THE TRANSFER OF AND PAYMENTS ON THE PRIORITY SENIOR SUBORDINATED NOTES
REFERENCED HEREIN ARE RESTRICTED BY AND SUBJECT TO THE TERMS AND
PROVISIONS OF THE SENIOR SUBORDINATION AGREEMENT DATED AS OF FEBRUARY 28,
1997, AS AMENDED, BY AND AMONG BANQUE PARIBAS, A BANK ORGANIZED UNDER THE
LAWS OF FRANCE ACTING THROUGH ITS HOUSTON, TEXAS AGENCY AS AGENT FOR
ITSELF AND THE OTHER SENIOR LENDERS, RICE PARTNERS II, L.P., A DELAWARE
LIMITED PARTNERSHIP, F-SOUTHLAND, L.L.C., A NORTH CAROLINA LIMITED
LIABILITY COMPANY, AND FF-SOUTHLAND, L.P., A DELAWARE LIMITED PARTNERSHIP
(AS SUCH AGREEMENT MAY BE FURTHER SUPPLEMENTED, MODIFIED, AMENDED OR
RESTATED FROM TIME TO TIME), A COPY OF WHICH IS ON FILE AT THE CHIEF
EXECUTIVE OFFICES OF THE COMPANY (THE "SENIOR SUBORDINATION AGREEMENT").
PRIORITY NOTE PURCHASE AGREEMENT
This Priority Note Purchase Agreement (this "Agreement"), dated as of
April 14, 1998, is by and among SOUTHLAND CONTAINER PACKAGING CORP., a
Texas corporation (as successor by merger to SHC Acquisition Corp., a
Florida corporation, and formerly called Southland Holding Company, herein
the "Company"), JOTAN, INC., a Florida corporation ("Parent") and RICE
PARTNERS II, L.P., a Delaware limited partnership ("Rice"), (Rice
sometimes being referred to herein as the "Purchaser"). Capitalized terms
used in this Agreement are defined in Section 11.1.
To induce Purchaser to purchase the Priority Senior Subordinated
Notes from the Company, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows.
I. DESCRIPTION OF PRIORITY SENIOR SUBORDINATED NOTES AND COMMITMENT
1.1 Description of Priority Senior Subordinated Notes. The Company
will authorize the issuance and sale of its Priority Senior Subordinated
Notes which shall be dated as of April 14, 1998, shall be in the aggregate
original principal amount of $1,250,000.00, and shall bear interest at the
fixed rate of 12.5% per annum; provided, however, that upon the occurrence
of a Potential Default under Section 8.1(a) hereof or any Event of
Default, and during the continuation thereof, the unpaid principal amount
of the Priority Senior Subordinated Notes shall bear interest at the rate
of 15.5% per annum. The Priority Senior Subordinated Notes shall be
substantially in the form attached hereto as Exhibit A. Interest on the
Priority Senior Subordinated Notes shall be computed on the basis of the
actual number of days elapsed over a 360 day year.
1.2 Commitment; Funding. Subject to the terms and conditions hereof
and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to Purchaser, and Purchaser
agrees to purchase from the Company, Priority Senior Subordinated Notes in
the aggregate principal amount of One Million Two Hundred and Fifty
Thousand and no/100 Dollars ($1,250,000). Delivery of the Priority Senior
Subordinated Notes shall be made on the Closing Date in the offices of
Xxxxxx Xxxxx, L.L.P., 0000 Xxxx Xxxxxx, Xxxxx 000, Xxxxxx, Xxxxx 00000,
against payment of the purchase price thereof, in immediately available
funds, disbursed on the Closing Date as the Company shall designate in
writing or at such other location as the parties shall determine. The
Priority Senior Subordinated Notes will be delivered to the Purchaser in
fully registered form, and shall be issued in Purchaser's name or the name
of its nominee.
1.3 Use of Proceeds. The proceeds from the sale of the Priority
Senior Subordinated Notes shall be used solely to (a) provide working
capital and (b) pay all fees, costs and expenses payable pursuant to this
Agreement.
II. PAYMENT AND PREPAYMENT OF SENIOR SUBORDINATED OBLIGATIONS
2.1 Principal and Interest Payments. Principal and interest on the
Priority Senior Subordinated Notes shall be due and payable as follows:
(a) Principal, including the capitalized PIK Interest evidenced
by the PIK Notes, together with the accrued interest thereon, shall
be due and payable in full on the Termination Date.
(b) Interest shall be due and payable (i) on May 30, 1998 (for
the period from and including the Closing Date to but excluding May 30,
1998), (ii) and thereafter quarterly in arrears on the last Business
Day of each February, May, August and November, commencing August 31,
1998 and (iii) on the Termination Date; provided, however, that with
respect to interest payable pursuant to clauses (i) and (ii), the
Company shall satisfy its obligation to pay interest in cash on such
dates by the issuance to the Purchaser of one or more Priority Senior
Subordinated Notes substantially in the form of Exhibit A-1 to this
Agreement (each a "PIK Note") evidencing the Company's obligation to
pay such accrued interest (the "PIK Interest"). Each such PIK Note
shall be in an amount equal to the interest due on such respective
date and shall constitute the capitalization of the PIK Interest
evidenced thereby. The Company shall have no obligation to pay PIK
Interest due on such respective dates in cash. Purchaser
acknowledges that the PIK Notes delivered pursuant to this Section
2.1(b) are "Priority Subordinate Loan Documents" and the Obligations
evidenced thereby are "Subordinate Debt" as both such terms are
defined in the Senior Subordination Agreement. The PIK Notes shall
bear interest at a fixed rate of 12.5% per annum; provided, however,
that upon the occurrence of a Potential Default under Section 8.1
hereof or any Event of Default, and during the continuation thereof,
the unpaid principal amount of the PIK Notes shall bear interest at a
rate of 15.5% per annum. All accrued interest on the PIK Notes shall
be due and payable on the Termination Date.
2.2 Optional Prepayments. Upon payment in full of the Senior Debt
and the termination of all commitments of the Senior Lender with respect
thereto, at the Company's option and upon notice given as provided below,
the Company may, at any time and from time to time, prepay all or any part
of the principal of the Priority Senior Subordinated Notes, by payment of
the principal amount to be prepaid, plus (a) any accrued and unpaid
interest on the principal amount so prepaid, plus (b) any expenses and/or
damages for which Purchaser may be entitled to receive payment or
reimbursement hereunder, plus (c) a premium equal to the percentage of the
principal amount so prepaid which is applicable in accordance with the
following table based on the date on which such prepayment is made (a
"Prepayment Fee"):
Prepayment Date Premium
Closing Date through February 28, 1999 10.71%
March 1, 1999 through February 29, 2000 8.92%
March 1, 2000 through February 28, 2001 7.14%
March 1, 2001 through February 28, 2002 5.36%
March 1, 2002 and thereafter 0.00%
Each partial prepayment under this Section 2.2 shall be in a principal
amount of not less than $250,000 or, if greater than $250,000, then in
integral multiples of $100,000. Each prepayment under this Section 2.2
shall be applied first to any expenses or costs to which Purchaser may be
entitled, second to accrued and unpaid interest on the principal amount so
prepaid, third to any applicable Prepayment Fee, fourth to the principal,
and fifth to any damages to which Purchaser may be entitled. The amount of
any such prepayment may not be reborrowed by the Company. The Company
shall give notice of any optional prepayment to Purchaser not less than
fifteen (15) days nor more than sixty (60) days before the date for
prepayment, specifying in each such notice the date upon which such
prepayment is to be made and the principal amount (together with accrued
and unpaid interest, if any, thereon and any applicable Prepayment Fee) to
be prepaid on such date. Notice of prepayment having been so given, the
applicable prepayment amount shall become due and payable on the specified
prepayment date. The Company shall have no right to prepay the Priority
Senior Subordinated Notes except as provided in this Section 2.2 or in
Section 2.3.
2.3 Mandatory Prepayments. Any prepayment under this Section 2.3
shall be applied first to any expenses to which the Purchaser may be
entitled, second to accrued interest, third to any applicable Prepayment
Fee, fourth to the principal (including capitalized PIK Interest evidenced
by the PIK Notes), in the inverse order of maturities, and fifth to any
damages to which any Purchaser may be entitled. The amount of any such
mandatory prepayment may not be reborrowed by the Company. The Company
shall make mandatory prepayments to the Purchaser of the original
principal amount of the Priority Senior Subordinated Notes in each of the
following circumstances:
(a) If during any fiscal year after the Senior Debt is paid in
full and after all commitments of the Senior Lender with respect
thereto have been terminated, Parent or the Company shall sell or
otherwise dispose of (other than as permitted by Section 6.8 or
Section 7.3) any property or properties in excess of five percent
(5%) of its total assets (including as a result of a Casualty Event
(to the extent the net cash proceeds therefrom are not subsequently
applied or committed to apply toward replacement, restoration,
rebuilding or repair of the damaged property within ninety (90) days
after the receipt of such net cash proceeds)), then the Company shall
prepay the Priority Senior Subordinated Notes in an amount equal to
the lesser of (i) the aggregate net cash proceeds of such sale or
other disposition (minus the cost of any replacement assets or
properties purchased within ninety (90) days either before or after
such sale) or (ii) the aggregate amount of all Priority Senior
Subordinated Obligations (including any applicable Prepayment Fee)
such prepayment and premium to be made within ten (10) Business Days
of receipt of such net proceeds.
(b) In the event of any sale or other disposition of all or
substantially all of the stock or assets of Parent or the Company in
a single transaction or series of transactions or a Casualty Event
(to the extent not subsequently applied or committed to apply toward
replacement, restoration, rebuilding or repair of the damaged
property within 90 days after the receipt of such net cash proceeds),
the Company shall, after the Senior Debt has been paid in full and
after all commitments of the Senior Lender with respect thereto have
been terminated, prepay the Priority Senior Subordinated Notes in an
amount equal to the lesser of (i) the aggregate remaining net cash
proceeds of such sales or dispositions (minus the cost of any
replacement assets or properties purchased within ninety (90) days
either before or after such sale) or (ii) the aggregate amount of all
Priority Senior Subordinated Obligations (including any applicable
Prepayment Fees), such prepayment to be made within ten (10) Business
Days of receipt of such net proceeds.
2.4 Additional Payments. After payment in full of the Priority
Senior Subordinated Obligations, unless otherwise provided herein or in
the Other Agreements, all Senior Subordinated Obligations, shall be
payable by the Company to the holder thereof, in accordance with the
applicable terms thereof. Payment of fees and expenses due and payable on
the Closing Date to Purchaser and Purchaser's legal counsel shall be paid
in full on the Closing Date.
2.5 Liquidated Damages. Any Prepayment Fee payable pursuant to
Section 2.2 or Section 2.3 shall be payable as liquidated damages for loss
of the opportunity to recover loan origination expenses and profits over
the balance of the term of this Agreement and not as a penalty and the
Company acknowledges and agrees that such Prepayment Fees are a reasonable
estimate of such losses.
2.6 Direct Payment. The Company will pay all sums becoming due
hereunder and on the Priority Senior Subordinated Notes to Purchaser at
the address specified for Purchaser on Annex I hereto, by wire transfer in
U.S. Dollars of Federal Reserve Funds or other immediately available
funds, to the account specified for Purchaser on Annex I, or at such other
address or in such other form as Purchaser shall have designated by notice
to the Company at least five Business Days prior to the date of any
payment, in each case without presentment and without notations being made
thereon. All payments by the Company shall be made without set-off or
counterclaim. Any wire transfer shall identify such payment as "12.5%
Priority Senior Subordinated Notes/Southland Container Packaging Corp."
and shall identify the payment as interest and/or reimbursement of costs
and expenses, together with the applicable date or period to which it
relates.
2.7 Payments Payable on Business Days. Payments of all amounts due
hereunder or under the Priority Senior Subordinated Notes shall be made on
a Business Day. Any payment due on a day that is not a Business Day shall
be made on the next Business Day, together with all interest (if any)
accrued in the interim.
2.8 Interest Laws. Notwithstanding any provision to the contrary
contained in this Agreement or any Other Agreement, the Company shall not
be required to pay, and neither Purchaser shall be permitted to contract
for, take, reserve, charge or receive, any compensation which constitutes
interest under applicable law in excess of the maximum amount of interest
permitted by law ("Excess Interest"). If any Excess Interest is provided
for or determined by a court of competent jurisdiction to have been
provided for in this Agreement or in any Other Agreement or otherwise
contracted for, taken, reserved, charged or received, then in such event:
(a) the provisions of this Section 2.8 shall govern and control; (b) the
Company shall not be obligated to pay any Excess Interest; (c) any Excess
Interest that the Purchaser may have contracted for, taken, reserved,
charged or received hereunder shall be, at the Holders' option,
(i) applied as a credit against the outstanding principal balance of the
Priority Senior Subordinated Obligations or accrued and unpaid interest
(not to exceed the maximum amount permitted by law), (ii) refunded to the
payor thereof, or (iii) any combination of the foregoing; (d) the interest
provided for shall be automatically reduced to the maximum lawful rate
allowed from time to time under applicable law (the "Maximum Rate"), and
this Agreement and the Other Agreements shall be deemed to have been, and
shall be, reformed and modified to reflect such reduction; and (e) the
Company shall have no action against the Holder for any damages arising
due to any Excess Interest. If for any period of time interest on any
Priority Senior Subordinated Obligations is calculated at the Maximum Rate
rather than the applicable rate under this Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest
payable on such Priority Senior Subordinated Obligations shall remain at
the Maximum Rate until the Holder shall have received the amount of
interest which the Holder would have received during such period on such
Priority Senior Subordinated Obligations had the rate of interest not been
limited to the Maximum Rate during such period. All sums paid or agreed
to be paid hereunder or under the Other Agreements for the use,
forbearance or detention of sums due shall, to the extent permitted by
applicable law, be amortized, pro-rated, allocated and spread throughout
the full term of the Priority Senior Subordinated Obligations until
payment in full so that the rate or amounts of interest on account of the
Priority Senior Subordinated Obligations does not exceed the Maximum Rate.
The terms of this Section 2.8 shall be deemed incorporated into each Other
Agreement and any other document or instrument between the Company and any
Holder or directed to the Company by any Holder, whether or not specific
reference to this Section 2.8 is made.
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
3.1 Existence. It is a limited partnership, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
3.2 Authority. It has the right and power and authority to enter
into, execute, deliver and perform its obligations under this Agreement,
and its partners, managers, officers or agents executing and delivering
this Agreement are duly authorized to do so. This Agreement has been duly
and validly executed and delivered and constitutes the legal, valid and
binding obligation of such Purchaser, enforceable in accordance with its
terms.
3.3 Investor Status. It (i) is an "accredited investor," as that
term is defined in Regulation D under the Securities Act of 1933, as
amended, or (ii) has such knowledge, skill, sophistication and experience
in business and financial matters, based on actual participation, that it
is capable of evaluating the merits and risks of the purchase of its
Priority Senior Subordinated Notes from the Company and the suitability
thereof for such Purchaser.
3.4 Investment for Own Account. Except as otherwise contemplated by
this Agreement, it is acquiring its Priority Senior Subordinated Notes for
investment for its own account and, in any event, not with a view to any
distribution thereof in violation of applicable securities laws.
3.5 Legend on Notes. It agrees that its Priority Senior
Subordinated Notes will bear the appropriate legends referencing
restrictions on transfer and will not be offered, sold or transferred in
the absence of registration or exemption under applicable securities laws.
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE COMPANY
To induce Purchaser to enter into this Agreement, Parent and the
Company represent and warrant to Purchaser that the following statements
are, and will be, true, correct and complete:
4.1 Corporate Existence and Authority. Each of the Parent and its
wholly owned subsidiary, the Company (a) is a corporation duly organized,
validly existing, and in good standing under the laws of its state of
incorporation, (b) has all requisite corporate power and authority to own
its assets and carry on its business as now conducted; and (c) is
qualified to do business in all jurisdictions in which the nature of its
business makes such qualification necessary and where failure to so
qualify would have a Material Adverse Effect. Parent and the Company each
has the corporate power and authority to execute, deliver, and perform its
respective obligations under this Agreement, the Purchase Documents, the
Senior Loan Documents, and all Other Agreements to which it is, or in
connection with the transactions contemplated hereby may become, a party.
4.2 Authorization and Compliance with Laws and Material Agreements.
The execution, delivery and performance by Parent and the Company of this
Agreement, the Purchase Documents, the Senior Loan Documents and the Other
Agreements to which each is or may in connection with the transactions
contemplated hereby become a party have been or prior to the consummation
of such transactions contemplated hereby will be duly authorized by all
requisite action on the part of Parent and the Company, and do not and
will not violate its respective Restated Articles of Incorporation,
Articles of Incorporation or Bylaws (each as amended to the date first
above written) or any law or any order of any court, governmental
authority or arbitrator, and do not and will not upon the consummation of
the transactions contemplated hereby, in any material respect, conflict
with, result in a breach of, or constitute a default under, or result in
the imposition of any Lien (except Permitted Liens) upon any assets of
Parent or the Company pursuant to the provisions of any loan agreement,
indenture, mortgage, security agreement, franchise, permit, license or
other instrument or agreement by which Parent or the Company or any of
their properties are bound. No authorization, approval or consent of, and
no filing or registration with, any court, governmental authority or third
Person is or will be necessary for the execution, delivery or performance
by Parent or the Company of this Agreement, the Purchase Documents, the
Senior Loan Documents, and the Other Agreements to which each is a party
or the validity or enforceability thereof other than those presently
obtained. Neither Parent nor the Company is (a) in violation of any term
of its Articles of Incorporation or Bylaws or (b) in material violation of
any material contract, agreement, judgment or decree or (c) in material
violation of any applicable laws, regulations or rules.
4.3 Rights in Properties; Liens. Parent and the Company have good
and marketable title to all material properties and assets reflected on
their balance sheets, and none of such properties or assets is subject to
any Liens, except Permitted Liens. Parent and the Company enjoy peaceful
and undisturbed possession under all leases necessary for the operation of
their other Properties, assets, and businesses and all such leases are
valid and subsisting and are in full force and effect. There exists no
default under any provision of any lease which would permit the lessor
thereunder to terminate any such lease or to exercise any rights under
such lease which, individually or together with all other such defaults,
could have a Material Adverse Effect. Each of Parent and the Company has
the right to use all of the Intellectual Property necessary to its
business as presently conducted, and Parent's and the Company's use of the
Intellectual Property does not infringe on the rights of any other Person
in any material respect. To the best of the Company's and Parent's
knowledge, no other Person is infringing the rights of Parent or the
Company in any of the Intellectual Property. Neither Parent nor the
Company owes any royalties, honoraria or fees to any Person by reason of
its use of the Intellectual Property.
4.4 Enforceability. This Agreement, the Purchase Documents, the
Senior Loan Documents and the Other Agreements to which Parent and the
Company is a party, when delivered, shall constitute the legal, valid and
binding obligations of Parent and the Company enforceable against Parent
and the Company in accordance with their respective terms.
4.5 Use of Proceeds; Margin Securities. Neither Parent nor the
Company is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T, U or X of the Board
of Governors of the Federal Reserve System), and no part of the proceeds
of any extension of credit under this Agreement will be used to purchase
or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying margin stock. Neither Parent, the
Company nor any Person acting on their behalf has taken any action that
might cause the transactions contemplated by this Agreement, the
Acquisition Documents, the Senior Loan Documents or any Other Agreements
to violate Regulations G, T, U or X or to violate the Securities Exchange
Act of 1934, as amended.
4.6 ERISA. All members of any Controlled Group have complied with
all applicable minimum funding requirements and all other applicable and
material requirements of ERISA and the Code, applicable to the Employee
Benefit Plans it or they sponsor or maintain, and there are no existing
conditions that would give rise to material liability thereunder. With
respect to any Employee Benefit Plan, all members of any Controlled Group
have made all contributions or payments to or under each Employee Benefit
Plan required by law, by the terms of such Employee Benefit Plan or the
terms of any contract or agreement. No Termination Event has occurred in
connection with any Pension Plan, and there are no unfunded benefit
liabilities, as defined in Section 4001(a)(18) of ERISA, with respect to
any Pension Plan which poses a risk of causing a Lien to be created on the
assets of Parent or the Company or which will result in the occurrence of
a Reportable Event. No member of any Controlled Group has been required
to contribute to a multiemployer plan, as defined in Section 4001(a)(3) of
ERISA, since September 2, 1974. No material liability to the Pension
Benefit Guaranty Corporation has been, or is expected to be, incurred by
any member of a Controlled Group. The term "liability," as referred to in
this Section 4.6, includes any joint and several liability. No prohibited
transaction under ERISA or the Code has occurred with respect to any
Employee Benefit Plan which could have a Material Adverse Effect or a
material adverse effect on the condition, financial or otherwise, of an
Employee Benefit Plan.
4.7 Subsidiaries and Capitalization. All the issued and outstanding
shares of capital stock of Parent and the Company are duly authorized,
validly issued, fully paid and nonassessable. The capitalization of
Parent and the Company on the Closing Date is set forth on Schedule 4.7.
No violation of any preemptive rights of shareholders of Parent or the
Company has occurred by virtue of the transactions contemplated under this
Agreement, the Purchase Documents, the Senior Loan Documents or any Other
Agreement. There are no outstanding contracts, options, warrants,
instruments, documents or agreements binding upon Parent or the Company
granting to any Person or group of Persons any right to purchase or
acquire shares of Parent's or the Company's capital stock, except
(i) pursuant to the Purchase Documents, and (ii) Permitted Stock (as
defined in the Purchase Documents).
4.8 Investment Company Act. Neither Parent, the Company, nor any
company controlling Parent or the Company is required to be registered as
an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
4.9 Public Utility Holding Company Act. Neither Parent nor the
Company is a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
4.10 Securities Laws. The Company has complied with or is exempt
from the registration and/or qualification requirements of all federal and
state securities or blue sky laws applicable to the issuance or sale of
the Priority Senior Subordinated Notes.
V. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
Purchaser's obligations hereunder shall be subject to (a) the
performance by each of Parent and the Company of its respective
obligations hereunder which by the terms hereof are to be performed at or
prior to delivery of the Priority Senior Subordinated Notes, and (b) the
satisfaction of the following conditions on or before the Closing Date:
5.1 Effectiveness of Senior Loan Amendment. The Senior Loan
Amendment shall have been duly executed and delivered by the parties
thereto and shall be on terms and conditions, including amortization
periods, satisfactory to the Purchaser. All conditions precedent to the
effectiveness of such amendment shall have been satisfied or waived with
Senior Lender's consent.
5.2 Effectiveness of the First Amendment to the Senior Subordination
Agreement. The First Amendment to Senior Subordination Agreement dated as
of April 14, 1998, shall have been duly executed and delivered by the
parties thereto, and shall be on terms and conditions which are
satisfactory to the Purchaser and Senior Lender.
5.3 Approval. Purchaser's investment committee shall have approved
the purchase of its Priority Senior Subordinated Notes on terms set forth
herein and in the Other Agreements.
5.4 Documents. Purchaser shall have received the following, each in
form and substance satisfactory to such Purchaser:
(a) Priority Senior Subordinated Notes. Its Priority Senior
Subordinated Notes issued in the name of Purchaser duly executed by the
Company;
(b) Warrant and Purchase Documents. The Warrant which shall be
duly issued and delivered by Parent to Purchaser in the denominations
specified in and in accordance with the fully executed Purchase Documents
and all other documents and instruments required pursuant thereto;
(c) Other Agreements. All Other Agreements, duly executed by
the parties thereto;
(d) General Certificate of the Company's Secretary or Assistant
Secretary. A certificate of the Secretary or Assistant Secretary of the
Company together with true, correct and complete copies of the following:
(i) Articles of Incorporation. The Articles of
Incorporation of the Company, including all amendments thereto,
certified by the Secretary of State of the state of its incorporation
and dated within thirty (30) days prior to the Closing Date;
(ii) Bylaws. The Bylaws of the Company, including all
amendments thereto;
(iii) Resolutions. The resolutions of the Board of
Directors of the Company authorizing the execution, delivery and
performance of this Agreement, the Purchase Documents, the Senior
Loan Amendment and the Other Agreements to which the Company is a
party;
(iv) Existence and Good Standing Certificates.
Certificates of the appropriate government officials of the state of
incorporation of the Company as to its existence and good standing,
and certificates of the appropriate government officials in each
state where the Company does business and where failure to qualify as
a foreign corporation would have a Material Adverse Effect, as to its
good standing and due qualification to do business in such state,
each dated within thirty (30) days prior to the Closing Date; and
(v) Incumbency. The names of the officers of the Company
authorized to sign this Agreement and the Other Agreements to be
executed by the Company, together with a sample of the true signature
of each such officer;
(g) General Certificate of Parent's Secretary or Assistant
Secretary. A certificate of the Secretary or Assistant Secretary of
Parent together with true, correct and complete copies of the following:
(i) Restated Articles of Incorporation. The Restated
Articles of Incorporation of Parent, including all amendments
thereto, certified by the Secretary of State of the state of its
incorporation;
(ii) Bylaws. The Bylaws of Parent, including all
amendments thereto;
(iii) Resolutions. The resolutions of the Board of
Directors of Parent authorizing (A) the execution, delivery and
performance of this Agreement, the Purchase Documents, the Senior
Loan Amendment, and the Other Agreements to which Parent is a party,
(B) the issuance of the Warrant to Purchaser, and (C) the reservation
of a sufficient number of Warrant Shares (as defined in the Purchase
Documents);
(iv) Existence and Good Standing Certificates.
Certificates of the appropriate government officials of the state of
incorporation of Parent as to its existence and good standing, and
certificates of the appropriate government officials in each state
where Parent does business and where failure to qualify as a foreign
corporation would have a Material Adverse Effect, as to its good
standing and due qualification to do business in such state, each
dated within thirty (30) days prior to the Closing Date; and
(v) Incumbency. The names of the officers of Parent
authorized to sign this Agreement and the Other Agreements to be
executed by Parent, together with a sample of the true signature of
each such officer;
(h) Senior Loan Amendment. Copies of the Senior Loan Amendment
and each document to be executed in connection therewith, and a
certificate of the Chief Executive Officer and Chief Financial Officer of
the Company and Parent certifying that all conditions precedent to the
effectiveness of the Senior Loan Amendment have been met or waived;
(i) Sources and Uses Certificate. A certificate in form and
substance satisfactory to Purchaser executed by the Chief Executive
Officer and Chief Financial Officer of the Company and Parent, setting
forth in reasonable detail the sources and uses of funds in the
transactions contemplated herein, in the Senior Loan Documents and in the
Other Agreements;
(j) Transaction Certificate. A certificate of the Chief
Executive Officer and the Chief Financial Officer of the Company and
Parent that, to the best of their knowledge after due investigation, all
conditions precedent to the effectiveness of this Agreement have been
satisfied or waived;
(k) Guaranty Agreements. A Parent Guaranty executed by Parent,
and a Company Guaranty executed by the Company;
(l) Additional Information, Other Documents and Agreements.
Such other information, documents, agreements, commitments and
undertakings as Purchaser or Purchaser's counsel shall reasonably request.
5.5 No Legislative Change. For the period from December 31, 1997 to
the Closing Date, there shall have been no law, act, rule, regulation or
order of any legislative, administrative or judicial body or official
which could prevent Purchaser from consummating the transactions
contemplated by this Agreement and the Other Agreements.
5.6 No Event of Default. No Event of Default or Potential Default
shall have occurred and be continuing.
5.7 Representations and Warranties. All representations and
warranties contained in this Agreement, the Senior Loan Amendment, the
Purchase Documents and the Other Agreements shall be true and correct on
the Closing Date.
VI. AFFIRMATIVE COVENANTS
The Company and Parent covenant and agree that, from the date hereof
and until the Priority Senior Subordinated Obligations have been finally
and irrevocably paid in full in accordance with the terms hereof and
thereof:
6.1 Financial Statements. Parent will furnish to Purchaser:
(a) As soon as available, and in any event within one hundred
twenty (120) days after the end of each fiscal year of Parent, beginning
with the fiscal year ending December 31, 1997, (i) a copy of the financial
statements of Parent for such fiscal year containing a consolidated and
consolidating balance sheet, statement of income, statement of
stockholders' equity, and statement of cash flow as at the end of such
fiscal year and for the fiscal year then ended, in each case setting forth
in comparative form the figures for the preceding fiscal year, together
with management's discussion and analysis of variances prepared by
Parent's management, all in reasonable detail and audited and certified by
Ernst & Young LLP or any other "Big Six" firm of independent certified
public accountants (or any other firm of independent certified public
accountants of recognized national standing selected by Parent and
consented to by the Holder provided that the Holder's consent shall not
unreasonably be withheld) to the effect that such financial statements
have been prepared in accordance with GAAP; (ii) a certificate delivered
to each Purchaser by such independent certified public accountants
confirming the calculations set forth in the officers' certificate
delivered simultaneously therewith in accordance with Section 6.2(a); and
(iii) a comparison of the actual results during such fiscal year to those
originally budgeted by the Company prior to the beginning of such fiscal
year, together with management's discussion and analysis of variances, as
well as, variances between actual results for such fiscal year and actual
results for the previous fiscal year. The annual audit report required
hereby shall not be qualified or limited because of restricted or limited
examination by the accountant of any material portion of any of the
records of the Company.
(b) As soon as available, and in any event within thirty (30)
days after the end of each calendar month, a copy of an unaudited
financial report of Parent and the Company as of the end of such calendar
month and for the portion of the fiscal year then ended, containing
balance sheets, statements of income, retained earnings and statements of
cash flow, in each case setting forth in comparative form the figures for
the corresponding period of the preceding fiscal year, together with
management's discussion and analysis of variances all in reasonable
detail, including, without limitation, a comparison of the actual results
during such period to those originally budgeted by Parent and the Company
prior to the beginning of such fiscal period and for the fiscal year to
date.
(c) Forty-five (45) days after the beginning of each fiscal
year of Parent, an annual budget or business plan for such fiscal year,
including a projected consolidated and consolidating balance sheet, income
statement, and cash flow statement for such year (and any underlying
assumptions), and, promptly during each fiscal year, all revisions thereto
approved by the board of directors of Parent.
6.2 Certificates; Other Information. Parent will furnish to
Purchaser all of the following:
(a) Concurrently with the delivery of each of the financial
statements referred to in Section 6.1(a) and Section 6.1(b), a certificate
of an authorized officer of the Company and Parent in the form of the
officer's certificate attached hereto as Exhibit B (i) stating that, to
the knowledge of such officer, no Event of Default or Potential Default
has occurred and is continuing or, if such officer has knowledge of an
Event of Default or Potential Default, the nature thereof and specifying
the steps taken or proposed to remedy such matter, (ii) stating that the
financial statements attached have been prepared in accordance with GAAP
and fairly and accurately present (subject to year-end audit adjustments,
for the annual certificates) the financial condition and results of
operations of Parent and the Company at the date and for the period
indicated therein, (iii) containing summaries of accounts payable agings,
accounts receivable agings, and inventory, (iv) containing a schedule of
the outstanding Indebtedness for borrowed money of Parent and the Company
describing in reasonable detail each such debt issue or loan outstanding
and the principal amount and amount of accrued and unpaid interest with
respect to each such debt issue or loan, (v) containing management's
discussion and analysis of the business and affairs of Parent and the
Company which includes, but is not limited to, a discussion of the results
of operations compared to those originally budgeted for such period, and
(vi) a report detailing (A) all matters affecting the value,
enforceability or collectibility of any material portion of its assets
including, without limitation, the Company's reclamation or repossession
of, or the return to the Company of, a material amount of goods and
material claims or disputes asserted by any customer or other obligor, and
(B) any material adverse change in the relationship between Parent or the
Company and any of its material suppliers or customers.
(b) As soon as available, (i) a copy of each financial
statement, report, notice or proxy statement sent by Parent to its
stockholders in their capacity as stockholders, (ii) a copy of each
regular, periodic or special report, registration statement, or prospectus
filed by Parent with any securities exchange or the Securities and
Exchange Commission or any successor agency, (iii) any material order
issued by any court, governmental authority, or arbitrator in any material
proceeding to which Parent or the Company is a party, (iv) copies of all
press releases and other statements made available generally by Parent or
the Company to the public generally concerning material developments in
Parent's or the Company's business, and (v) a copy of all correspondence
and reports sent by Parent or the Company to the Senior Lender outside of
the ordinary course of business.
(c) Promptly, such additional information concerning Parent and
the Company as Purchaser may reasonably request.
6.3 Books and Records; Accounting System. Parent and the Company
will, keep (a) proper books of record and account in which full, true and
correct entries will be made of all dealings or transactions of or in
relation to its business and affairs; (b) set up on its books accruals
with respect to all taxes, assessments, charges, levies and claims; and
(c) on a reasonably current basis set up on its books from its earnings
allowances against doubtful receivables, advances and investments and all
other proper accruals (including, without limitation, by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties),
which should be set aside from such earnings in connection with its
business. All determinations pursuant to this subsection shall be made in
accordance with, or as required by, GAAP consistently applied. Parent and
the Company will, maintain a modern system of accounting established and
administered in accordance with sound business practices to permit
preparation of consolidated financial statements in conformity with GAAP.
6.4 Financial Disclosure. The Company and Parent hereby irrevocably
authorize and direct all accountants and auditors employed by them at any
time during the term of this Agreement to exhibit and deliver to Purchaser
copies of any of their respective financial statements, trial balances or
other accounting records of any sort in the accountant's or auditor's
possession, and to disclose to Purchaser any information they may have
concerning either party's financial status and business operations. Each
of the Company and Parent hereby irrevocably authorizes all federal, state
and municipal authorities to furnish to Purchaser copies of reports or
examinations relating to the Company or Parent, whether made by the
Company, Parent or otherwise.
6.5 Disclosure of Material Matters. Parent and the Company will,
promptly upon learning thereof, report to Purchaser (a) all matters
materially affecting the value, enforceability or collectibility of any
material portion of its assets including, without limitation, changes to
significant contracts, schedules of equipment, changes of significant
equipment or real property, the reclamation or repossession of, or the
return to the Company or Parent, a material amount of goods and material
claims or disputes asserted by any customer or other obligor, and (b) any
material adverse change in the relationship between Parent or the Company
and any of its suppliers or customers.
6.6 Performance of Obligations. Parent and the Company will duly
and punctually pay and perform their obligations, as applicable, under
this Agreement, the Purchase Documents and the Other Agreements to which
each is a party.
6.7 Preservation of Existence and Conduct of Business. Parent and
Company will each preserve and maintain its corporate existence and all of
its leases, privileges, franchises, qualifications and rights that are
necessary or useful in the ordinary conduct of its business and where
failure to do so would have a Material Adverse Effect, and conduct its
business as presently conducted in an orderly and efficient manner in
accordance with good business practices.
6.8 Maintenance of Properties. Parent and the Company will each
operate and maintain in good condition and repair (ordinary wear and tear
excepted) and replace as necessary, all of its material assets and
properties which are necessary in accordance with sound business practices
in the proper conduct of its business so that the value and operating
efficiency of its assets and properties are maintained and preserved.
Parent and the Company will, at all times, maintain the Intellectual
Property material to its business in full force and effect, and will
defend and protect the Intellectual Property against all material adverse
claims.
6.9 Payment of Taxes and Claims. Parent and the Company will pay or
discharge, at or before maturity or before becoming delinquent (a) all
taxes, levies, assessments, vault, water and sewer rents, rates, charges,
levies, permits, inspection and license fees and other governmental and
quasi-governmental charges and any penalties or interest for nonpayment
thereof, heretofore or hereafter imposed or which may become a Lien upon
any property owned by Parent or the Company or arising with respect to the
occupancy, use, possession or leasing thereof (collectively the
"Impositions") and (b) all lawful claims for labor, material, and
supplies, which, if unpaid, might become a Lien upon any of its Property;
provided, however, that neither Parent nor the Company will be required to
pay or discharge any claim for labor, material, or supplies or any
Imposition (i) which is being contested in good faith by appropriate
actions or proceedings diligently pursued, and for which adequate reserves
in conformity with GAAP with respect thereto have been established to the
reasonable satisfaction of the Holder, and (ii) if the failure to pay or
discharge the same would not result in a Material Adverse Effect.
6.10 Compliance with Laws. Parent and the Company will comply with
all acts, rules, regulations and orders of any legislative, administrative
or judicial body or official applicable to the operation of Parent's or
the Company's business if noncompliance with such acts, rules, regulations
or orders could have a Material Adverse Effect; provided, however, Parent
or the Company may contest or dispute any acts, rules, regulations, orders
and directions of those bodies or officials by appropriate actions or
proceedings diligently pursued, if adequate reserves in conformity with
GAAP with respect thereto are established to the reasonable satisfaction
of the Holder.
6.11 Payment of Leasehold Obligations. Each of the Parent and the
Company will, at all times, pay, when and as due, its rental obligations
under all leases under which it is a tenant or lessee, and shall otherwise
comply, in all material respects, with all other terms of such leases and
keep them in full force and effect and, at the request of the Holder, will
provide evidence of its having done so; provided, however, Parent or the
Company may contest or dispute its obligations under such leases by
appropriate actions or proceedings diligently pursued if adequate reserves
in conformity with GAAP with respect thereto are established.
6.12 Insurance; Casualty Event. Parent and the Company will
maintain, with financially sound, reputable and solvent companies,
insurance policies acceptable to the Holder (a) insuring its assets
against loss by fire, explosion, theft and other risks and casualties as
are customarily insured against by companies engaged in the same or a
similar business, and (b) insuring Parent and the Company against
liability for personal injury and property damages relating to its assets,
such policies to be in such amounts and covering such risks as are usually
insured against by companies engaged in the same or a similar business,
and insuring such other matters as may from time to time be reasonably
requested by the Holder. Parent and Company will provide copies of all
such insurance policies to Purchaser within ten (10) days following
Purchaser's request for the same. Parent and the Company will (i) pay, or
cause to be paid, all premiums for such insurance at least thirty (30)
days before such premiums become due, (ii) furnish to Purchaser
satisfactory proof of the timely making of such payments, (iii) deliver
all renewal policies to Purchaser at least five (5) days before the
expiration date of each expiring policy, (iv) cause such policies to
require the insurer to give notice to Purchaser of termination of any such
policy at least thirty (30) days before such termination is to be
effective and (v) immediately deliver written notice to Purchaser of any
Casualty Event. If Parent or the Company fails to provide and pay for any
such insurance, Purchaser may, at its option, but shall not be required
to, pay the same and charge Parent or the Company therefor.
6.13 Inspection Rights. At any reasonable time and from time to
time, Parent and the Company will, permit representatives of Purchaser to
examine and make copies of the books and records of, and visit and inspect
the properties of, Parent and the Company, and to discuss the business,
operations, and financial condition of Parent and the Company with its
respective officers and employees and with its independent certified
public accountants. Such examinations and inspections may include, but
are not limited to, audits of the application of proceeds from the
Priority Senior Subordinated Notes. In accordance with the terms of
Section 12.1 hereof, Parent will promptly reimburse Purchaser for all
expenses incurred by representatives of Purchaser in connection with such
inspections.
6.14 Notices. Parent and the Company will promptly, but in any event
within two (2) Business Days after first becoming aware thereof, notify
Purchaser via telephone, subsequently confirmed or, if requested by
Purchaser, in writing of:
(a) the commencement of any event, including but not limited
to, any action, suit, or proceeding against Parent or the Company, that
could have a Material Adverse Effect, which notice shall specify the
nature of such event and what action Parent or the Company has taken or is
taking or proposes to take with respect thereto;
(b) the occurrence of an event of default, or an event which
with the passage of time or giving of notice or both constitutes an event
of default under the Senior Loan Documents, Junior Note Documents or under
any instrument or agreement evidencing any other Indebtedness of Parent or
the Company, which notice shall specify the nature of such event,
condition or default and what action Parent or the Company has taken or is
taking or proposes to take with respect thereto; or
(c) The occurrence of an Event of Default or a Potential
Default, which notice shall specify the nature of such event, condition or
default and what action Parent or the Company has taken or is taking or
proposes to take with respect thereto.
Any notification required by this Section 6.14 shall be accompanied by a
certificate of the Chief Executive Officer or Chief Financial Officer
setting forth the details of the specified events and the action which
Parent or the Company proposes to take with respect thereto.
6.15 Additional Notices. Immediately upon receipt by Parent or the
Company, Parent or the Company will provide each Purchaser with copies of
all notices (including notices of default), statements and financial
information, including notices of default, received from the Senior Lender
under the Senior Loan Agreement, Junior Lenders under the Junior Note
Documents, and any other creditor or lessor with respect to the
acceleration of the maturity of any item of Indebtedness for borrowed
money or the repossession of property from Parent or the Company.
6.16 Amendments. Parent and Company will promptly provide Purchaser
with copies of all proposed amendments to the Senior Loan Documents,
Junior Note Documents, and of all other loan agreements to which Parent or
such Subsidiary is a party.
6.17 Further Assurances. Parent and the Company will execute and
deliver to Purchaser from time to time, upon demand, such supplemental
agreements, statements, assignments and transfers, or instructions or
documents as Purchaser may request, in order that the full intent of this
Agreement and the Other Agreements may be carried into effect.
6.18 Compliance with ERISA and the Code. Parent and the Company will
comply, and will cause each other member of any Controlled Group to
comply, with all minimum funding requirements, and all other material
requirements, of ERISA and the Code, if applicable, to any Employee
Benefit Plan it or they sponsor or maintain, so as not to give rise to any
liability thereunder. Parent and the Company will, pay and will cause
each other member of any Controlled Group to pay when due any amount
payable by it to the Pension Benefit Guaranty Corporation. Promptly after
the filing thereof, Parent and the Company shall furnish to each Purchaser
with regard to each Employee Benefit Plan, copies of each annual report
required to be filed pursuant to Section 104 of ERISA in connection with
each such plan for each plan year.
6.19 Compliance with Regulations G, T, U and X. Neither the Company,
Parent nor any Person acting on their behalf will take any action which
might cause this Agreement, the Priority Senior Subordinated Notes, the
Purchase Documents, the Senior Loan Documents or any Other Agreements to
violate, and the Company and Parent will take all actions necessary to
cause compliance with, Regulations G, T, U and X of the Board of Governors
of the Federal Reserve System and the Securities Exchange Act of 1934, in
each case as now in effect or as the same may hereafter be in effect.
6.20 Fiscal Year. The Company and Parent will cause their fiscal
year to be the twelve month period ending on December 31 of each year.
6.21 Environmental Costs.
(a) Parent and the Company hereby indemnify and hold Purchaser
harmless from and against any liability, loss, damage, suit, action or
proceeding pertaining to solid or hazardous waste materials or other
waste-like or toxic substances, including, but not limited to, claims of
any federal, state or municipal government or quasi-governmental agency or
any third person, whether arising under any federal, state or municipal
law or regulation, or tort, contract or common law that relates to Parent
and the Company.
(b) To the extent the laws of the United States or any state in
which property, leased or owned, of Parent or the Company provide that a
Lien upon the property of Parent or the Company may be obtained for the
removal of Polluting Substances which have been released, no later than
sixty (60) days after notice is given by any Holder to the Company, the
Company shall deliver to each Purchaser a report issued by a qualified,
third party environmental consultant selected by the Company and approved
by such Holder as to the existence of any Polluting Substances located
upon or beneath the specified property, leased or owned by Parent or the
Company. To the extent any such Polluting Substance is located therein or
thereunder that either (i) subjects the property to Lien or (ii) requires
removal to safeguard the health of any Person, Parent and the Company
will, remove, or cause to be removed, such Lien and such Polluting
Substance at Parent's and the Company's expense.
6.22 Financial Covenants.
(a) Fixed Charge Coverage. Parent shall not permit the ratio of
Operating Cash Flow to Fixed Charges computed on the basis of the
Operating Cash Flow and Fixed Charges for the twelve (12) month period
ending on the last day of each month (beginning with the month ending
January 31, 1999) to be less than the ratio of 0.9:1.
(b) EBITDA. Parent shall not permit EBITDA for the nine (9) month
period ending September 30, 1998, to be less than $2,009,000 and for the
twelve (12) month period ending December 31, 1998, to be less than
$2,825,000.
VII. NEGATIVE COVENANTS
Parent and the Company covenant and agree that from the date hereof
until the Priority Senior Subordinated Obligations have been finally and
irrevocably paid in full in accordance with the terms hereof and thereof,
without the prior consent of the Holder:
7.1 Indebtedness. Parent and the Company will not, create, incur,
issue, assume, guarantee or otherwise become liable for any Indebtedness
except (a) Permitted Indebtedness; (b) any extension, renewal or
refinancing of any Permitted Indebtedness (other than the Senior Debt) on
such terms and conditions as are, on the whole, no more onerous to Parent
or the Company than the terms and conditions of such Permitted
Indebtedness on the date of such extension, renewal or refinancing; and
(c) any replacement or refinancing of the Senior Debt; provided that
(i) the interest rate on such refinancing shall be no greater than the
interest rate permitted by the Senior Subordination Agreement, (ii) the
amortization of principal on such refinancing shall be for no shorter
period, and for no greater annual amounts, than the amortization provided
for in the Senior Loan Agreement, (iii) the amount so replaced or
refinanced shall be no greater than the maximum amount permitted to be
outstanding under the Senior Loan Agreement on the date of such
replacement or refinancing, (iv) the collateral security for such
replacement or refinancing does not extend to assets other than those
contemplated by the Senior Loan Agreement (and proceeds thereof) and
(v) the other terms and conditions of such replacement or refinancing are,
on the whole, no more onerous to the Company than the terms of the Senior
Loan Agreement with such amendments thereto permitted by the Senior
Subordination Agreement. Any Permitted Indebtedness which is subordinated
to the Priority Senior Subordinated Obligations shall continue to be
subordinated to the Priority Senior Subordinated Obligations on terms and
conditions satisfactory to the Purchaser.
7.2 Limitation on Liens. Parent and the Company will not incur,
create, assume, or permit to exist any Lien upon any of its property,
assets, or revenues, including, but not limited to, its shares of capital
stock, whether now owned or hereafter acquired, except Permitted Liens.
7.3 Merger, Acquisition, Dissolution and Sale of Assets. Parent and
the Company will not (a) become a party to a merger or consolidation,
(b) purchase or otherwise acquire all or a substantial part of the assets
of any Person or any shares or other evidence of beneficial ownership of
any Person, (c) dissolve or liquidate, (d) form, acquire or permit the
existence of any Subsidiary or Subsidiaries other than the Subsidiaries in
existence on the date hereof and those permitted to be created under the
terms of the Senior Loan Agreement, and (e) sell, assign or transfer any
of its assets, except (i) the transfer of all assets of Parent (other than
the stock of the Company) to the Company, (ii) sales of inventory in the
ordinary course of business, (iii) sales of other assets reasonably and in
good faith determined by the Company to be obsolete or no longer necessary
to the Company's business, and (iv) asset dispositions permitted by the
Senior Loan Agreement,
7.4 Restricted Payments. Parent and the Company will not at any time
make or become obligated to make, directly or indirectly, any
(a) declaration of any dividend on, or any other payment or distribution
in respect of, any shares of capital stock of the Company; except (i)
dividends in cash from the Company to Parent to the extent necessary to
permit Parent to first pay the Priority Senior Subordinated Obligations
due and payable from Parent to Purchaser, (ii) dividends in cash from the
Company to Parent to the extent necessary to permit Parent to pay the
Senior Subordinated Obligations due and payable from Parent, and (iii)
other dividends permitted by the Senior Loan Agreement, (b) except as
otherwise provided for herein, any professional consulting or management
fees or any other payments to any shareholders of Parent, (c) payment or
distribution on account of the purchase, repurchase, redemption, put, call
or other retirement of any shares of capital stock of Parent or of any
warrant, option or other right to acquire such shares (except pursuant to
the Purchase Documents or the Certificate and as permitted by the Senior
Loan Agreement), or (d) payment or distribution on account of any
Indebtedness of the Company which is subordinate to the Priority Senior
Subordinated Notes.
7.5 Loans and Investments. Except for Permitted Investments, Parent
and the Company will not make any advance, loan, extension of credit, or
capital contribution to or investment in, or purchase any stock, bonds,
notes, debentures, or other securities of any Person.
7.6 Transactions with Affiliates. Except as contemplated by this
Agreement and the Other Agreements, Parent and the Company will not enter
into any transaction with any director, officer, employee, shareholder, or
Affiliate of Parent, except, on prior approval by the Company's board of
directors of the terms which shall be fair and reasonable and be at least
as favorable as would result in a comparable arm's-length transaction with
a Person not a director, officer, employee, shareholder or Affiliate of
Parent, as the case may be.
7.7 Capital Expenditure Limit. Parent and the Company shall not
make or incur an aggregate amount of all Capital Expenditures during
Fiscal Year 1998 in excess of $400,000. In calculating compliance with
this Section 7.7, the aggregate amount of all payments due under a Capital
Lease for the entire term thereof (excluding, however, the interest
portion of capitalized lease payments) shall be considered expended in
full on the date that the Capital Lease is entered into.
7.8 Modification of Senior Loan Agreement. Parent and the Company
will not agree or consent to any modification, amendment or waiver of any
of the terms or provisions of the Senior Loan Documents without the prior
written consent of the Holder except such amendments and waivers which can
be made to the Senior Loan Documents without the consent of the Purchaser
under the terms of the Senior Subordination Agreement.
VIII. EVENTS OF DEFAULT AND REMEDIES THEREFOR
8.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) (i) the Company shall fail to pay when due (whether upon
acceleration or otherwise), any principal payable under the Priority
Senior Subordinated Notes, (ii) the Company shall fail to pay within three
(3) Business Days of the date due any interest payable under the Priority
Senior Subordinated Notes or this Agreement, or (iii) the Company or
Parent shall fail to pay within five (5) Business Days after receipt of
notice of failure to pay (whether by acceleration or otherwise), any other
Priority Senior Subordinated Obligations;
(b) the Company or Parent shall fail to pay when due (following
the expiration of applicable notice and cure periods, if any), whether
upon acceleration or otherwise, any Indebtedness (excluding for purposes
of this Section 8.1(b) only the Senior Debt), individually or in the
aggregate, having an unpaid principal amount in excess of $750,000;
(c) The Company or Parent, as the case may be, shall fail to
perform or observe any (i) obligation, agreement, covenant, term or
condition (other than the obligation to make payment) contained (A) in the
Priority Senior Subordinated Notes; (B) in Section 6.1 of this Agreement,
and such default is not cured or otherwise waived within fifteen (15) days
after written notice thereof is provided to Parent or Company, as the case
may be, or (C) in this Agreement (excluding the obligations, agreements,
covenants, terms or conditions governed by Sections 8.1(a), 8.1(c)(i)(A)
and (B) above), and such default is not cured or otherwise waived within
thirty (30) days after written notice thereof is provided to Parent or
Company, as the case may be or (ii) material obligation, agreement,
covenant, term or condition (other than the obligation to make payment
which is covered by Section 8.1(a) above) contained in the Other
Agreements and such default is not cured or otherwise waived within thirty
(30) days after written notice thereof is provided to Parent or Company,
as the case may be;
(d) Parent or the Company shall fail in any material respect to
comply with any material agreement, indenture, mortgage, deed of trust, or
other agreement (excluding the Senior Loan Documents and the Other
Agreements) binding on it or affecting its properties or business, unless
a waiver or consent has been obtained therefor;
(e) any representation, warranty or other material information
whatsoever made or provided by the Company or Parent in connection with
this Agreement or the Other Agreements or otherwise to induce Purchaser to
purchase the Priority Senior Subordinated Notes, or Warrant was incorrect
or misleading in any material respect, when made;
(f) the Parent or the Company shall become subject to an Event
of Bankruptcy;
(g) any judgment or order for payment of money shall be
rendered against Parent or the Company which exceeds an uninsured amount
of $750,000.00 and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order, or (ii) there shall
be a period of thirty (30) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect;
(h) the Senior Debt shall have been accelerated or the holders
thereof shall have commenced an action to foreclose on the liens securing
the Senior Debt;
(i) Parent shall cease to directly own and control one hundred
percent (100%) of the aggregate number of shares of capital stock of the
Company;
(j) the occurrence of a material change in ownership in Parent
(for purposes of this subsection a "change in ownership" means those
circumstances in which (i) F-Jotan, L.L.C. shall own, directly or
indirectly, five percent (5%) less than (A) the Registrable Securities (as
defined in the Purchase Agreement as defined in the Junior Note Documents)
so owned by such party on March 4, 1997 or (B) the number of shares of
issued and outstanding voting stock of Parent (without giving effect to
the issuance of any shares of Common Stock under the Warrants or the
conversion of the Series A Preferred Stock) so owned by such party on
Xxxxx 0, 0000, (xx) Rice or the Southland Purchasers shall cease to
beneficially own or control, directly or indirectly, at least seventy
percent (70%) of the issued and outstanding shares of capital stock of the
Company (determined on a fully diluted basis) owned by Rice or the
Southland Purchasers, as the case may be, on March 4, 1997, or (iii) Rice
shall not have the legal right or ability, directly or through its
Subsidiaries, to elect a majority of the members of the board of directors
of Parent);
(k) Parent or the Company shall revoke or attempt to revoke its
guaranty agreement executed in favor of Purchaser, or shall repudiate its
liability thereunder or shall fail to comply in any material respect with
the terms thereof; or
(l) an Event of Default shall occur and be continuing under the
Junior Note Documents.
8.2 Remedies of Holder upon Occurrence of Event of Default. When
any Event of Default described in Section 8.1 above, other than any Event
of Default described in clause (f) thereof, has occurred and is
continuing, the majority-in-interest of the Holders may (in addition to
any other right, power or remedy permitted to the Holder by law) declare
the entire amount of the Priority Senior Subordinated Obligations,
including, without limitation, the entire principal, Prepayment Fee (if
any) and all interest accrued then outstanding under the Priority Senior
Subordinated Notes, to be, and the same shall thereupon become, forthwith
due and payable, without any presentment, demand, protest, notice of
default, notice of intention to accelerate, notice of acceleration or
other notice of any kind, all of which are hereby expressly waived, and in
such event the Company shall (subject to the terms of the Senior
Subordination Agreement) forthwith pay to the Holder an amount equal to
one hundred percent (100%) of the amount thereof. When any Event of
Default described in clause (f) of Section 8.1 above shall occur, all of
the Priority Senior Subordinated Obligations, including, without
limitation, the entire principal, Prepayment Fee (if any), and all accrued
interest then outstanding under the Priority Senior Subordinated Notes,
shall thereupon be forthwith due and payable without any presentment,
demand, protest, notice of default, notice of intention to accelerate,
notice of acceleration or other notice of any kind (including any notice
by the Holder of the Priority Senior Subordinated Notes), all of which are
hereby expressly waived by Parent and the Company, and the Company will
(subject to the terms of the Senior Subordination Agreement) forthwith pay
to each Holder an amount equal to one hundred percent (100%) of the amount
thereof. The provisions of this Section 8.2 are solely for the benefit of
the Holder and neither the Company nor any other Person shall have any
rights with respect to or be entitled to enforce this Section 8.2. If, at
any time or times, an Event of Default shall have occurred and be
continuing under the Priority Senior Subordinated Notes, this Agreement or
any Other Agreement, Rice (so long as it is a Holder) may act as the
representative of and, as such, shall consult with any other Holder in
connection with any action to be taken with respect to such default and/or
with respect to the enforcement of their rights and remedies.
8.3 Annulment of Acceleration. The provisions of the foregoing
Section 8.2 are subject to the condition that, if all or any part of the
Priority Senior Subordinated Obligations have been declared or have
otherwise become immediately due and payable by reason of the occurrence
of any Event of Default, Purchaser may, by written instrument delivered to
the Company (an "Annulment Notice"), rescind and annul such declaration
and the consequences thereof as to the Priority Senior Subordinated
Obligations, provided that (a) at the time such Annulment Notice is
delivered no judgment or decree has been entered for the payment of any
monies due pursuant to such Priority Senior Subordinated Obligations in
connection therewith, and (b) all arrears of interest and all other sums
payable on such Priority Senior Subordinated Obligations in connection
therewith (except any principal, interest or Prepayment Fee which has
become due and payable solely by reason of such declaration under
Section 8.2 hereof) shall have been duly paid or deferred by the Holder;
and provided further, that no such rescission and annulment shall extend
to or affect any subsequent default or Event of Default or impair any
right consequent thereto, and shall not be deemed a waiver of the Event of
Default giving rise to the acceleration unless specifically waived in
writing by the Holder.
8.4 Payment of Priority Senior Subordinated Obligations. Subject to
the terms of the Senior Subordination Agreement: (a) Purchaser shall have
the right, which is absolute and unconditional, to receive payment of the
interest as provided in this Agreement on its Priority Senior Subordinated
Notes and payment of all other Priority Senior Subordinated Obligations on
the date when due and, upon the occurrence and continuance of an Event of
Default, Rice shall have the right, which is absolute and unconditional,
to institute suit against Parent or the Company on behalf of the Holder
for the enforcement of any such payment, and (b) such rights shall not be
impaired without the Holder's prior written consent.
8.5 Remedies. Subject to the terms of the Senior Subordination
Agreement, if any Event of Default shall occur and be continuing,
Purchaser may exercise any right or remedy it has at law, in equity or
under this Agreement or any Other Agreement. No right or remedy conferred
upon or reserved to Purchaser under this Agreement or any Other Agreement
is intended to be exclusive of any other right or remedy, and every right
and remedy shall be cumulative and in addition to every other right or
remedy given hereunder or now or hereafter existing under any applicable
law. Every right and remedy given by this Agreement or by applicable law
to any Holder may be exercised from time to time and as often as may be
deemed expedient by such Holder.
8.6 Conduct No Waiver. No course of dealing on the part of
Purchaser, nor any delay or failure on the part of Purchaser to exercise
any of its rights, shall operate as a waiver of such right or otherwise
prejudice such Purchaser's rights, powers and remedies. If the Company
fails to pay, when due, the principal of, Prepayment Fee (if any) or the
interest on, the Priority Senior Subordinated Notes, or fails to comply
with any other provision of this Agreement, the Company shall pay to the
Holder, to the extent permitted by law, on demand, such further amounts as
shall be sufficient to cover the cost and expenses, including, but not
limited to, reasonable attorney's fees, incurred by Purchaser in
collecting any sums due on the Priority Senior Subordinated Notes or in
otherwise enforcing any of such Purchaser's rights.
IX. SUBORDINATION
9.1 Notwithstanding any provision in this Agreement to the contrary,
the Indebtedness evidenced by the Priority Senior Subordinated Notes shall
be subordinate to the Senior Debt, and Purchaser's rights and remedies
hereunder shall be subordinate to the rights and remedies of the Senior
Lender, all in accordance with the terms of the Senior Subordination
Agreement. Nothing contained in this Section 9.1 or elsewhere in this
Agreement, in the Priority Senior Subordinated Notes or the Senior
Subordination Agreement is intended to or shall impair, as between the
Company and Purchaser, the obligations of the Company, which are absolute
and unconditional, to pay to Purchaser the principal of, Prepayment Fee
(if any) and interest on the Priority Senior Subordinated Notes and all
other Priority Senior Subordinated Obligations as and when the same shall
become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of Purchaser and creditors of the
Company other than the holders of the Senior Debt.
9.2 Notwithstanding any provision in this Agreement to the contrary,
the Indebtedness evidenced by the Senior Subordinated Notes shall be
subordinate in right of payment to all regularly scheduled payments of
interest and principal with respect to the Priority Senior Subordinated
Notes and Priority Senior Subordinated Obligations, and any rights and
remedies of the holders of the Senior Subordinated Notes shall be
subordinate to the rights and remedies of the Purchaser all in accordance
with the terms of the Senior Subordination Agreement. Nothing contained
in this Section 9.2 or elsewhere in this Agreement, in the Priority Senior
Subordinated Notes or the Senior Subordination Agreement is intended to or
shall impair, as between the Company and any holder of the Senior
Subordinated Notes, the obligations of the Company, which are absolute and
unconditional, to pay to such holder the principal of, Prepayment Fee (if
any) and interest on the Senior Subordinated Notes and all other Senior
Subordinated Obligations as and when the same shall become due and payable
in accordance with their terms, or is intended to or shall affect the
relative rights of such holder and creditors of the Company other than the
holders of the Senior Debt and the Purchaser.
X. FORM OF PRIORITY SENIOR SUBORDINATED NOTES, REGISTRATION, TRANSFER
AND REPLACEMENT
10.1 Form of Priority Senior Subordinated Notes. The Priority Senior
Subordinated Notes initially delivered under this Agreement will be fully
registered notes in the form attached hereto as Exhibit A. The Priority
Senior Subordinated Notes are issuable only in fully registered form.
10.2 Priority Senior Subordinated Notes Register. The Company shall
cause to be kept at the principal office a register for the registration
and transfer of the Priority Senior Subordinated Notes. The names and
addresses of the Holder of the Priority Senior Subordinated Notes, the
transfer thereof and the names and addresses of the transferees of the
Priority Senior Subordinated Notes shall be recorded in such register.
10.3 Issuance of New Priority Senior Subordinated Notes upon Exchange
or Transfer. Upon surrender for exchange or registration of transfer of
any Priority Senior Subordinated Notes at the office of the Company
designated for notices in accordance with Section 12.3 hereof, the Company
shall execute and deliver, at its expense, one or more new Priority Senior
Subordinated Notes of any authorized denomination requested by the Holder
of the surrendered Priority Senior Subordinated Notes, each dated the date
to which interest has been paid on the Priority Senior Subordinated Notes
so surrendered (or, if no interest has been paid, the date of the
surrendered Priority Senior Subordinated Notes), but in the same aggregate
unpaid principal amount as the surrendered Priority Senior Subordinated
Notes, and registered in the name of such Person or Persons as shall be
designated in writing by such Holder. Every Priority Senior Subordinated
Notes surrendered for registration of transfer shall be duly endorsed, or
be accompanied by a written instrument of transfer duly executed, by the
Holder of such Priority Senior Subordinated Notes or by his attorney duly
authorized in writing.
10.4 Replacement of Priority Senior Subordinated Notes. Upon receipt
of evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of a Priority Senior Subordinated Notes and, in the case of
any such loss, theft or destruction, upon delivery of a bond of indemnity
in such form and amount as shall be reasonably satisfactory to the Company
or, in the event of such mutilation upon surrender and cancellation of
such Priority Senior Subordinated Notes, the Company, without charge to
the Holder thereof, will make and deliver a new Priority Senior
Subordinated Note of like tenor and the same series in lieu of such lost,
stolen, destroyed or mutilated Priority Senior Subordinated Note. If any
such lost, stolen or destroyed Priority Senior Subordinated Notes is owned
by any Purchaser or any other Holder whose credit is satisfactory to the
Company, then the affidavit of an authorized officer of such owner setting
forth the fact of loss, theft or destruction and of its ownership of the
Priority Senior Subordinated Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof, and no
further indemnity shall be required as a condition to the execution and
delivery of a new Priority Senior Subordinated Note, other than a written
agreement of such owner (in form reasonably satisfactory to the Company)
to indemnify the Company.
XI. INTERPRETATION OF AGREEMENT
11.1 Certain Terms Defined. When used in this Agreement, the terms
set forth below are defined as follows:
"Affiliate" means any Person directly or indirectly controlling,
controlled by, or under common control with, the Person in question.
A Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract, or
otherwise.
"Agreement" means this Priority Note Purchase Agreement, including
all schedules and exhibits hereto, as the same may be modified,
supplemented, extended and/or amended from time to time.
"Annulment Notice" is defined in Section 8.3.
"Business Day" means each day of the week except Saturdays, Sundays,
and days on which banking institutions are authorized by law to close
in the States of Florida and Texas.
"Capital Expenditures" means, for any period, all expenditures of
Parent and the Company which are classified as capital expenditures
in accordance with GAAP including all such expenditures associated
with Capital Lease Obligations but excluding, to the extent included,
any such expenditures made in connection with an acquisition funded
with the proceeds of the advances made or held by any Senior Lender
pursuant to Section 3.1 of the Senior Loan Agreement.
"Capital Lease Obligations" means, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal
property, which obligations are required to be classified and
accounted for as a capital lease on a balance sheet of such Person
under GAAP. For purposes of this Agreement, the amount of such
Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"Casualty Event" means any of the following events: (a) the
destruction of any Property or other tangible assets of Parent or the
Company, or the occurrence of damage to such Property or assets,
which in each case renders the repair or replacement thereof
uneconomic; (b) the requisition of title to such Property or assets
by any governmental authority for a period of more than 6 months;
(c) the constructive total loss with respect to such Property or
assets; or (d) the loss of quiet title to any real property owned or
leased by Parent or the Company to the extent that such loss
constitutes an insurable loss or otherwise interferes with the normal
and customary use of such real estate in the ordinary course of
business.
"Certificate" is defined in Article I of the Purchase Agreement.
"Closing Date" means the date on which all of the conditions stated
in Article V of this Agreement have been met to Purchaser's
satisfaction and the purchase price for the Priority Senior
Subordinated Notes has been paid, but in any event not later than
April 20, 1998.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, and the regulations promulgated thereunder.
"Common Stock" means the $.01 par value common stock of Parent.
"Company" means Southland Container Packaging Corp., a Texas
corporation, the successor by merger to SHC Acquisition Corp., a
Florida corporation, and formerly called Southland Holding Company,
and shall include its Subsidiaries, if any.
"Company Guaranty" means the guaranty of Company in favor of the
Purchaser, in form and substance satisfactory to Purchaser, as the
same may be amended or otherwise modified from time to time.
"Controlled Group" means any group of organizations within the
meaning of Section 414(b), (c), (m) or (o) of the Code of which
Parent or the Company is a member.
"Dollars" and "$" mean lawful money of the United States of America.
"EBITDA" means, for any period and any Person, the total of the
following each calculated without duplication for such Person on a
consolidated basis for such period: (a) Net Income; plus (b) any
provision for (or less any benefit from) income or franchise taxes
included in determining Net Income; plus (c) interest expense
deducted in determining Net Income; plus (d) amortization and
depreciation expense deducted in determining Net Income; plus (e)
other noncash charges deducted in determining consolidated net income
and not already deducted in accordance with clause (d) above or
clauses (b) and (c) of the definition of Net Income; plus (f) all
restructuring expenses, litigation or arbitration costs related to
recovery of proceeds of the Golden State Litigation or the Selling
Shareholder Arbitration, contingency allocations and other non-
recurring non-operating expenses, but, in each case, only to the
extent such amounts were deducted in calculating Net Income.
"Employee Benefit Plan" means any employee benefit plan, as defined
in Section 3(3) of ERISA, which is, previously has been or will be
established or maintained by any member of a Controlled Group.
"Environmental Laws" means all federal, state, or local laws,
ordinances, rules, regulations, interpretations and orders of courts
or administrative agencies or authorities relating to pollution or
protection of the environment (including, without limitation, ambient
air, surface water, ground water, land surface, and subsurface
strata), and other laws relating to (a) Polluting Substances or
(b) the manufacture, processing, distribution, use, treatment,
handling, storage, disposal, or transportation of Polluting
Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and in effect from time to time, and the regulations
promulgated thereunder.
"Event of Bankruptcy" means any of (a) the filing by a Person of a
voluntary petition in bankruptcy under any provision of any
bankruptcy law or a petition to take advantage of any insolvency act,
(b) the admission in writing by Parent or the Company of its
inability to pay its debts generally as they become due, (c) the
appointment of a receiver or receivers for all or a material part of
a Person's assets with the consent of such Person, (d) the filing of
any bankruptcy, arrangement or reorganization petition by or, with
the consent of a Person, against such Person under any provision of
any bankruptcy law, (e) a receiver, liquidator or trustee of a Person
or a substantial part of its assets shall be appointed pursuant to
the Federal Bankruptcy Code by the order of a court of competent
jurisdiction which shall not be dismissed or stayed within thirty
(30) days, or (f) an involuntary petition to reorganize or liquidate
a Person pursuant to the Federal Bankruptcy Code shall be filed
against such Person and shall not be dismissed or stayed within
thirty (30) days.
"Event of Default" is defined in Section 8.1.
"Excess Interest" is defined in Section 2.8.
"Fiscal Year" means a twelve (12) month period ending December 31.
"Fiscal Quarters" means the three (3) month periods falling in each
Fiscal Year ending March 31, June 30, September 30 and December 31.
"Fixed Charges" means, for any period, the total of the following for
Parent and the Company calculated on a consolidated basis without
duplication for such period: (A) cash interest expense; plus (B) cash
federal and state income taxes paid; plus (C) scheduled amortization
of Indebtedness paid or payable (excluding, to the extent included,
nonpermanent principal repayments under the Revolving Loans (as
defined in the Senior Loan Agreement) and scheduled principal
payments with respect to the unsecured promissory notes issued to
trade creditors and the Company's auditors).
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting
Standards Board and/or their respective successors and which are
applicable in the circumstances as of the date in question, provided,
that neither Parent nor any Subsidiary may change the use or
application of any accounting method, practice or principle without
the prior written consent of the Holder, which consent may require
that an adjustment be made to any and all the financial covenants and
the capital expenditure covenant set forth herein. Accounting
principles are applied on a "consistent basis" when the accounting
principles observed in a current period are comparable in all
material respects to those accounting principles applied in a
preceding period.
"Golden State Litigation" means any litigation commenced or claims
asserted (whether now existing or hereafter arising) by the Parent,
Company or any Subsidiary against Golden State Container, Inc. n/k/a
Victory Packaging, Inc., Xxxxx Xxxxxx, Xxxx Xxxxxxxxx, Xxxx Xxxxx,
Xxxx Xxxxxx, Xxxxx Xxxxxx, Xxx Xxxxxxx, Xxxx Xxxxx, Xxxx X'Xxxxxx,
Xxxxxx Xxxxxx, Xxxxxx Xxxxxx, Xxxxx Xxxx or any other former
employees of Parent, or the Company or any of their respective
successors and assigns.
"Holder" when used in reference to the Priority Senior Subordinated
Notes and/or the Priority Senior Subordinated Obligations, means the
Person or Persons who, at the time of determination, is the lawful
owner of all or a portion of Priority Senior Subordinated Notes or an
obligee of all or a portion of the Priority Senior Subordinated
Obligations. Unless otherwise provided in this Agreement, in each
instance that the Holder is required to request or consent in concert
to or otherwise express approval of an action, the Holder will be
deemed to have requested or consented to such action or given such
approval if the Holders of a majority-in-interest of the Priority
Senior Subordinated Notes so request, consent or approve.
"Impositions" is defined in Section 6.9.
"Indebtedness" means for any Person: (a) all indebtedness, whether
or not represented by bonds, debentures, notes, securities, or other
evidences of indebtedness, for the repayment of money borrowed,
(b) all indebtedness representing deferred payment of the purchase
price of property or assets, (c) all indebtedness under any lease
which, in conformity with GAAP, is required to be capitalized for
balance sheet purposes and leases of property or assets made as a
part of any sale and lease-back transaction if required to be
capitalized, (d) all indebtedness under guaranties, endorsements,
assumptions, or other contractual obligations, including any letters
of credit, or the obligations in respect of, or to purchase or
otherwise acquire, indebtedness of others, (e) all indebtedness
secured by a Lien existing on property owned, subject to such Lien,
whether or not the indebtedness secured thereby shall have been
assumed by the owner thereof, (f) trade accounts payable more than
one hundred twenty (120) days past due, and (g) all amendments,
renewals, extensions, modifications and refundings of any
indebtedness or obligations referred to in clauses (a), (b), (c),
(d), (e) or (f).
"Intellectual Property" means all patents, patent rights, patent
applications, licenses, inventions, trade secrets, know-how,
proprietary techniques (including processes and substances),
trademarks, service marks, trade names and copyrights.
"Junior Lenders" means Rice Partners II, L.P., F-Southland, L.L.C.,
and FF-Southland, L.P., solely for purposes of and as defined in,
that certain Note Purchase Agreement dated as of February 28, 1997.
"Junior Note Documents" means that certain Note Purchase Agreement
dated February 28, 1997, and the amendments thereto, together with
all documents, agreements, notes and instruments delivered pursuant
thereto in connection with or arising from the purchase of the Senior
Subordinated Notes and equity interests related thereto.
"Lien" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, financing statement, or conditional sale or title
retention agreement, or any other interest in property designed to
secure the repayment of Indebtedness or any other obligation, whether
arising by agreement, operation of law, or otherwise.
"Material Adverse Effect" means (a) a material adverse effect upon
the business, operations, properties, assets or condition (financial
or otherwise) of Parent or the Company or (b) the impairment of the
ability of any party to perform its obligations under this Agreement
or any of the Other Agreements to which it is a party or of Purchaser
to enforce or collect any of the Priority Senior Subordinated
Obligations. In determining whether any individual event would
result in a Material Adverse Effect, notwithstanding that such event
does not of itself have such effect, a Material Adverse Effect shall
be deemed to have occurred if the cumulative effect of such event and
all other then existing events would result in a Material Adverse
Effect.
"Maximum Rate" is defined in Section 2.8.
"Net Income" means, for any period and any Person, such Person's
consolidated net income (or loss), but excluding: (a) the income of
any other Person (other than its subsidiaries) in which such Person
or any of its subsidiaries has an ownership interest, unless received
by such Person or its subsidiary in a cash distribution; (b) any
after-tax gains or losses attributable to asset disposition; and (c)
to the extent not included in clauses (a) and (b) above, any after-
tax extraordinary, non-cash or nonrecurring gains or losses.
"Operating Cash Flow" means, for any period, the total of the
following for Parent and the Company calculated on a consolidated
basis without duplication for such period: (a) EBITDA; minus (b) all
Capital Expenditures which are not financed with Indebtedness of the
Company permitted by Section 12.1(f) of the Senior Loan Agreement but
including Capital Expenditures financed with proceeds of the
Revolving Loans (as defined in the Senior Loan Agreement).
"Other Agreements" means the Priority Senior Subordinated Notes, the
Purchase Documents, Parent Guaranty, Company Guaranty and all other
agreements, instruments and documents (including, without limitation,
notes, guarantees, powers of attorney, consents, assignments,
contracts, notices, subordination agreements and all other written
matter), and all renewals, modifications and extensions thereof,
whether heretofore, now or hereafter executed by or on behalf of
Parent and/or any Subsidiary of the Company and delivered to and for
the benefit of Purchaser or any Person participating with Purchaser
in the Priority Senior Subordinated Notes with respect to this
Agreement or any of the transactions contemplated by this Agreement.
The Other Agreements shall not include any Senior Loan Documents.
"Parent" means Jotan, Inc., a Florida corporation and, unless the
context requires otherwise, shall include its Subsidiaries, if any.
"Parent Guaranty" means the guaranty of Parent in favor of Purchaser,
in form and substance satisfactory to Purchaser, as the same may be
amended or otherwise modified from time to time.
"Pension Plan" means any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which is, was or will be established or
maintained by any member of the Controlled Group.
"Permitted Indebtedness" means (a) any Indebtedness in favor of the
Senior Lender under the Senior Loan Agreement and created pursuant
thereto, (b) any Indebtedness in favor of any Holder and/or the Other
Agreements and created pursuant thereto, (c) any Indebtedness in
favor of the Junior Lenders under the Junior Note Documents and
created pursuant thereto, (d) purchase money Indebtedness of the
Company (including Capital Lease Obligations) incurred after February
28, 1997 not to exceed $1,500,000 in the aggregate at any time
outstanding secured by purchase money Liens permitted hereunder
subject to the limitations placed on Capital Expenditures in Section
7.7, (e) the other Indebtedness set forth on Schedule 11.1(a) and
approved by the Purchaser, (f) guaranties by Parent or Company of
such Indebtedness and (g) any other Indebtedness permitted by the
Senior Loan Agreement.
"Permitted Investments" means the following:
(a) securities issued or directly and fully guaranteed or
insured by the United States Government or any agency or
instrumentality thereof (provided that the full faith and credit of
the United States Government is pledged in support thereof), having
maturities of not more than twelve (12) months from the date of
acquisition;
(b) time deposits and certificates of deposit (i) of any
commercial bank incorporated in the United States of recognized
standing having capital and surplus in excess of $100,000,000 with
maturities of not more than twelve months from the date of
acquisition or (ii) which are fully insured by the Bank Insurance
Fund with maturities of not more than twelve (12) months from the
date of acquisition;
(c) commercial paper issued by any Person incorporated in the
United States rated at least A-1 or the equivalent thereof by
Standard & Poor's Corporation or at least P-1 or the equivalent
thereof by Xxxxx'x Investors Service, Inc. and in each case maturing
not more than twelve (12) months after the date of acquisition;
(d) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in
clauses (a) through (c) above; or
(e) advances, loans, extensions of credit or capital
contributions and investments permitted by the Senior Loan Agreement.
"Permitted Liens" means (a) Liens in favor of the Senior Lender under
the Senior Loan Documents created in accordance with the terms
thereof as in effect on the date hereof, (b) Liens securing purchase
money Indebtedness incurred to finance the acquisition of capital
assets by the Company, subject to the limitations placed on Capital
Expenditures in Section 7.7 hereof, but only so long as (i) such Lien
attaches only to the asset so financed, (ii) the Indebtedness secured
by such Lien does not exceed one hundred percent (100%) of the
purchase price, including installation and freight, of the asset so
financed and (iii) no Event of Default or Potential Default has
occurred and is continuing, (c) Liens for property taxes not yet due,
(d) materialmen's, mechanics', worker's, repairmen's, employees' or
other like Liens arising against the Company in the ordinary course
of business, in each case which are either not delinquent or are
being contested in good faith and by appropriate actions or
proceedings conducted with due diligence and for the payment of which
adequate reserves in accordance with GAAP have been established with
respect thereto, (e) deposits to secure payment of worker's
compensation, unemployment insurance or other social security
benefits and (f) Liens disclosed on Schedule 11.1(b) and replacements
of such Liens so long as such Lien does not extend beyond the
property or asset then subject to such Lien and (g) other Liens
permitted by the Senior Loan Agreement.
"Person" means any individual, sole proprietorship, corporation,
business trust, unincorporated organization, association, company,
partnership, joint venture, governmental authority (whether a
national, federal, state, county, municipality or otherwise, and
shall include without limitation any instrumentality, division,
agency, body or department thereof), or other entity.
"PIK Interest" is defined in Section 2.1(b).
"PIK Notes" is defined in Section 2.1(b).
"Potential Default" means the occurrence of any condition or event
which, with the passage of time or giving of notice or both, would
constitute an Event of Default.
"Preferred Stock" means, collectively, the $0.01 par value Series A
Convertible Preferred Stock and the $0.01 par value Series B
Redeemable Preferred Stock of Parent.
"Prepayment Fee" is defined in Section 2.2 and includes any
Prepayment Fee arising as a result of the Holder's exercise of their
rights and remedies under Section 8.2.
"Priority Senior Subordinated Notes" means the term promissory notes
issued to Purchaser pursuant to this Agreement, including all PIK
Notes issued as evidence of the Company's obligation to pay PIK
Interest pursuant to Section 2.1(b) hereof, together with all
renewals, modifications, extensions, substitutions and replacements
thereof.
"Priority Senior Subordinated Obligations" means and includes any and
all Indebtedness and/or liabilities of Parent, Company or any
Subsidiary to Purchaser of every kind, nature and description, direct
or indirect, secured or unsecured, joint, several, joint and several,
absolute or contingent, due or to become due, now existing or
hereafter arising under this Agreement or any Other Agreement
(regardless of how such Indebtedness or liabilities arise or by what
agreement or instrument they may be evidenced or whether evidenced by
any agreement or instrument) and all obligations of Parent, Company,
or Subsidiary to Purchaser to perform acts or refrain from taking any
action under any of the aforementioned documents, together with all
renewals, modifications, extensions, increases, substitutions or
replacements of any such Indebtedness.
"Priority Shareholder Agreement" means that certain Priority
Shareholders' Agreement dated as of the date hereof among Parent,
Purchaser, and the other parties thereto, as the same may be amended,
modified, extended or restated from time to time.
"Property" means all real property owned, leased or operated by
Parent or any Subsidiary thereof.
"Purchase Agreement" means that Priority Warrant Purchase Agreement
dated as of April 14, 1998 executed by and between Parent and
Purchaser and the other parties named therein, with respect to the
issuance to Purchaser of the Warrant.
"Purchase Documents" means, collectively, (a) the Warrant, (b) the
Purchase Agreement, and (c) the Priority Shareholder Agreement dated
as of April 14, 1998 executed by Purchaser, Parent and the other
parties named therein, as each of the foregoing may be amended from
time to time.
"Purchaser" means Rice, together with its transferees, successors and
assigns of the Priority Senior Subordinated Notes or the Priority
Senior Subordinated Obligations and any nominees on whose behalf any
of the foregoing purchase or otherwise acquire any of such
Indebtedness of the Company, and shall include, but not be limited
to, each and every "Holder" as defined herein.
"Reportable Event" means (i) any of the events set forth in Sections
4043(b) (other than a merger, consolidation or transfer of assets in
which no Pension Plan involved has any unfunded benefit liabilities),
4068(f) or 4063(a) of ERISA, (ii) any event requiring any member of
the Controlled Group to provide security under Section 401(a)(29) of
the Code, or (iii) any failure to make payments required by
Section 412(m) of the Code.
"Securities" means any stock, shares, options, warrants, voting trust
certificates, or other instruments evidencing an ownership interest
or a right to acquire an ownership interest in a Person or any bonds,
debentures, notes or other evidences of indebtedness, secured or
unsecured.
"Selling Shareholder Arbitration" means any arbitration, claim,
demand or proceeding commenced by or against the Company and/or
Parent (whether now existing or hereafter arising) and involving
Xxxxxx X. Xxxxxxxxxxx, Xxxx X. Xxxxxxx, Xx., and Xxxxxxx X. Xxxxxxx,
as sellers of all of the issued and outstanding capital stock of the
Company to Parent's designee as of February 28, 1997.
"Senior Agent" means Banque Paribas, a bank organized under the laws
of France, as agent for the Senior Lenders, and its successors and
assigns.
"Senior Debt" shall have the same meaning as set forth in the Senior
Subordination Agreement.
"Senior Lender" means individually and collectively, as the context
requires, the Persons who are now or may from time to time become
lenders under the Senior Loan Agreement, and any Person or Persons
who replaces or refinances the Senior Debt under the terms set forth
in Section 7.1(c).
"Senior Loan Agreement" means the Credit Agreement by and among
Parent, the Company, the Senior Agent and the Senior Lender, dated as
of the February 28, 1997, as amended by that certain letter amendment
dated April 30, 1997, that certain Second Amendment to Credit
Agreement dated as of June 20, 1997, that certain Third Amendment to
Credit Agreement dated as of August 20, 1997, that certain Fourth
Amendment to Credit Agreement dated as of November 6, 1997, and that
certain Fifth Amendment to Credit Agreement dated as of April 14,
1998 and as further amended from time to time in accordance with the
express provisions of the Senior Subordination Agreement, and all
documents and instruments delivered pursuant thereto in connection
with the loans and advances made thereunder.
"Senior Loan Amendment" means the Fifth Amendment to Credit Agreement
by and among Parent, the Company, the Senior Agent, and the Senior
Lender dated as of April 14, 1998, and all documents and instruments
delivered pursuant thereto or in connection therewith.
"Senior Loan Documents" means the Senior Loan Agreement and all
amendments thereto, including the Senior Loan Amendment, the "Loan
Documents" (as defined in the Senior Loan Agreement), and all
agreements, documents and instruments executed in connection
therewith or contemplated thereby, and all amendments to all the
foregoing.
"Senior Subordinated Notes" means the term promissory notes issued to
each Junior Lender pursuant to the Junior Note Documents, together
with all renewals, modifications, extensions, substitutions and
replacements thereof.
"Senior Subordinated Obligations" means and includes any and all
Indebtedness and/or liabilities of Parent, the Company and any
Subsidiary to each Purchaser under the Junior Note Documents of every
kind, nature and description, direct or indirect, secured or
unsecured, joint, several, joint and several, absolute or contingent,
due or to become due, now existing or hereafter arising, under such
Junior Note Documents (regardless of how such Indebtedness or
liabilities arise or by what agreement or instrument they may be
evidenced or whether evidenced by any agreement or instrument) and
all obligations of Parent, Company, and any Subsidiary to each
Purchaser to perform acts or refrain from taking any action under any
of the aforementioned documents, together with all renewals,
modifications, extensions, increases, substitutions or replacements
of any of such Indebtedness.
"Senior Subordination Agreement" means that certain Senior
Subordination Agreement dated as of February 28, 1997, by and among
the Senior Agent, Rice Partners II, L.P., F-Southland, L.L.C., and
FF-Southland, L.P., as amended as of April 14, 1998, and as the same
may be further amended, modified, extended or restated from time to
time, including as amended by that certain First Amendment to Senior
Subordination Agreement dated as of April 14, 1998.
"Subsidiary" means any Person of which or in which the Company and
its other Subsidiaries or Parent and its Subsidiaries, as the context
requires, own directly or indirectly fifty percent (50%) or more of
(a) the combined voting power of all classes having general voting
power under ordinary circumstances to elect a majority of the board
of directors or equivalent body of such Persons, if it is a
corporation, (b) the capital interest or profits interest of such
Person, if it is a partnership, joint venture or similar entity, or
(c) the beneficial interest of such Person if it is a trust,
association or other unincorporated organization.
"Termination Date" means the earliest to occur of (a) February 28,
2003, (b) the date on which the Priority Senior Subordinated Notes
are accelerated pursuant to Article VIII or (c) the date on which the
Priority Senior Subordinated Obligations are paid in full.
"Termination Event" means (a) a Reportable Event, (b) the termination
of a Pension Plan which has unfunded benefit liabilities (including
an involuntary termination under Section 4042 of ERISA), (c) the
filing of a Notice of Intent to Terminate a Pension Plan, (d) the
initiation of proceedings to terminate a Pension Plan under
Section 4042 of ERISA or (e) the appointment of a trustee to
administer a Pension Plan under Section 4042 of ERISA.
"Transfer" is defined in Section 12.5 hereof.
"Transferee" means any Person to whom a Transfer is made.
"Warrants" is defined in the Purchase Documents and shall be
denominated as set forth therein.
Terms which are defined in other Sections of this Agreement shall have the
meanings specified therein. All other terms contained in this Agreement
shall have, when the context so indicates, the meanings provided for by
the Uniform Commercial Code as adopted and in force in the State of
Florida, as from time to time in effect.
11.2 Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is
required to be made for the purposes of this Agreement, the same shall be
done, unless specified otherwise, in accordance with GAAP, except where
such principles are inconsistent with the requirements of this Agreement.
11.3 Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the
action in question is taken directly or indirectly by such Person.
11.4 References. When used in this Agreement, the words "hereof",
"herein" and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and the words "Article", "Section", "subsection", "clause",
"Annex", "Schedule" and "Exhibit" refer to Articles, Sections, subsections
and clauses of, and Annexes, Schedules and Exhibits to, this Agreement
unless otherwise specified.
XII. MISCELLANEOUS
12.1 Expenses. The Company agrees to pay (a) all out-of-pocket
expenses of Purchaser (including reasonable fees, expenses and
disbursements of each Purchaser's counsel) in connection with the
preparation, negotiation, enforcement, operation and administration of
this Agreement, the Priority Senior Subordinated Notes, the Other
Agreements, or any documents executed in connection therewith, or any
waiver, modification or amendment of any provision hereof or thereof; and
(b) if an Event of Default occurs, all court costs and costs of
collection, including, without limitation, reasonable fees, expenses and
disbursements of counsel employed in connection with any and all
collection efforts. The attorneys' fees arising from such services,
including those of any appellate proceedings, and all expenses, costs,
charges and other fees incurred by such counsel or Purchaser in any way or
respect arising in connection with or relating to any of the events or
actions described in this Article XII shall be payable by the Company to
Purchaser, on demand, and shall be additional Priority Senior Subordinated
Obligations. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: recording costs, appraisal
costs, paralegal fees, costs and expenses; accountants' fees, costs and
expenses; court costs and expenses; photocopying and duplicating expenses;
court reporter fees, costs and expenses; long distance telephone charges;
air express charges, telegram charges; facsimile charges; secretarial
overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal services. The
Company agrees to indemnify Purchaser from and hold it harmless against
any documentary taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery by the Company or any
other Person of this Agreement, the Other Agreements, and any documents
executed in connection therewith.
12.2 Indemnification. IN ADDITION TO AND NOT IN LIMITATION OF THE
OTHER INDEMNITIES PROVIDED FOR HEREIN OR IN ANY OTHER AGREEMENTS, THE
COMPANY HEREBY INDEMNIFIES AND AGREES TO HOLD HARMLESS PURCHASER AND ANY
OTHER HOLDERS, AND EVERY AFFILIATE OF ANY OF THE FOREGOING, AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES AND AGENTS, FROM ANY
CLAIMS, ACTIONS, DAMAGES, COSTS, ATTORNEYS' FEES AND EXPENSES (INCLUDING
ANY OF THE SAME ARISING OUT OF THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE
PERSON TO BE INDEMNIFIED) TO WHICH ANY OF THEM MAY BECOME SUBJECT, INSOFAR
AS SUCH LOSSES, LIABILITIES, CLAIMS, ACTIONS, DAMAGES, COSTS AND EXPENSES
ARISE FROM OR RELATE TO THIS AGREEMENT OR THE OTHER AGREEMENTS, OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREBY, OR FROM ANY INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY
THREATENED INVESTIGATION, LITIGATION OR OTHER PROCEEDING RELATING TO ANY
OF THE FOREGOING, OR FROM ANY VIOLATION OR CLAIM OF VIOLATION OF ANY
APPLICABLE ENVIRONMENTAL LAWS WITH RESPECT TO ANY REAL OR PERSONAL
PROPERTY, OR FROM ANY GOVERNMENTAL OR JUDICIAL CLAIM, ORDER OR JUDGMENT
WITH RESPECT TO ANY REAL OR PERSONAL PROPERTY OF THE COMPANY, OR FROM ANY
BREACH OF THE WARRANTIES, REPRESENTATIONS OR COVENANTS CONTAINED IN THIS
AGREEMENT OR THE OTHER AGREEMENTS. THE FOREGOING INDEMNIFICATION INCLUDES
ANY SUCH CLAIMS, ACTIONS, DAMAGES, COSTS, AND EXPENSES INCURRED BY REASON
OF THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE PERSON TO BE INDEMNIFIED,
BUT EXCLUDES ANY OF THE SAME INCURRED BY REASON OF SUCH PERSON'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
12.3 Notices. Except as otherwise expressly provided herein, all
communications provided for hereunder shall be in writing and delivered or
mailed by the United States mails, certified mail, return receipt
requested, (a) if to Purchaser, addressed to the Purchaser at the address
specified on Annex I hereto or to such other addresses as the Purchaser
may in writing designate, (b) if to any other Holder, addressed to such
Holder at such address as such Holder may in writing designate, and (c) if
to Parent or any Subsidiary, addressed to Parent at the address set forth
next to its name on the signature pages hereto or to such other address as
Parent may in writing designate. Notices shall be deemed to have been
validly served, given or delivered (and "the date of such notice" or words
of similar effect shall mean the date) five (5) days after deposit in the
United States mails, certified mail, return receipt requested, with proper
postage prepaid, or upon actual receipt thereof (whether by noncertified
mail, telecopy, telegram, facsimile, express delivery or otherwise),
whichever is earlier.
12.4 Reproduction of Documents. This Agreement and all documents
relating hereto, including, without limitation (a) consents, waivers and
modifications which may hereafter be executed, (b) documents received by
the Purchaser at the closing of the purchase of the Priority Senior
Subordinated Notes, and (c) financial statements, certificates and other
information previously or hereafter furnished to Purchaser, may be
reproduced by the Purchaser by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and Purchaser
may destroy any original document so reproduced. The Company agrees and
stipulates that any such reproduction which is legible shall be admissible
in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not
such reproduction was made by the Company in the regular course of
business) and that any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence; provided that
nothing herein contained shall preclude the Company from objecting to the
admission of any reproduction on the basis that such reproduction is not
accurate, has been altered, is otherwise incomplete or is otherwise
inadmissible.
12.5 Assignment, Sale of Interest. Neither Parent nor the Company
may sell, assign or transfer this Agreement, or the Other Agreements or
any portion thereof, including, without limitation, Parent's or the
Company's rights, title, interests, remedies, powers and/or duties
hereunder or thereunder. Parent and the Company hereby consent to Rice's
participation, sale, assignment, transfer or other disposition
(collectively, a "Transfer"), at any time or times hereafter at the
Company's expense, of this Agreement, or the Other Agreements to which
Parent or any Subsidiary is a party, or of any portion hereof or thereof,
including, without limitation, Rice's rights, title, interests, remedies,
powers and/or duties hereunder or thereunder; provided, however, that
except in the case of an assignment of all of Purchaser's rights under
this Agreement and the Priority Senior Subordinated Notes, the outstanding
principal amount of the Priority Senior Subordinated Notes of the
assigning Purchaser being assigned, pursuant to each assignment shall in
no event be less than Five Hundred Thousand Dollars ($500,000). In
connection with any Transfer, Parent and the Company agree to cooperate
fully with Rice and any potential Transferee. Such cooperation shall
include, but is not limited to, cooperating with any audits or other due
diligence investigation undertaken by any potential Transferee.
12.6 Successors and Assigns. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.
12.7 Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
12.8 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, and
it shall not be necessary in making proof of this Agreement to produce or
account for more than one such counterpart or reproduction thereof
permitted by Section 12.3.
12.9 Reliance on and Survival Provisions. All covenants,
representations and warranties made by Parent and the Company herein and
in any certificates delivered pursuant hereto, whether or not in
connection with a closing, (a) shall be deemed to be material and to have
been relied upon by Purchaser, notwithstanding any investigation
heretofore or hereafter made by Purchaser or on Purchaser's behalf, and
(b) shall survive the delivery of this Agreement and the Priority Senior
Subordinated Notes until all obligations of Parent and the Company under
this Agreement shall have been satisfied.
12.10 Integration and Severability. This Agreement embodies the
entire agreement and understanding between Purchaser, Parent and the
Company, and supersedes all prior agreements and understandings relating
to the subject matter hereof. In case any one or more of the provisions
contained in this Agreement or in the Priority Senior Subordinated Notes,
or any application thereof, shall be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein, and any other application
thereof, shall not in any way be affected or impaired thereby.
12.11 Law Governing. ALL OBLIGATIONS, RIGHTS AND REMEDIES
HEREUNDER, SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF FLORIDA, WITHOUT GIVING
EFFECT TO THE CHOICE-OF-LAW RULES THEREOF. THE PRIORITY SENIOR
SUBORDINATED NOTES SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE SPECIFIED THEREIN. PURCHASER
RETAINS ALL RIGHTS UNDER THE LAWS OF THE UNITED STATES OF AMERICA,
INCLUDING THOSE RELATING TO THE CHARGING OF INTEREST.
12.12 Waivers; Modification. NO PROVISION OF THIS AGREEMENT MAY
BE WAIVED, AMENDED, CHANGED OR MODIFIED, OR THE DISCHARGE THEREOF
ACKNOWLEDGED, ORALLY, BUT ONLY BY AN AGREEMENT IN WRITING SIGNED BY THE
PARTY AGAINST WHOM THE ENFORCEMENT OF ANY WAIVER, CHANGE, MODIFICATION OR
DISCHARGE IS SOUGHT.
12.13 Waiver of Jury Trial. AFTER REVIEWING THIS SECTION 12.13
WITH ITS COUNSEL, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
PARENT, THE COMPANY AND PURCHASER HEREBY KNOWINGLY, INTELLIGENTLY AND
INTENTIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE PRIORITY SENIOR SUBORDINATED NOTES OR ANY DOCUMENTS ENTERED
INTO IN CONNECTION THEREWITH OR THE TRANSACTIONS CONTEMPLATED THEREBY OR
THE ACTIONS OF PURCHASER IN THE NEGOTIATION, ADMINISTRATION, OR
ENFORCEMENT THEREOF. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
PURCHASER TO PURCHASE THE PRIORITY SENIOR SUBORDINATED NOTES FROM THE
COMPANY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
IN WITNESS WHEREOF, Parent, the Company and Purchaser have caused this
Agreement to be executed and delivered by their respective officers
thereunto duly authorized.
PARENT:
JOTAN, INC.
By:____________________________
Xxxxxx X. Xxxxxxxx,
Chief Financial Officer
Address for Notices for Parent and all Subsidiaries:
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: Xx. Xxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxx & Lardner
The Green Leaf Building
000 Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
X.X. Xxx 000
Xxxxxxxxxxxx, Xxxxxxx 00000-0000
Attn: Xxxxx Xxxxx
Facsimile: (000) 000-0000
COMPANY:
SOUTHLAND CONTAINER PACKAGING
CORP.
By:____________________________
Xxxxxx X. Xxxxxxxx,
Chief Financial Officer
PURCHASER:
RICE PARTNERS II, L.P.
By: Rice Capital Group IV,
L.P., Its general partner
By: RMC Fund Management,
L.P., Its general partner
By: Rice Mezzanine Corporation, its
general partner
By:____________________________
Xxxxxxx X. Xxxxxxxx
Managing Director
STATE OF __________ ]
]
COUNTY OF ________ ]
This instrument was acknowledged before me on this ___ day of
_____________, 1998 by Xxxxxx X. Xxxxxxxx, Chief Financial Officer of
Jotan, Inc.
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
STATE OF _________ ]
]
COUNTY OF ________ ]
This instrument was acknowledged before me on this ___ day of
_____________, 1998 by Xxxxxx X. Xxxxxxxx, Chief Financial Officer of
Southland Container Packaging Corp.
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
STATE OF __________ ]
]
COUNTY OF ________ ]
This instrument was acknowledged before me on this ___ day of
_____________, 1998 by Xxxxxxx X. Xxxxxxxx, Managing Partner of Rice
Mezzanine Corporation, as general partner of RMC Fund Management, L.P., as
general partner of Rice Capital Group IV, L.P. as general partner for Rice
Partners II, L.P.
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
Annex I
to
Note Purchase Agreement
Information Concerning Rice
Rice: Rice Partners II, L.P.
Principal Amount of
Priority Senior Subordinated Notes: $1,250,000.00
Denomination of Warrants:
To be determined in accordance with the Purchase Documents.
Address for notices:
Rice Partners II, L.P.
c/o Rice Capital Group IV, L.P.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
and with a copy to:
Xxxxxx Xxxxx, L.L.P.
0000 Xxxx Xxxxxx, Xxxxx 000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
Payments to be made
by wire transfer to:
Southwest Bank of Texas, N.A.
Houston, Texas
ABA Routing #000000000
Accounting #0000000
For the Account of:
Rice Partners II, L.P.
Money Market Account #0000000
re: Southland Container Packaging Corp.
12.5% Senior Subordinated Note
Schedule 4.7
to
Note Purchase Agreement
Capitalization
Exhibit A
to
Priority Note Purchase Agreement
Form of Priority Senior Subordinated Note
Exhibit A-1
to
Priority Note Purchase Agreement
Priority Senior Subordinated Notes
Form of PIK Note
Exhibit B
to
Note Purchase Agreement
Form of Officer's Compliance Certificate
