contemplated by this Agreement, except as and to the extent that any such party shall be so obligated by Requirements of Law, in which case the other party shall be advised and the parties shall use their best efforts (subject to the Requirements of Law) to cause a mutually agreeable release or announcement to be issued. 13.4 Notices. All notices or other communications required or permitted hereunder shall be in writing and shall be deemed given, delivered and received (a) when delivered, if delivered personally by a commercial messenger delivery service with verification of delivery, (b) four (4) days after mailing, when sent by registered or certified mail, return receipt requested and postage prepaid, (c) one business day after delivery to a private courier service, when delivered to a private courier service providing documented overnight service, (d) on the date of delivery if delivered by facsimile or electronic mail and confirmed before 5:00 p.m. (local time) on any business day, or (e) on the next business day if delivered by facsimile and electronic mail and confirmed either after 5:00 p.m. (local time) or on a non-business day, in each case addressed as follows: If to the Company, the Shareholders or the Real Estate Sellers (prior to the Closing Date): Landis Plastics, Inc. 10800 South Central Avenue Chicago Ridge, IL 60415 Attn: Gregory J. Landis PH: (773) 239-2390 FAX: (708) 422-7513 with a copy to: Shefsky & Froelich Ltd. 444 N. Michigan Avenue Suite 2500 Chicago, IL 60611 Attn: Jeffry A. Melnick PH: (312) 836-4010 FAX: (312) 527-5921 Email: jmelnick@shefskylaw.com If to the Shareholders or the Real Estate Sellers (after the Closing): Gregory J. Landis, as Shareholder Representative, c/o Landis Plastics, Inc. 10800 South Central Avenue Chicago Ridge, IL 60415 PH: (773) 239-2390 FAX: (708) 422-7513 If to Buyer, Sub, and after the Closing date, the Surviving Corporation: Berry Plastics Corporation 101 Oakley Street Evansville, IN 47710 Attn: Ira G. Boots PH: (812) 424-2904 (ext. 11301) FAX: (812) 421-9604 Email: IraBoots@BerryPlastics.com with a copy to: Fried, Frank, Harris, Shriver & Jacobson One New York Plaza New York, NY 10004 Attn: Warren S. de Wied, Esq. PH: (212) 859-8296 FAX: (212) 859-4000 Email: dewiewa@ffhsj.com or to such other address or addresses as may hereafter be specified by notice given by any of the above to the others. 13.5 Successors and Assigns. (a) The rights of any party under this Agreement shall not be assignable by such party hereto prior to the Closing without the written consent of the other parties, except that the rights of Buyer hereunder may be assigned prior to the Closing, without the consent of the Company or Shareholders, to any entity controlled by Buyer, provided Buyer shall remain primarily liable hereunder. (b) This Agreement shall be binding upon and inure to the benefit of the parties hereto and their successors and permitted assigns. Nothing in this Agreement, expressed or implied, is intended or shall be construed to confer upon any Person other than the parties hereto and their respective successors any right, remedy or claim under or by reason of this Agreement. 13.6 Entire Agreement; Amendments. This Agreement and the Exhibits and Schedules referred to herein, the documents delivered pursuant hereto and the Confidentiality Agreement contain the entire understanding of the parties hereto with regard to the subject matter contained herein or therein, and supersede all prior agreements, understandings or letters of intent between or among any of the parties hereto. This Agreement shall not be amended, modified or supplemented except by a written instrument signed by an authorized representative of each of the parties hereto. 13.7 Interpretation. Article titles and headings to sections herein are inserted for convenience of reference only and are not intended to be a part of or to affect the meaning or interpretation of this Agreement. The Schedules and Exhibits referred to herein shall be construed with and as an integral part of this Agreement to the same extent as if they were set forth verbatim herein. 13.8 Waivers. Any term or provision of this Agreement may be waived, or the time for its performance may be extended, by the party or parties entitled to the benefit thereof. Any such waiver shall be validly and sufficiently authorized for the purposes of this Agreement if, as to any party, it is authorized in writing by an authorized representative of such party. The failure of any party hereto to enforce at any time any provision of this Agreement shall not be construed to be a waiver of such provision, nor in any way to affect the validity of this Agreement or any part hereof or the right of any party thereafter to enforce each and every such provision. No waiver of any breach of this Agreement shall be held to constitute a waiver of any other or subsequent breach. 13.9 Expenses. The Company, Buyer and Sub shall pay their respective legal and other expenses incurred by it, in connection with the negotiation and preparation of this Agreement and the transactions contemplated herein, it being understood that the costs and expenses of the Company incurred on behalf of the Shareholders in connection with the transactions contemplated hereby shall be borne by the Shareholders after the Closing to the extent not included in Transaction Costs. The expenses of the Shareholder Representative shall be paid by the Shareholders as provided in the Shareholders Representative Agreement. 13.10 Partial Invalidity. Whenever possible, each provision hereof shall be interpreted in such manner as to be effective and valid under applicable law, but in case any one or more of the provisions contained herein shall, for any reason, be held to be invalid, illegal or unenforceable in any respect, such provision shall be ineffective to the extent, but only to the extent, of such invalidity, illegality or unenforceability without invalidating the remainder of such invalid, illegal or unenforceable provision or provisions or any other provisions hereof, unless such a construction would be unreasonable. 13.11 Execution in Counterparts. This Agreement may be executed in one or more counterparts, each of which shall be considered an original instrument, but all of which shall be considered one and the same agreement, and shall become binding when one or more counterparts have been signed by each of the parties hereto and delivered to each of the Shareholders and Buyer. 13.12 Specific Performance. Notwithstanding anything in this Agreement to the contrary, the Shareholders represent and warrant that, because of the unique nature of the business operations conducted by the Company, the failure of them to carry out their obligations to perform this Agreement and to consummate the Merger on the Closing Date would cause Buyer and Sub to incur damages for which there is no adequate remedy at law; the parties hereto accordingly agree that, in addition to any other remedies available to Buyer and Sub, any such failure by the Shareholders to perform this Agreement shall be subject to the remedy of specific performance. 13.13 Governing Law. This Agreement shall be governed by and construed in accordance with the internal laws (as opposed to the conflicts of law provisions) of the State of Illinois, provided that the Merger shall be governed by the IBCA and the DGCL. 13.14 Submission to Jurisdiction. The Company, each of the Shareholders, Buyer and Sub hereby irrevocably submit in any suit, action or proceeding arising out of or related to this Agreement, the Buyer Ancillary Agreements, the Company Ancillary Agreements, the Shareholder Ancillary Agreements or all or any of the transactions contemplated hereby or thereby to the exclusive jurisdiction of either (a) the United States District Court for the Northern District of Illinois or (b) any court of the State of Illinois located in Cook County, Illinois, and waive any and all objections to jurisdiction that they may have under the laws of the State of Illinois or the United States. IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be duly executed and delivered as of the day and year first above written. BERRY PLASTICS CORPORATION By: /s/ Ira G. Boots ------------------------------------------ Name: Ira G. Boots ------------------------------------------ Title: President & CEO ------------------------------------------ BERRY PLASTICS ACQUISITION CORPORATION IV By: /s/ Ira G. Boots ------------------------------------------ Name: Ira G. Boots ------------------------------------------ Title: President & CEO ------------------------------------------ LANDIS PLASTICS, INC. By: /s/ H. Richard Landis ------------------------------------------ Name: H. Richard Landis ------------------------------------------ Title: CEO ------------------------------------------ SHAREHOLDERS OF LANDIS PLASTICS
- ------------------------------------------------ ----------------------------------------- /s/ H. Richard Landis /s/ Bonita R. Landis - ----------------------------------------- ----------------------------------------- H. Richard Landis Bonita R. Landis HENRY R. LANDIS II GRANTOR RETAINED ANNUITY HENRY R. LANDIS II GRANTOR RETAINED ANNUITY TRUST #1, DATED DECEMBER 19, 1997 TRUST #2, DATED DECEMBER 19, 1997 By: /s/ H. Richard Landis By: /s/ H. Richard Landis ------------------------------------ ----------------------------------- H. Richard Landis, a/k/a Henry R. Landis II as H. Richard Landis, a/k/a Henry R. Landis II Trustee as Trustee HENRY R. LANDIS II GRANTOR RETAINED ANNUITY TRUST #3, DATED DECEMBER 19, 1997 By: /s/ H. Richard Landis ------------------------------------ H. Richard Landis, a/k/a Henry R. Landis II as Trustee GREGORY J. LANDIS IRREVOCABLE TRUST, DATED DAVID A. LANDIS IRREVOCABLE TRUST, DATED DECEMBER 23, 1988 DECEMBER 23, 1988 By: /s/ Gregory J. Landis By: /s/ Gregory J. Landis ------------------------------------ ----------------------------------- Gregory J. Landis, as Co-Trustee Gregory J. Landis, as Co-Trustee By: /s/ David A. Landis By: /s/ David A. Landis ------------------------------------ ----------------------------------- David A. Landis, as Co-Trustee David A. Landis, as Co-Trustee JAMES M. LANDIS IRREVOCABLE TRUST, RUSSEL J. LANDIS IRREVOCABLE TRUST, DATED DATED DECEMBER 23, 1988 DECEMBER 23, 1988 By: /s/ James M. Landis By: /s/ Russel J. Landis ------------------------------------ ----------------------------------- James M. Landis, as Co-Trustee Russel J. Landis, as Co-Trustee By:/s/ David A. Landis By: /s/ H. Richard Landis ------------------------------------ ----------------------------------- David A. Landis, as Co-Trustee H. Richard Landis, as Co-Trustee EDWARD D. LANDIS IRREVOCABLE TRUST, YVONNE T. LANDIS IRREVOCABLE TRUST, DATED DECEMBER 23, 1988 DATED DECEMBER 23, 1988 By: /s/ Edward D. Landis By: /s/ Yvonne T. Martello ------------------------------------ ----------------------------------- Edward D. Landis, as Co-Trustee Yvonne T. Martello f/k/a Yvonne T. Landis, as Co-Trustee By: /s/ H. Richard Landis By: /s/ Gregory J. Landis ------------------------------------ ----------------------------------- H. Richard Landis, as Co-Trustee Gregory J. Landis, as Co-Trustee JAMES M. LANDIS TRUST 2000, DATED YVONNE T. MARTELLO TRUST 2000, DATED NOVEMBER 6, 2000 September 25, 2000 By: /s/ Russel J. Landis By: /s/ David A. Landis ------------------------------------ ----------------------------------- Russel J. Landis as Co-Trustee David A. Landis as Co-Trustee By: /s/ James M. Landis By: /s/ Yvonne T. Martello ------------------------------------ ----------------------------------- James M. Landis, as Co-Trustee Yvonne T. Martello as Co-Trustee DAVID A. LANDIS TRUST 2000, DATED GREGORY J. LANDIS TRUST 2000, DATED SEPTEMBER 25, 2000 JUNE 9, 2000 By:/s/ Gregory J. Landis By:/s/ David A. Landis ------------------------------------ ----------------------------------- Gregory J. Landis as Co-Trustee David A. Landis as Co-Trustee By:/s/ David A. Landis By:/s/ Gregory J. Landis ------------------------------------ ----------------------------------- David A. Landis, as Co-Trustee Gregory J. Landis, as Co-Trustee RUSSEL J. LANDIS TRUST 2000, DATED September 25, 2000 By:/s/ James M. Landis ------------------------------------ James M. Landis as Co-Trustee By:/s/ Russel J. Landis ------------------------------------ Russel J. Landis, as Co-Trustee DANIEL J. LANDIS IRREVOCABLE TRUST, DATED GREGORY P. LANDIS IRREVOCABLE TRUST, DATED APRIL 1, 2003 APRIL 1, 2003 By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------ ----------------------------------- Gregory J. Landis, as Co-Trustee Gregory J. Landis, as Co-Trustee By:/s/ Denise E. Landis By:/s/ Denise E. Landis ------------------------------------ ----------------------------------- Denise E. Landis, as Co-Trustee Denise E. Landis, as Co-Trustee KATHRYN T. LANDIS IRREVOCABLE TRUST, JULIE A. LANDIS IRREVOCABLE TRUST, DATED DATED, MAY 15, 2003 MAY 15, 2003 By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------ ----------------------------------- David A. Landis, as Co-Trustee David A. Landis, as Co-Trustee By:/s/ Marianne Landis By:/s/ Marianne Landis ------------------------------------ ----------------------------------- Marianne Landis, Co-Trustee Marianne Landis, as Co-Trustee STEVEN R. LANDIS IRREVOCABLE TRUST, DAVID T. LANDIS IRREVOCABLE TRUST, DATED DATED MAY 15, 2003 MAY 15, 2003 By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------ ----------------------------------- David A. Landis, as Co-Trustee David A. Landis, as Co-Trustee By:/s/ Marianne Landis By:/s/ Marianne Landis ------------------------------------ ----------------------------------- Marianne Landis, Co-Trustee Marianne Landis, as Co-Trustee MANAGEMENT SHAREHOLDERS By:/s/ William VanMeter By:/s/ James Torgerson ------------------------------------ ----------------------------------- William VanMeter, Individually James Torgerson, Individually By:/s/ Stephen Pace By:/s/ Ross Neininger ------------------------------------ ----------------------------------- Stephen Pace, Individually Ross Neininger, Individually By:/s/ Bruno Rudolf By:/s/ Zigmond Kossakowski ------------------------------------ ----------------------------------- Bruno Rudolf, Individually Zigmond Kossakowski, Individually By:/s/ Bimal Kalvani By:/s/ Mike Clark ------------------------------------ ----------------------------------- Bimal Kalvani, Individually Mike Clark, Individually By:/s/ Steve Ellis By:/s/ Greg Clinton ------------------------------------ ----------------------------------- Steve Ellis, Individually Greg Clinton, Individually By:/s/ Doug Bridwell By:/s/ John Sabey ------------------------------------ ----------------------------------- Doug Bridwell, Individually John Sabey, Individually LANDIS FAMILY NEW YORK PARTNERSHIP, an Illinois general partnership GREGORY J. LANDIS and DAVID A. GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Gregory J. Landis, LANDIS, Co-Trustees of the Henry J. Landis II, share of the LANDIS FAMILY TRUST NO. 2 share of the LANDIS FAMILY TRUST NO. 2 By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------ ------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------ ------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the David A. Landis share of Co-Trustees of the James M. Landis share of the the LANDIS FAMILY TRUST NO. 2 LANDIS FAMILY TRUST NO. 2 By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------ ------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------ ------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Yvonne T. Landis share Co-Trustees of the Russell J. Landis share of the of the LANDIS FAMILY TRUST NO. 2 LANDIS FAMILY TRUST NO. 2 By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------ ------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------ ------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee LANDIS FAMILY ALSIP PARTNERSHIP, an Illinois general partnership GREGORY J. LANDIS and DAVID A. GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the David A. Landis LANDIS, Co-Trustees of the James M. Landis share of the LANDIS FAMILY TRUST share of the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------ ------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------ ------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Yvonne T. LANDIS, Co-Trustees of the Edward D. Landis share of the LANDIS FAMILY TRUST Landis share of the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------ ------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------ ------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Russell J. Landis share of the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis ------------------------------------ GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis ------------------------------------ DAVID A. LANDIS, Co-Trustee LANDIS FAMILY ARIZONA PARTNERSHIP, an Illinois general partnership GREGORY J. LANDIS and DAVID A. LANDIS, GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Gregory J. Landis share Co-Trustees of the Henry J. Landis, II share of the LANDIS FAMILY TRUST of the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------ ------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------ ------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the David A. Landis share Co-Trustees of the James M. Landis share of of the LANDIS FAMILY TRUST the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis By:/s/ Gregory J. Landis ------------------------------------ ------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------ ------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Yvonne T. Landis share Co-Trustees of the Edward D. Landis share of of the LANDIS FAMILY TRUST the LANDIS FAMILY TRUST By:/s/ Gregory J. Landis By: /s/ Gregory J. Landis ------------------------------------ ------------------------------- GREGORY J. LANDIS, Co-Trustee GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis By:/s/ David A. Landis ------------------------------------ ------------------------------- DAVID A. LANDIS, Co-Trustee DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS and DAVID A. LANDIS, Co-Trustees of the Russell J. Landis share of the LANDIS FAMILY TRUST By: /s/ Gregory J. Landis ------------------------------------ GREGORY J. LANDIS, Co-Trustee By:/s/ David A. Landis ------------------------------------ DAVID A. LANDIS, Co-Trustee GREGORY J. LANDIS, as Shareholder Representative /s/ Gregory J. Landis - --------------------------------------
EX-4.1 4 ex41.txt EX 4.1 REGISTRATION RIGHTS AGREEMENT Exhibit 4.1 EXECUTION COPY This REGISTRATION RIGHTS AGREEMENT dated November 20, 2003 (the "Agreement") is entered into by and among Berry Plastics Corporation, a Delaware corporation (the "Company"), BPC Holding Corporation, a Delaware corporation ("Holding"), the other guarantors listed on the signature page hereof (together with Holding, the "Guarantors"), and J.P. Morgan Securities Inc. ("JPMorgan") and Goldman, Sachs & Co. ("Goldman, Sachs") (together with JPMorgan, the "Initial Purchasers"). The Company, Holding, the other Guarantors and the Initial Purchasers are parties to the Purchase Agreement dated November 10, 2003 (the "Purchase Agreement"), which provides for the sale by the Company to the Initial Purchasers of $85,000,000 aggregate principal amount of the Company's 10 3/4% Senior Subordinated Notes due 2012 (the "Securities"), which will be guaranteed on an unsecured senior subordinated basis by each of the Guarantors. As an inducement to the Initial Purchasers to enter into the Purchase Agreement, the Company and the Guarantors have agreed to provide to the Initial Purchasers, the Market-Makers (as defined herein) and their direct and indirect transferees the registration rights set forth in this Agreement. The execution and delivery of this Agreement is a condition to the closing under the Purchase Agreement. In consideration of the foregoing, the parties hereto agree as follows: SECTION 1. Definitions. As used in this Agreement, the following terms shall have the following meanings: "Business Day" shall mean any day that is not a Saturday, Sunday or other day on which commercial banks in New York City are authorized or required by law to remain closed. "Closing Date" shall mean the Closing Date as defined in the Purchase Agreement. "Company" shall have the meaning set forth in the preamble and shall also include the Company's successors. "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. "Exchange Dates" shall have the meaning set forth in Section 2(a)(ii) hereof. "Exchange Offer" shall mean the exchange offer by the Company and the Guarantors of Exchange Securities for Registrable Securities pursuant to Section 2(a) hereof. "Exchange Offer Registration" shall mean a registration under the Securities Act effected pursuant to Section 2(a) hereof. "Exchange Offer Registration Statement" shall mean an exchange offer registration statement on Form S-4 (or, if applicable, on another appropriate form) and all amendments and supplements to such registration statement, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein. "Exchange Securities" shall mean senior subordinated notes issued by the Company and guaranteed by the Guarantors under the Indenture containing terms identical to the Securities (except that the Exchange Securities will not be subject to restrictions on transfer or to any increase in annual interest rate for failure to comply with this Agreement) and to be offered to Holders of Securities in exchange for Securities pursuant to the Exchange Offer. "Goldman, Sachs" shall have the meaning set forth in the preamble. "Guarantors" shall have the meaning set forth in the preamble and shall also include any Guarantor's successors. "Holders" shall mean the Initial Purchasers, for so long as they own any Registrable Securities, and each of their successors, assigns and direct and indirect transferees who become owners of Registrable Securities under the Indenture; provided that for purposes of Sections 4 and 6 of this Agreement, the term "Holders" shall include Participating Broker-Dealers; and provided, further, that for the purposes of Section 6 of this Agreement, the term "Holders" shall include the Market-Makers. "Initial Purchasers" shall have the meaning set forth in the preamble. "Indenture" shall mean the Indenture relating to the Securities dated as of July 22, 2002, among the Company, Holding, the other Guarantors and U.S. Bank Trust National Association, as trustee, and as the same may be amended from time to time in accordance with the terms thereof. "JPMorgan" shall have the meaning set forth in the preamble. "Majority Holders" shall mean the Holders of a majority of the aggregate principal amount of outstanding Registrable Securities; provided that whenever the consent or approval of Holders of a specified percentage of Registrable Securities is required hereunder, Registrable Securities owned directly or indirectly by Holding or any of its affiliates shall not be counted in determining whether such consent or approval was given by the Holders of such required percentage or amount; provided, further, however, that the foregoing proviso shall not apply to Section 5 hereof. "Market-Maker" shall have the meaning set forth in Section 5(a) hereof. "Market-Maker's Information" shall have the meaning set forth in Section 5(e) hereof. "Market-Making Registration Statement" shall have the meaning set forth in Section 5(a)(i) hereof. "Participating Broker-Dealers" shall have the meaning set forth in Section 4(a) hereof. "Person" shall mean an individual, partnership, limited liability company, corporation, trust or unincorporated organization, or a government or agency or political subdivision thereof. "Prospectus" shall mean the prospectus included in a Registration Statement, including any preliminary prospectus, and any such prospectus as amended or supplemented by any prospectus supplement, including a prospectus supplement with respect to the terms of the offering of any portion of the Registrable Securities covered by a Shelf Registration Statement, and by all other amendments and supplements to such prospectus, and in each case including any document incorporated by reference therein. "Purchase Agreement" shall have the meaning set forth in the preamble. "Registrable Securities" shall mean the Securities; provided that the Securities shall cease to be Registrable Securities (i) when a Registration Statement with respect to such Securities has been declared effective under the Securities Act and such Securities have been exchanged or disposed of pursuant to such Registration Statement, (ii) when such Securities are eligible to be sold pursuant to Rule 144(k) (or any similar provision then in force, but not Rule 144A) under the Securities Act, (iii) when such securities are sold pursuant to Rule 144 under circumstances in which any legend borne by such Securities relating to restrictions on transferability thereof, under the Securities Act or otherwise, is removed by the Company or pursuant to the Indenture in accordance with the Securities Act or (iv) when such Securities cease to be outstanding. "Registration Expenses" shall mean any and all expenses incident to performance of or compliance by the Company and the Guarantors with this Agreement, including without limitation: (i) all SEC, stock exchange or National Association of Securities Dealers, Inc. registration and filing fees, (ii) all fees and expenses incurred in connection with compliance with state securities or blue sky laws (including reasonable fees and disbursements of counsel for any Underwriters or Holders in connection with blue sky qualification of any Exchange Securities or Registrable Securities, in any case, not to exceed $10,000), (iii) all expenses relating to preparing, printing and distributing any Registration Statement, any Prospectus and any amendments or supplements thereto, any underwriting agreements, securities sales agreements or other similar agreements and any other documents relating to the performance of and compliance with this Agreement, (iv) all rating agency fees, (v) all fees and disbursements relating to the qualification of the Indenture under applicable securities laws, (vi) the fees and disbursements of the Trustee and its counsel, (vii) the fees and disbursements of counsel for the Company and the Guarantors and, in the case of a Shelf Registration Statement, the reasonable fees and disbursements of one counsel for the Holders (which counsel shall be selected by the Majority Holders and which counsel may also be counsel for the Initial Purchasers), (viii) the reasonable fees and disbursements of one counsel in connection with a Market-Making Registration Statement (which counsel shall be mutually agreeable to the Market-Makers) and (ix) the fees and disbursements of the independent public accountants of the Company and the Guarantors, including the expenses of any special audits or "comfort" letters required by or incident to the performance of and compliance with this Agreement, but excluding fees and expenses of counsel to the Underwriters (other than fees and expenses set forth in clause (ii) above) or the Holders and underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of Registrable Securities by a Holder. "Registration Statement" shall mean any registration statement of the Company and the Guarantors that covers any of the Exchange Securities or Registrable Securities pursuant to the provisions of this Agreement, including, without limitation, any Market-Making Registration Statement, and all amendments and supplements to any such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein. "SEC" shall mean the Securities and Exchange Commission. "Securities Act" shall mean the Securities Act of 1933, as amended from time to time. "Shelf Effectiveness Period" shall have the meaning set forth in Section 2(b) hereof. "Shelf Registration" shall mean a registration effected pursuant to Section 2(b) hereof. "Shelf Registration Statement" shall mean a "shelf" registration statement of the Company and the Guarantors that covers all the Registrable Securities (but no other securities unless approved by the Holders whose Registrable Securities are to be covered by such Shelf Registration Statement) on an appropriate form under Rule 415 under the Securities Act, or any similar rule that may be adopted by the SEC, and all amendments and supplements to such registration statement, including post-effective amendments, in each case including the Prospectus contained therein, all exhibits thereto and any document incorporated by reference therein. "Staff" shall mean the staff of the SEC. "Trust Indenture Act" shall mean the Trust Indenture Act of 1939, as amended from time to time. "Trustee" shall mean the trustee with respect to the Securities under the Indenture. "Underwriter" shall have the meaning set forth in Section 3 hereof. "Underwritten Offering" shall mean an offering in which Registrable Securities are sold to an Underwriter for reoffering to the public. SECTION 2. Registration Under the Securities Act. (a) To the extent not prohibited by any applicable law or applicable interpretations of the Staff, the Company and the Guarantors shall use their reasonable best efforts to (i) cause to be filed an Exchange Offer Registration Statement covering an offer to the Holders to exchange all the Registrable Securities for Exchange Securities and (ii) have such Registration Statement remain effective until 180 days after the closing of the Exchange Offer. The Company and the Guarantors shall commence the Exchange Offer reasonably promptly after the Exchange Offer Registration Statement is declared effective by the SEC and use their reasonable best efforts to complete the Exchange Offer not later than 60 days after such effective date. The Company and the Guarantors shall commence the Exchange Offer by mailing the related Prospectus, appropriate letters of transmittal and other accompanying documents to each Holder stating, in addition to such other disclosures as are required by applicable law: (i) that the Exchange Offer is being made pursuant to this Agreement and that all Registrable Securities validly tendered and not properly withdrawn will be accepted for exchange; (ii) the dates of acceptance for exchange (which shall be a period of at least 20 Business Days from the date such notice is mailed) (the "Exchange Dates"); (iii) that any Registrable Security not tendered will remain outstanding and continue to accrue interest but will not retain any rights under this Agreement; (iv) that any Holder electing to have a Registrable Security exchanged pursuant to the Exchange Offer will be required to surrender such Registrable Security, together with the appropriate letters of transmittal, to the institution and at the address (located in the Borough of Manhattan, The City of New York) and in the manner specified in the notice, prior to the close of business on the last Exchange Date; and (v) that any Holder will be entitled to withdraw its election, not later than the close of business on the last Exchange Date, by sending to the institution and at the address (located in the Borough of Manhattan, The City of New York) specified in the notice, a telegram, telex, facsimile transmission or letter setting forth the name of such Holder, the principal amount of Registrable Securities delivered for exchange and a statement that such Holder is withdrawing its election to have such Securities exchanged. As a condition to participating in the Exchange Offer, a Holder will be required to represent to the Company and the Guarantors that (i) any Exchange Securities to be received by it will be acquired in the ordinary course of its business, (ii) at the time of the commencement of the Exchange Offer it has no arrangement or understanding with any Person to participate in the distribution (within the meaning of the Securities Act) of the Exchange Securities in violation of the provisions of the Securities Act, (iii) it is not an "affiliate" (within the meaning of Rule 405 under Securities Act) of the Company or any Guarantor and (iv) if such Holder is a broker-dealer that will receive Exchange Securities for its own account in exchange for Registrable Securities that were acquired as a result of market-making or other trading activities, then such Holder will deliver a Prospectus in connection with any resale of such Exchange Securities. As soon as practicable after the last Exchange Date, the Company and the Guarantors shall: (i) accept for exchange Registrable Securities or portions thereof validly tendered and not properly withdrawn pursuant to the Exchange Offer; and (ii) deliver, or cause to be delivered, to the Trustee for cancellation all Registrable Securities or portions thereof so accepted for exchange by the Company and issue, and cause the Trustee to promptly authenticate and deliver to each Holder, Exchange Securities equal in principal amount to the principal amount of the Registrable Securities surrendered by such Holder. The Company and the Guarantors shall use their reasonable best efforts to complete the Exchange Offer as provided above and shall comply with the applicable requirements of the Securities Act, the Exchange Act and other applicable laws and regulations in connection with the Exchange Offer. The Exchange Offer shall not be subject to any conditions, other than that the Exchange Offer does not violate any applicable law or applicable interpretations of the Staff of the SEC. (b) In the event that (i) the Company and the Guarantors determine that the Exchange Offer Registration provided for in Section 2(a) above is not available or may not be completed as soon as practicable after the last Exchange Date because it would violate any applicable law or applicable interpretations of the Staff of the SEC, (ii) the Exchange Offer is not for any other reason completed by the Target Registration Date (as defined herein) or (iii) the Exchange Offer has been completed and in the opinion of counsel for the Initial Purchasers a Registration Statement must be filed and a Prospectus must be delivered by the Initial Purchasers in connection with any offering or sale of Registrable Securities originally purchased and still held by the Initial Purchasers, the Company and the Guarantors shall use their reasonable best efforts to cause to be filed as soon as practicable after such determination, date or notice of such opinion of counsel is given to the Company, as the case may be, a Shelf Registration Statement providing for the sale of all the Registrable Securities by the Holders thereof and to have such Shelf Registration Statement declared effective by the SEC. To the extent a Shelf Registration Statement is required to be filed pursuant to clause (ii) but the Exchange Offer is completed on a date later than the Target Registration Date, upon completion of the Exchange Offer the Company and the Guarantors will no longer be required to file, make effective or continue the effectiveness of the Shelf Registration Statement. In the event that the Company and the Guarantors are required to file a Shelf Registration Statement pursuant to clause (iii) of the preceding sentence, the Company and the Guarantors shall use their reasonable best efforts to file and have declared effective by the SEC both an Exchange Offer Registration Statement pursuant to Section 2(a) with respect to all Registrable Securities and a Shelf Registration Statement (which may be a combined Registration Statement with the Exchange Offer Registration Statement) with respect to offers and sales of Registrable Securities held by the Initial Purchasers after completion of the Exchange Offer. The Company and the Guarantors agree to use their reasonable best efforts to keep the Shelf Registration Statement continuously effective until the expiration of the period referred to in Rule 144(k) under the Securities Act with respect to the Registrable Securities or such shorter period that will terminate when the Exchange Offer has been consummated or all the Registrable Securities covered by the Shelf Registration Statement have been sold pursuant to the Shelf Registration Statement or are no longer outstanding (the "Shelf Effectiveness Period"). The Company and the Guarantors further agree to supplement or amend the Shelf Registration Statement and the related Prospectus if required by the rules, regulations or instructions applicable to the registration form used by the Company and the Guarantors for such Shelf Registration Statement or by the Securities Act or by any other rules and regulations thereunder for shelf registration or if reasonably and timely requested by a Holder of Registrable Securities with respect to information relating to such Holder, and to use their reasonable best efforts to cause any such amendment to become effective and such Shelf Registration Statement and Prospectus to become usable as soon as thereafter practicable. The Company and the Guarantors agree to furnish to the Holders of Registrable Securities copies of any such supplement or amendment promptly after its being used or filed with the SEC. (c) The Company and the Guarantors shall pay all Registration Expenses in connection with the registration pursuant to Section 2(a) and Section 2(b) hereof. Each Holder shall pay all underwriting discounts and commissions and transfer taxes, if any, relating to the sale or disposition of such Holder's Registrable Securities pursuant to the Shelf Registration Statement. (d) An Exchange Offer Registration Statement pursuant to Section 2(a) hereof or a Shelf Registration Statement pursuant to Section 2(b) hereof will not be deemed to have become effective unless it has been declared effective by the SEC. In the event that either the Exchange Offer is not completed or the Shelf Registration Statement, if required hereby, is not declared effective on or prior to the later of (i) June 17, 2004 and (ii) 60 days after the release to the Company of the funds held in escrow pursuant to the Escrow Agreement (as defined in the Purchase Agreement) (the "Target Registration Date"), the interest rate on the Registrable Securities will be increased by (i) 0.25% per annum for the first 90-day period immediately following the Target Registration Date and (ii) an additional 0.25% per annum with respect to each subsequent 90-day period, in each case until the Exchange Offer is completed or the Shelf Registration Statement, if required hereby, is declared effective by the SEC or the Securities become freely tradable under the Securities Act, up to a maximum aggregate increase of 1.00% per annum of additional interest. If the Shelf Registration Statement has been declared effective and thereafter either ceases to be effective or the Prospectus contained therein ceases to be usable at any time during the Shelf Effectiveness Period, and such failure to remain effective or usable exists for more than 45 consecutive days or more than 60 days (whether or not consecutive) in any 12-month period, then the interest rate on the Registrable Securities will be increased by 0.25% per annum commencing on the 46th or 61st day in such 12-month period, with further increases, subject to a maximum of 1.00% per annum of additional interest, in accordance with the schedule in the prior paragraph, and ending on such date that the Shelf Registration Statement has again been declared effective or the Prospectus again becomes usable. (e) Without limiting the remedies available to the Initial Purchasers and the Holders, the Company and the Guarantors acknowledge that any failure by the Company or the Guarantors to comply with their obligations under Section 2(a) and Section 2(b) hereof may result in material irreparable injury to the Initial Purchasers or the Holders for which there is no adequate remedy at law, that it will not be possible to measure damages for such injuries precisely and that, although any monetary damages will be limited to the amounts specified in Section 2(d) hereof, in the event of any such failure, the Initial Purchasers or any Holder may obtain such other relief as may be required to specifically enforce the Company's and the Guarantors' obligations under Section 2(a) and Section 2(b) hereof. SECTION 3. Registration Procedures. In connection with their obligations pursuant to Section 2(a) and Section 2(b) hereof, the Company and the Guarantors shall use commercially reasonable efforts to: (a) prepare and file with the SEC a Registration Statement on the appropriate form under the Securities Act, which form (x) shall be selected by the Company and the Guarantors, (y) shall, in the case of a Shelf Registration, be available for the sale of the Registrable Securities by the selling Holders thereof and (z) shall comply as to form in all material respects with the requirements of the applicable form and include all financial statements required by the SEC to be filed therewith; and use their commercially reasonable efforts to cause such Registration Statement to become effective within the timeframe required under this Agreement and remain effective for the applicable period in accordance with Section 2 hereof; (b) prepare and file with the SEC such amendments and post-effective amendments to each Registration Statement as may be necessary to keep such Registration Statement effective for the applicable period in accordance with Section 2 hereof and cause each Prospectus to be supplemented by any required prospectus supplement and, as so supplemented, to be filed pursuant to Rule 424 under the Securities Act; and keep each Prospectus current during the period described in Section 4(3) of and Rule 174 under the Securities Act that is applicable to transactions by brokers or dealers with respect to the Registrable Securities or Exchange Securities; (c) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, to counsel for such Holders and to each Underwriter of an Underwritten Offering of Registrable Securities, if any, without charge, as many copies of each Prospectus as reasonably requested, including each preliminary Prospectus, and any amendment or supplement thereto, in order to facilitate the sale or other disposition of the Registrable Securities thereunder; and the Company and the Guarantors consent to the use of such Prospectus and any amendment or supplement thereto in accordance with applicable law by each of the selling Holders of Registrable Securities and any such Underwriters in connection with the offering and sale of the Registrable Securities covered by and in the manner described in such Prospectus or any amendment or supplement thereto in accordance with applicable law; (d) endeavor to register or qualify the Registrable Securities under all applicable state securities or blue sky laws of such jurisdictions as any Holder of Registrable Securities covered by a Registration Statement shall reasonably request in writing by the time the applicable Registration Statement is declared effective by the SEC; cooperate with the Holders in connection with any filings required to be made with the National Association of Securities Dealers, Inc.; and do any and all other acts and things that may be reasonably necessary or advisable to enable each Holder to complete the disposition in each such jurisdiction of the Registrable Securities owned by such Holder; provided that neither the Company nor any Guarantor shall be required to (i) qualify as a foreign corporation or other entity or as a dealer in securities in any such jurisdiction where it would not otherwise be required to so qualify, (ii) file any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not so subject; (e) in the case of a Shelf Registration, notify each Holder of Registrable Securities and counsel for such Holders promptly and, if requested by any such Holder or counsel, confirm such advice in writing (i) when a Registration Statement has become effective and when any post-effective amendment thereto has been filed and becomes effective, (ii) of any request by the SEC or any state securities authority for amendments and supplements to a Registration Statement and Prospectus or for additional information after the Registration Statement has become effective, (iii) of the issuance by the SEC or any state securities authority of any stop order suspending the effectiveness of a Registration Statement or the initiation of any proceedings for that purpose, (iv) if, between the effective date of a Registration Statement and the closing of any sale of Registrable Securities covered thereby, the representations and warranties of the Company or any Guarantor contained in any underwriting agreement, securities sales agreement or other similar agreement, if any, relating to an offering of such Registrable Securities cease to be true and correct in all material respects or if the Company or any Guarantor receives any notification with respect to the suspension of the qualification of the Registrable Securities for sale in any jurisdiction or the initiation of any proceeding for such purpose, (v) of the happening of any event during the period a Shelf Registration Statement is effective that makes any statement made in such Registration Statement or the related Prospectus untrue in any material respect or that requires the making of any changes in such Registration Statement or Prospectus in order to make the statements therein not misleading and (vi) of any determination by the Company or any Guarantor that a post-effective amendment to a Registration Statement would be appropriate; (f) use their reasonable best efforts to obtain the withdrawal of any order suspending the effectiveness of a Registration Statement at the earliest possible moment and provide immediate notice to each Holder of the withdrawal of any such order; (g) in the case of a Shelf Registration, furnish to each Holder of Registrable Securities, without charge, at least one conformed copy of each Registration Statement and any post-effective amendment thereto (without any documents incorporated therein by reference or exhibits thereto, unless requested); (h) in the case of a Shelf Registration, cooperate with the selling Holders of Registrable Securities to facilitate the timely preparation and delivery of certificates representing Registrable Securities to be sold and not bearing any restrictive legends and enable such Registrable Securities to be issued in such denominations and registered in such names (consistent with the provisions of the Indenture) as the selling Holders may reasonably request at least one Business Day prior to the closing of any sale of Registrable Securities; (i) in the case of a Shelf Registration, upon the occurrence of any event contemplated by Section 3(e)(v) hereof, use their reasonable best efforts to prepare and file with the SEC a supplement or post-effective amendment to a Registration Statement or the related Prospectus or any document incorporated therein by reference or file any other required document so that, as thereafter delivered to purchasers of the Registrable Securities, such Prospectus will not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements therein, in the light of the circumstances under which they were made, not misleading; and the Company and the Guarantors shall notify the Holders of Registrable Securities to suspend use of the Prospectus as promptly as practicable after the occurrence of such an event, and such Holders hereby agree to suspend use of the Prospectus until the Company and the Guarantors have amended or supplemented the Prospectus to correct such misstatement or omission; (j) a reasonable time prior to the filing of any Registration Statement, any Prospectus, any amendment to a Registration Statement or amendment or supplement to a Prospectus or of any document that is to be incorporated by reference into a Registration Statement or a Prospectus after initial filing of a Registration Statement, provide copies of such document to the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, to the Holders of Registrable Securities and their counsel) and make such of the representatives of the Company and the Guarantors as shall be reasonably requested by the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities or their counsel) available for discussion of such document; and the Company and the Guarantors shall not, at any time after initial filing of a Registration Statement, file any Prospectus, any amendment of or supplement to a Registration Statement or a Prospectus, or any document that is to be incorporated by reference into a Registration Statement or a Prospectus, of which the Initial Purchasers and their counsel (and, in the case of a Shelf Registration Statement, the Holders of Registrable Securities and their counsel) shall not have previously been advised and furnished a copy or to which the Initial Purchasers or their counsel (and, in the case of a Shelf Registration Statement, the Holders or their counsel) shall object; (k) obtain a CUSIP number for all Exchange Securities or Registrable Securities, as the case may be, not later than the effective date of a Registration Statement; (l) cause the Indenture to be qualified under the Trust Indenture Act in connection with the registration of the Exchange Securities or Registrable Securities, as the case may be; cooperate with the Trustee and the Holders to effect such changes to the Indenture as may be required for the Indenture to be so qualified in accordance with the terms of the Trust Indenture Act; and execute, and use their reasonable best efforts to cause the Trustee to execute, all documents as may be required to effect such changes and all other forms and documents required to be filed with the SEC to enable the Indenture to be so qualified in a timely manner; (m) in the case of a Shelf Registration, make available for inspection by an appropriate representative of the Holders of the Registrable Securities (an "Inspector") who is not a direct or indirect competitor of the Company or any Guarantor, any Underwriter participating in any disposition pursuant to such Shelf Registration Statement, and attorneys and accountants designated by the Holders, at reasonable times and in a reasonable manner, all pertinent financial and other records, documents and properties of the Company and the Guarantors, and cause the respective officers, directors and employees of the Company and the Guarantors to supply all information reasonably requested by any such Inspector, Underwriter, attorney or accountant in connection with a Shelf Registration Statement; provided that if any such information is identified by the Company or any Guarantor as being confidential or proprietary, prior to being given such information, each Person receiving such information shall take such actions as are reasonably necessary to protect the confidentiality of such information, including executing a customary confidentiality agreement that is not inconsistent with the rights and interests of any Inspector, Holder or Underwriter; (n) in the case of a Shelf Registration, use their reasonable best efforts to cause all Registrable Securities to be listed on any securities exchange or any automated quotation system on which similar securities issued or guaranteed by the Company or any Guarantor are then listed if requested by the Majority Holders, to the extent such Registrable Securities satisfy applicable listing requirements; (o) if reasonably requested by any Holder of Registrable Securities covered by a Registration Statement, promptly incorporate in a Prospectus supplement or post-effective amendment such information with respect to such Holder as such Holder reasonably requests to be included therein and make all required filings of such Prospectus supplement or such post-effective amendment as soon as the Company and the Guarantors have received notification of the matters to be incorporated in such filing; and (p) in the case of a Shelf Registration, enter into such customary agreements and take all such other actions in connection therewith (including those requested by the Holders of a majority in principal amount of the Registrable Securities being sold) in order to expedite or facilitate the disposition of such Registrable Securities including, but not limited to, an Underwritten Offering and in such connection, (i) to the extent possible, make such representations and warranties to the Holders and any Underwriters of such Registrable Securities with respect to the business of Holding and its subsidiaries, the Registration Statement, Prospectus and documents incorporated by reference or deemed incorporated by reference, if any, in each case, in form, substance and scope as are customarily made by issuers to underwriters in underwritten offerings and confirm the same if and when requested, (ii) obtain opinions of counsel to the Company and the Guarantors (which counsel and opinions, in form, scope and substance, shall be reasonably satisfactory to the Holders and such Underwriters and their respective counsel) addressed to each selling Holder and Underwriter of Registrable Securities, covering the matters customarily covered in opinions requested in underwritten offerings, (iii) obtain "comfort" letters from the independent certified public accountants of the Company and the Guarantors (and, if necessary, any other certified public accountant of any subsidiary of the Company or any Guarantor, or of any business acquired by the Company or any Guarantor for which financial statements and financial data are or are required to be included in the Registration Statement) addressed to each selling Holder and Underwriter of Registrable Securities to the extent permitted by appropriate accounting standards, such letters to be in customary form and covering matters of the type customarily covered in "comfort" letters in connection with underwritten offerings and (iv) deliver such documents and certificates as may be reasonably requested by the Holders of a majority in principal amount of the Registrable Securities being sold or the Underwriters, and which are customarily delivered in underwritten offerings, to evidence the continued validity of the representations and warranties of the Company and the Guarantors made pursuant to clause (i) above and to evidence compliance with any customary conditions contained in an underwriting agreement. In the case of a Shelf Registration Statement, the Company or any Guarantor may require each Holder of Registrable Securities to furnish to the Company and the Guarantors such information regarding such Holder and the proposed disposition by such Holder of such Registrable Securities as the Company and the Guarantors may from time to time reasonably request in writing. In the case of a Shelf Registration Statement, each Holder of Registrable Securities agrees that, upon receipt of any notice from the Company and the Guarantors of the happening of any event of the kind described in Section 3(e)(iii) or 3(e)(v) hereof or a notice pursuant to the last sentence of this paragraph, such Holder will forthwith discontinue disposition of Registrable Securities pursuant to a Shelf Registration Statement until such Holder's receipt of the copies of the supplemented or amended Prospectus contemplated by Section 3(i) hereof and, if so directed by the Company and the Guarantors, such Holder will deliver to the Company and the Guarantors all copies in its possession, other than permanent file copies then in such Holder's possession, of the Prospectus covering such Registrable Securities that is current at the time of receipt of such notice. In addition, the Company may give notice of the suspension of the offering and sale under the Shelf Registration Statement for a period or periods the Board of Directors of the Company reasonably determines to be necessary, if the Board of Directors determines in good faith that such action is in the best interests of the Company. If the Company and the Guarantors shall give any such notice to suspend the disposition of Registrable Securities pursuant to a Registration Statement, the Company and the Guarantors shall extend the period during which the Registration Statement shall be maintained effective pursuant to this Agreement by the number of days during the period from and including the date of the giving of such notice to and including the date when the Holders shall have received copies of the supplemented or amended Prospectus necessary to resume such dispositions. The Company and the Guarantors may give any such notice only twice during any 365-day period and any such suspensions shall not exceed 45 days for each suspension and there shall not be more than two suspensions in effect during any 365-day period. The Holders of Registrable Securities covered by a Shelf Registration Statement who desire to do so may sell such Registrable Securities in an Underwritten Offering. In any such Underwritten Offering, the investment banker or investment bankers and manager or managers (the "Underwriters") that will administer the offering will be selected by the Majority Holders of the Registrable Securities included in such offering, subject to the consent of the Company, not to be unreasonably withheld. SECTION 4. Participation of Broker-Dealers in Exchange Offer. (a) The Staff of the SEC has taken the position that any broker-dealer that receives Exchange Securities for its own account in the Exchange Offer in exchange for Securities that were acquired by such broker-dealer as a result of market-making or other trading activities (a "Participating Broker-Dealer") may be deemed to be an "underwriter" within the meaning of the Securities Act and must deliver a prospectus meeting the requirements of the Securities Act in connection with any resale of such Exchange Securities. The Company and the Guarantors understand that it is the Staff's position that if the Prospectus contained in the Exchange Offer Registration Statement includes a plan of distribution containing a statement to the above effect and the means by which Participating Broker-Dealers may resell the Exchange Securities, without naming the Participating Broker-Dealers or specifying the amount of Exchange Securities owned by them, such Prospectus may be delivered by Participating Broker-Dealers to satisfy their prospectus delivery obligation under the Securities Act in connection with resales of Exchange Securities for their own accounts, so long as the Prospectus otherwise meets the requirements of the Securities Act. (b) In light of the above, and notwithstanding the other provisions of this Agreement, the Company and the Guarantors agree to amend or supplement the Prospectus contained in the Exchange Offer Registration Statement, as would otherwise be contemplated by Section 3(i), for a period of up to 180 days after the last Exchange Date (as such period may be extended pursuant to the penultimate paragraph of Section 3 of this Agreement), if requested by the Initial Purchasers or by one or more Participating Broker-Dealers, in order to expedite or facilitate the disposition of any Exchange Securities by Participating Broker-Dealers consistent with the positions of the Staff recited in Section 4(a) above. The Company and the Guarantors further agree that Participating Broker-Dealers shall be authorized to deliver such Prospectus during such period in connection with the resales contemplated by this Section 4. (c) The Initial Purchasers shall have no liability to the Company, any Guarantor or any Holder with respect to any request that they may make pursuant to Section 4(b) above. SECTION 5. Market-Making. (a) For so long as any of the Securities or Exchange Securities are outstanding and Goldman, Sachs or JPMorgan (each, a "Market-Maker" and, together, the "Market-Makers") or any of their respective affiliates are an affiliate of the Company, Holding or the Guarantors and proposes to make a market in the Securities or Exchange Securities as part of their business in the ordinary course, the following provisions shall apply for the sole benefit of the Market-Makers: (i) The Company and the Guarantors shall (A) on the date that the Exchange Offer Registration Statement is filed with the SEC, file a registration statement (the "Market-Making Registration Statement") (which may be the Exchange Offer Registration Statement or the Shelf Registration Statement if permitted by the rules and regulations of the SEC) and use its commercially reasonable efforts to cause such Market-Making Registration Statement to be declared effective by the SEC on or prior to the consummation of the Exchange Offer; (B) periodically amend such Market-Making Registration Statement to the extent required so that the information contained therein complies with the requirements of Section 10(a) under the Securities Act; (C) within 45 days following the end of each of Holding's and its subsidiaries' fiscal quarters (or within 90 days following the end of their fiscal year), file a supplement to the prospectus contained in the Market-Making Registration Statement that sets forth the financial results of Holding and its subsidiaries for such quarter, unless such information is incorporated by reference in the prospectus; (D) amend the Market-Making Registration Statement or supplement the related prospectus when necessary to reflect any material changes in the information provided therein in order to comply with applicable laws; and (E) amend the Market-Making Registration Statement when required to do so in order to comply with Section 10(a)(3) of the Securities Act; provided, however, that (1) prior to filing the Market-Making Registration Statement, any amendment thereto or any supplement to the related prospectus (other than a supplement filed pursuant to clause (C) of this paragraph), the Company and the Guarantors will furnish to each Market-Maker copies of all such documents proposed to be filed, which documents will be subject to the review of each Market-Maker and its respective counsel, (2) the Company and the Guarantors will not file the Market-Making Registration Statement, any amendment thereto or any amendment or supplement to the related prospectus (other than a supplement filed pursuant to clause (C) of this paragraph) to which either Market-Maker and its respective counsel shall reasonably object unless the Company and the Guarantors are advised by counsel that such Market-Making Registration Statement, amendment or supplement is required to be filed and (3) the Company and the Guarantors will provide each Market-Maker and its respective counsel with copies of the Market-Making Registration Statement and each amendment and supplement filed. (ii) The Company and the Guarantors shall notify each Market-Maker and, if requested by either Market-Maker, confirm such advice in writing, (A) when any post-effective amendment to the Market-Making Registration Statement or any amendment or supplement to the related prospectus has been filed, and, with respect to any post-effective amendment, when the same has become effective; (B) of any request by the SEC for any post-effective amendment to the Market-Making Registration Statement, any supplement or amendment to the related prospectus or for additional information; (C) the issuance by the SEC of any stop order suspending the effectiveness of the Market-Making Registration Statement or the initiation of any proceedings for that purpose; (D) of the receipt by the Company or any Guarantor of any notification with respect to the suspension of the qualification of the Securities for sale in any jurisdiction or the initiation or threatening of any proceedings for such purpose; and (E) of the happening of any event that makes any statement made in the Market-Making Registration Statement, the related prospectus or any amendment or supplement thereto untrue or that requires the making of any changes in the Market-Making Registration Statement, such prospectus or any amendment or supplement thereto, in order to make the statements therein not misleading. (iii) If any event contemplated by Section 5(a)(ii)(B) through (E) occurs during the period for which the Company and the Guarantors are required to maintain an effective Market-Making Registration Statement, the Company and the Guarantors shall promptly prepare and file with the SEC a post-effective amendment to the Market-Making Registration Statement or an amendment or supplement to the related prospectus or file any other required document so that the prospectus will not include an untrue statement of a material fact or omit to state a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. (iv) In the event of the issuance of any stop order suspending the effectiveness of the Market-Making Registration Statement or of any order suspending the qualification of the Securities or Exchange Securities for sale in any jurisdiction, the Company and the Guarantors shall use promptly their commercially reasonable efforts to obtain its withdrawal. (v) The Company and the Guarantors shall furnish to each Market-Maker, without charge, (i) at least one conformed copy of the Market-Making Registration Statement and any post-effective amendment thereto; and (ii) as many copies of the related prospectus and any amendment or supplement thereto as each Market-Maker may reasonably request. (vi) The Company and the Guarantors shall consent to the use of the prospectus contained in the Market-Making Registration Statement or any amendment or supplement thereto by either Market-Maker in connection with the offering and sale of the Securities or Exchange Securities. (vii) Notwithstanding the foregoing provisions of this Section 5, the Company and the Guarantors may for valid business reasons, including without limitation, a potential acquisition, divestiture of assets or other material corporate transaction, issue a notice that the Market-Making Registration Statement is no longer effective or the prospectus included therein is no longer usable for offers and sales of the Securities or Exchange Securities and may issue any notice suspending use of the Market-Making Registration Statement required under applicable securities laws to be issued; provided that the use of the Market-Making Registration Statement shall not be suspended for more than 60 days in the aggregate in any consecutive 12 month period, unless otherwise agreed to in writing by each Market-Maker. Each Market-Maker agrees that upon receipt of any notice from the Company pursuant to this Section 5(a)(vii), it will discontinue use of the Market-Making Registration Statement until receipt of copies of the supplemented or amended prospectus relating thereto or until advised in writing by the Company that the use of the Market-Making Registration Statement may be resumed and will not disclose the existence of the notice or the facts related thereto. (b) In connection with the Market-Making Registration Statement, the Company and the Guarantors shall make reasonably available for inspection, at reasonable times and in a reasonable manner by a representative of, and counsel acting for, each Market-Maker all relevant financial and other records, pertinent corporate documents and properties of the Company and the Guarantors and (ii) use their reasonable best efforts to have their officers, directors, employees, accountants and counsel supply all relevant information reasonably requested by such representative or counsel or either Market-Maker; provided that if any such information is identified by the Company or any Guarantor as being confidential or proprietary, prior to being given such information, each Person receiving such information shall take such actions as are reasonably necessary to protect the confidentiality of such information, including executing a customary confidentiality agreement that is not inconsistent with the rights and interests of any Market-Maker, representative thereof or counsel thereto; (c) Prior to the effective date of the Market-Making Registration Statement, the Company and the Guarantors will endeavor to register or qualify, or cooperate with each Market-Maker and its counsel in connection with the registration or qualification of, the Securities or Exchange Securities for offer and sale under the securities or blue sky laws of such jurisdictions as each Market-Maker reasonably requests in writing and do any and all other acts or things necessary or advisable to enable the offer and sale in such jurisdictions of the Securities or Exchange Securities covered by the Market-Making Registration Statement; provided that neither the Company nor any Guarantor shall be required to (i) qualify as a foreign corporation or other entity or as a dealer of securities in any such jurisdiction where it would not otherwise be required to so qualify, (ii) file any general consent to service of process in any such jurisdiction or (iii) subject itself to taxation in any such jurisdiction if it is not so subject. (d) Each of the Company and the Guarantors represents and agrees that the Market-Making Registration Statement, any post-effective amendments thereto, any amendments or supplements to the related prospectus and any documents filed by it under the Exchange Act will, when they become effective or are filed with the SEC, as the case may be, conform in all material respects to the requirements of the Securities Act and the Exchange Act and the rules and regulations of the SEC thereunder and will not, as of the effective date of such Market-Making Registration Statement or post-effective amendments and as of the filing date of amendments or supplements to such prospectus or filings under the Exchange Act, contain an untrue statement of a material fact or omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading; provided that no representation or warranty is made as to information contained in or omitted from the Market-Making Registration Statement or the related prospectus in reliance upon and in conformity with written information furnished to the Company and the Guarantors by either Market-Maker specifically for inclusion therein, which information the parties hereto agree will be limited to the statements concerning the market-making activities of such Market-Maker to be set forth on the cover page and in the "Plan of Distribution" section of the prospectus (the "Market-Maker's Information"). (e) At the time of effectiveness of the Market-Making Registration Statement and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented, the Company and the Guarantors shall (if requested by either Market-Maker) furnish each Market-Maker and its respective counsel with a certificate of its Chairman of the Board of Directors and Chief Financial Officer to the effect that: (i) the Market-Making Registration Statement has been declared effective; (ii) in the case of an amendment to the Market-Making Registration Statement, such amendment has become effective under the Securities Act as of the date and time specified in such certificate, if applicable; and, in the case of an amendment or supplement to the Prospectus, such amendment or supplement to the prospectus was filed with the SEC pursuant to the subparagraph of Rule 424(b) under the Securities Act specified in such certificate on the date specified therein; (iii) to the knowledge of such officers, no stop order suspending the effectiveness of the Market-Making Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the SEC; and (iv) such officers have examined the Market-Making Registration Statement and the prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and as of the date of such Market-Making Registration Statement, amendment or supplement, as applicable, the Market-Making Registration Statement and the prospectus, as amended or supplemented, if applicable, did not include any untrue statement of a material fact and did not omit to state a material fact required to be stated therein or necessary to make the statements therein not misleading. (f) At the time of effectiveness of the Market-Making Registration Statement and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented, the Company and the Guarantors shall (if requested by either Market-Maker) furnish each Market-Maker and its respective counsel with the written opinion of counsel for the Company and the Guarantors satisfactory to each Market-Maker to the effect that: (i) the Market-Making Registration Statement has been declared effective; (ii) in the case of an amendment to the Market-Making Registration Statement, such amendment has become effective under the Securities Act as of the date and time specified in such opinion, if applicable; and, in the case of an amendment or supplement to the Prospectus, such amendment or supplement to the prospectus was filed with the SEC pursuant to the subparagraph of Rule 424(b) under the Securities Act specified in such opinion on the date specified therein; (iii) to the knowledge of such counsel, no stop order suspending the effectiveness of the Market-Making Registration Statement has been issued and no proceeding for that purpose is pending or threatened by the SEC; and (iv) such counsel has reviewed the Market-Making Registration Statement and the prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and participated with officers of the Company and the Guarantors and independent public accountants for the Company and the Guarantors in the preparation of such Market-Making Registration Statement and prospectus (and, in the case of an amendment or supplement, such amendment or supplement) and has no reason to believe that (except for the financial statements and other financial data contained therein as to which no belief is required) as of the date of such Market-Making Registration Statement, amendment or supplement, as applicable, the Market-Making Registration Statement and the prospectus, as amended or supplemented, if applicable, contained any untrue statement of a material fact or omitted to state a material fact required to be stated therein or necessary to make the statements therein not misleading. Such opinion shall be consistent with the form of opinion delivered in connection with the Purchase Agreement. (g) At the time of effectiveness of the Market-Making Registration Statement and concurrently with each time the Market-Making Registration Statement or the related prospectus shall be amended or such prospectus shall be supplemented to include audited annual financial information, the Company and the Guarantors shall (if requested in writing by either Market-Maker) furnish each Market-Maker and its respective counsel with a letter of Ernst & Young, LLP (or other independent public accountants for the Company and the Guarantors of nationally recognized standing), in form satisfactory to each Market-Maker, addressed to each Market-Maker and dated the date of delivery of such letter, (i) confirming that they are independent public accountants within the meaning of the Securities Act and are in compliance with the applicable requirements relating to the qualification of accountants under Rule 2-01 of Regulation S-X of the SEC and, (ii) in all other respects, substantially in the form of the letter delivered to the Initial Purchasers pursuant to Section 5(e) of the Purchase Agreement, with, in the case of an amendment or supplement to include audited financial information, such changes as may be necessary to reflect the amended or supplemented financial information. (h) The Company and the Guarantors, on the one hand, and the Market- Makers, on the other hand, hereby agree to indemnify each other, and, if applicable, contribute to the other, in accordance with Section 6 of this Agreement. (i) The Company and the Guarantors will comply with the provisions of this Section 5 at their own expense and will reimburse the Market-Makers for their documented Registration Expenses associated with this Section 5. (j) For purposes of this Section 5, (i) any reference to the terms "amend", "amendment" or "supplement" with respect to the Market-Making Registration Statement or the prospectus contained therein shall be deemed to refer to and include the filing under the Exchange Act of any document deemed to be incorporated therein by reference and (ii) any reference to the terms "Securities" or "Exchange Securities" shall be deemed to refer to and include any securities issued in exchange for or with respect to such Securities or Exchange Securities. SECTION 6. Indemnification and Contribution. (a) The Company and each Guarantor, jointly and severally, agree to indemnify and hold harmless (x) each Initial Purchaser and each Holder (including each Market-Maker), their respective affiliates, directors and officers and each Person, if any, who controls any Initial Purchaser or any Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act, from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several, that arise out of, or are based upon, any untrue statement or alleged untrue statement of a material fact contained in any Registration Statement (including any Market-Making Registration Statement) or any Prospectus or any omission or alleged omission to state therein a material fact required to be stated therein or necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, except insofar as such losses, claims, damages or liabilities arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to any Initial Purchaser or any Holder furnished to the Company in writing through JPMorgan or such selling Holder expressly for use therein; provided that with respect to any such untrue statement in or omission from any preliminary prospectus, the indemnity agreement contained in this paragraph (a) shall not inure to the benefit of any Initial Purchaser or any Holder (including any Market-Maker) from whom the person asserting any such loss, claim, damage or liability received Securities or Exchange Securities to the extent that any such loss, claim, damage or liability of or with respect to such Initial Purchaser or Holder results from the fact that both (i) a copy of the final prospectus was not sent or given to such person at or prior to the written confirmation of the sale of such Securities or Exchange Securities to such person and (ii) the untrue statement in or omission from such preliminary prospectus was corrected in the final prospectus unless, in either case, such failure to deliver the final prospectus was a result of non-compliance by the Company or any Guarantor with the provisions of Section 3 or 5 hereof; and (y) the Market-Makers from and against any and all losses, claims, damages and liabilities (including, without limitation, legal fees and other expenses incurred in connection with any suit, action or proceeding or any claim asserted, as such fees and expenses are incurred), joint or several that arise out of, or are based upon, any breach by the Company or the Guarantors of their representations, warranties and agreements contained in Section 5 of this Agreement. In connection with any Underwritten Offering permitted by Section 3, the Company and the Guarantors, jointly and severally, will also indemnify the Underwriters, if any, selling brokers, dealers and similar securities industry professionals participating in the distribution, their respective affiliates and each Person who controls such Persons (within the meaning of the Securities Act and the Exchange Act) to the same extent as provided above with respect to the indemnification of the Holders, if requested in connection with any Registration Statement. (b) Each Holder (including each Market-Maker) agrees, severally and not jointly, to indemnify and hold harmless the Company, the Guarantors, the Initial Purchasers and the other selling Holders, their respective affiliates, the directors of the Company and the Guarantors, each officer of the Company and the Guarantors who signed the Registration Statement or Market-Making Registration Statement, as the case may be, and each Person, if any, who controls the Company, the Guarantors, any Initial Purchaser and any other selling Holder within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act to the same extent as the indemnity set forth in paragraph (a) above, but only with respect to any losses, claims, damages or liabilities that arise out of, or are based upon, any untrue statement or omission or alleged untrue statement or omission made in reliance upon and in conformity with any information relating to such Holder furnished to the Company in writing by such Holder expressly for use in any Registration Statement (including any Market-Making Registration Statement) and any Prospectus. (c) If any suit, action, proceeding (including any governmental or regulatory investigation), claim or demand shall be brought or asserted against any Person in respect of which indemnification may be sought pursuant to paragraph (a) or (b) above, such Person (the "Indemnified Person") shall promptly notify the Person against whom such indemnification may be sought (the "Indemnifying Person") in writing; provided that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have under this Section 6 except to the extent that it has been materially prejudiced (through the forfeiture of substantive rights or defenses) by such failure; and provided, further, that the failure to notify the Indemnifying Person shall not relieve it from any liability that it may have to an Indemnified Person otherwise than under this Section 6. If any such proceeding shall be brought or asserted against an Indemnified Person and it shall have notified the Indemnifying Person thereof, the Indemnifying Person shall retain counsel reasonably satisfactory to the Indemnified Person to represent the Indemnified Person and any others entitled to indemnification pursuant to this Section 6 that the Indemnifying Person may designate in such proceeding and shall pay the fees and expenses of such counsel related to such proceeding, as incurred. In any such proceeding, any Indemnified Person shall have the right to retain its own counsel, but the fees and expenses of such counsel shall be at the expense of such Indemnified Person unless (i) the Indemnifying Person and the Indemnified Person shall have mutually agreed to the contrary; (ii) the Indemnifying Person has failed within a reasonable time to retain counsel reasonably satisfactory to the Indemnified Person; (iii) the Indemnified Person shall have reasonably concluded that there may be legal defenses available to it that are different from or in addition to those available to the Indemnifying Person; or (iv) the named parties in any such proceeding (including any impleaded parties) include both the Indemnifying Person and the Indemnified Person and representation of both parties by the same counsel would be inappropriate due to actual or potential differing interests between them. It is understood and agreed that the Indemnifying Person shall not, in connection with any proceeding or related proceeding in the same jurisdiction, be liable for the reasonable fees and expenses of more than one separate firm (in addition to any local counsel) for all Indemnified Persons, and that all such fees and expenses shall be reimbursed as they are incurred after receipt by the Company of appropriate documentation specifically identifying this Section 6 of this Agreement. Any such separate firm (w) for any Initial Purchaser, its affiliates, directors and officers and any control Persons of such Initial Purchaser shall be designated in writing by JPMorgan, (x) for any Market-Maker, its affiliates, directors and officers and any control Persons of such Market-Maker shall be designated in writing by such Market-Maker, (y) for any other Holder, its affiliates, directors and officers and any control Persons of such Holder shall be designated in writing by the Majority Holders and (z) in all other cases shall be designated in writing by the Company. The Indemnifying Person shall not be liable for any settlement of any proceeding effected without its written consent, but if settled with such consent or if there be a final judgment for the plaintiff, the Indemnifying Person agrees to indemnify each Indemnified Person from and against any loss or liability by reason of such settlement or judgment. Notwithstanding the foregoing sentence, if at any time an Indemnified Person shall have requested in writing, with such request specifically identifying this Section 6 of this Agreement, that an Indemnifying Person reimburse the Indemnified Person for fees and expenses of counsel as contemplated by this paragraph, the Indemnifying Person shall be liable for any settlement of any proceeding effected without its written consent if (i) such settlement is entered into more than 45 days after receipt by the Indemnifying Person of such request and (ii) the Indemnifying Person shall not have reimbursed the Indemnified Person in accordance with such request prior to the date of such settlement, except with respect to amounts reasonably challenged. No Indemnifying Person shall, without the written consent of the Indemnified Person, effect any settlement of any pending or threatened proceeding in respect of which any Indemnified Person is or could have been a party and indemnification could have been sought hereunder by such Indemnified Person, unless such settlement (A) includes an unconditional release of such Indemnified Person, in form and substance reasonably satisfactory to such Indemnified Person, from all liability on claims that are the subject matter of such proceeding and (B) does not include any statement as to or any admission of fault, culpability or a failure to act by or on behalf of any Indemnified Person. (d) If the indemnification provided for in paragraphs (a) and (b) above is unavailable to an Indemnified Person or insufficient in respect of any losses, claims, damages or liabilities referred to therein, then each Indemnifying Person under such paragraph, in lieu of indemnifying such Indemnified Person thereunder, shall contribute to the amount paid or payable by such Indemnified Person as a result of such losses, claims, damages or liabilities (i) in such proportion as is appropriate to reflect the relative benefits received by the Company and the Guarantors from the offering of the Securities and the Exchange Securities, on the one hand, and by the Holders from receiving Securities or Exchange Securities registered under the Securities Act, on the other hand, or (ii) if the allocation provided by clause (i) is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) but also the relative fault of the Company and the Guarantors on the one hand and the Holders on the other in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, as well as any other relevant equitable considerations. The relative fault of the Company and the Guarantors on the one hand and the Holders on the other shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by the Company and the Guarantors or by the Holders and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such statement or omission. (e) The Company, the Guarantors, the Holders agree that it would not be just and equitable if contribution pursuant to this Section 6 were determined by pro rata allocation (even if the Holders were treated as one entity for such purpose) or by any other method of allocation that does not take account of the equitable considerations referred to in paragraph (d) above. The amount paid or payable by an Indemnified Person as a result of the losses, claims, damages and liabilities referred to in paragraph (d) above shall be deemed to include, subject to the limitations set forth above, any legal or other expenses incurred by such Indemnified Person in connection with any such action or claim. Notwithstanding the provisions of this Section 6, in no event shall a Holder be required to contribute any amount in excess of the amount by which the total price at which the Securities or Exchange Securities sold by such Holder exceeds the amount of any damages that such Holder has otherwise been required to pay by reason of such untrue or alleged untrue statement or omission or alleged omission, nor shall the Market-Makers be required to contribute any amount in excess of its commission from the market-making transactions at issue. No Person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to contribution from any Person who was not guilty of such fraudulent misrepresentation. (f) The remedies provided for in this Section 6 are not exclusive and shall not limit any rights or remedies that may otherwise be available to any Indemnified Person at law or in equity. (g) The indemnity and contribution provisions contained in this Section 6 shall remain operative and in full force and effect regardless of (i) any termination of this Agreement, (ii) any investigation made by or on behalf of the Initial Purchasers, the Market-Makers or any Holder, their respective affiliates or any Person controlling any Initial Purchaser or any Holder, or by or on behalf of the Company or the Guarantors, their respective affiliates or the officers or directors of or any Person controlling the Company or the Guarantors, (iii) acceptance of any of the Exchange Securities and (iv) any sale of Registrable Securities pursuant to a Shelf Registration Statement or a Market-Making Registration Statement. SECTION 7. General. (a) No Inconsistent Agreements. The Company and the Guarantors represent, warrant and agree that (i) the rights granted to the Holders or the Market-Makers hereunder do not in any way conflict with and are not inconsistent with the rights granted to the holders of any other outstanding securities issued or guaranteed by the Company or any Guarantor under any other agreement and (ii) neither the Company nor any Guarantor has entered into, or on or after the date of this Agreement will enter into, any agreement that is inconsistent with the rights granted to the Holders of Registrable Securities or the Market-Makers in this Agreement or otherwise conflicts with the provisions hereof. (b) Amendments and Waivers. The provisions of this Agreement, including the provisions of this sentence, may not be amended, modified or supplemented, and waivers or consents to departures from the provisions hereof may not be given unless the Company and the Guarantors have obtained the written consent of Holders of at least a majority in aggregate principal amount of the outstanding Registrable Securities affected by such amendment, modification, supplement, waiver or consent or, with respect to the provisions of Section 5, the written consent of each Market-Maker; provided that no amendment, modification, supplement, waiver or consent to any departure from the provisions of Section 6 hereof shall be effective as against any Holder of Registrable Securities or either Market-Maker unless consented to in writing by such Holder or such Market-Maker, as applicable. Any amendments, modifications, supplements, waivers or consents pursuant to this Section 7(b) shall be by a writing executed by each of the parties hereto. (c) Notices. All notices and other communications provided for or permitted hereunder shall be made in writing by hand-delivery, registered first-class mail, telex, telecopier, or any courier guaranteeing overnight delivery (i) if to a Holder or a Market-Maker, at the most current address given by such Holder to the Company by means of a notice given in accordance with the provisions of this Section 7(c), which address initially is, with respect to the Initial Purchasers and the Market-Makers, the address of the Initial Purchasers (including the Market-Makers) set forth in the Purchase Agreement; (ii) if to the Company and the Guarantors, initially at the Company's address set forth in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 7(c); and (iii) to such other persons at their respective addresses as provided in the Purchase Agreement and thereafter at such other address, notice of which is given in accordance with the provisions of this Section 7(c). All such notices and communications shall be deemed to have been duly given: at the time delivered by hand, if personally delivered; five Business Days after being deposited in the mail, postage prepaid, if mailed; when answered back, if telexed; when receipt is acknowledged, if telecopied; and on the next Business Day if timely delivered to an air courier guaranteeing overnight delivery. Copies of all such notices, demands or other communications shall be concurrently delivered by the Person giving the same to the Trustee, at the address specified in the Indenture. (d) Successors and Assigns. This Agreement shall inure to the benefit of and be binding upon the successors, assigns and transferees of each of the parties, including, without limitation and without the need for an express assignment, subsequent Holders; provided that nothing herein shall be deemed to permit any assignment, transfer or other disposition of Registrable Securities in violation of the terms of the Purchase Agreement or the Indenture. If any transferee of any Holder shall acquire Registrable Securities in any manner, whether by operation of law or otherwise, such Registrable Securities shall be held subject to all the terms of this Agreement, and by taking and holding such Registrable Securities such Person shall be conclusively deemed to have agreed to be bound by and to perform all of the terms and provisions of this Agreement and such Person shall be entitled to receive the benefits hereof. The Initial Purchasers (in their capacity as Initial Purchasers) shall have no liability or obligation to the Company or the Guarantors with respect to any failure by a Holder to comply with, or any breach by any Holder of, any of the obligations of such Holder under this Agreement. (e) Purchases and Sales of Securities. The Company and the Guarantors shall not, and shall use their reasonable best efforts to cause their affiliates (as defined in Rule 405 under the Securities Act) not to, purchase and then resell or otherwise transfer any Registrable Securities. (f) Third Party Beneficiaries. Each Holder shall be a third party beneficiary to the agreements made hereunder (excluding those agreements made in Section 5 herein) between the Company and the Guarantors, on the one hand, and the Initial Purchasers, on the other hand, and shall have the right to enforce such agreements directly to the extent it deems such enforcement necessary or advisable to protect its rights or the rights of other Holders hereunder. (g) Counterparts. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement. (h) Headings. The headings in this Agreement are for convenience of reference only, are not a part of this Agreement and shall not limit or otherwise affect the meaning hereof. (i) Governing Law. This Agreement shall be governed by and construed in accordance with the laws of the State of New York. (j) Miscellaneous. This Agreement contains the entire agreement between the parties relating to the subject matter hereof and supersedes all oral statements and prior writings with respect thereto. If any term, provision, covenant or restriction contained in this Agreement is held by a court of competent jurisdiction to be invalid, void or unenforceable or against public policy, the remainder of the terms, provisions, covenants and restrictions contained herein shall remain in full force and effect and shall in no way be affected, impaired or invalidated. The Company, the Guarantors and the Initial Purchasers shall endeavor in good faith negotiations to replace the invalid, void or unenforceable provisions with valid provisions the economic effect of which comes as close as possible to that of the invalid, void or unenforceable provisions. IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first written above. BPC HOLDING CORPORATION, By: /s/ James M. Kratochvil ----------------------- Name: James M. Kratochvil Title: Executive Vice President, Chief Financial Officer BERRY PLASTICS CORPORATION, By: /s/ James M. Kratochvil ----------------------- Name: James M. Kratochvil Title: Executive Vice President, Chief Financial Officer BERRY IOWA CORPORATION, PACKERWARE CORPORATION, KNIGHT PLASTICS, INC., BERRY STERLING CORPORATION, BERRY PLASTICS DESIGN CORPORATION, POLY-SEAL CORPORATION, VENTURE PACKAGING, INC., VENTURE PACKAGING MIDWEST, INC., BERRY PLASTICS TECHNICAL SERVICES, INC., CPI HOLDING CORPORATION, CARDINAL PACKAGING, INC., AEROCON, INC., BERRY TRI-PLAS CORPORATION, BERRY PLASTICS ACQUISITION CORPORATION III, PESCOR, INC., BERRY PLASTICS ACQUISITION CORPORATION IV, BERRY PLASTICS ACQUISITION CORPORATION V, BERRY PLASTICS ACQUISITION CORPORATION VI, BERRY PLASTICS ACQUISITION CORPORATION VII, BERRY PLASTICS ACQUISITION CORPORATION VIII, BERRY PLASTICS ACQUISITION CORPORATION IX, BERRY PLASTICS ACQUISITION CORPORATION X, BERRY PLASTICS ACQUISITION CORPORATION XI, BERRY PLASTICS ACQUISITION CORPORATION XII, BERRY PLASTICS ACQUISITION CORPORATION XIII, BERRY PLASTICS ACQUISITION CORPORATION XIV, LLC, BERRY PLASTICS ACQUISITION CORPORATION XV, LLC, By: /s/ James M. Kratochvil ----------------------- Name: James M. Kratochvil Title: Executive Vice President, Chief Financial Officer Confirmed and accepted as of the date first above written: J.P. MORGAN SECURITIES INC. For itself and on behalf of the Initial Purchasers, and for itself and on behalf of Goldman, Sachs & Co. as Market-Makers By:/s/ Pierre Maman ---------------- Authorized Signatory The foregoing agreement is hereby agreed to and accepted as of the closing date of the Landis Acquisition (as defined in the Purchase Agreement). LANDIS PLASTICS, INC. By: /s/ James M. Kratochvil ----------------------- Name: James M. Kratochvil Title: Executive Vice President, Chief Financial Officer -----END PRIVACY-ENHANCED MESSAGE-----