Securities and Exchange Commission
Washington, D.C. 20549
Form 8-K
Current Report
Pursuant to Section 13 or 15(d) of the Securities and Exchange Act of 1934
Date of Report (Date of Earliest Event Reported): February 28, 1997
JOTAN, INC.
(Exact Name of Registrant as Specified in its Charter)
Florida 0-24188
(State or Other Jurisdiction (Commission File Number)
of Incorporation
59-3181162
(IRS Employee Identification No.)
118 West Adams Street, Suite 900, Jacksonville, Florida 32202
(Address of Principal Executive Offices) (Zip Code)
904-355-2592
(Registrant's Telephone Number, Including Area Code)
Item 2. Acquisition or Disposition of Assets
On March 4, 1997, JOTAN, Inc. (the "Company"), a Florida corporation,
completed the acquisition of all of the issued and outstanding shares of stock
of Southland Holding Company (Southland) with an effective date of February
28, 1997. The acquisition, which will be accounted for as a purchase, was
made pursuant to the Amended and Restated Share Purchase Agreement, dated as
of February 28, 1997, between the Company, Southland, and the shareholders of
Southland.
The aggregate purchase price was approximately $27.5 million, subject to
adjustment based on the post-closing audit. In connection with the
acquisition, Jotan will pay non-competition fees to the shareholders of
Southland in the aggregate amount of approximately $6.6 million.
In order to finance the Southland acquisition and to fund future expansion,
the Company signed an agreement on February 28, 1997 with Rice Capital II LLP
(Rice) to provide $9 million of senior subordinated debt and acquire $10
million of senior redeemable preferred stock. In connection with this
transaction, F-Southland, LLC, a North Carolina limited liability company, and
FF-Southland Limited Partnership, a North Carolina limited partnership will
purchase an aggregate amount of $2 million of such senior subordinated debt
and $2 million of such senior redeemable preferred stock in lieu of Rice.
In addition, the Company signed an agreement with Banque Paribas on February
28, 1997 to obtain up to $12 million in a senior revolving facility and $27
million in senior term/acquisition credit facilities. As part of the Banque
Paribas financing agreement, the Company terminated its long-term financing
arrangement with CIT and paid off other long-term credit facilities. Amounts
outstanding on these facilities at February 28, 1997 totaled approximately
$19.3 million.
Southland is a leading supplier of corrugated packaging products to the moving
and storage industry, as well as to companies in the air freight and
perishable food markets. Southland has eleven distribution centers located in
California, Washington, Colorado, Massachusetts, New York, New Jersey,
Maryland, North Carolina, Georgia, and Florida. Southland's revenues for the
year ended April 30, 1996 were $62.5 million.
Item 7. Financial Statements, Pro Forma Financial Information and Exhibits.
Financial Statements of Businesses Acquired. It is impracticable for the
Company to provide the financial statements of Southland required by
this Item 7(a) at the time of filing this report on Form 8-K.
Accordingly, in accordance with Item 7(a)(4) of Form 8-K, the Company
will file the required audited financial statements of Southland in an
amendment to this report on Form 8-K as soon as practicable, but not
later than 60 days after March 17, 1997.
Pro Forma Financial Information. It is impracticable for the Company to
provide the pro forma financial information relative to Southland
required by this Item 7(b) at the time of filing of this report on Form
8-K. Accordingly, in accordance with Item 7(b)(2) of Form 8-K, the
Company will file the required pro forma financial information relative
to Southland in an amendment to this report on Form 8-K as soon as is
practicable, but not later than 60 days after March 17, 1997.
Exhibits.
2.1 Credit Agreement among JOTAN, Inc., SHC Acquisition Corp., as borrower
who will merge in Southland Holding Company, Banque Paribas, As Agent and
the lenders named therein, including Exhibits A, B, C, D, E, F, and G,
dated February 28, 1997.
2.2 Preferred Stock Warrant Purchase Agreement, dated February 28, 1997,
by and among JOTAN, Inc., Rice Partners II, L.P., F-Southland, L.L.C,
FF-Southland, L.P. and F-JOTAN, L.L.C. and the Shareholders named
therein.
2.3 Shareholder Agreement among JOTAN, Inc., the Shareholders as set forth
in therein and Rice Partners II, L.P. and F-JOTAN, the Purchaser, dated
February 28, 1997.
5.1 Articles of Amendment to Restated Articles of Incorporation of JOTAN,
Inc., dated February 28, 1997.
7.1 Amended and Restated Share Purchase Agreement, dated as of February 28,
1997, by and among JOTAN, Inc., Southland Holding Company, and the
Shareholders of Southland Holding Company.
<PAGE>
Signatures
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Regisrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date: March 17, 1997 JOTAN, Inc.
By:________________________________
Jerry Callahan
President and Chief
Operating Officer
By:________________________________
David Freedman
Vice President and
Chief Financial Officer
<PAGE>
CREDIT AGREEMENT
among
JOTAN, INC.,
SHC ACQUISITION CORP.
as borrower
who will merge into
SOUTHLAND HOLDING COMPANY,
BANQUE PARIBAS
as Agent,
and
the lenders named herein
28 February 1997
<PAGE>
TABLE OF CONTENTS
ARTICLE 1 - Definitions................................................. 1
Section 1.1 Definitions............................................... 1
Section 1.2 Other Definitional Provisions............................ 20
Section 1.3 Accounting Terms and Determinations...................... 20
Section 1.4 Time of Day.............................................. 21
ARTICLE 2 - Revolving Credit Facility.................................. 21
Section 2.1 Revolving Commitments.................................... 21
Section 2.2 Notes.................................................... 21
Section 2.3 Repayment of Revolving Loans............................. 21
Section 2.4 Use of Proceeds.......................................... 22
Section 2.5 Revolving Commitment Fee................................. 22
Section 2.6 Termination or Reduction of Revolving Commitments........ 22
Section 2.7 Letters of Credit........................................ 22
ARTICLE 3 - Acquisition Loans.......................................... 25
Section 3.1 Acquisition Commitments.................................. 25
Section 3.2 Acquisition Notes........................................ 25
Section 3.3 Repayment of Acquisition Loans........................... 26
Section 3.4 Use of Proceeds of Acquisition Loans..................... 26
Section 3.5 Acquisition Commitment Fee............................... 26
Section 3.6 Termination or Reduction of Acquisition Commitments...... 26
ARTICLE 4 - Term A Loan................................................ 27
Section 4.1 Term A Commitments....................................... 27
Section 4.2 Term A Notes............................................. 27
Section 4.3 Repayment of Term A Loans................................ 27
Section 4.4 Use of Proceeds.......................................... 28
ARTICLE 5 - Term B Loan................................................ 28
Section 5.1 Term B Commitments....................................... 28
Section 5.2 Term B Notes............................................. 28
Section 5.3 Repayment of Term B Loans................................ 28
Section 5.4 Use of Proceeds.......................................... 30
ARTICLE 6 - Interest and Fees.......................................... 30
Section 6.1 Interest Rate............................................ 30
Section 6.2 Determinations of Margins................................ 30
Section 6.3 Payment Dates............................................ 31
Section 6.4 Default Interest......................................... 32
Section 6.5 Conversions and Continuations of Accounts................ 32
Section 6.6 Computations............................................. 32
ARTICLE 7 - Administrative Matters..................................... 32
Section 7.1 Borrowing Procedure...................................... 32
Section 7.2 Minimum Amounts.......................................... 33
Section 7.3 Certain Notices.......................................... 33
Section 7.4 Prepayments.............................................. 34
Section 7.5 Method of Payment........................................ 36
Section 7.6 Pro Rata Treatment....................................... 37
Section 7.7 Sharing of Payments...................................... 37
Section 7.8 Non-Receipt of Funds by the Agent........................ 37
Section 7.9 Withholding Taxes........................................ 38
Section 7.10 Withholding Tax Exemption................................ 38
Section 7.11 Participation Obligations Absolute;
Failure to Fund Participation........................... 39
<PAGE>
ARTICLE 8 - Yield Protection and Illegality............................ 39
Section 8.1 Additional Costs......................................... 39
Section 8.2 Limitation on Libor Accounts............................. 41
Section 8.3 Illegality............................................... 42
Section 8.4 Treatment of Affected Loans.............................. 42
Section 8.5 Compensation............................................. 42
Section 8.6 Capital Adequacy......................................... 43
Section 8.7 Replacement/Payoff of Affected Bank...................... 43
ARTICLE 9 - Conditions Precedent....................................... 44
Section 9.1 Initial Loan and Letter of Credit........................ 44
Section 9.2 Acquisitions Loans....................................... 48
Section 9.3 All Loans and Letters of Credit.......................... 51
ARTICLE 10 - Representations and Warranties............................ 52
Section 10.1 Corporate Existence...................................... 52
Section 10.2 Financial Condition...................................... 52
Section 10.3 Corporate Action; No Breach.............................. 53
Section 10.4 Operation of Business.................................... 54
Section 10.5 Litigation and Judgments................................. 54
Section 10.6 Rights in Properties; Liens.............................. 54
Section 10.7 Enforceability........................................... 54
Section 10.8 Approvals................................................ 54
Section 10.9 Debt..................................................... 54
Section 10.10 Taxes.................................................... 54
Section 10.11 Margin Securities........................................ 55
Section 10.12 ERISA.................................................... 55
Section 10.13 Disclosure............................................... 55
Section 10.14 Subsidiaries; Capitalization............................. 55
Section 10.15 Agreements............................................... 56
Section 10.16 Compliance with Laws..................................... 56
Section 10.17 Investment Company Act................................... 56
Section 10.18 Public Utility Holding Company Act....................... 56
Section 10.19 Environmental Matters.................................... 56
Section 10.20 Transaction Documents.................................... 57
Section 10.21 Broker's Fees............................................ 58
Section 10.22 Employee Matters......................................... 58
Section 10.23 Solvency................................................. 58
ARTICLE 11 - Positive Covenants........................................ 58
Section 11.1 Reporting Requirements................................... 58
Section 11.2 Maintenance of Existence; Conduct
of Business............................................. 61
Section 11.3 Maintenance of Properties................................ 61
Section 11.4 Taxes and Claims......................................... 61
Section 11.5 Insurance................................................ 61
Section 11.6 Keeping Books and Records................................ 61
Section 11.7 Compliance with Laws..................................... 61
Section 11.8 Compliance with Agreements............................... 62
Section 11.9 Further Assurances; Exception to
Perfection and Collateral Matters....................... 62
Section 11.10 ERISA.................................................... 64
Section 11.11 Interest Rate Protection................................. 64
Section 11.12 Inspection; Bank Meeting................................. 65
Section 11.13 Acquisition Agreements................................... 65
Section 11.14 Asset Transfer........................................... 65
<PAGE>
ARTICLE 12 - Negative Covenants........................................ 65
Section 12.1 Debt..................................................... 66
Section 12.2 Limitation on Liens and Restrictions on
Subsidiaries............................................ 67
Section 12.3 Mergers, Etc............................................. 68
Section 12.4 Restricted Junior Payments............................... 69
Section 12.5 Investments.............................................. 70
Section 12.6 Limitation on Issuance of Capital Stock.................. 71
Section 12.7 Transactions With Affiliates............................. 72
Section 12.8 Disposition of Assets.................................... 72
Section 12.9 Sale and Leaseback....................................... 72
Section 12.10 Lines of Business........................................ 72
Section 12.11 Management Fees and Compensation......................... 73
ARTICLE 13 - Financial Covenants....................................... 73
Section 13.1 Total Debt to EBITDA..................................... 73
Section 13.2 Interest Coverage........................................ 73
Section 13.3 Fixed Charge Coverage.................................... 74
Section 13.4 Capital Expenditure Limits............................... 74
Section 13.5 EBITDA................................................... 75
Section 13.6 Net Worth................................................ 76
ARTICLE 14 - Default................................................... 76
Section 14.1 Events of Default........................................ 76
Section 14.2 Remedies................................................. 79
Section 14.3 Cash Collateral.......................................... 80
Section 14.4 Performance by the Agent................................. 80
Section 14.5 Setoff................................................... 80
Section 14.6 Continuance of Default................................... 81
ARTICLE 15 - The Agent................................................. 81
Section 15.1 Appointment, Powers and Immunities....................... 81
Section 15.2 Rights of Agent as a Bank................................ 82
Section 15.3 Defaults................................................. 82
Section 15.4 Indemnification.......................................... 82
Section 15.5 Independent Credit Decisions............................. 83
Section 15.6 Several Commitments...................................... 83
Section 15.7 Successor Agent.......................................... 83
Section 15.8 Agent Fee................................................ 84
Section 15.9 Authorized Actions....................................... 84
ARTICLE 16 - Miscellaneous............................................. 84
Section 16.1 Expenses................................................. 84
Section 16.2 Indemnification.......................................... 85
Section 16.3 Limitation of Liability.................................. 85
Section 16.4 No Duty.................................................. 86
Section 16.5 No Fiduciary Relationship................................ 86
Section 16.6 Equitable Relief......................................... 86
Section 16.7 No Waiver; Cumulative Remedies........................... 86
Section 16.8 Successors and Assigns................................... 86
Section 16.9 Survival................................................. 89
Section 16.10 ENTIRE AGREEMENT......................................... 89
Section 16.11 Amendments............................................... 89
Section 16.12 Maximum Interest Rate.................................... 90
Section 16.13 Notices.................................................. 90
Section 16.14 Governing Law; Venue; Service of Process................. 91
Section 16.15 Counterparts............................................. 91
Section 16.16 Severability............................................. 91
Section 16.17 Headings................................................. 91
Section 16.18 Non-Application of Chapter 15 of
Texas Credit Code....................................... 91
Section 16.19 Construction............................................. 91
Section 16.20 Independence of Covenants................................ 92
Section 16.21 WAIVER OF JURY TRIAL..................................... 92
<PAGE>
INDEX TO EXHIBITS
Exhibit Description of Exhibit
"A" Revolving Note
"B" Acquisition Note
"C" Term A Note
"D" Term B Note
"E" Borrowing Base Report
"F" Subsidiary Guaranty
"G" Holding Guaranty
"H" Holding Security Agreement
"I" Borrower Security Agreement
"J" Subsidiary Security Agreement
"K" Assignment and Acceptance
"L" Compliance Certificate
INDEX TO SCHEDULES
Schedule Description of Schedule
1.1(a) Mortgaged Property
1.1(b) Pro Forma
1.1(c) Previous Debt
10.2 Projections
10.5 Existing Litigation
10.14 Subsidiaries; Capitalization
10.22 Employee Matters
11.9 Pledged Deposit Accounts
12.1 Debt
12.2 Liens
<PAGE>
CREDIT AGREEMENT
THIS CREDIT AGREEMENT (the "Agreement"), dated as of February 28, 1997,
is among JOTAN, INC., a corporation duly organized and validly existing under
the laws of the State of Florida ("Holding"), SHC ACQUISITION CORP., a
corporation duly organized and validly existing under the laws of the State of
Florida("Borrower" but after the Acquisition Merger the term "Borrower" shall
mean SOUTHLAND HOLDING COMPANY, as successor in interest by merger to SHC
Acquisition Corp.), each of the banks or other lending institutions which is
or which may from time to time become a signatory hereto or any successor or
assignee thereof pursuant to Section 16.8 hereof (individually, a "Bank" and,
collectively, the "Banks"), and BANQUE PARIBAS, a bank organized under the
laws of the Republic of France, individually as a Bank and as agent for itself
and the other Banks (in its capacity as agent, together with its successors in
such capacity, the "Agent").
R E C I T A L S:
The Borrower and Holding have requested that the Banks extend credit to
the Borrower in the form of a revolving credit facility, two term loan
facilities, and an acquisition loan facility. The Banks are willing to extend
such credit to the Borrower upon the terms and conditions hereinafter set
forth.
NOW THEREFORE, in consideration of the premises and the mutual covenants
herein contained, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. As used in this Agreement, the following terms
have the following meanings:
"Account" means either a Prime Rate Account or a Libor Account.
"Acquisition Commitment" means, as to any Bank and as of any date of
determination, the obligation of such Bank to make advances of funds from time
to time in an aggregate principal amount at any time outstanding up to but not
exceeding the sum of (a) the amount set forth opposite the name of such Bank
on the signature pages hereto (or if applicable, in its Assignment and
Acceptance) under the heading "Acquisition Commitment" as the same may be
reduced or terminated pursuant to Section 3.6, Section 8.7 or Section 14.2
minus (b) all Acquisition Loans made or held by such Bank to the date of
determination. The aggregate amount of the Acquisition Commitments of all
Banks equals Ten Million Dollars ($10,000,000) on the Closing Date.
"Acquisition Merger" means the merger of Borrower with and into
Southland, with Southland as the surviving Person.
"Acquisition Termination Date" means February 28, 2002.
"Acquisition Loans" means, as to any Bank, the advances made or held by
such Bank pursuant to Section 3.1 and as to all Banks, all the advances made
or held by the Banks pursuant to Section 3.1. The term "Acquisition Loan"
shall mean, as to any Bank, the advance made or held by such Bank pursuant to
Section 3.1 on a day to finance a Permitted Acquisition identified pursuant to
Section 9.2 and as to all Banks, the advances made or held by the Banks
pursuant to Section 3.1 on such day to finance such Permitted Acquisition.
"Acquisition Notes" means the promissory notes provided for by Section
3.2 and all amendments or other modifications thereof.
"Additional Costs" has the meaning specified in Section 8.1.
"Additional Mortgaged Properties" has the meaning specified in
Section 11.9(b).
"Adjusted Libor Rate" means, for any Libor Account for any Interest
Period therefor, the rate per annum (rounded upwards, if necessary, to the
nearest 1/16 of 1%) determined by the Agent to be equal to the Libor Rate for
such Libor Account for such Interest Period divided by 1 minus the Reserve
Requirement for such Libor Account for such Interest Period.
"Adjusted Target EBITDA" has the meaning specified in Subsection
9.2(c)(v)(B).
"Adjustment Date" has the meaning specified in Section 6.2.
"Affiliate" means, as to any Person, any other Person (a) that directly
or indirectly, through one or more intermediaries, controls or is controlled
by, or is under common control with, such Person; (b) that directly or
indirectly beneficially owns or holds five percent (5%) or more of any class
of voting stock of such Person; or (c) five percent (5%) or more of the voting
stock of which is directly or indirectly beneficially owned or held by the
Person in question. The term "control" means the possession, directly or
indirectly, of the power to direct or cause direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract, or otherwise; provided, however, in no event shall the Agent or any
Bank be deemed an Affiliate of Holding or any Subsidiaries.
"Agent" has the meaning set forth in the introductory paragraph of this
Agreement.
"Agreement" has the meaning set forth in the introductory paragraph of
this Agreement, as the same may be amended or otherwise modified.
"Applicable Lending Office" means for each Bank and each Type of
Account, the lending office of such Bank (or of an Affiliate of such Bank)
designated for such Account below its name on the signature pages hereof or in
its Assignment and Acceptance or such other office of such Bank (or of an
Affiliate of such Bank) as such Bank may from time to time specify to the
Borrower and the Agent as the office by which its Loans subject to Accounts of
such Type are to be made and maintained.
"Applicable Rate" has the meaning set forth in Section 6.1 hereof.
"Asset Disposition" means the disposition whether by sale, lease,
transfer, loss, damage, destruction, condemnation or otherwise of any or all
of the assets of Holding or any Subsidiaries other than (a) sales of inventory
in the ordinary course of business and (b) the Asset Transfer.
"Asset Transfer" means the transfer of all assets of Holding (other than
the stock of Borrower and, unless the Agent otherwise directs, the Mortgaged
Property located in Thomasville Georgia but including the stock of Atlantic
Bag and Paper Company) to Borrower.
"Assignment and Acceptance" means an assignment and acceptance entered
into by a Bank and its assignee and accepted by the Agent pursuant to Section
16.8 hereof, in substantially the form of Exhibit "K" hereto.
"Bank" has the meaning set forth in the introductory paragraph of this
Agreement.
"Borrower" has the meaning set forth in the introductory paragraph of
this Agreement.
"Borrower Security Agreement" means the security agreement between the
Borrower and Agent for the benefit of itself and the Banks, in substantially
the form of Exhibit "I", as the same may be amended or otherwise modified.
"Borrowing Base" means, at any time and calculated without duplication
based on the report most recently delivered at such time pursuant to Section
11.1(d), an amount equal to the sum of (a) the aggregate amount of Eligible
Accounts multiplied by eighty-five percent (85%) plus (b) Eligible Inventory
multiplied by sixty percent (60%) minus (c) an amount equal to all amounts
then owed to Thomas J. Gilligan which are secured by a Lien on treasury shares
of Southland.
"Borrowing Base Report" means a report in substantially the form of
Exhibit "E" hereto properly completed and executed by an authorized officer of
Holding.
"Business Day" means (a) any day excluding Saturday, Sunday and any day
which either is a legal holiday under the laws of the States of New York,
Texas and Florida or is a day on which banking institutions located in any
such States are closed, and (b), with respect to all borrowings, payments,
Conversions, Continuations, Interest Periods, and notices in connection with
Loans subject to Libor Accounts, any day which is a Business Day described in
clause (a) above and which is also a day on which dealings in Dollar deposits
are carried out in the London interbank market.
"Calculation Period" has the meaning specified in Section 6.2.
"Capital Expenditures" means, for any period, all expenditures of
Holding and its Subsidiaries 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 Acquisition
Loans.
"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.
"Capitalization Documents" means, collectively: (a) any or all of the
stock certificates representing the Holding Series B Stock and the series A
preferred stock of Holding; (b) the Stock and Warrant Purchase Agreement and
the warrants issued pursuant thereto; (c) each document governing the issuance
of, or setting forth the terms of, Holding Series B Stock, the series A
preferred stock of Holding and such warrants; and (d) any stockholders
agreement among the holders of Holding's capital stock.
"Closing Date" means March 4, 1997.
"Code" means the Internal Revenue Code of 1986, as amended, and the
regulations promulgated and rulings issued thereunder.
"Collateral" means the property in which Liens have been granted
pursuant to the Collateral Documents, whether such Liens are now existing or
hereafter arise.
"Collateral Documents" means the Mortgages, the Holding Security
Agreement, the Borrower Security Agreement, the Subsidiary Security Agreements
and all documentation executed and delivered pursuant to the terms thereof.
"Commitment Percentage" means, as to any Bank, the percentage equivalent
of the amount of the Commitments of such Bank (or the Commitment in question)
divided by the aggregate amount of all the Commitments of all of the Banks (or
the Commitment in question of all the Banks).
"Commitments" means, as to each Bank, such Bank's Revolving Commitment,
Acquisition Commitment, Term A Commitment and Term B Commitment.
"Compliance Certificate" means a certificate in substantially the form
of Exhibit "L" hereto, properly completed and executed by the chief financial
officer of Holding.
"Continue", "Continuation", and "Continued" shall refer to the
continuation pursuant to Section 6.5 or Article 8 of a Libor Account as a
Libor Account from one Interest Period to the next Interest Period.
"Convert", "Conversion", and "Converted" shall refer to a conversion
pursuant to Section 6.5 or Article 8 of one Type of Account into the other
Type of Account.
"Debt" means as to any Person at any time (without duplication): (a) all
obligations of such Person for borrowed money; (b) all obligations of such
Person evidenced by bonds, notes, debentures, or other similar instruments;
(c) all obligations of such Person to pay the deferred purchase price of
property or services, except trade accounts payable of such Person arising in
the ordinary course of business that are not past due by more than ninety (90)
days or that are being contested in good faith by appropriate proceedings
diligently pursued and for which adequate reserves have been established;
(d) all Capital Lease Obligations of such Person; (e) all Debt or other
obligations of others Guaranteed by such Person; (f) all obligations secured
by a Lien existing on property owned by such Person, whether or not the
obligations secured thereby have been assumed by such Person or are
non-recourse to the credit of such Person; (g) all reimbursement obligations
of such Person (whether contingent or otherwise) in respect of letters of
credit, bankers' acceptances, surety or other bonds and similar instruments
(including those outstanding with respect to Letters of Credit); (h) all
liabilities of such Person in respect of unfunded vested benefits under any
Plan; and (i) all obligations of such Person, contingent or otherwise, for the
payment of money under any noncompete, consulting or similar agreement entered
into with the seller of a Target or any other similar arrangements providing
for the deferred payment of the purchase price for a Permitted Acquisition.
The term "Debt" shall not include any amounts owed as deferred compensation to
officers and employees of a Person.
"Default" means an Event of Default or the occurrence of an event or
condition which with notice or lapse of time or both would become an Event of
Default.
"Default Rate" means, in respect of any principal of any Loan, any
Reimbursement Obligation, or any other amount payable by the Borrower under
any Loan Document which is not paid when due (whether at stated maturity, by
acceleration, or otherwise), a rate per annum during the period commencing on
the due date until such amount is paid in full equal to the sum of two percent
(2%) plus the Applicable Rate for Prime Rate Accounts under the Term B Loans
as in effect from time to time (provided, that if such amount in default is
principal of a Loan subject to a Libor Account and the due date is a day other
than the last day of an Interest Period therefor, the "Default Rate" for such
principal shall be, for the period from and including the due date and to but
excluding the last day of the Interest Period therefor, two percent (2%) plus
the interest rate for such Loan for such Interest Period as provided in
Section 6.1, and, thereafter, the rate provided for above in this definition).
"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.
"Eligible Account" means an account of Holding or any Subsidiary created
from the performance of services or the sale of goods by Holding or the
applicable Subsidiary in the ordinary course of business that satisfies the
following conditions:
(i) the account complies in all material respects with all
applicable laws, rules, and regulations, including, without limitation,
usury laws;
(ii) the account is due within sixty (60) days from the original
date of invoice and the account has not been outstanding for more than
sixty (60) days past the date due;
(iii) the account arises from a contract (including contracts
arising out of purchase orders and invoices), the performance of which
has been completed by Holding or the applicable Subsidiary, and no
portion of such performance has been subcontracted by Holding or the
applicable Subsidiary to a third party; provided that this clause (iii)
shall not exclude accounts arising from sales where the product sold is
directly shipped from the manufacturer to the account debtor;
(iv) Holding or the applicable Subsidiary has good and
indefeasible title to the account and the account is not subject to any
Lien except Liens in favor of the Agent;
(v) the account is subject to a first priority, perfected Lien
in favor of the Agent;
(vi) the account debtor or other obligor thereunder is not
insolvent or the subject of any bankruptcy or insolvency proceeding and
has not made an assignment for the benefit of creditors, suspended
normal business operations, dissolved, liquidated, terminated its
existence, ceased to pay its debts as they become due, or suffered a
receiver or trustee to be appointed for any of its assets or affairs;
(vii) the account is not evidenced by chattel paper or an
instrument;
(viii) Holding's or the applicable Subsidiary's performance
of the contract to which the account relates is not assured by a
performance, completion, or other bond;
(ix) the account is not owed by an Affiliate of Holding or the
applicable Subsidiary unless such account arises in a transaction
permitted by Section 12.7, or by a director, officer, agent, stockholder
or employee of Holding or the applicable Subsidiary or by Holding to a
Subsidiary or by a Subsidiary to Holding or by one Subsidiary to
another;
(x) the account is payable in Dollars by the account debtor or
is payable in Canadian dollars by the account debtor; provided that
Canadian dollar denominated accounts (i) must be denominated in Dollars
for purposes of each Borrowing Base Report based on the exchange rate
for the exchange of Canadian dollars to Dollars as set forth in The Wall
Street Journal (or other publication acceptable to Agent) as of the date
of the calculation of the Borrowing Base and (ii) no more than Five
Hundred Thousand Dollars ($500,000) worth of accounts payable in
Canadian dollars may be included as Eligible Accounts at any one time
(the actual amount of such accounts at any time included herein the
"Canadian Accounts");
(xi) the account debtor is domiciled in the United States of
America or, if not so domiciled, the account is either (a) backed by a
satisfactory letter of credit that is issued or confirmed by a bank
located in the United States of America that is acceptable to the Agent
or (b) is a Canadian Account;
(xii) not more than twenty-five percent (25%) of the aggregate
amount of the accounts owed by the account debtor and its Affiliates to
Holding and the Subsidiaries, on an aggregate basis, are more than sixty
(60) days past due;
(xiii) the account debtor is not a Governmental Authority
unless (a) any applicable assignment of claims procedure shall have been
complied with or (b) the account debtor is the United States Postal
Service; provided that the aggregate amount of the accounts which are
owed by the United States Postal Service, which are subject to the
Federal Assignment of Claims Act (31 U.S.C. Section 3727), where the
requirements of such act have not been complied with and which are
included as Eligible Accounts, shall not at any time exceed Five Hundred
Thousand Dollars ($500,000);
(xiv) the account does not arise from the sale of any good that is
on a bill-and-hold, guaranteed sale, sale-or-return, sale on approval,
consignment, or any other repurchase or return basis; provided that this
clause (xiv) shall not exclude accounts arising from sales where Holding
or a Subsidiary purchases products to be sold to a customer under a
binding contract where such customer has agreed to either accept
delivery of such products purchased by Holding or a Subsidiary or pay
for them within ninety (90) days of Holding's or the Subsidiary's
purchase thereof;
(xv) the account does not arise out of a contract with or order
from, an account debtor that, by its terms, prohibits or makes void or
unenforceable the grant of a security interest in and to such account;
and
(xvi) the account is not an Excluded Account. The term "Excluded
Account" means an account that has been identified by the Agent (by
thirty (30) days prior written notice to Holding) as being unacceptable
for inclusion in the Borrowing Base because the Agent has determined
that the account debtor is not creditworthy or that the Agent might not
otherwise be able to receive the full amount of the account within a
reasonable period of time and at a reasonable cost of collection if it
sought to realize on its security interest therein, such determination
to be made in the Agent's judgment, in good faith and based on
information which, in its reasonable judgment, supports such
determination.
The amount of the Eligible Accounts owed by an account debtor to Holding or
the applicable Subsidiary shall be reduced by the amount of all "contra
accounts" and other obligations owed by Holding or the applicable Subsidiary
to such account debtor. The amount of the Eligible Accounts owed by an
account debtor shall be reduced by the amount thereof which is subject to any
setoff, counterclaim, defense, dispute, recoupment or other adjustment. The
portion of any account constituting retainage that has been withheld by the
account debtor or other obligor shall not constitute an Eligible Account. If
the aggregate amount of the accounts due from a single account debtor exceeds
an aggregate amount equal to twenty percent (20%) of the aggregate of all
accounts of Holding and the Subsidiaries at the time of determination, the
amount of the excess shall be subtracted from all Eligible Accounts.
"Eligible Inventory" means, at any time, the sum of (a) all inventory of
raw materials and finished goods then owned by (and in the possession or under
the control of) Holding and the Subsidiaries and held for sale or disposition
in the ordinary course of Holding's and the Subsidiaries' business, which is
not subject to any Lien other than the Agent's, in which the Agent has a
perfected, first priority security interest, valued at the lower of actual
cost or fair market value minus (b) the Rent Reserve (as defined in this
definition below). Eligible Inventory shall not include (a) inventory that
has been shipped or delivered to a customer on consignment, a sale-or-return
basis, or on the basis of any similar understanding, (b) inventory with
respect to which a claim exists disputing Holding's or a Subsidiary's title to
or right to possession of such inventory, (c) inventory that is not in good
condition or does not comply in all material respects with any applicable law,
rule, or regulation or any standard imposed by any Governmental Authority with
respect to its manufacture, use, or sale, (d) inventory that is located
outside of the United States of America or that is held by a third party, (e)
inventory that has been held by Holding and the Subsidiaries for over One
Hundred Eighty (180) days, (f) inventory that is located at a leased location
unless (i) the applicable landlord shall have executed a landlord Lien waiver
or subordination that is satisfactory to the Agent or (ii) a portion of the
lease obligations relating to the lease in question is included in the Rent
Reserve on a basis reasonably acceptable to the Agent, and (g) inventory that
the Agent has determined (by thirty (30) days prior written notice to Holding)
to be unacceptable for inclusion in the Borrowing Base because the Agent has
determined that the inventory is unmarketable or that the Agent might not
otherwise be able to receive sufficient value from the sale of such inventory
if it sought to realize on its security interest therein, such determination
to be made in the Agent's judgment, in good faith and based on information
which, in its reasonable judgment, supports such determination. The term
"Rent Reserve" means an amount equal to the sum of (a) Twelve Thousand Dollars
($12,000) (representing the amount of the prior claim that the landlord of the
502 McKean Street location of Atlantic Bag and Paper Company has in and to the
inventory located thereon) plus (b) an amount equal to the lease payments to
become due within the six (6) months following the date of the calculation of
Eligible Inventory under the terms of the lease of the property located at 125
National Road, Edison, New Jersey.
"Environmental Laws" means any and all federal, state, and local laws,
regulations, and requirements pertaining to health, safety, or the
environment, as such laws, regulations, and requirements may be amended or
supplemented from time to time.
"Environmental Liabilities" means, as to any Person, all liabilities,
obligations, responsibilities, Remedial Actions, losses, damages, punitive
damages, consequential damages, treble damages, costs, and expenses,
(including, without limitation, all fees, disbursements and expenses of
counsel, expert and consulting fees and costs of investigation and feasibility
studies), fines, penalties, sanctions, and interest incurred as a result of
any claim or demand, by any Person, whether based in contract, tort, implied
or express warranty, strict liability, criminal or civil statute, including
any Environmental Law, permit, order or agreement with any Governmental
Authority or other Person, arising from environmental, health or safety
conditions or the Release or threatened Release of a Hazardous Material into
the environment.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and published interpretations
thereunder.
"ERISA Affiliate" means any corporation or trade or business which is a
member of the same controlled group of corporations (within the meaning of
Section 414(b) of the Code) as Holding or is under common control (within the
meaning of Section 414(c) of the Code) with Holding.
"Event of Default" has the meaning specified in Section 14.1.
"Excess Cash Flow" means, for any period, the total of the following,
each calculated without duplication for Holding and the Subsidiaries on a
consolidated basis for such period: (a) EBITDA; less (b) cash income or
franchise taxes paid; less (c) Capital Expenditures not financed with Debt
other than advances under the Revolving Loans; less (d) scheduled amortization
of Debt actually paid; less (e) cash interest expense paid; plus (f) any
extraordinary or nonrecurring cash gains, other cash gains attributable to
asset dispositions and noncash losses or charges which were excluded in
determining Net Income; less (g) any extraordinary cash losses, any
nonrecurring cash losses, or other cash losses attributable to asset
dispositions and other cash charges which were excluded in determining Net
Income; less (h) all optional principal prepayments on the Acquisition Loans,
Term A Loans and Term B Loans; plus (i) decreases in Working Capital; less (j)
increases in Working Capital. The term "Working Capital" means current assets
less current liabilities excluding cash, cash equivalents, the current portion
of long-term Debt, the principal balance of the Revolving Loans and any
amounts due to or due from Affiliates.
"Federal Funds Rate" means, for any day, the rate per annum (rounded
upwards, if necessary, to the nearest 1/16 of 1%) equal to the weighted
average of the rates on overnight federal funds transactions with members of
the Federal Reserve System arranged by federal funds brokers on such day, as
published by the Federal Reserve Bank of New York on the Business Day next
succeeding such day, provided that (a) if the day for which such rate is to be
determined is not a Business Day, the Federal Funds Rate for such day shall be
such rate on such transactions on the next preceding Business Day as so
published on the next succeeding Business Day, and (b) if such rate is not so
published on such next succeeding Business Day, the Federal Funds Rate for any
day shall be the average rate charged to the Agent on such day on such
transactions as determined by the Agent.
"Fiscal Quarters" means the three (3) month periods falling in each
Fiscal Year ending March 31, June 30, September 30, and December 31.
"Fiscal Year" means a twelve (12) month period ending December 31.
"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.
Accounting principles are applied on a "consistent basis" when the accounting
principles applied in a current period are comparable in all material respects
to those accounting principles applied in a preceding period.
"Governmental Authority" means any nation or government, any state or
political subdivision thereof and any entity exercising executive,
legislative, judicial, regulatory, or administrative functions of or
pertaining to government.
"Guarantee" by any Person means any obligation, contingent or otherwise,
of such Person directly or indirectly guaranteeing any Debt or other
obligation of any other Person or indemnifying such other Person for an
obligation and, without limiting the generality of the foregoing, any
obligation, direct or indirect, contingent or otherwise, of such Person (a) to
purchase or pay (or advance or supply funds for the purchase or payment of)
such Debt or other obligation (whether arising by virtue of partnership
arrangements, by agreement to keep-well, to purchase assets, goods, securities
or services, to take-or-pay, or to maintain financial statement conditions or
otherwise) or (b) entered into for the purpose of assuring in any other manner
the obligee of such Debt or other obligation of the payment thereof or to
protect the obligee against loss in respect thereof (in whole or in part),
provided that the term Guarantee shall not include endorsements for collection
or deposit in the ordinary course of business. The term "Guarantee" used as a
verb has a corresponding meaning.
"Guaranties" means the Holding Guaranty and the Subsidiary Guaranties.
"Hazardous Material" means any substance, product, waste, pollutant,
material, chemical, contaminant, constituent, or other material which is or
becomes listed, regulated, or addressed under any Environmental Law.
"Holding" has the meaning set forth in the introductory paragraph of
this Agreement.
"Holding Guaranty" means the guaranty of Holding in favor of the Agent
and the Banks, in substantially the form of Exhibit "G", as the same may be
amended or otherwise modified from time to time.
"Holding Security Agreement" means the security agreement between
Holding and Agent for the benefit of itself and the Banks, in substantially
the form of Exhibit "H", as the same may be amended or otherwise modified.
"Holding Series B Stock" means the Series B Preferred Stock, $0.01 par
value per share of Holding issued pursuant to the Stock and Warrant Purchase
Agreement.
"Interest Period" means with respect to any Libor Accounts, each period
commencing on the date such Account is established or Converted from a Prime
Rate Account or the last day of the next preceding Interest Period with
respect to such Libor Account, and ending on the numerically corresponding day
in the first, second, third or sixth calendar month thereafter, as the
Borrower may select as provided in Section 6.5 or 7.1, except that each such
Interest Period which commences on the last Business Day of a calendar month
(or on any day for which there is no numerically corresponding day in the
appropriate subsequent calendar month) shall end on the last Business Day of
the appropriate subsequent calendar month. Notwithstanding the foregoing:
(a) each Interest Period which would otherwise end on a day which is not a
Business Day shall end on the next succeeding Business Day (or if such
succeeding Business Day falls in the next succeeding calendar month, on the
next preceding Business Day); (b) any Interest Period which would otherwise
extend beyond the Termination Date applicable to a given Loan shall end on
such Termination Date; (c) no more than eight (8) Interest Periods shall be in
effect at the same time; (d) no Interest Period for any Libor Account shall
have a duration of less than one (1) month and, if the Interest Period would
otherwise be a shorter period, the related Libor Account shall not be
available hereunder; and (e) no Interest Period in respect of the Acquisition
Loans, the Term A Loans or Term B Loans may extend beyond a principal
repayment date thereof unless, after giving effect thereto, the aggregate
principal amount of such Loan subject to Libor Accounts having Interest
Periods that end after such principal payment date shall be equal to or less
than the aggregate principal amount of such Loan to be outstanding hereunder
after such principal payment date.
"Letter of Credit Liabilities" means, at any time, the aggregate face
amounts of all outstanding Letters of Credit and all unreimbursed drawings
under Letters of Credit.
"Letters of Credit" has the meaning specified in Section 2.7(a).
"Libor Account" means a portion of a Loan that bears interest at a rate
based upon the Adjusted Libor Rate.
"Libor Rate" means, for any Libor Account for any Interest Period
therefor, the rate per annum (rounded upwards, if necessary, to the nearest
1/16 of 1%) offered to the Agent at approximately 11:00 a.m. London time (or
as soon thereafter as practicable) two Business Days prior to the first day of
such Interest Period by leading banks in the London interbank market of Dollar
deposits in immediately available funds having a term comparable to such
Interest Period and in an amount comparable to the principal amount of the
Libor Account applicable to the Agent to which such Interest Period relates.
If the Agent is not participating in a Libor Account during any Interest
Period therefor (pursuant to Section 8.4 hereof or for any other reason), the
Adjusted Libor Rate for such Account for such Interest Period shall be
determined by reference to the amount of the Accounts which the Agent would
have made had it been participating in such Account.
"Libor Rate Margin" has the meaning specified in Section 6.2.
"Lien" means any lien, mortgage, security interest, tax lien, financing
statement, pledge, charge, hypothecation, assignment, preference, priority, or
other encumbrance of any kind or nature whatsoever (including, without
limitation, any conditional sale or title retention agreement), whether
arising by contract, operation of law, or otherwise.
"Loans" means Revolving Loans, Acquisition Loans, Term A Loans, and Term
B Loans.
"Loan Documents" means this Agreement, the Notes, the Collateral
Documents, the Guaranties, the Senior Subordination Agreement, and all other
promissory notes, security agreements, deeds of trust, assignments,
guaranties, letters of credit, and other instruments, agreements and other
documentation executed and delivered pursuant to or in connection with this
Agreement, as such instruments, agreements and other documentation may be
amended or otherwise modified; excluding, however, the Southland Acquisition
Documents, Subordinated Loan Documents and Capitalization Documents.
"Material Adverse Effect" means (a) a material adverse effect on the
business, condition (financial or otherwise), operations, or properties of
Holding and the Subsidiaries taken as a whole; or (b) a material adverse
effect on the validity, perfection, priority or ability of the Agent to
enforce the Agent's Lien on the Collateral or of the ability of the Agent or
any Bank to enforce a material provision of the Loan Documents. In
determining whether any individual event could reasonably be expected to
result in a Material Adverse Effect, notwithstanding that such event does not
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 could reasonably be expected to result in a Material Adverse Effect.
"Maximum Rate" means, at any time and with respect to any Bank, the
maximum rate of nonusurious interest under applicable law that such Bank may
charge the Borrower. The Maximum Rate shall be calculated in a manner that
takes into account any and all fees, payments, and other charges contracted
for, charged or received in connection with the Loan Documents that constitute
interest under applicable law. Each change in any interest rate provided for
herein based upon the Maximum Rate resulting from a change in the Maximum Rate
shall take effect without notice to the Borrower at the time of such change in
the Maximum Rate. For purposes of determining the Maximum Rate under Texas
law, the applicable rate ceiling shall be the indicated rate ceiling described
in, and computed in accordance with, Article 5069-1.04, Vernon's Texas Civil
Statutes.
"Mortgage" means each of the mortgages, deeds of trust, leasehold
mortgages, leasehold deeds of trust, collateral assignments of leases or other
real estate security documents delivered by Borrower or any Obligated Party to
Agent, with respect to Mortgaged Property or Additional Mortgaged Property,
all in form and substance satisfactory to Agent.
"Mortgage Policies" shall have the meaning specified in Subsection
11.9(b).
"Mortgaged Property" means the real property owned or leased by Holding
or a Subsidiary designated on Schedule 1.1(a).
"Multiemployer Plan" means a multiemployer plan defined as such in
Section 3(37) of ERISA to which contributions have been made by Holding or any
ERISA Affiliate and which is covered by Title IV of ERISA.
"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 it
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.
"Net Proceeds" means cash proceeds (including casualty insurance
proceeds paid with respect to damage to property) received by Holding or any
Subsidiaries from any Asset Disposition (including payments under notes or
other debt securities received in connection with any Asset Disposition and
insurance proceeds and awards of condemnation), net of (a) the costs of such
sale, lease, transfer or other disposition (including professional fees and
expenses and taxes attributable to such sale, lease or transfer) and (b)
amounts applied to repayment of Debt (other than the Obligations and the Debt
governed by the Subordinated Loan Documents) secured by a lien, security
interest, claim or encumbrance on the asset or property disposed.
"Note Purchase Agreement" means that certain Note Purchase Agreement
dated as of February 28, 1997, among Borrower, Holding, Rice Partners, F-
Southland, L.L.C., and FF-Southland, L.P., as the same may be amended or
otherwise modified in accordance with the restrictions set out in the Senior
Subordination Agreement.
"Notes" means the Revolving Notes, the Acquisition Notes, the Term A
Notes and the Term B Notes.
"Obligated Party" means Holding, the Subsidiaries, or any other Person
(exclusive of the Borrower) who is or becomes party to any agreement that
guarantees or secures payment and performance of the Obligations or any part
thereof.
"Obligation" means all obligations, indebtedness, and liabilities of the
Borrower to the Agent and the Banks, or any of them, arising pursuant to any
of the Loan Documents, pursuant to any interest rate swap, interest rate caps,
interest rate collars or other similar agreements entered into with the
Borrower or any Subsidiary enabling it to fix or limit its interest expense or
pursuant to any foreign exchange, currency hedging, commodity hedging or other
agreement entered into with the Borrower or any Subsidiary enabling it to
limit the market risk of holding currency or a commodity in either the cash or
futures markets, whether now existing or hereafter arising, whether direct,
indirect, related, unrelated, fixed, contingent, liquidated, unliquidated,
joint, several, or joint and several, including, without limitation, the
obligation of the Borrower to repay the Loans, the Reimbursement Obligations,
interest on the Loans and Reimbursement Obligations, and all fees, costs, and
expenses (including attorneys' fees) provided for in the Loan Documents or
such agreements enabling Borrower to fix or limit its interest expense or
limit its other market risks.
"Operating Cash Flow" has the meaning specified in Section 13.2.
"Outstanding Revolving Credit" means, at any time of determination, the
sum of (a) the aggregate amount of Revolving Loans then outstanding; plus (b)
the aggregate amount of Letter of Credit Liabilities (or when calculated with
respect to a Bank, including the Agent as a Bank, such Bank's participation or
other interest in such Letter of Credit Liabilities).
"PBGC" means the Pension Benefit Guaranty Corporation or any entity
succeeding to all or any of its functions under ERISA.
"Permitted Acquisitions" shall mean acquisitions of all the equity
Securities of a Person or of all or substantially all of (a) such Person's
assets or (b) the assets of a division or branch of such Person, in each case,
in a transaction that satisfies all the applicable criteria set out in Section
9.2 which have not otherwise been waived by all the Banks.
"Person" means any individual, corporation, business trust, association,
company, partnership, joint venture, Governmental Authority, or other entity.
"Plan" means any employee benefit plan established or maintained by
Holding or any ERISA Affiliate and which is covered by Title IV of ERISA.
"Previous Debt" means all the obligations, indebtedness and liability of
Holding, its Subsidiaries, Southland and Southland's Subsidiaries described on
Schedule 1.1(c).
"Prime Margin" has the meaning specified in Section 6.2.
"Prime Rate" means the variable rate of interest publicly announced from
time to time by Morgan Guaranty or any successor in interest to such bank (at
its head office) (or such other bank as may be designated by the Agent as
provided below) as its prime rate of interest, which rate of interest may or
may not be the lowest or best rate charged by such bank; provided, however,
that, in lieu of Morgan Guaranty or any successor bank to Morgan Guaranty for
purposes of establishing the Prime Rate, the Agent may, at any time and from
time to time upon five (5) Business Days' prior written notice to Borrower and
the Banks, designate any other bank as may be reasonably acceptable to
Borrower and the Banks, as the reference bank for purposes of establishing the
Prime Rate. Each change in the Prime Rate shall become effective without
prior notice to Borrower automatically as of the opening of business on the
date of such change in the Prime Rate.
"Prime Rate Account" means a portion of a Loan that bears interest at a
rate based upon the Prime Rate.
"Principal Office" means the principal office of the Agent, located in
Houston, Texas.
"Prior Target" means all Targets acquired or whose assets have been
acquired in a Permitted Acquisition.
"Pro Forma" means the unaudited consolidated balance sheet of Holding
and the Subsidiaries as of February 28, 1997, after giving effect to the
Related Transactions which is attached hereto as Schedule 1.1(b).
"Prohibited Transaction" means any transaction set forth in Section 406
or 407 of ERISA or Section 4975(c)(1) of the Code for which there does not
exist a statutory or administrative exemption.
"Projections" means Holding's forecasted consolidated and consolidating:
(a) balance sheets; (b) profit and loss statements; (c) cash flow statements;
and (d) capitalization statements, all prepared on a Subsidiary by Subsidiary
basis and otherwise consistent with Holding's, Southland's and their
respective subsidiaries historical financial statements, together with
appropriate supporting details and a statement of underlying assumptions.
"Purchase Agreements" has the meaning specified in Subsection 9.2(a).
"Purchase Price" means, as of any date of determination and with respect
to a proposed acquisition, the purchase price to be paid for the Target or its
assets, including all cash consideration paid or committed to be paid (whether
classified as purchase price, noncompete payments or otherwise), all fees,
expenses and other costs, directly attributable to acquisition of the Target
or its assets, and the Dollar value of all other assets to be transferred by
the purchaser in connection with such acquisition to the seller all valued in
accordance with the applicable Purchase Agreements.
"Quarterly Payment Date" means the last day of March, June, September
and December of each year, the first of which shall be March 31, 1997.
"Regulation D" means Regulation D of the Board of Governors of the
Federal Reserve System as the same may be amended or supplemented from time to
time.
"Regulatory Change" means, with respect to any Bank, any change after
the date of this Agreement in United States federal, state, or foreign laws or
regulations (including Regulation D) or the adoption or making after such date
of any interpretations, directives, or requests applying to a class of banks
including such Bank of or under any United States federal or state, or any
foreign, laws or regulations (whether or not having the force of law) by any
court or governmental or monetary authority charged with the interpretation or
administration thereof.
"Reimbursement Obligation" means the obligation of the Borrower to
reimburse the Agent for any demand for payment or drawing under a Letter of
Credit in accordance with Subsection 2.7(e).
"Related Transactions" means the Southland Acquisition, the Acquisition
Merger, the dividend paid to the shareholders of Southland in connection with
the Southland Acquisition, the execution and delivery of the Transaction
Documents, the funding of the Loans on the Closing Date, the funding of the
Debt evidenced by the Subordinated Notes, the issuance of the Holding Series B
Stock and the warrants pursuant to the Stock and Warrant Purchase Agreement,
the repayment of the Previous Debt and the payment of all fees, costs and
expenses associated with the foregoing and, with respect to each advance under
the Acquisition Commitments, the Permitted Acquisition funded with the
proceeds thereof.
"Release" means, as to any Person, any release, spill, emission,
leaking, pumping, injection, deposit, disposal, disbursement, leaching, or
migration of Hazardous Materials into the indoor or outdoor environment or
into or out of property owned by such Person, including, without limitation,
the movement of Hazardous Materials through or in the air, soil, surface
water, ground water, or property in violation of Environmental Laws.
"Remedial Action" means all actions required to (a) cleanup, remove,
treat, or otherwise address Hazardous Materials in the indoor or outdoor
environment, (b) prevent the Release or threat of Release or minimize the
further Release of Hazardous Materials so that they do not migrate or endanger
or threaten to endanger public health or welfare or the indoor or outdoor
environment, or (c) perform pre-remedial studies and investigations and
post-remedial monitoring and care.
"Required Banks" means Banks having (a) fifty-one percent (51%) or more
of the sum of the Revolving Commitments, the Acquisition Commitments and the
outstanding principal amount of the Term A Loans and the Term B Loans or (b)
if the Acquisition Commitments have terminated or have otherwise been
fulfilled and the Revolving Commitments are still in effect, fifty-one percent
(51%) or more of the sum of the Revolving Commitments, the Term A Loans, the
Term B Loans and the Acquisition Loans or (c) if all Commitments have
terminated or have otherwise been fulfilled, fifty-one percent (51%) or more
of the outstanding principal amount of the Loans and participations in the
Letters of Credit.
"Reportable Event" means any of the events set forth in Section 4043 of
ERISA for which the 30-day notice requirement has not been waived by the PBGC.
"Reserve Requirement" means, for any Libor Account for any Interest
Period therefor, the average maximum rate at which reserves (including any
marginal, supplemental or emergency reserves) are required to be maintained
during such Interest Period under Regulation D by member banks of the Federal
Reserve System in New York City with deposits exceeding one billion Dollars
against "Eurocurrency Liabilities" as such term is used in Regulation D.
Without limiting the effect of the foregoing, the Reserve Requirement shall
reflect any other reserves required to be maintained by such member banks by
reason of any Regulatory Change against any category of liabilities which
includes deposits by reference to which the Adjusted Libor Rate is to be
determined or any category of extensions of credit or other assets which
include Libor Accounts.
"Revolving Commitment" means, as to each Bank, the obligation of such
Bank to make advances of funds and purchase participation interests in (or
with respect to the Agent as a Bank, hold other interests in) Letters of
Credit in an aggregate principal amount at any one time outstanding up to but
not exceeding the amount set forth opposite the name of such Bank on the
signature pages hereto (or if applicable, its Assignment and Acceptance) under
the heading "Revolving Commitment", as the same may be reduced or terminated
pursuant to Section 2.6, Section 7.4, Section 8.7 or Section 14.2. The
aggregate amount of the Revolving Commitments of all Banks equals Twelve
Million Dollars ($12,000,000).
"Revolving Loans" means, as to any Bank, the advances made by such Bank
pursuant to Section 2.1.
"Revolving Termination Date" means February 28, 2002.
"Revolving Notes" means the promissory notes provided for by Section 2.2
and all amendments or other modifications thereof.
"Rice Partners" means Rice Partners II, L.P., a Delaware limited
partnership.
"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.
"Senior Subordination Agreement" means that certain Senior Subordination
Agreement dated as of February 28, 1997 among Holding, the Subsidiaries, Agent
and the initial holders of the Subordinated Notes, as the same may be amended
or otherwise modified.
"Southland" means Southland Holding Company, a Texas corporation.
"Southland Acquisition" means the purchase of all the outstanding shares
of capital stock of Southland and certain assets of Southland Container, Inc.
pursuant to the Southland Purchase Agreement.
"Southland Acquisition Documents" means the Southland Purchase
Agreement, all documentation executed pursuant to the terms thereof and all
documentation executed and delivered to consummate or in connection with the
Acquisition Merger, as the same may be amended or otherwise modified;
excluding, however, the Loan Documents, Capitalization Documents and
Subordinated Loan Documents.
"Southland Purchase Agreement" means the Share Purchase Agreement dated
December 19, 1996 among Holding, Southland, and the shareholders of Southland,
as the same has been assigned to Borrower and as the same may be amended or
otherwise modified.
"Stock and Warrant Purchase Agreement" means that certain Preferred
Stock and Warrant Purchase Agreement dated as of February 28, 1997, among
Holding, Rice Partners, F-Southland, L.L.C., FF-Southland, L.P. and each of
the shareholders of Holding named therein, as the same may be amended or
otherwise modified.
"Subordinated Loan Documents" means the Note Purchase Agreement, the
Subordinated Notes, the guaranties issued pursuant to the Note Purchase
Agreement and all other promissory notes, guaranties and other documentation
executed and delivered pursuant to or in connection with the Note Purchase
Agreement; excluding, however, the Southland Acquisition Documents, the Loan
Documents and the Capitalization Documents.
"Subordinated Notes" means those certain 12.5% Senior Subordinated Notes
in the aggregate original principal amount of $9,000,000 issued pursuant to
the Note Purchase Agreement.
"Subsidiary" means any corporation (or other entity) of which at least a
majority of the outstanding shares of stock (or other ownership interests)
having by the terms thereof ordinary voting power to elect a majority of the
board of directors (or similar governing body) of such corporation (or other
entity) (irrespective of whether or not at the time stock (or other ownership
interests) of any other class or classes of such corporation (or other entity)
shall have or might have voting power by reason of the happening of any
contingency) is at the time directly or indirectly owned or controlled by
Holding or one or more of the Subsidiaries or by Holding and one or more of
the Subsidiaries.
"Subsidiary Guaranty" means the guaranty of a Subsidiary in favor of the
Agent and the Banks, in substantially the form of Exhibit "F", as the same may
be amended or otherwise modified from time to time.
"Subsidiary Security Agreement" means the security agreement between a
Subsidiary and the Agent for the benefit of itself and the Banks, in
substantially the form of Exhibit "J" hereto, as the same may be amended or
otherwise modified.
"Target" has the meaning specified in Section 9.2.
"Term A Commitment" means, as to any Bank, the obligation of such Bank
to make an advance of funds on the Closing Date in the principal amount set
forth opposite the name of such Bank on the signature pages hereto under the
heading "Term A Commitment." The aggregate amount of the Term A Commitments
of all Banks equals Nine Million Dollars ($9,000,000.00) on the Closing Date.
"Term A Loans" means, as to any Bank, the Loans made or held by such
Bank pursuant to Section 4.1 hereof, and as to all Banks, all the Loans made
or held by the Banks pursuant to Section 4.1.
"Term A Notes" means the promissory notes provided for by Section 4.2
and all amendments or other modifications thereof.
"Term A Termination Date" means February 28, 2002.
"Term B Commitment" means, as to any Bank, the obligation of such Bank
to make an advance of funds on the Closing Date in the principal amount set
forth opposite the name of such Bank on the signature pages hereto under the
heading "Term B Commitment." The aggregate amount of the Term B Commitments
of all Banks equals Eight Million Dollars ($8,000,000.00) on the Closing Date.
"Term B Loans" means, as to any Bank, the Loans made or held by such
Bank pursuant to Section 5.1, and as to all Banks, all the Loans made or held
by the Banks pursuant to Section 5.1.
"Term B Notes" means the promissory notes provided for by Section 5.2
and all amendments or other modifications thereof.
"Term B Termination Date" means February 29, 2004.
"Termination Date" means the Revolving Termination Date, the Acquisition
Termination Date, the Term A Termination Date or the Term B Termination Date.
"Total Debt" means, at the time of determination, the sum of (a) all the
Debt of Borrower and the Subsidiaries determined on a consolidated basis other
than the Letter of Credit Liabilities and Debt outstanding under the Revolving
Loans plus (b) the arithmetic average of the sum of (i) the principal balance
of the Revolving Loans outstanding as of the date of determination plus (ii)
the principal balance of the Revolving Loans on the last day of each of the
eleven (11) calendar months immediately preceding the date of determination,
plus (c) the arithmetic average of the sum of (i) the Letter of Credit
Liabilities outstanding as of the date of determination plus (ii) the Letter
of Credit Liabilities outstanding on the last day of each of the eleven (11)
calendar months immediately preceding the date of determination.
"Total Debt to EBITDA Ratio" means the ratio of Total Debt to EBITDA
calculated in accordance with Section 13.1.
"Transaction Documents" means the Southland Acquisition Documents, the
Loan Documents, the Subordinated Loan Documents, the Capitalization Documents
and the Purchase Agreements and all documentation executed and delivered in
connection with the Asset Transfer.
"Type" means either type of Account (i.e., either a Prime Rate Account
or Libor Account).
"UCC" means the Uniform Commercial Code as in effect in the State of
Texas.
Section 1.2 Other Definitional Provisions. All definitions contained in
this Agreement are equally applicable to the singular and plural forms of the
terms defined. The words "hereof", "herein", and "hereunder" and words of
similar import referring to this Agreement refer to this Agreement as a whole
and not to any particular provision of this Agreement. Unless otherwise
specified, all Article and Section references pertain to this Agreement.
Terms used herein that are defined in the UCC, unless otherwise defined
herein, shall have the meanings specified in the UCC.
Section 1.3 Accounting Terms and Determinations. Except as otherwise
expressly provided herein, all accounting terms used herein shall be
interpreted, and all financial statements and certificates and reports as to
financial matters required to be delivered to the Agent and the Banks
hereunder shall be prepared, in accordance with GAAP, on a basis consistent
with those used in the preparation of the financial statements referred to in
Section 10.2. All calculations made for the purposes of determining
compliance with the provisions of this Agreement shall be made by application
of GAAP, on a basis consistent with those used in the preparation of the
financial statements referred to in Section 10.2. To enable the ready and
consistent determination of compliance by Holding and with its obligations
under this Agreement, Holding will not change the manner in which either the
last day of its Fiscal Year or the last days of the first three Fiscal
Quarters of its Fiscal Years is calculated. In the event any changes in
accounting principles required by GAAP or recommended by Holding's certified
public accountants and implemented by Holding occur and such changes result in
a change in the method of the calculation of financial covenants, standards or
terms under this Agreement, then Holding, the Agent and the Banks agree to
enter into negotiations in order to amend such provisions of this Agreement so
as to equitably reflect such changes with the desired result that the criteria
for evaluating such covenants, standards or terms shall be the same after such
changes as if such changes had not been made. Until such time as such an
amendment shall have been executed and delivered by the Agent, Holding and the
Banks, all financial covenants, standards and terms in this Agreement shall
continue to be calculated or construed as if such changes had not occurred.
Notwithstanding any other term contained in this Agreement, should the
application of purchase or other accounting principles permit Holding, in
accordance with GAAP, to characterize certain expenditures incurred in
connection with the Southland Acquisition as capital items rather than
expense, then such expenditures shall be treated as expense in the period such
expenditures were incurred or paid for all purposes under this Agreement
unless such expenditure was identified and capitalized in the Pro Forma or
unless the Required Banks otherwise consent.
Section 1.4 Time of Day. Unless otherwise indicated, all references in
this Agreement to times of day shall be references to Houston, Texas time.
ARTICLE 2
Revolving Credit Facility
Section 2.1 Revolving Commitments. Subject to the terms and conditions
this Agreement, each Bank severally agrees to make advances to the Borrower
from time to time from and including the Closing Date to but excluding the
Revolving Termination Date in an aggregate principal amount at any time
outstanding up to but not exceeding the amount of such Bank's Revolving
Commitment as then in effect; provided, however, (a) the Outstanding Revolving
Credit applicable to a Bank shall not at any time exceed such Bank's Revolving
Commitment and (b) the Outstanding Revolving Credit shall not at any time
exceed the lesser of (i) the aggregate Revolving Commitments or (ii) the
Borrowing Base. Subject to the foregoing limitations, and the other terms and
provisions of this Agreement, the Borrower may borrow, prepay, and reborrow
hereunder the amount of the Revolving Commitments and may establish Prime Rate
Accounts and Libor Accounts thereunder and, until the Termination Date, the
Borrower may Continue Libor Accounts established under the Revolving Loans or
Convert Accounts established under the Revolving Loans of one Type into
Accounts of the other Type. Accounts of each Type under the Revolving Loan
made by each Bank shall be established and maintained at such Bank's
Applicable Lending Office for Revolving Loans of such Type.
Section 2.2 Notes. The Revolving Loans made by a Bank shall be
evidenced by a single promissory note of the Borrower in substantially the
form of Exhibit "A" hereto, payable to the order of such Bank in a principal
amount equal to its Revolving Commitment as originally in effect and otherwise
duly completed.
Section 2.3 Repayment of Revolving Loans. The Borrower shall pay to the
Agent, for the account of the Banks, the outstanding principal amount of all
of the Revolving Loans on the Revolving Termination Date.
Section 2.4 Use of Proceeds. The proceeds of the Revolving Loans shall
be used by the Borrower for general corporate purposes arising in the ordinary
course of business, including, the financing of the Borrower's working capital
requirements, capital expenditures and Reimbursement Obligations and for the
purpose of making loans to the Subsidiaries in accordance with Section 12.1.
Section 2.5 Revolving Commitment Fee. The Borrower agrees to pay to the
Agent for the account of each Bank a commitment fee on the daily average
unused amount of such Bank's Revolving Commitment for the period from and
including the Closing Date to and including the Revolving Termination Date, at
a rate equal to one half of one percent (.50%). Accrued commitment fees under
this Section 2.5 shall be payable in arrears on each Quarterly Payment Date
and on the Revolving Termination Date.
Section 2.6 Termination or Reduction of Revolving Commitments. The
Borrower shall have the right to terminate fully or to reduce in part the
unused portion of the Revolving Commitments at any time and from time to time,
provided that: (a) the Borrower shall give the Agent at least one (1) Business
Day notice of each such termination or reduction as provided in Section 7.3
hereof; and (b) each partial reduction shall be in an aggregate amount at
least equal to One Million Dollars ($1,000,000) or a greater multiple of Five
Hundred Thousand Dollars ($500,000). The Revolving Commitments may not be
reinstated after they have been terminated or reduced.
Section 2.7 Letters of Credit.
(a) Commitment to Issue. The Borrower may utilize the Revolving
Commitments by requesting that the Agent issue, and the Agent, subject
to the terms and conditions of this Agreement, shall issue, letters of
credit for Borrower's or one of its Subsidiaries' account (such letters
of credit being hereinafter referred to as the "Letters of Credit");
provided, however, (i) the aggregate amount of outstanding Letter of
Credit Liabilities shall not at any time exceed Two Million Dollars
($2,000,000); (ii) the Outstanding Revolving Credit shall not at any
time exceed the lesser of (A) the aggregate Revolving Commitments or (B)
the Borrowing Base; and (iii) the Outstanding Revolving Credit
applicable to a Bank shall not at any time exceed such Bank's Revolving
Commitment. Upon the date of issue of a Letter of Credit, the Agent
shall be deemed, without further action by any party hereto, to have
sold to each other Bank, and each other Bank shall be deemed, without
further action by any party hereto, to have purchased from the Agent a
participation to the extent of such Bank's Commitment Percentage
(calculated with respect to the Revolving Commitments only) in such
Letter of Credit and the related Letter of Credit Liabilities.
(b) Letter of Credit Request Procedure. Except for Letters of
Credit issued on the Closing Date, the Borrower shall give the Agent at
least three (3) Business Days prior notice (effective upon receipt)
specifying the date of each Letter of Credit and the nature of the
transactions to be supported thereby. Upon receipt of such notice the
Agent shall promptly notify each other Bank of the contents thereof and
of such Bank's Commitment Percentage (calculated based on the Revolving
Commitments only) of the amount of the proposed Letter of Credit. Each
Letter of Credit shall have an expiration date that does not extend
beyond a date which is thirty (30) days prior to the Revolving
Termination Date, shall be payable in Dollars, must support a
transaction entered into in the ordinary course of the Borrower's
business, must be satisfactory in form and substance to the Agent, and
shall be issued pursuant to such documentation as the Agent may require,
including, without limitation, the Agent's standard form letter of
credit request and reimbursement agreement; provided, that, in the event
of any conflict between the terms of such agreement and the other Loan
Documents, the terms of the other Loan Documents shall control.
(c) Letter of Credit Fees. The Borrower will pay to the Agent
for the account of each Bank a letter of credit fee on such Bank's
Commitment Percentage of the amount available for drawings under each
Letter of Credit, such letter of credit fee (i) to be paid in advance on
the date of the issuance of the Letter of Credit and on each Quarterly
Payment Date thereafter until the date of expiration or termination
thereof (each such date herein a "Payment Date") and (ii) to be
calculated for the period from and including one Payment Date to and
excluding the next at a rate per annum equal to the LIBOR Rate Margin
applicable to the Revolving Loans. After receiving any payment of any
letter of credit fees under this clause (c), the Agent will promptly pay
to each Bank the letter of credit fees then due such Bank. With respect
to each Letter of Credit, the Borrower will also pay to the Agent for
its account only and on each Payment Date applicable to a Letter of
Credit, a fronting fee per annum equal to one quarter of one percent
(.25%) of the maximum amount available to be drawn under the Letter of
Credit. The Borrower will also pay to the Agent, for its account only,
all customary fees for amendments to and processing of the Letters of
Credit.
(d) Funding of Drawings. Upon receipt from the beneficiary of
any Letter of Credit or any demand for payment or other drawing under
such Letter of Credit, the Agent shall promptly notify the Borrower and
each Bank as to the amount to be paid as a result of such demand or
drawing and the respective payment date. Not later than 11:00 a.m. on
the applicable payment date, each Bank will make available to the Agent,
at the Principal Office, in immediately available funds, an amount equal
to such Bank's Commitment Percentage of the amount to be paid as a
result of such demand or drawing even if the conditions to a Loan under
Article 9 hereof have not been satisfied.
(e) Reimbursements. The Borrower shall be irrevocably and
unconditionally obligated to immediately reimburse the Agent for any
amounts paid by the Agent upon any demand for payment or drawing under
any Letter of Credit, without presentment, demand, protest, or other
formalities of any kind. All payments on the Reimbursement Obligations
shall be made to the Agent at the Principal Office for the account of
the Agent in Dollars and in immediately available funds, without setoff,
deduction or counterclaim not later than 3:00 p.m. on the date of the
corresponding payment under the Letter of Credit by the Agent; provided,
that Agent has provided notice to Borrower prior to 12:00 noon on such
day that such payment is due. In the event such notice is received
after 12:00 noon on a Business Day, such payment shall be due not later
than 3:00 p.m. on the next succeeding Business Day. Subject to the
other terms and conditions of this Agreement, such reimbursement may be
made by Borrower requesting a Revolving Loan in accordance with Section
7.1 hereof, the proceeds of which shall be credited against the
Borrower's Reimbursement Obligations. The Agent will pay to each Bank
such Bank's Commitment Percentage of all amounts received from the
Borrower for application in payment, in whole or in part, to the
Reimbursement Obligation in respect of any Letter of Credit, but only to
the extent such Bank has made payment to the Agent in respect of such
Letter of Credit pursuant to clause (d) of this Section 2.7.
(f) Reimbursement Obligations Absolute. The Reimbursement
Obligations of the Borrower under this Agreement shall be absolute,
unconditional, and irrevocable, and shall be performed strictly in
accordance with the terms of the Loan Documents under all circumstances
whatsoever and the Borrower hereby waives any defense to the payment of
the Reimbursement Obligations based on any circumstance whatsoever,
including without limitation, in either case, the following
circumstances: (i) any lack of validity or enforceability of any Letter
of Credit or any other Loan Document; (ii) any amendment or waiver of
or any consent to departure from any Loan Document; (iii) the existence
of any claim, set-off, counterclaim, defense or other rights which the
Borrower, any Obligated Party, or any other Person may have at any time
against any beneficiary of any Letter of Credit, the Agent, any Bank, or
any other Person, whether in connection with any Loan Document or any
unrelated transaction; (iv) any statement, draft, or other documentation
presented under any Letter of Credit proving to be forged, fraudulent,
invalid, or insufficient in any respect or any statement therein being
untrue or inaccurate in any respect whatsoever; (v) payment by the Agent
under any Letter of Credit against presentation of a draft or other
document that does not comply with the terms of such Letter of Credit;
or (vi) any other circumstance whatsoever, whether or not similar to any
of the foregoing; provided that Reimbursement Obligations with respect
to a Letter of Credit may be subject to avoidance by the Borrower if the
Borrower proves in a final nonappealable judgment that it was damaged
and that such damage arose directly from the Agent's willful misconduct
or gross negligence in determining whether the documentation presented
under the Letter of Credit in question complied with the terms thereof.
(g) Issuer Responsibility. The Borrower assumes all risks of
the acts or omissions of any beneficiary of any Letter of Credit with
respect to its use of such Letter of Credit. Neither the Agent, any
Bank nor any of their respective officers or directors shall have any
responsibility or liability to the Borrower or any other Person for:
(a) the failure of any draft to bear any reference or adequate reference
to any Letter of Credit, or the failure of any documents to accompany
any draft at negotiation, or the failure of any Person to surrender or
to take up any Letter of Credit or to send documents apart from drafts
as required by the terms of any Letter of Credit, or the failure of any
Person to note the amount of any instrument on any Letter of Credit,
each of which requirements, if contained in any Letter of Credit itself,
it is agreed may be waived by the Agent; (b) errors, omissions,
interruptions, or delays in transmission or delivery of any messages;
(c) the validity, sufficiency, or genuineness of any draft or other
document, or any endorsement(s) thereon, even if any such draft,
document or endorsement should in fact prove to be in any and all
respects invalid, insufficient, fraudulent, or forged or any statement
therein is untrue or inaccurate in any respect; (d) the payment by the
Agent to the beneficiary of any Letter of Credit against presentation of
any draft or other document that does not comply with the terms of the
Letter of Credit; or (e) any other circumstance whatsoever in making or
failing to make any payment under a Letter of Credit. The Borrower
shall have a claim against the Agent, and the Agent shall be liable to
the Borrower, to the extent of any direct, but not indirect, consequen-
tial or punitive, damages suffered by the Borrower which the Borrower
proves in a final nonappealable judgment were caused by (i) the Agent's
willful misconduct or gross negligence in determining whether documents
presented under any Letter of Credit complied with the terms thereof or
(ii) the Agent's willful failure to pay under any Letter of Credit after
presentation to it of documentation strictly complying with the terms
and conditions of such Letter of Credit. The Agent may accept documents
that appear on their face to be in order, without responsibility for
further investigation, regardless of any notice or information to the
contrary.
ARTICLE 3
Acquisition Loans
Section 3.1 Acquisition Commitments. Subject to the terms and
conditions of this Agreement, each Bank severally agrees to make one or more
advances to the Borrower from time to time from and including the Closing Date
to but excluding February 29, 2000 in an aggregate principal amount at any
time outstanding up to but not exceeding the amount of such Bank's Acquisition
Commitment as then in effect. Subject to the foregoing limitations, and the
other terms and provisions of this Agreement, until February 29, 2000, the
Borrower may borrow the amount of the Acquisition Commitments and may
establish Prime Rate Accounts or Libor Accounts thereunder and, until the
Acquisition Termination Date, the Borrower may Continue Libor Accounts
established under the Acquisition Loans or Convert Accounts established under
the Acquisition Loans of one Type into Accounts of another Type. Accounts of
each Type established under the Acquisition Loans made by each Bank shall be
made and maintained at such Bank's Applicable Lending Office for Accounts of
such Type. Once an Acquisition Loan has been repaid it may not be reborrowed.
Section 3.2 Acquisition Notes. The Acquisition Loans made by a Bank
shall be evidenced by a single promissory note of the Borrower in
substantially the form of Exhibit "B" hereto, payable to the order of such
Bank in a principal amount equal to its Acquisition Commitment as originally
in effect and otherwise duly completed.
Section 3.3 Repayment of Acquisition Loans. The Borrower shall pay to
the Agent for the account of the Banks the outstanding principal amount of the
Acquisition Loans in installments as follows:
(a) On each of the four (4) Quarterly Payment Dates following
the second anniversary of the Closing Date, an amount equal to the
quotient obtained by dividing by four (4), the product of (i) the
aggregate principal amount of the Acquisition Loans outstanding as of
the second anniversary of the Closing Date multiplied by (ii) fifteen
percent (15%);
(b) On each of the four (4) Quarterly Payment Dates following
the third anniversary of the Closing Date, an amount equal to the
quotient obtained by dividing by four (4),the product of (i) the
aggregate principal amount of the Acquisition Loans outstanding as of
the third anniversary of the Closing Date multiplied by (ii) twenty-five
percent (25%);
(c) On each of the three (3) Quarterly Payment Dates following
the fourth anniversary of the Closing Date, an amount equal to the
quotient obtained by dividing the aggregate principal amount of the
Acquisition Loans outstanding as of the fourth anniversary of the
Closing Date by four (4); and
(d) On the Acquisition Termination Date, an amount equal to the
remaining aggregate unpaid principal amount of the Acquisition Loans.
Section 3.4 Use of Proceeds of Acquisition Loans. The proceeds of
Acquisition Loans shall be used by the Borrower to finance the Purchase Price
of Permitted Acquisitions.
Section 3.5 Acquisition Commitment Fee. The Borrower agrees to pay to
the Agent for the account of each Bank a commitment fee on the daily average
unused amount of such Bank's Acquisition Commitment for the period from and
including the Closing Date to and including February 29, 2000, at the rate of
one-half percent (0.5%) per annum. Accrued commitment fees payable under this
Section 3.5 shall be payable in arrears on each Quarterly Payment Date and on
February 29, 2000.
Section 3.6 Termination or Reduction of Acquisition Commitments. The
Borrower shall have the right to terminate fully or to reduce in part the
unused portion of the Acquisition Commitments at any time and from time to
time, provided that: (a) the Borrower shall give the Agent at least one (1)
Business Day notice of each such termination or reduction as provided in
Section 7.3 hereof; and (b) each partial reduction shall be in an aggregate
amount at least equal to Five Hundred Thousand Dollars ($500,000) or a greater
multiple of One Hundred Thousand Dollars ($100,000). The Acquisition
Commitments may not be reinstated after they have been terminated or reduced.
ARTICLE 4
Term A Loan
Section 4.1 Term A Commitments. Subject to the terms and conditions of
this Agreement, each Bank severally agrees to make an advance of funds to the
Borrower in the amount of its Term A Commitment on the Closing Date. The
Borrower may establish Prime Rate Accounts or Libor Accounts thereunder and,
until the Term A Termination Date, the Borrower may Continue Libor Accounts
established under the Term A Loan or Convert Accounts established under the
Term A Loan of one Type into Accounts of another Type. Accounts of each Type
established under the Term A Loans made by each Bank shall be made and
maintained at such Bank's Applicable Lending Office for Accounts of such Type.
Section 4.2 Term A Notes. The Term A Loan made by a Bank shall be
evidenced by a single promissory note of the Borrower in substantially the
form of Exhibit "C" hereto payable to the order of such Bank in a principal
amount equal to its Term A Commitment as originally in effect and otherwise
duly completed.
Section 4.3 Repayment of Term A Loans. The Borrower shall pay to the
Agent for the account of the Banks the aggregate outstanding principal amount
of the Term A Loans in installments as follows:
(a) Nineteen (19) consecutive quarterly principal installments
due and payable on each Quarterly Payment Date in accordance with the
following schedule:
<TABLE>
<CAPTION>
Quarterly Payment Dates Installment
----------------------- -----------
<S> <C>
June 1997 $250,000
September 1997 $250,000
December 1997 $250,000
March 1998 $250,000
June 1998 $375,000
September 1998 $375,000
December 1998 $375,000
March 1999 $375,000
June 1999 $437,500
September 1999 $437,500
December 1999 $437,500
March 2000 $437,500
June 2000 $500,000
September 2000 $500,000
December 2000 $500,000
March 2001 $500,000
June 2001 $687,500
September 2001 $687,500
December 2001 $687,500
</TABLE>
(b) one final installment in the amount of all unpaid principal
of the Term A Loan due and payable on the Term A Termination Date.
Section 4.4 Use of Proceeds. The proceeds of the Term A Loans shall be
used by the Borrower (a) to finance the Southland Acquisition, (b) to
refinance the Previous Debt, and (c) to pay transaction expenses associated
with the Related Transactions.
ARTICLE 5
Term B Loan
Section 5.1 Term B Commitments. Subject to the terms and conditions of
this Agreement, each Bank severally agrees to make an advance of funds to the
Borrower in the amount of its Term B Commitment on the Closing Date. The
Borrower may establish Prime Rate Accounts or Libor Accounts thereunder and,
until the Term B Termination Date, the Borrower may Continue Libor Accounts
established under the Term B Loan or Convert Accounts established under the
Term B Loan of one Type into Accounts of another Type. Accounts of each Type
established under the Term B Loan made by each Bank shall be made and
maintained at such Bank's Applicable Lending Office for Accounts of such
Type.
Section 5.2 Term B Notes. The Term B Loan made by a Bank shall be
evidenced by a single promissory note of the Borrower in substantially the
form of Exhibit "D" hereto, payable to the order of such Bank in a principal
amount equal to its Term B Commitment as originally in effect and otherwise
duly completed.
Section 5.3 Repayment of Term B Loans. The Borrower shall pay to the
Agent for the account of the Banks the aggregate outstanding principal amount
of the Term B Loans in installments as follows:
(a) Twenty-seven (27) consecutive quarterly principal
installments due and payable on each Quarterly Payment Date in
accordance with the following schedule:
<TABLE>
<CAPTION>
Quarterly Payment Dates Installment
----------------------- -----------
<S> <C>
June 1997 $25,000
September 1997 $25,000
December 1997 $25,000
March 1998 $25,000
June 1998 $25,000
September 1998 $25,000
December 1998 $25,000
March 1999 $25,000
June 1999 $25,000
September 1999 $25,000
December 1999 $25,000
March 2000 $25,000
June 2000 $25,000
September 2000 $25,000
December 2000 $25,000
March 2001 $25,000
June 2001 $25,000
September 2001 $25,000
December 2001 $25,000
March 2002 $25,000
June 2002 $875,000
September 2002 $875,000
December 2002 $875,000
March 2003 $875,000
June 2003 $1,000,000
September 2003 $1,000,000
December 2003 $1,000,000
</TABLE>
(b) one final installment in the amount of all unpaid principal
of the Term B Loans due and payable on the Term B Termination Date.
Section 5.4 Use of Proceeds. The proceeds of the Term B Loans shall be
used by the Borrower (a) to finance the Southland Acquisition, (b) to
refinance the Previous Debt, and (c) to pay transaction expenses associated
with the Related Transactions.
ARTICLE 6
Interest and Fees
Section 6.1 Interest Rate. The Borrower shall pay to the Agent for the
account of each Bank interest on the unpaid principal amount of each Loan made
by such Bank for the period commencing on the date of such Loan to but
excluding the date such Loan is due, at a fluctuating rate per annum equal to
the Applicable Rate. The term "Applicable Rate" means:
(a) during the period that such Loans or portions thereof are
subject to a Prime Rate Account, the Prime Rate plus the Prime Margin;
and
(b) during the period that such Loans or portions thereof are
subject to a Libor Account, the Adjusted Libor Rate plus the Libor Rate
Margin.
Section 6.2 Determinations of Margins. The margins identified in
Section 6.1 hereof shall be defined and determined as follows:
(a) "Prime Margin" shall mean (i) during the period commencing
on the Closing Date and ending on but not including the first Adjustment
Date (as defined below), one and one-quarter percent (1.25%) per annum
for Revolving Loans, Acquisition Loans and Term A Loans and one and
three quarters percent (1.75%) per annum for Term B Loans and
(ii) during each period, from and including one Adjustment Date to but
excluding the next Adjustment Date (herein a "Calculation Period"), the
percent per annum set forth in the table below in this Section 6.2 under
the heading "Prime Margin", under the heading for the applicable Loan
and opposite the Total Debt to EBITDA Ratio calculated for the completed
twelve (12) months which immediately preceded the beginning of the
applicable Calculation Period.
(b) "Libor Rate Margin" shall mean (i) during the period
commencing on the Closing Date and ending on but not including the first
Adjustment Date (as defined below), two and three quarters percent
(2.75%) per annum for Revolving Loans, Acquisition Loans and Term A
Loans and three and one quarter percent (3.25%) per annum for Term B
Loans, and (ii) during each Calculation Period, the percent per annum
set forth in the table below in this Section 6.2 under the heading
"LIBOR Rate Margin", under the heading for the applicable Loan and
opposite the Total Debt to EBITDA Ratio calculated for the completed
twelve (12) months which immediately preceded the beginning of the
applicable Calculation Period.
The following is the table referred to in clauses (a) and (b) of this
Section 6.2:
<TABLE>
<CAPTION>
PRIME MARGIN LIBOR RATE MARGIN
------------------------------- -------------------------------
Total Debt Revolv- Acqui- Revolv- Acqui-
to EBITDA ing Term A Term B sition ing Term A Term B sition
Ratio Loan Loan Loan Loan Loan Loan Loan Loan
- ---------- ------- ------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
> 5.0 1.75% 1.75% 2.25% 1.75% 3.25% 3.25% 3.75% 3.25%
<=5.0 >3.5 1.25% 1.25% 1.75% 1.25% 2.75% 2.75% 3.25% 2.75%
<=3.5 >2.5 1.00% 1.00% 1.50% 1.00% 2.50% 2.50% 3.00% 2.50%
<=2.5 .75% .75% 1.25% .75% 2.25% 2.25% 2.75% 2.25%
</TABLE>
Upon delivery of the Compliance Certificate pursuant to Subsection
11.1(c) in connection with the financial statements of Holding and the
Subsidiaries required to be delivered pursuant to Subsection 11.1(b) at the
end of each Fiscal Quarter commencing with such Compliance Certificate
delivered for the Fiscal Quarter ending September 30, 1998, the Prime Margin
and the Libor Rate Margin (for Interest Periods commencing after the
applicable Adjustment Date, as defined below) shall automatically be adjusted
in accordance with the Total Debt to EBITDA Ratio set forth therein and the
tables set forth above, such automatic adjustment to take effect as of the
first Business Day after the receipt by the Agent of the related Compliance
Certificate pursuant to Subsection 11.1(c). The term "Adjustment Date" shall
mean each such Business Day when such margins change pursuant to the
immediately prior sentence or the next following sentence. If Holding fails
to deliver such Compliance Certificate which sets forth the Total Debt to
EBITDA Ratio within the period of time required by Subsection 11.1(c): (i)
the Prime Margin shall automatically be adjusted to one and one-quarter
percent (1.25%) per annum for Revolving Loans, Acquisition Loans and Term A
Loans and one and three quarters percent (1.75%) for Term B Loans; and (ii)
the Libor Rate Margin (for Interest Periods commencing after the applicable
Adjustment Date) shall automatically be adjusted to two and three quarters
percent (2.75%) per annum for Revolving Loans, Acquisition Loans and Term A
Loans and three and one quarter percent (3.25%) of Term B Loans. The
automatic adjustments provided for in the preceding sentence shall take effect
as of the first Business Day after the last day on which Holding was required
to deliver the applicable Compliance Certificate in accordance with Subsection
11.1(c) and shall remain in effect until subsequently adjusted in accordance
herewith upon the delivery of such Compliance Certificate.
Section 6.3 Payment Dates. Accrued interest on the Loans shall be due
and payable as follows: (i) in the case of Loans subject to Prime Rate
Accounts, on each Quarterly Payment Date and on the Termination Date of such
Loan; (ii) in the case of Loans subject to Libor Accounts and with respect to
each such Account, on (A) the last day of the Interest Period with respect
thereto, (B) in the case of an Interest Period greater than three months, at
three-month intervals after the first day of such Interest Period, and (C) on
the Termination Date of such Loan.
Section 6.4 Default Interest. Notwithstanding the foregoing, the
Borrower will pay to the Agent for the account of each Bank interest at the
applicable Default Rate on any principal of any Loan made by such Bank, any
Reimbursement Obligation, and (to the fullest extent permitted by law) any
other amount payable by the Borrower under any Loan Document to or for the
account of the Agent or such Bank, that is not paid in full when due (whether
at stated maturity, by acceleration, or otherwise), for the period from and
including the due date thereof to but excluding the date the same is paid in
full. Interest payable at the Default Rate shall be payable from time to time
on demand.
Section 6.5 Conversions and Continuations of Accounts. Subject to
Section 7.2 hereof, the Borrower shall have the right from time to time to
Convert all or part of any Prime Rate Account in existence under a Loan into a
Libor Account under the same Loan or to Continue Libor Accounts in existence
under a Loan as Libor Accounts under the same Loan, provided that: (a) the
Borrower shall give the Agent notice of each such Conversion or Continuation
as provided in Section 7.3 hereof; (b) a Libor Account may only be Converted
on the last day of the Interest Period therefore; and (c) except for
Conversions into Prime Rate Accounts, no Conversions or Continuations shall be
made while a Default has occurred and is continuing.
Section 6.6 Computations. Interest payable by the Borrower hereunder
and under the other Loan Documents with respect to Libor Accounts shall be
computed on the basis of a year of 360 days and the actual number of days
elapsed (including the first day but excluding the last day) in the period for
which interest is payable unless such calculation would result in a usurious
rate, in which case interest shall be calculated on the basis of a year of 365
or 366 days, as the case may be. Interest with respect to Prime Rate Accounts
and fees payable by the Borrower hereunder shall be computed on the basis of a
year of 365 or 366 days, as the case may be.
ARTICLE 7
Administrative Matters
Section 7.1 Borrowing Procedure. The Borrower shall give the Agent, and
the Agent will give the Banks, notice of each borrowing under the Commitments
in accordance with Section 7.3 hereof. Not later than 1:00 p.m. on the date
specified for each borrowing under the applicable Commitment, each Bank
obligated with respect to such Commitment will make available the amount of
the Loan to be made by it on such date to the Agent, at the Principal Office,
in immediately available funds, for the account of the Borrower. The amounts
received by the Agent shall, subject to the terms and conditions of this
Agreement, be made available to the Borrower at Borrower's direction by
transferring the same, in immediately available funds by wire transfer,
automated clearinghouse debit or interbank transfer to (a) a bank account of
Borrower designated by Borrower in writing or (b) a Person or Persons
designated by the Borrower in writing.
Section 7.2 Minimum Amounts. Except for prepayments and Conversions
pursuant to Article 8 hereof, each Prime Rate Account applicable to a Loan and
each prepayment of principal of a Loan shall be in a minimum principal amount
of Two Hundred Fifty Thousand Dollars ($250,000) or any larger amount in
increments of One Hundred Thousand Dollars ($100,000). Each LIBOR Account
applicable to a Loan shall be in a minimum principal amount of One Million
Dollars ($1,000,000) or any larger amount in increments of Five Hundred
Thousand Dollars ($500,000).
Section 7.3 Certain Notices. Notices by the Borrower to the Agent of
terminations or reductions of Commitments, of borrowings and prepayments of
Loans and of Conversion and Continuations of Accounts shall be irrevocable and
shall be effective only if received by the Agent not later than 11:00 a.m. on
the Business Day prior to the date of the relevant termination, reduction,
borrowing, Conversion, Continuation or other repayment specified below:
<TABLE>
<CAPTION>
Number of Business
Notice Days Prior
- -------------------------------------------------- ------------------
<S> <C>
Termination or reduction of Commitments 1
Borrowing of Loans subject to Prime Rate Accounts,
prepayment or repayment of Loans subject to Prime
Rate Accounts, or Conversions into Prime Rate
Accounts 1
Borrowing, prepayment or repayment of Loans subject
to Libor Accounts, Conversions into or
Continuations as Libor Accounts 3
</TABLE>
Any notices of the type described in this Section 7.3 which are received by
the Agent after the applicable time set forth above on a Business Day shall be
deemed to be received and shall be effective on the next Business Day. Each
such notice of termination or reduction shall specify the applicable
Commitments to be affected and the amount of the Commitments to be terminated
or reduced. Each such notice of borrowing, Conversion, Continuation, or
prepayment shall specify (a) the Loans to be borrowed or prepaid or the
Accounts to be Converted or Continued; (b) the amount (subject to Section 7.2
hereof) to be borrowed, Converted, Continued or prepaid; (c) in the case of a
Conversion, the Type of Account to result from such Conversion; (d) in the
case of a borrowing, the Type of Account or Accounts to be applicable to such
borrowing and the amounts thereof; (e) in the event a Libor Account is
selected, the duration of the Interest Period therefor; and (f) the date of
borrowing, Conversion, Continuation, or prepayment (which shall be a Business
Day). The Agent shall notify the Banks of the contents of each such notice on
the date of its receipt of the same or, if received on or after the applicable
time set forth above on a Business Day, on the next Business Day. In the
event the Borrower fails to select the Type of Account applicable to a Loan,
or the duration of any Interest Period for any Libor Account, within the time
period and otherwise as provided in this Section 7.3, such Account (if
outstanding as a Libor Account) will be automatically Converted into a Prime
Rate Account on the last day of the preceding Interest Period for such Account
or (if outstanding as a Prime Rate Account) will remain as, or (if not then
outstanding) will be made as, a Prime Rate Account. The Borrower may not
borrow any Loans subject to a Libor Account, Convert any Prime Rate Accounts
into Libor Accounts, or Continue any Libor Account as a Libor Account if the
Applicable Rate for such Libor Accounts would exceed the Maximum Rate.
Section 7.4 Prepayments.
(a) Mandatory.
(i) Revolving Loans. If at any time the Outstanding
Revolving Credit exceeds the Borrowing Base, the Borrower shall,
within one (1) Business Day after the occurrence thereof, prepay
the outstanding Revolving Loans by the amount of the excess or if
no Revolving Loans are outstanding and the Outstanding Revolving
Credit exceeds the Borrowing Base, immediately pledge to the Agent
cash or cash equivalents in an amount equal to the excess as
security for the Obligations.
(ii) Excess Cash Flow. On or before April 30 of each year,
commencing April 30, 1998, Borrower shall deliver to Agent a
certificate from the chief executive officer or chief financial
officer of Borrower certifying to a calculation of Excess Cash
Flow for the immediately preceding Fiscal Year (or with respect to
April 30, 1998, the period from the Closing Date to December 31,
1997) and the amount to be prepaid under this Subsection
7.4(a)(ii). On May 31 of each year commencing May 31, 1998, the
Borrower shall prepay the Loans in an amount equal to seventy-five
percent (75%) of Excess Cash Flow for the immediately preceding
Fiscal Year (or with respect to the May 31, 1998 payment date, the
Excess Cash Flow for the period from the Closing Date to December
31, 1997).
(iii) Prepayments from Asset Dispositions. If the Net
Proceeds relating to any Asset Disposition by Holding or any
Subsidiary exceed Fifty Thousand Dollars ($50,000) (it being
understood that if the Net Proceeds exceed Fifty Thousand Dollars
($50,000), the entire Net Proceeds and not just the portion in
excess of the foregoing amount shall be subject to this
Subsection) for any single transaction or series of related
transactions or if such Net Proceeds when aggregated with all
other Net Proceeds from such Asset Dispositions received during
the same Fiscal Year exceed One Hundred Thousand Dollars
($100,000) (it being understood that if the Net Proceeds exceed
One Hundred Thousand Dollars ($100,000), the entire Net Proceeds
not just the portion in excess of the foregoing amount shall be
subject to this Subsection), Borrower shall within five (5) days
of receipt of such Net Proceeds prepay the Loans in an amount
equal to the Net Proceeds of such Asset Disposition required to be
applied under this Subsection 7.4(a)(iii).
(iv) Prepayment from Equity Offerings. In the event that
Holding or a Subsidiary issues any Securities, no later than the
third (3rd) Business Day following the date of receipt of the
proceeds from any such issuance (other than: (a) proceeds from the
Securities issued on the Closing Date under the terms of the Stock
and Warrant Purchase Agreement; (b) proceeds from the Securities
permitted to be issued under Subsections 12.6(i), (ii) and (iii);
(c) proceeds from Securities issued to a seller of a Target or the
Target's assets in a Permitted Acquisition as the consideration
for the sale of the Target or it assets; and (d) proceeds in an
aggregate amount for the entire term of this Agreement not to
exceed Five Million Dollars ($5,000,000) received from the
issuance of equity Securities of Holding, (i) permitted to be
issued pursuant to Subsection 12.6(iv), (ii) issued to any of the
following: Rice Partners, Franklin Street/Fairview Capital,
L.L.C. or their Affiliates, (iii) issued at a time when no Event
of Default exists, and (iv) issued to finance, and are used to
finance, (A) the general working capital needs of Holding and the
Subsidiaries or (B) Permitted Acquisitions), Borrower shall prepay
the Loans in an amount equal to such proceeds, net of underwriting
discounts and commissions and other reasonable costs associated
therewith.
(v) Application of Mandatory Prepayments. Mandatory
prepayments made pursuant to Subsection 7.4(a)(ii), (iii) and (iv)
shall be applied as follows: (A) first to each installment due
under the Term A Loans and Term B Loans until such Loans are paid
in full, with each such installment being prepaid by its pro rata
portion of the amount of the prepayment, with an installment's pro
rata portion equal to a percentage obtained by multiplying by 100
the quotient derived by dividing the outstanding principal amount
of such installment by the aggregate outstanding principal amount
of all installments due under the Term A Loans and Term B Loans;
and (B) second to the Revolving Loans and Acquisition Loans, with
each such Loan being prepaid by its pro rata portion of the amount
prepaid pursuant to this clause (B), with a Loan's pro rata
portion for purposes of this clause (B) equal to a percentage
obtained by multiplying by 100 the quotient derived by dividing
the outstanding principal amount of such Loan by the aggregate
outstanding principal amount of the Revolving Loans and
Acquisition Loans. Prepayments applied to the Revolving Loans
pursuant to clause (B) shall have the effect of permanently
reducing the Revolving Commitments by the amount of the
prepayment. Partial prepayments made on the Acquisition Loans
after the fourth anniversary of the Closing Date shall be applied
to the installments due thereunder in the inverse order of
maturity. Notwithstanding the foregoing, in the event that the
Borrower reasonably expects the proceeds of an Asset Disposition
to be reinvested within one hundred twenty (120) days in
productive assets of a kind then used or usable in the business of
a Subsidiary and/or a Subsidiary acquired assets of a kind then
used or useable in its business within the one hundred twenty
(120) days period prior to the Asset Disposition in question,
then, instead of the applications described above, the Borrower
shall utilize the Net Proceeds therefrom to make a prepayment on
the Revolving Loans in an amount equal to the sum of the amount
needed for such reinvestment and the amount paid from the asset
previously acquired within such time period (with any excess being
applied as described above) and such prepayment shall not have the
effect of reducing the Revolving Commitments. Each prepayment
under Subsections 7.4(a)(ii), (iii) and (iv) shall be accompanied
with accrued interest in the amount prepaid to the date of
prepayment, any amount due under Section 8.5 as a result of such
prepayment and a certificate from Borrower detailing the
application thereof to the Loans as required by this clause (v).
(b) Optional. Subject to Section 7.2 hereof and the provisions
of this clause (b), Borrower may, at any time and from time to time
without premium or penalty upon prior notice to the Agent as specified
in Section 7.3 hereof, prepay or repay any Loan in full or in part. Any
optional prepayment of the Acquisition Loans, Term A Loans or Term B
Loans shall be accompanied with accrued interest on the amount prepaid
to the date of prepayment. Any partial prepayments of the Term A Loans
or Term B Loans shall be applied to the principal installments due
thereunder in the inverse order of maturity. Partial prepayments of the
Acquisition Loans after the fourth anniversary of the Closing Date shall
be applied to the installments due thereunder in the inverse order of
maturity. Loans subject to a Libor Account may be prepaid or repaid
only on the last day of the Interest Period applicable thereto unless
(i) the Borrower pays to the Agent for the account of the applicable
Banks any amounts due under Section 8.5 hereof as a result of such
prepayment or repayment or (ii) after giving effect to such prepayment
or repayment, the aggregate principal amount of the Libor Accounts
applicable to the Loan being prepaid or repaid having Interest Periods
that end after such payment date shall be equal to or less than the
principal amount of such Loan after such prepayment or repayment.
Section 7.5 Method of Payment. Except as otherwise expressly provided
herein, all payments of principal, interest, and other amounts to be made by
the Borrower or any Obligated Party under the Loan Documents shall be made to
the Agent at the Principal Office for the account of each Bank's Applicable
Lending Office in Dollars and in immediately available funds, without setoff,
deduction, or counterclaim, not later than 1:00 p.m. on the date on which
such payment shall become due (each such payment made after such time on such
due date to be deemed to have been made on the next succeeding Business Day).
The Borrower and each Obligated Party shall, at the time of making each such
payment, specify to the Agent the sums payable under the Loan Documents to
which such payment is to be applied (and in the event that the Borrower fails
to so specify, or if an Event of Default has occurred and is continuing, the
Agent may apply such payment and any proceeds of any Collateral to the
Obligations in such order and manner as it may elect in its sole discretion,
subject to Section 7.6 hereof). Each payment received by the Agent under any
Loan Document for the account of a Bank shall be paid to such Bank by 3:00
p.m. on the date the payment is deemed made to the Agent in immediately
available funds, for the account of such Bank's Applicable Lending Office.
Whenever any payment under any Loan Document shall be stated to be due on a
day that is not a Business Day, such payment may be made on the next
succeeding Business Day, and such extension of time shall in such case be
included in the computation of the payment of interest and commitment fee, as
the case may be.
Section 7.6 Pro Rata Treatment. Except to the extent otherwise provided
herein: (a) each Loan shall be made by the Banks, each payment of commitment
fees under Sections 2.5 and 3.5 hereof and letter of credit fees under
Subsection 2.7(c) hereof shall be made for the account of the Banks, and each
termination or reduction of the Commitments shall be applied to the
Commitments of the Banks, pro rata according to their respective Commitment
Percentages; (b) the making, Conversion, and Continuation of Accounts of a
particular Type (other than Conversions provided for by Section 8.4 hereof)
shall be made pro rata among the Banks holding Accounts of such Type according
to their respective Commitment Percentages; (c) each payment and prepayment of
principal of or interest on Loans or Reimbursement Obligations by the Borrower
shall be made to the Agent for the account of the Agent or the Banks holding
such Loans or Reimbursement Obligations (or participation interests therein)
pro rata in accordance with the respective unpaid principal amounts of such
Loans or participation interests held by the Agent or such Banks; (d) proceeds
of Collateral shall be shared by the Agent and the Banks pro rata in
accordance with the respective unpaid principal amounts of and interest on the
Obligations then due the Agent and the Banks; and (e) the Banks (other than
the Agent) shall purchase from the Agent participations in the Letters of
Credit to the extent of their respective Commitment Percentages (calculated
with respect to the Revolving Commitments only). If at any time payment, in
whole or in part, of any amount distributed by the Agent hereunder is
rescinded or must otherwise be restored or returned by Agent as a preference,
fraudulent conveyance or otherwise under any bankruptcy, insolvency or similar
law, then each Person receiving any portion of such amount agrees, upon
demand, to return the portion of such amount it has received to the Agent.
Section 7.7 Sharing of Payments. If a Bank shall obtain payment of any
principal of or interest on any of the Obligations due to such Bank hereunder
directly (and not through the Agent) through the exercise of any right of set-
off, banker's lien, counterclaim or similar right, or otherwise, it shall
promptly purchase from the other Banks participations in the Obligations held
by the other Banks in such amounts, and make such other adjustments from time
to time as shall be equitable to the end that all the Banks shall share the
benefit of such payment pro rata in accordance with the unpaid principal of
and interest on the Obligations then due to each of them. To such end, all of
the Banks shall make appropriate adjustments among themselves (by the resale
of participations sold or otherwise) if all or any portion of such excess
payment is thereafter rescinded or must otherwise be restored. The Borrower
agrees, to the fullest extent it may effectively do so under applicable law,
that any Bank so purchasing a participation in the Obligations held by the
other Banks may exercise all rights of set-off, banker's lien, counterclaim,
or similar rights with respect to such participation as fully as if such Bank
were a direct holder of Obligations in the amount of such participation.
Nothing contained herein shall require any Bank to exercise any such right or
shall affect the right of any Bank to exercise, and retain the benefits of
exercising, any such right with respect to any other indebtedness or
obligation of the Borrower.
Section 7.8 Non-Receipt of Funds by the Agent. Unless the Agent shall
have been notified by a Bank or the Borrower (the "Payor") prior to the date
on which such Bank is to make payment to the Agent hereunder or the Borrower
is to make a payment to the Agent for the account of one or more of the Banks,
as the case may be (such payment being herein called the "Required Payment"),
which notice shall be effective upon receipt, that the Payor does not intend
to make the Required Payment to the Agent, the Agent may assume that the
Required Payment has been made and may, in reliance upon such assumption (but
shall not be required to), make the amount thereof available to the intended
recipient on such date and, if the Payor has not in fact made the Required
Payment to the Agent, (a) the recipient of such payment shall, on demand, pay
to the Agent the amount made available to it together with interest thereon in
respect of the period commencing on the date such amount was so made available
by the Agent until the date the Agent recovers such amount at a rate per annum
equal to the Federal Funds Rate for such period and (b) Agent shall be
entitled to offset against any and all sums to be paid to such recipient, the
amount calculated in accordance with the foregoing clause (a).
Section 7.9 Withholding Taxes. To the extent permitted by applicable
law, all payments by the Borrower or any Obligated Party of amounts payable
under any Loan Document shall be payable without deduction for or on account
of any present or future taxes, duties or other charges levied or imposed by
the United States of America or by the government of any jurisdiction outside
the United States of America or by any political subdivision or taxing
authority of or in any of the foregoing through withholding or deduction with
respect to any such payments (but excluding any tax imposed on or measured by
the net income or profit of a Bank pursuant to the laws of the jurisdiction in
which it is organized or in which the principal office or Applicable Lending
Office or other lending office of such Bank is located or any subdivision
thereof or therein). If any such taxes, duties or other charges are so levied
or imposed, the Borrower or applicable Obligated Party will make additional
payments in such amounts so that every net payment of amounts payable by it
under any Loan Document, after withholding or deduction for or on account of
any such present or future taxes, duties or other charges, will not be less
than the amount provided for herein or therein, provided that the Borrower or
applicable Obligated Party may withhold to the extent required by law and
shall have no obligation to pay such additional amounts to any Bank to the
extent that such taxes, duties, or other charges are levied or imposed by
reason of the failure or inability of such Bank to comply with the provisions
of Section 7.10 hereof. The Borrower shall furnish promptly to the Agent for
distribution to each affected Bank, as the case may be, official receipts
evidencing any such withholding or reduction.
Section 7.10 Withholding Tax Exemption. Each Bank that is not
incorporated under the laws of the United States of America or a state thereof
agrees that it will deliver to the Borrower and the Agent two duly completed
copies of United States Internal Revenue Service Form 1001 or 4224, certifying
in either case that such Bank is entitled to receive payments from the
Borrower under any Loan Document without deduction or withholding of any
United States federal income taxes. Each Bank which so delivers a Form 1001
or 4224 further undertakes to deliver to Borrower and the Agent two (2)
additional copies of such form (or a successor form) on or before the date
such form expires or becomes obsolete or after the occurrence of any event
requiring a change in the most recent form so delivered by it, and such
amendments thereto or extensions or renewals thereof as may be reasonably
requested by the Borrower or the Agent, in each case certifying that such Bank
is entitled to receive payments from the Borrower under any Loan Document
without deduction or withholding of any United States federal income taxes,
unless an event (including without limitation any change in treaty, law or
regulation) has occurred prior to the date on which any such delivery would
otherwise be required which renders all such forms inapplicable or which would
prevent such Bank from duly completing and delivering any such form with
respect to it and such Bank advises the Borrower and the Agent that it is not
capable of receiving such payments without any deduction or withholding of
United States federal income tax.
Section 7.11 Participation Obligations Absolute; Failure to Fund
Participation. The obligations of a Bank to fund its participation in the
Letters of Credit in accordance with the terms hereof shall be absolute,
unconditional and irrevocable and shall be performed strictly in accordance
with the terms of the Loan Documents under all circumstances whatsoever,
including without limitation, the following circumstances: (a) any lack of
validity of any Loan Document; (b) the occurrence of any Default; (c) the
existence of any claim, set-off, counterclaim, defenses or other rights which
such Bank, the Borrower, any Obligated Party, or any other Person may have;
(d) the occurrence of any event that has or could reasonably be expected to
have a Material Adverse Effect; (e) the failure of any condition to a Loan
under Article 9 hereof to be satisfied; (f) the fact that after giving effect
to the funding of the participation the Outstanding Revolving Credit may
exceed the Borrowing Base; or (g) any other circumstance whatsoever, whether
or not similar to any of the foregoing; provided that, the obligations of a
Bank to fund its participation in a Letter of Credit may be subject to
avoidance by a Bank if such Bank proves in a final nonappealable judgment that
it was damaged and that such damage arose directly from the Agent's willful
misconduct or gross negligence in determining whether (i) the conditions set
forth in Article 9 hereof to the issuance of the Letter of Credit in question
were satisfied at the time of such issuance or such Loan or (ii) the
documentation presented under the Letter of Credit in question complied with
the terms thereof. If a Bank fails to fund its participation in a Letter of
Credit as required hereby, such Bank shall, subject to the foregoing proviso,
remain obligated to pay to the Agent the amount it failed to fund on demand
together with interest thereon in respect of the period commencing on the date
such amount should have been funded until the date the amount was actually
funded to the Agent at a rate per amount equal to the Federal Funds Rate for
such period and the Agent shall be entitled to offset against any and all sums
to be paid to such Bank hereunder the amount due the Agent under this
sentence.
ARTICLE 8
Yield Protection and Illegality
Section 8.1 Additional Costs.
(a) The Borrower shall pay directly to each Bank from time to
time such amounts as such Bank may reasonably determine to be necessary
to compensate it for any costs incurred by such Bank which such Bank
determines are attributable to its making or maintaining of any Loans
subject to Libor Accounts or Letters of Credit hereunder or its
obligation to make any of such Loans hereunder or issue or participate
in any Letter of Credit, or any reduction in any amount receivable by
such Bank hereunder in respect of any such Loans or Letters of Credit or
such obligation (such increases in costs and reductions in amounts
receivable being herein called "Additional Costs"), resulting from any
Regulatory Change which:
(i) changes the basis of taxation of any amounts payable
to such Bank under this Agreement or its Notes in respect of any
of such Loans (other than franchise taxes and taxes imposed on the
overall net income of such Bank or its Applicable Lending Office
for any of such Loans by the United States of America or the
jurisdiction in which such Bank has its Principal Office or such
Applicable Lending Office);
(ii) imposes or modifies any reserve, special deposit,
minimum capital, capital ratio, or similar requirement relating to
any extensions of credit or other assets of, or any deposits with
or other liabilities or commitments of, such Bank (including any
of such Loans or any deposits referred to in the definition of
"Libor Rate" in Section 1.1 hereof); or
(iii) imposes any other condition affecting this Agreement
or the Notes or any of such extensions of credit or liabilities or
commitments.
Each Bank will notify the Borrower (with a copy to the Agent) of any
event occurring after the date of this Agreement which will entitle
such Bank to compensation pursuant to this Subsection 8.1(a) as promptly
as practicable after it obtains knowledge thereof and determines to
request such compensation, and will designate a different Applicable
Lending Office for the Loans affected by such event if such designation
will avoid the need for, or reduce the amount of, such compensation and
will not, in the sole opinion of such Bank, violate any law, rule, or
regulation or be in any way disadvantageous to such Bank. Each Bank
will furnish the Borrower with a certificate setting forth the basis and
the amount of each request of such Bank for compensation under this
Subsection 8.1(a). If any Bank requests compensation from the Borrower
under this Subsection 8.1(a), the Borrower may, by notice to such Bank
(with a copy to the Agent) suspend the obligation of such Bank to issue
or participate in Letters of Credit or to make Loans subject to Libor
Accounts or Continue Libor Accounts as Libor Accounts or Convert Prime
Rate Accounts into Libor Accounts until the Regulatory Change giving
rise to such request ceases to be in effect (in which case the
provisions of Section 8.4 hereof shall be applicable with respect to
such Libor Accounts). A Bank may not request compensation under this
subsection 8.1(a) for Additional Cost incurred at any time before the
date which is twelve (12) months prior to the date the Bank requests
such compensation.
(b) Without limiting the effect of the foregoing provisions of
this Section 8.1, in the event that, by reason of any Regulatory Change,
any Bank either (i) incurs Additional Costs based on or measured by the
excess above a specified level of the amount of a category of deposits
or other liabilities of such Bank which includes deposits by reference
to which the interest rate on the Loans subject to Libor Accounts is
determined as provided in this Agreement or a category of extensions of
credit or other assets of such Bank which includes Loans subject to
Libor Accounts or (ii) becomes subject to restrictions on the amount of
such a category of liabilities or assets which it may hold, then, if
such Bank so elects by notice to the Borrower (with a copy to the
Agent), the obligation of such Bank to make Loans subject to Libor
Accounts or Continue Libor Accounts as Libor Accounts or Convert Prime
Rate Accounts into Libor Accounts hereunder shall be suspended until the
Regulatory Change giving rise to such request ceases to be in effect (in
which case the provisions of Section 8.4 hereof shall be applicable).
(c) Determinations and allocations by any Bank for purposes of
this Section 8.1 of the effect of any Regulatory Change on its costs of
maintaining its obligation to make Loans or issue or participate in
Letters of Credit or of making or maintaining Loans or issuing or
participating in Letters of Credit or on amounts receivable by it in
respect of Loans or Letters of Credit, and of the additional amounts
required to compensate such Bank in respect of any Additional Costs,
shall, absent manifest error, constitute prima facie evidence of the
accuracy thereof, provided that such determinations and allocations are
made on a reasonable basis.
Section 8.2 Limitation on Libor Accounts. Anything herein to the
contrary notwithstanding, if with respect to any Libor Accounts under a Loan
for any Interest Period therefor:
(a) The Agent determines (which determination shall be
conclusive) that quotations of interest rates for the relevant deposits
referred to in the definition of "Libor Rate" in Section 1.1 hereof are
not being provided in the relative amounts or for the relative
maturities for purposes of determining the rate of interest for the
Loans subject to such Libor Accounts as provided in this Agreement; or
(b) Required Banks determine (which determination shall be
conclusive) and notify the Agent that the relevant rates of interest
referred to in the definition of "Adjusted Libor Rate" in Section 1.1
hereof on the basis of which the rate of interest for such Loans for
such Interest Period is to be determined do not accurately reflect the
cost to the Banks of making or maintaining such Loans for such Interest
Period;
then the Agent shall give the Borrower prompt notice thereof specifying the
relevant Libor Account and the relevant amounts or periods, and so long as
such condition remains in effect, the Banks shall be under no obligation to
make additional Loans subject to a Libor Account or to Convert Prime Rate
Accounts into Libor Accounts and the Borrower shall, on the last day(s) of
the then current Interest Period (s) for the outstanding Libor Accounts,
either prepay the Loans subject to such Libor Accounts or Convert such Libor
Accounts into Prime Rate Accounts in accordance with the terms of this
Agreement.
Section 8.3 Illegality. Notwithstanding any other provision of this
Agreement, in the event that it becomes unlawful for any Bank or its
Applicable Lending Office to (a) honor its obligation to make Loans subject to
a Libor Account hereunder or (b) maintain Loans subject to a Libor Account
hereunder, then such Bank shall promptly notify the Borrower (with a copy to
the Agent) thereof and such Bank's obligation to make or maintain Loans
subject to a Libor Account and to Convert Prime Rate Accounts into Libor
Accounts hereunder shall be suspended until such time as such Bank may again
make and maintain Loans subject to a Libor Account (in which case the
provisions of Section 8.4 hereof shall be applicable).
Section 8.4 Treatment of Affected Loans. If the Accounts applicable to
a Loan of any Bank (hereinafter called "Affected Accounts") are to be
Converted pursuant to Sections 8.1 or 8.3 hereof, the Bank's Affected Accounts
shall be automatically Converted into Prime Rate Accounts on the last day(s)
of the then current Interest Period(s) (or, in the case of a Conversion
required by Section 8.3 hereof, on such earlier date as such Bank may specify
to the Borrower with a copy to the Agent) and, unless and until such Bank
gives notice as provided below that the circumstances specified in Sections
8.1 or 8.3 hereof which gave rise to such Conversion no longer exist: (a) to
the extent that such Bank's Affected Accounts have been so Converted, all
payments and prepayments of principal which would otherwise be applied to such
Bank's Affected Accounts shall be applied instead to its Prime Rate Accounts;
and (b) all Accounts which would otherwise be established or Continued by such
Bank as Libor Accounts shall be made as or Converted into Prime Rate Accounts
and all Accounts of such Bank which would otherwise be Converted into Libor
Accounts shall be Converted instead into (or shall remain as) Prime Rate
Accounts. If such Bank gives notice to the Borrower (with a copy to the
Agent) that the circumstances specified in Sections 8.1 or 8.3 hereof which
gave rise to the Conversion of such Bank's Affected Accounts pursuant to this
Section 8.4 no longer exist (which such Bank agrees to do promptly upon such
circumstances ceasing to exist) at a time when Libor Accounts are outstanding,
such Bank's Prime Rate Accounts shall be automatically Converted, on the first
day(s) of the next succeeding Interest Period(s) for such outstanding Libor
Accounts to the extent necessary so that, after giving effect thereto, all
Accounts held by the Banks holding Libor Accounts and by such Bank are held
pro rata (as to principal amounts, Types, and Interest Periods) in accordance
with their respective Commitment Percentages.
Section 8.5 Compensation. The Borrower shall pay to the Agent for the
account of each Bank, upon the request of such Bank, such amount or amounts as
shall be sufficient (in the reasonable opinion of such Bank) to compensate it
for any loss, cost, or expense incurred by it as a result of:
(a) Any payment or prepayment of a Loan subject to a Libor
Account or Conversion of a Libor Account for any reason (including,
without limitation, the acceleration of the outstanding Loans pursuant
to Subsection 14.2(a) hereof) on a date other than the last day of an
Interest Period for the applicable Libor Account; or
(b) Any failure by the Borrower for any reason (including,
without limitation, the failure of any conditions precedent specified in
Article 9 to be satisfied) to borrow or prepay a Loan subject to a Libor
Account, or Convert a Prime Rate Account to a Libor Account on the date
for such borrowing, Conversion, or prepayment specified in the relevant
notice of borrowing, prepayment, or Conversion under this Agreement.
Without limiting the effect of the preceding sentence, such compensation shall
include an amount equal to the excess, if any, of (i) the amount of interest
which otherwise would have accrued on the principal amount so paid or
Converted or not borrowed for the period from the date of such payment,
Conversion, or failure to borrow to the last day of the Interest Period for
such Libor Account (or, in the case of a failure to borrow, the Interest
Period for such Libor Account which would have commenced on the date specified
for such borrowing) at the applicable rate of interest for such Libor Account
provided for herein over (ii) the interest component of the amount such Bank
would have bid in the London interbank market for Dollar deposits of leading
banks and amounts comparable to such principal amount and with maturities
comparable to such period.
Section 8.6 Capital Adequacy. If after the date hereof, any Bank shall
have determined that any Regulatory Change or any change in the compliance by
such Bank (or its parent) with any guideline, request, or directive regarding
capital adequacy (whether or not having the force of law) of any central bank
or other Governmental Authority has or would have the effect of reducing the
rate of return on such Bank's (or its parent's) capital as a consequence of
its obligations hereunder or the transactions contemplated hereby to a level
below that which such Bank (or its parent) could have achieved but for such
Regulatory Change or change in compliance by an amount deemed by such Bank to
be material, then from time to time, within ten (10) Business Days after
demand by such Bank (with a copy to the Agent), the Borrower shall pay to such
Bank such additional amount or amounts as will compensate such Bank (or its
parent) for such reduction. A certificate of such Bank claiming compensation
under this Section and setting forth the additional amount or amounts to be
paid to it hereunder shall constitute prima facie evidence of the accuracy
thereof absent manifest error, provided that the determination thereof is made
on a reasonable basis. In determining such amount or amounts, such Bank may
use any reasonable averaging and attribution methods. With respect to each
demand by a Bank under this Section 8.6, no Bank shall have the right to
demand compensation for amounts attributable to any reduction in such Bank's
rate of return occurring at any time before the date which is twelve (12)
months prior to the date the Bank gives such demand for compensation to
Borrower.
Section 8.7 Replacement/Payoff of Affected Bank. Within five (5) days
after receipt by Borrower of written notice and demand from any Bank for any
payment under the terms of Section 7.9, Section 8.1 or Section 8.6, or within
ten (10) days of a Bank becoming a Nonconsenting Bank (as defined below),
Borrower may, at its option notify Agent and such Bank (the "Affected Bank")
of its intention to either (a) obtain, at Borrower's expense, a replacement
Bank ("Replacement Bank") to purchase the Affected Bank's Loans and its
obligations under the Loan Documents or (b) prepay in full all outstanding
Obligations owed to such Affected Bank and terminate such Affected Bank's
Revolving Commitment and Acquisition Commitment, in which case the Revolving
Commitments and Acquisition Commitments will be reduced by the amount of the
Affected Bank's Revolving Commitment and Acquisition Commitment. Borrower
shall, within thirty (30) days following the delivery of such notice from
Borrower either (a) cause the Replacement Bank to purchase the Loans of the
Affected Bank and assume the Affected Bank's obligations hereunder in
accordance with the terms of an Assignment and Acceptance for cash in an
aggregate amount equal to the aggregate unpaid principal of the Loans held by
such Bank, all unpaid interest and commitment fees accrued thereon, and all
other Obligations owed to such Bank including amounts owed under Sections 7.9,
8.1, or 8.6 or (b) prepay in full all outstanding Obligations owed to such
Affected Bank (including amounts owed under Sections 7.9, 8.1, or 8.6) and
terminate such Affected Bank's obligations under the Revolving Commitments and
the Acquisition Commitments. Notwithstanding the foregoing, (i) the Borrower
shall continue to be obligated to pay to the Affected Bank in full all amounts
then demanded and due under Sections 7.9, 8.1, or 8.6 in accordance with the
terms thereof, (ii) neither the Agent nor any Bank shall have any obligation
to find a Replacement Bank, (iii) the Replacement Bank must be reasonably
acceptable to the Agent and (iv) Banque Paribas cannot be replaced or paid off
under this Section 8.7 without its consent. In the event that (x) the
Borrower or Agent has requested that the Banks consent to a departure or
waiver of any provisions of the Loan Documents or agree to any other
modification thereof, (y) the consent, waiver or other modification in
question requires the agreement of all Banks in accordance with the terms of
Section 16.11 and (z) Banks holding at least 80% of the total Commitments have
agreed to such consent, waiver or other modification, then any Bank who does
not agree to such consent, waiver or other modification shall be deemed a
"Nonconsenting Bank".
ARTICLE 9
Conditions Precedent
Section 9.1 Initial Loan and Letter of Credit. The obligation of each
Bank to make its initial Loan and the obligation of the Agent to issue the
initial Letter of Credit are subject to the following conditions precedent:
(a) Deliveries. The Agent shall have received on or before the
Closing Date and on or before the day of any such Loan or Letter of
Credit all of the following, each dated (unless otherwise indicated) the
Closing Date, in form and substance satisfactory to the Agent:
(i) Resolutions; Authority. Resolutions of the Board of
Directors of the Borrower and each Obligated Party certified by
its Secretary or an Assistant Secretary which authorize its
execution, delivery, and performance of the Transaction Documents
to which it is or is to be a party.
(ii) Incumbency Certificate. A certificate of incumbency
certified by the Secretary or an Assistant Secretary of the
Borrower and each Obligated Party certifying the names of its
officers (A) who are authorized to sign the Transaction Documents
to which it is or is to be a party (including the certificates
contemplated herein) together with specimen signatures of each
such officer and (B) who will, until replaced by other officers
duly authorized for that purpose, act as its representative for
the purposes of signing documentation and giving notices and other
communications in connection with this Agreement and the
transactions contemplated hereby.
(iii) Organizational Documents. The articles of
incorporation of the Borrower and each Obligated Party certified
by the Secretary of State of the state of its incorporation and
dated a current date.
(iv) Bylaws. The bylaws of the Borrower and each Obligated
Party certified by its Secretary or an Assistant Secretary.
(v) Governmental Certificates. Certificates of the
appropriate government officials of the state of incorporation of
the Borrower and each Obligated Party as to its existence and, to
the extent applicable, good standing and certificates of the
appropriate government officials of each state in which the
Borrower and each Obligated Party is required to qualify to do
business and where failure to so qualify could reasonably be
expected to have a Material Adverse Effect, as to the Borrower's
and each Obligated Party's qualification to do business and good
standing in such state, all dated a current date.
(vi) Notes. The Notes executed by the Borrower dated the
date hereof.
(vii) Guaranties. A Subsidiary Guaranty executed by each
Subsidiary and the Holding Guaranty executed by Holding, all dated
the date hereof.
(viii) Senior Subordination Agreement. The Senior
Subordination Agreement executed by all the parties thereto and
dated the date hereof.
(ix) Personal Property Collateral Documents and Personal
Property Collateral. The Holding Security Agreement executed by
Holding, the Borrower Security Agreement executed by the Borrower
and a Subsidiary Security Agreement executed by each Subsidiary,
all dated the date hereof; certificates representing the capital
stock of the Subsidiaries together with undated Stock Powers
executed in blank; the promissory notes evidencing the Debt of the
Subsidiaries to Borrower endorsed payable to the order of the
Agent; UCC, tax and judgment Lien search reports listing all
documentation on file against Holding, the Subsidiaries, Southland
Container, Inc., Southland and Southland's subsidiaries in each
jurisdiction in which any such party or any Collateral is located
or registered; and executed documentation as the Agent may deem
necessary to perfect or protect its Liens, including, without
limitation: (A) intellectual property assignments; (B) financing
statements under the UCC and other applicable documentation under
the laws of any jurisdiction with respect to the perfection of
Liens; and (C) except as provided in Section 11.9, waivers,
subordinations or acknowledgments from all third parties who have
possession or control of any Collateral including without
limitation agreements with the landlords of all premises leased by
Holding and any Subsidiary containing such consents and waivers as
the Agent may require and agreements from each bank or brokerage
company holding any deposit, commodity or investment account of
Holding or any Subsidiary containing such agreements as the Agent
may require.
(x) Termination of Liens. Duly executed UCC-3 termination
statements, mortgage releases and such other documentation as
shall be necessary to terminate or release all Liens other than
those permitted by Section 12.2 hereof.
(xi) Mortgages. Executed Mortgages dated the date hereof
covering the Mortgaged Property together with title insurance
policies or reports and surveys as required under Section 11.9(b).
(xii) Insurance Policies. Certificates of insurance
summarizing the insurance policies of Holding and the Subsidiaries
required by this Agreement and reflecting the Agent as additional
insured under such policies and as loss payee with respect to all
policies covering Collateral.
(xiii) Opinion of Counsel. Favorable opinions of legal
counsel to Holding and the Subsidiaries from such jurisdictions
and, as to such matters as, the Agent may reasonably request.
(xiv) Fees. The up front and agent fees set forth in that
certain letter dated February 12, 1997, from Agent to Rice
Partners and Holding (less the credit against such fees provided
for therein).
(xv) Borrowing Base Report. An initial Borrowing Base
Report reflecting the combined pro forma Eligible Accounts for
Holding, the Subsidiaries and Southland as of January 31, 1997
together with the receivable aging report required thereby.
(xvi) Transaction Documents. Executed copies of the
Southland Acquisition Documents, the Subordinated Loan Documents
and the Capitalization Documents. All certificates and opinions
delivered in connection with such Transaction Documents shall be
addressed to Agent and Banks or accompanied by a written
authorization from the Person delivering such certificate or
opinion stating that Agent and Banks may rely on such document as
though it were addressed to it.
(xvii) Letter of Direction. A letter of direction from
Borrower addressed to Agent with respect to the disbursement of
the proceeds of the Loans.
(xviii) Environmental Report. Environmental audit
reports in scope and substance satisfactory to Agent and its
counsel concerning the properties and business of Southland, its
subsidiaries, Holding and the Subsidiaries prepared by a
nationally recognized firm of environmental engineers.
(b) Closing Date Availability. After giving effect to the
consummation of the Related Transactions, the lesser of the Revolving
Commitment or the Borrowing Base shall exceed the Outstanding Revolving
Credit by not less than Seven Million Dollars ($7,000,000.00).
(c) Attorneys' Fees and Expenses. The costs and expenses
(including attorneys' fees) referred to in Section 16.1 hereof, to the
extent incurred, shall have been paid in full.
(d) Capitalization. The following shall have been issued and
sold: (i) the Subordinated Notes, the gross cash proceeds of which
shall be not less than Nine Million Dollars ($9,000,000); and (ii) the
Holding Series B Stock, the gross cash proceeds of which shall be not
less than Ten Million Dollars ($10,000,000). In addition, all
certificates (excluding stock certificates) and opinions delivered in
connection with the Subordinated Notes and the Holding Series B Stock
shall be addressed to Agent and Banks or accompanied by a written
authorization from the Person delivering such certificate or opinion
stating that Agent and Banks may rely on such document as though it were
addressed to them.
(e) Government Approvals. The Federal Trade Commission or U.S.
Justice Department under the Hart-Scott-Rodino Anti-Trust Improvements
Act shall have approved the transactions contemplated by the Southland
Acquisition Documents or the waiting period thereunder shall have
expired.
(f) Gilligan Lien. Copies of the documentation governing the
Liens granted in favor of, and the obligations owing to, Thomas J.
Gilligan.
(g) Minority Southland Shareholders. Evidence that Southland
owns one hundred percent (100%) of each of its subsidiaries or the Agent
shall have been provided evidence satisfactory to it that after giving
effect to the Related Transactions, Southland will own one hundred
percent (100%) of each of its subsidiaries and all shares previously
held by employees of such Subsidiary will be canceled.
(h) 1996 Audit. Holding shall have provided Agent with a
current draft of the audited consolidated financial statements of
Holding as at and for the fiscal year ended December 31, 1996.
(i) Related Transactions. Agent shall have been provided
evidence satisfactory to it that the Related Transactions (including the
Southland Acquisition and the Acquisition Merger but excluding any
Permitted Acquisition funded with an advance under the Acquisition
Commitments) will occur on the Closing Date.
Section 9.2 Acquisitions Loans. The obligation of each Bank to make any
Acquisition Loan (including the initial Acquisition Loan) is subject to the
following additional conditions precedent:
(a) Acquisition Request. Borrower shall have provided to the
Agent and each Bank at least twenty (20) days prior to the date that the
proposed Acquisition Loan is to be requested, the following: (i) the
name of the Person (the "Target") who is to be acquired or whose assets
are to be acquired; (ii) a description of the nature of the Target's
business; (iii) copies of the documentation (or substantially final
drafts of the documentation) intended to effect the proposed acquisition
(the "Purchase Agreements"); (iv) a summary of the terms and conditions
of the proposed acquisition; (v) a certificate of the chief financial
officer or chief executive officer of the Borrower certifying that no
Default exists or could reasonably be expected to occur as a result of
the proposed acquisition; and (vi) any other information the Agent may
reasonably request.
(b) Purchase Price. The Purchase Price for the proposed
acquisition does not exceed Three Million Five Hundred Thousand Dollars
($3,500,000) and the sum of the Purchase Prices paid for all Permitted
Acquisitions consummated in the same Fiscal Year as the proposed
acquisition is to occur plus the Purchase Price of the proposed
acquisition does not exceed Five Million Dollars ($5,000,000).
(c) Acquisition Criteria. Borrower shall provide to the Agent
and each Bank evidence that:
(i) Borrower has completed due diligence on the Target and
the assets to be acquired satisfactory to Agent, including,
without limitation, if applicable, a due diligence investigation
as to the compliance with all Environmental Laws by the Target and
the assets to be acquired;
(ii) The Target is involved in the same general type of
business activities as the Borrower and the Subsidiaries;
(iii) If the proposed acquisition is an acquisition of the
stock of a Target, the acquisition will be structured so that the
Target will become a wholly-owned direct Subsidiary. If the
proposed acquisition is an acquisition of assets, the acquisition
will be structured so that either Borrower or a wholly-owned
Subsidiary owned directly by Borrower shall acquire the assets;
(iv) Neither the Target nor its assets shall be subject to
any contingent obligations (including contingent obligations
arising from any Environmental Liabilities), Environmental
Liabilities, unsatisfied judgments or any pending action, charge,
claim, demand, suit, proceeding, petition, governmental
investigation or arbitration that could reasonably be expected to
have a Material Adverse Effect;
(v) The following criteria are satisfied:
(A) Borrower shall have provided to the Agent and
each Bank (i) copies of the financial statements of the
Target for the twelve (12) month period prior to the closing
of the proposed acquisition for which financial statements
are available (but in any event financial statements for the
most recently completed fiscal year of such Target)
containing at a minimum, a balance sheet, statement of
income and statement of cash flow prepared in accordance
with GAAP, (ii) if the financial statements of the Target
are not audited by an independent certified public
accountant acceptable to the Agent, a review or other
analysis of such Target and its financial condition prepared
by a third party acceptable to the Agent, with such analysis
to be in form and substance acceptable to the Agent, and
(iii) a pro forma financial projection of the Borrower and
the Subsidiaries (including the Target) for the period
following the date of the consummation of the proposed
acquisition to the Term B Termination Date which reflects
compliance with the financial covenants in this Agreement;
(B) The Purchase Price to be paid by the Borrower to
acquire the Target or the assets to be acquired does not
exceed an amount equal to the product obtained by
multiplying by five and one-half (5.5) the Adjusted Target
EBITDA of the Target or, as applicable, the Adjusted Target
EBITDA of the Target attributable to such assets acquired,
for the most recently completed twelve (12) month period
prior to the closing of the proposed acquisition for which
financial statements are available. The term "Adjusted
Target EBITDA" means, for any period, the sum of the
following, each calculated without duplication for the
Target or the assets acquired for such period: (1) EBITDA;
plus (2) all of those expenses which have been deducted in
calculating EBITDA for such period and which will be
eliminated in the future upon the consummation of the
proposed acquisition by the Borrower as approved by Agent;
minus (3) all income or gains which have been added in
calculating EBITDA for such period and which will be
eliminated in the future upon the consummation of the
proposed acquisition by the Borrower as approved by Agent;
(C) The quotient obtained by dividing (i) the sum of
the Senior Debt (as defined below) as of the date of the
proposed acquisition plus the amounts to be borrowed under
the Acquisition Commitments in connection with the
acquisition in question plus any other Debt to be incurred
or assumed in connection with the proposed acquisition by
(ii) the Acquisition EBITDA (as defined below) plus, on a
pro forma basis, the Adjusted Target EBITDA of the Target
or, if applicable, the Adjusted Target EBITDA of the Target
attributable to the assets acquired, both for the most
recently completed twelve (12) month period prior to the
date of determination for which financial statements are
available, shall not exceed the ratio set forth below
opposite the applicable period during which the acquisition
is to occur:
<TABLE>
<CAPTION>
Period Ratio
---------------------------- -------
<S> <C>
Close Date through 12/31/97 3.25
1/1/98 through 12/31/98 2.75
1/1/99 through 2/29/00 2.5
</TABLE>
The term "Acquisition EBITDA" means, for any period
(the "Subject Period"), the total of the following
calculated without duplication for such period: (a) if
calculated on or after February 28, 1998, the EBITDA of
Holding and its Subsidiaries determined on a consolidated
basis or if calculated at any time prior to February 28,
1998, the product of (i) the EBITDA of Holding and its
Subsidiaries determined on a consolidated basis for the
period from the Closing Date to the month end most recently
completed as of the date of determination multiplied by
(ii) the Annualized Factor (the term "Annualized Factor"
means a number equal to the quotient obtained by dividing
twelve (12) by the number of months to have completely
lapsed since the Closing Date), plus (b) on a pro forma
basis, the Adjusted Target EBITDA of each Prior Target or,
as applicable, the Adjusted Target EBITDA of a Prior Target
attributable to the assets acquired from such Prior Target,
for any portion of such Subject Period occurring prior to
the date of the Borrower's acquisition of such Prior Target
or the related assets but only to the extent such Adjusted
Target EBITDA for such Prior Target can be established based
on financial statements of the Prior Target prepared in
accordance with GAAP. "Senior Debt" means, at the time of
determination, the sum of (a) all the Debt of Borrower and
the Subsidiaries determined on a consolidated basis minus
(b) all the Debt evidenced by the Subordinated Notes.
(D) The Target or the assets of the Target to be
acquired has produced positive operating cash flow in the
twelve (12) month period prior to the date of the proposed
acquisition, with operating cash flow for such period being
calculated by subtracting the Target's unfinanced capital
expenditures for such period from its Adjusted Target EBITDA
(as defined in clause (B) above) for such period;
(E) The average daily balances of the sum of
Holding's cash, cash equivalents and the Borrowing
Availability of Holding and the Subsidiaries for the thirty
(30) day period prior to the date of the proposed
acquisition and calculated as if the acquisition occurred on
the first (1st) day of such period, shall equal or exceed
Three Million Dollars ($3,000,000). The term "Borrowing
Availability", means at any time of determination, the
amount by which the Revolving Commitments exceed the
Outstanding Revolving Credit (as calculated from the most
recent Borrowing Base Report delivered under
Subsection 11.1(d)).
(F) A certificate of the chief financial officer or
chief executive officer of the Borrower certifying to the
calculations demonstrating compliance with this clause (v);
(d) Purchase Agreements. Prior to the closing of the proposed
acquisition, (i) Agent and the Banks shall have received executed copies
of the Purchase Agreements relating to the proposed acquisition; (ii)
the Purchase Agreements shall be in full force and effect and no
material term or condition thereof shall have been amended, modified, or
waived after the execution thereof (other than solely to extend the date
by which the proposed acquisition is required to occur) except those for
which prior written notice was provided to Agent; (iii) none of the
parties to the Purchase Agreements shall have failed to perform any
material obligation or covenant required by the Purchase Agreement to be
performed or complied with by it on or before the date of the closing of
the proposed acquisition unless waived with the consent of the Agent;
and (iv) Agent shall have received a certificate from Borrower's chief
executive officer or chief financial officer to the effect set forth in
clauses (i), (ii) and (iii) above.
(e) Proposed Acquiree Loan Documents. If the proposed
acquisition is an acquisition of the stock of a Target, then (i) the
Target shall execute and deliver to Agent a Subsidiary Guaranty, a
Subsidiary Security Agreement, Mortgage and such documentation required
by Agent to cause the Liens granted thereby to be perfected and to have
priority over all other Liens other than those permitted by Section 12.2
hereto, (ii) the Borrower shall execute and deliver to the Agent an
amendment to the Borrower Security Agreement describing as collateral
thereunder the stock of the Target, and (iii) the Borrower shall deliver
to the Agent the certificates representing the stock of the Target
together with undated stock powers duly executed in blank. If the
proposed acquisition is an acquisition of assets, the Borrower or the
Subsidiary acquiring the assets shall execute and deliver to Agent such
documentation requested by Agent to cause the property acquired to be
subject to a perfected Lien in favor of Agent for the benefit of the
Banks and for such Lien to have priority over all other Liens other than
those permitted by Section 12.2 hereto.
Section 9.3 All Loans and Letters of Credit. The obligation of each
Bank to make any Loan (including the initial Loan) and the obligation of the
Agent to issue any Letter of Credit (including the initial Letter of Credit)
are subject to the following additional conditions precedent:
(a) No Default. No Default shall have occurred and be
continuing, or would result from such Loan or Letter of Credit;
(b) Representations and Warranties. All of the representations
and warranties contained in Article 10 hereof and in the other Loan
Documents shall be true and correct on and as of the date of such Loan
or Letter of Credit with the same force and effect as if such
representations and warranties had been made on and as of such date
except (i) to the extent that such representations and warranties relate
specifically to another date or (ii) to the extent that a fact, event or
circumstance has occurred that makes such representation or warranty
untrue but which is not prohibited to occur or exist (or which does not
cause an Event of Default) under the Loan Documents; and
(c) Additional Documentation. The Agent shall have received
such additional approvals, opinions, or other documentation as the Agent
may reasonably request.
Each notice of borrowing by the Borrower hereunder, and each request for the
issuance of a Letter of Credit, shall constitute a representation and warranty
by the Borrower that the conditions precedent set forth in Subsections 9.3(a)
and 9.3(b) hereof have been satisfied (both as of the date of such notice and,
unless the Borrower otherwise notifies the Agent prior to the date of such
borrowing or Letter of Credit, as of the date of such borrowing or Letter of
Credit).
ARTICLE 10
Representations and Warranties
To induce the Agent and the Banks to enter into this Agreement, Holding
and Borrower represent and warrant to the Agent and the Banks that the
following statements are, and, after giving effect to the Related
Transactions, will be true, correct and complete:
Section 10.1 Corporate Existence. Holding and each Subsidiary is a
corporation duly organized, validly existing, and in good standing under the
laws of the jurisdiction of its incorporation; (b) has all requisite power and
authority to own its assets and carry on its business as now being or as
proposed to be 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. Borrower and each Obligated Party have the power and authority to
execute, deliver, and perform their respective obligations under the
Transaction Documents to which it is or may become a party.
Section 10.2 Financial Condition.
(a) Financial Statements. Holding has delivered to Agent
(i) audited consolidated financial statements of Holding as at and for
the Fiscal Year ended December 31, 1995, (ii) audited consolidated
financial statements of Southland as at and for its fiscal year ended
April 30, 1996, (iii) unaudited consolidated financial statements of
Holding as at and for the Fiscal Year ended December 31, 1996,
(iv) unaudited consolidated financial statements of Southland as at and
for the eight (8) month period ended December 31, 1996, and (v) the
draft of the audited consolidated financial statements of Holding as at
and for the Fiscal Year ended December 31, 1996. All financial
statements concerning Holding, the Subsidiaries and Southland have been
prepared in accordance with GAAP (subject in the case of the unaudited
financial statements to audit adjustments and the fact that such
financial statements do not contain footnotes), and present fairly, the
financial condition of the parties subject thereof as of the respective
dates indicated therein and the results of operations for the respective
periods indicated therein. Neither Holding nor any of the Subsidiaries
has any material contingent liabilities, liabilities for taxes, unusual
forward or long-term commitments, or unrealized or anticipated losses
from any unfavorable commitments except as referred to or reflected in
such financial statements. There has been no Material Adverse Effect
since the effective date of the most recent financial statements
delivered to Agent.
(b) Pro Forma. The Pro Forma was prepared by Holding based on
the unaudited consolidated balance sheet of Holding and Southland dated
December 31, 1996 and was prepared in accordance with GAAP, with only
such adjustments thereto as would be required in accordance with GAAP.
(c) Projections. The Projections delivered and to be delivered
(including the Projections annexed hereto as Schedule 10.2) have been
and will be prepared by Holding in light of the past operation of the
business of Southland, Holding and the Subsidiaries. The Projections
represent and will represent as of the date thereof the good faith
estimate of Holding and its senior management concerning the most
probable course of its business.
Section 10.3 Corporate Action; No Breach. The execution, delivery,
and performance by the Borrower and each Obligated Party of the Transaction
Documents to which each is or may become a party and compliance with the terms
and provisions hereof and thereof have been duly authorized by all requisite
action on the part of the Borrower and each Obligated Party and do not and
will not (a) violate or conflict with, or result in a breach of, or require
any consent under (i) the articles of incorporation or bylaws of the Borrower
or any Obligated Party, (ii) any applicable law, rule, or regulation or any
order, writ, injunction, or decree of any Governmental Authority or arbitrator
other than such violations, conflicts and breaches which do not have a
Material Adverse Effect, or (iii) any agreement or instrument to which
Holding, any of the Subsidiaries, or any other Obligated Party is a party or
by which any of them or any of their property is bound or subject other than
such violations, conflicts and breaches which do not have a Material Adverse
Effect, or (b) constitute a default under any such agreement or instrument, or
result in the creation or imposition of any Lien (except as provided herein or
Liens in favor of Agent) upon any of the revenues or assets of Holding, any
Subsidiary, or any other Obligated Party other than such defaults which do not
have a Material Adverse Effect.
Section 10.4 Operation of Business. Holding and each of the
Subsidiaries possess all licenses, permits, franchises, patents, copyrights,
trademarks, and tradenames, or rights thereto, necessary to conduct their
respective businesses substantially as now conducted and as presently proposed
to be conducted except those that the failure to so possess could not
reasonably be expected to have a Material Adverse Effect, and Holding and each
of the Subsidiaries are not in violation of any valid rights of others with
respect to any of the foregoing.
Section 10.5 Litigation and Judgments. Except as disclosed on
Schedule 10.5 hereto, there is no action, suit, investigation, or proceeding
before or by any Governmental Authority or arbitrator pending, or to the
knowledge of Holding, threatened against or affecting Holding or any
Subsidiary. Except as disclosed on Schedule 10.5, there are no outstanding
judgments against Holding or any Subsidiary. The matters disclosed on
Schedule 10.5 are not reasonably expected to result in a Material Adverse
Effect.
Section 10.6 Rights in Properties; Liens. Holding and each
Subsidiary have good title to or valid leasehold interests in their respective
properties and assets, real and personal, including the properties, assets,
and leasehold interests reflected in the financial statements described in
Section 10.2 hereto, and none of the properties, assets, or leasehold
interests of Holding or any Subsidiary is subject to any Lien, except as
permitted by Section 12.2 hereto.
Section 10.7 Enforceability. The Transaction Documents to which
the Borrower or any Obligated Party is a party, when delivered, shall
constitute the legal, valid, and binding obligations of the Borrower or the
Obligated Party, as applicable, enforceable against Borrower or the applicable
Obligated Party in accordance with their respective terms, except as limited
by bankruptcy, insolvency, or other laws of general application relating to
the enforcement of creditors' rights and general principles of equity.
Section 10.8 Approvals. No authorization, approval, or consent of,
and no filing or registration with, any Governmental Authority or third party
is or will be necessary for the execution, delivery, or performance by the
Borrower or any Obligated Party of the Transaction Documents to which each is
or may become a party or for the validity or enforceability thereof except for
such authorizations, approvals, consents, filings and registrations which have
been obtained and are described in the Southland Purchase Agreement or those
the failure to obtain or make will not have a Material Adverse Effect. The
waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976
applicable to the Southland Acquisition has expired without any adverse
action.
Section 10.9 Debt. Neither Holding nor any Subsidiary has any
Debt, except as permitted by Section 12.1 hereto.
Section 10.10 Taxes. Holding and each Subsidiary have filed all
material tax returns (federal, state, and local) required to be filed,
including all income, franchise, employment, property, and sales tax returns,
and have paid all of their respective liabilities for taxes, assessments,
governmental charges, and other levies that are due and payable other than
those being contested in good faith by appropriate proceedings diligently
pursued for which adequate reserves have been established. Except as
disclosed in writing to Agent, Holding knows of no pending investigation of
Holding or any Subsidiary by any taxing authority or of any pending but
unassessed tax liability of Holding or any Subsidiary.
Section 10.11 Margin Securities. Neither Holding nor any Subsidiary
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 Loan will be
used to purchase or carry any margin stock or to extend credit to others for
the purpose of purchasing or carrying margin stock.
Section 10.12 ERISA. Holding and each Subsidiary are in compliance
with all applicable provisions of ERISA except for such events of
noncompliance that will not have a Material Adverse Effect. Neither a
Reportable Event nor a Prohibited Transaction has occurred and is continuing
with respect to any Plan. No notice of intent to terminate a Plan has been
filed, nor has any Plan been terminated. No circumstances exist which
constitute grounds entitling the PBGC to institute proceedings to terminate,
or appoint a trustee to administer, a Plan, nor has the PBGC instituted any
such proceedings. Neither Holding nor any ERISA Affiliate has completely or
partially withdrawn from a Multiemployer Plan. Holding and each ERISA
Affiliate have met their minimum funding requirements under ERISA with respect
to all of their Plans except for those instances of noncompliance with such
requirements that will not have a Material Adverse Effect. The present value
of all vested benefits under each Plan do not exceed the fair market value of
all Plan assets allocable to such benefits, as determined on the most recent
valuation date of the Plan and in accordance with ERISA, by an amount that
will have a Material Adverse Effect. Neither Holding nor any ERISA Affiliate
has incurred any liability to the PBGC under ERISA in an amount that will have
a Material Adverse Effect.
Section 10.13 Disclosure. All factual information furnished by or
on behalf of Holding or any Subsidiary in writing to the Agent or any Bank
(including, without limitation, all information contained in the Transaction
Documents) for purposes of or in connection with this Agreement, the other
Transaction Documents or any transaction contemplated herein or therein is,
and all other such factual information hereafter furnished by or on behalf of
Holding or any Subsidiary to the Agent or any Bank, will be true and accurate
in all material respects on the date as of which such information is dated or
certified and not incomplete by omitting to state any fact necessary to make
such information not misleading in any material respect at such time in light
of the circumstances under which such information was provided.
Section 10.14 Subsidiaries; Capitalization. As of the Closing Date
and after giving effect to the Related Transactions, Holding has no
Subsidiaries other than those listed on Schedule 10.14 hereto. As of the
Closing Date and after giving effect to the Related Transactions, Schedule
10.14 sets forth the jurisdiction of incorporation or organization of each
such Subsidiary, the percentage of the Holding's ownership of the outstanding
voting stock (or other ownership interests) of each such Subsidiary and the
authorized, issued and outstanding capital stock of Holding and each
Subsidiary. As of the Closing Date and after giving effect to the Related
Transactions, Rice Partners, F-Southland, L.L.C., FF-Southland, L.P. and F-
Jotan, L.L.C. own the shares of capital stock of Holding disclosed in Section
II of Schedule 10.14. All of the outstanding capital stock of Holding and
each Subsidiary has been validly issued, is fully paid, is nonassessable and
has not been issued in violation of any preemptive or similar rights. Except
as disclosed on Schedule 10.14, there are (a) no outstanding subscriptions,
options, warrants, calls, or rights (including preemptive rights) to acquire,
and no outstanding securities or instruments convertible into, capital stock
of Holding or any Subsidiary, and (b) no shareholder agreements, voting trusts
or similar agreements in effect and binding on any shareholder of Holding or a
Subsidiary or the capital stock of Holding and a Subsidiary. All shares of
capital stock of Holding and each Subsidiary and the Subordinated Notes were
issued in compliance with all applicable state and federal securities laws.
Section 10.15 Agreements. Neither Holding nor any Subsidiary is a
party to any indenture, loan, or credit agreement, or to any lease or other
agreement or instrument, or subject to any charter or corporate restriction
that could reasonably be expected to have a Material Adverse Effect. Neither
Holding nor any Subsidiary is in default in any respect in the performance,
observance, or fulfillment of any of the obligations, covenants, or conditions
contained in any agreement or instrument to which it is a party other than
defaults which will not have a Material Adverse Effect.
Section 10.16 Compliance with Laws. Neither Holding nor any
Subsidiary is in violation of any law, rule, regulation, order, or decree of
any Governmental Authority or arbitrator other than defaults which will not
have a Material Adverse Effect.
Section 10.17 Investment Company Act. Neither Holding nor any
Subsidiary is an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
Section 10.18 Public Utility Holding Company Act. Neither Holding
nor any Subsidiary 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.
Section 10.19 Environmental Matters.
(a) Holding, each Subsidiary, and all of their respective
properties, assets, and operations are in compliance in all material
respects with all Environmental Laws. Holding is not aware of, nor has
Holding received notice of, any past, present, or future conditions,
events, activities, practices, or incidents which may interfere with or
prevent the material compliance or continued material compliance of
Holding and the Subsidiaries with all Environmental Laws;
(b) Holding and each Subsidiary have obtained all permits,
licenses, and authorizations that are required under applicable
Environmental Laws the failure of which to obtain would result in a
Material Adverse Effect. All such permits are in good standing and
Holding and its Subsidiaries are in compliance in all material respects
with all of the terms and conditions of such permits;
(c) No Hazardous Materials exist on, about, or within or have
been used, generated, stored, transported, disposed of on, or Released
from any of the properties or assets of Holding or any Subsidiary except
(i) in compliance in all material respects with Environmental Laws and
(ii) as disclosed in that certain letter dated March 4, 1997 from ERM-
Southeast, Inc. to Holding relating to Holding's Thomasville Georgia
location (the "Phase II Report"). The Hazardous Materials identified in
the Phase II report (i) were not Released by Holding or any of its
Affiliates and (ii) have not been and are not now utilized by Holding or
any of its Affiliates at the Thomasville Georgia location of Holding.
The use which Holding and the Subsidiaries make and intend to make of
their respective properties and assets will not result in the use,
generation, storage, transportation, accumulation, disposal, or Release
of any Hazardous Material on, in, or from any of their properties or
assets except in compliance in all material respects with Environmental
Laws;
(d) Neither Holding nor any of the Subsidiaries nor any of their
respective currently or previously owned or leased properties or
operations is subject to any outstanding or, to the best of its
knowledge, threatened order from or agreement with any Governmental
Authority or other Person or subject to any judicial or administrative
proceeding with respect to (i) failure to comply with Environmental
Laws, (ii) Remedial Action, or (iii) any Environmental Liabilities
arising from a Release or threatened Release;
(e) There are no conditions or circumstances associated with the
currently or previously owned or leased properties or operations of
Holding or any of the Subsidiaries that could reasonably be expected to
give rise to any Environmental Liabilities;
(f) Neither Holding nor any of the Subsidiaries is a treatment,
storage, or disposal facility requiring a permit under the Resource
Conservation and Recovery Act, 42 U.S.C. 6901 et seq., regulations
thereunder or any comparable provision of state law. Holding and the
Subsidiaries are in compliance with all applicable financial
responsibility requirements of all Environmental Laws in all material
respects;
(g) Neither Holding nor any of the Subsidiaries has filed or
failed to file any notice required under applicable Environmental Law
reporting a Release; and
(h) No Lien arising under any Environmental Law has attached to
any property or revenues of Holding or the Subsidiaries.
Section 10.20 Transaction Documents. As of the Closing Date,
Holding has delivered to Agent a complete and correct copy of the Southland
Acquisition Documents, the Subordinated Loan Documents and the Capitalization
Documents, each such Transaction Document is in full force and effect and no
material term or condition thereof has been amended or otherwise waived except
for such amendments and waivers approved by the Agent, none of the parties
thereto has failed to perform any material obligation thereunder, and each of
the representations and warranties given therein is true and correct in all
material respects on and as of the Closing Date.
Section 10.21 Broker's Fees. Except for the payment of a finder's
fee in the amount of Four Hundred Thousand Dollars ($400,000) to M.S. Farrell
at the closing of the Southland Acquisition and an investment banking fee of
up to Four Hundred Fifty Thousand Dollars ($450,000) to Dominion Partners at
the closing of the Southland Acquisition, no broker's or finder's fee,
commission or similar compensation will be payable with respect to the Related
Transactions. No other similar fees or commissions will be payable by Holding
or any Subsidiary for any other services rendered to Holding or any of its
Subsidiaries ancillary to the Related Transaction.
Section 10.22 Employee Matters. Except as set forth on Schedule
10.22, (a) neither Holding nor any Subsidiary, nor any of their respective
employees is subject to any collective bargaining agreement, (b) no petition
for certification or union election is pending with respect to the employees
of Holding or any Subsidiary and no union or collective bargaining unit has
sought such certification or recognition with respect to the employees of
Holding or any Subsidiary and (c) there are no strikes, slowdowns, work
stoppages or controversies pending or, to the best knowledge of Holding after
due inquiry, threatened between Holding or any Subsidiary and its respective
employees, other than employee grievances arising in the ordinary course of
business which could not reasonably be expected to have, either individually
or in the aggregate, a Material Adverse Effect. Except as set forth on
Schedule 10.22, neither Holding nor any Subsidiaries is subject to an
employment contract.
Section 10.23 Solvency. As of and from and after the date of this
Agreement and after giving effect to the consummation of the Related
Transactions, Holding and each of the Subsidiaries individually and on a
consolidated basis: (a) owns and will own assets the fair saleable value of
which are (i) greater than the total amount of liabilities (including
contingent liabilities) and (ii) greater than the amount that will be required
to pay the probable liabilities of its then existing debts as they become
absolute and matured considering all financing alternatives and potential
asset sales reasonably available to it; (b) has capital that is not
unreasonably small in relation to its business as presently conducted or any
contemplated or undertaken transaction; and (c) does not intend to incur and
does not believe that it will incur debts beyond its ability to pay such debts
as they become due.
ARTICLE 11
Positive Covenants
Holding and Borrower covenant and agree that, as long as the Obligations
or any part thereof are outstanding or any Bank has any Commitment hereunder,
they will perform and observe the following positive covenants:
Section 11.1 Reporting Requirements. Holding will furnish to the
Agent:
(a) Annual Financial Statements. As soon as available, and in
any event within one hundred twenty (120) days after the end of each
Fiscal Year of the Holding, beginning with the Fiscal Year ending
December 31, 1996, (i) a copy of the annual audit report of the Holding
and the Subsidiaries for such Fiscal Year containing, on a consolidated
basis, balance sheets and statements of income, retained earnings, and
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, all in reasonable detail and audited and
certified on an unqualified basis by Ernst & Young or other independent
certified public accountants of recognized standing selected by Holding
and reasonably acceptable to the Agent, to the effect that such report
has been prepared in accordance with GAAP; and (ii) a copy of the annual
unaudited report of Holding and the Subsidiaries for such Fiscal Year
containing, on a consolidating basis balance sheets and statements of
income, retained earnings, and 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, and in
reasonable detail certified by the chief executive officer or chief
financial officer of Holding to have been prepared in accordance with
GAAP (but excluding footnotes) and to fairly present the financial
condition and results of operation of Holding and the Subsidiaries, on a
consolidating basis at the date and for the Fiscal Year then ended;
(b) Monthly Financial Statements. As soon as available, and in
any event within thirty (30) days after the end of each month, a copy of
an unaudited financial report of Holding and the Subsidiaries as of the
end of such period and for the portion of the Fiscal Year then ended
containing, on a consolidated and consolidating basis, balance sheets
and statements of income, retained earnings, and cash flow, in each case
setting forth in comparative form the figures for the corresponding
period of the preceding Fiscal Year, all in reasonable detail certified
by the chief executive officer or chief financial officer of Holding to
have been prepared in accordance with GAAP (but excluding footnotes) and
to fairly present (subject to year-end audit adjustments) the financial
condition and results of operations of Holding and the Subsidiaries, on
a consolidated and consolidating basis, at the date and for the periods
indicated therein;
(c) Compliance Certificate. Within thirty (30) days after the
end of each month and accompanying the annual financial statements
delivered in accordance with Subsection 11.1(a), a Compliance
Certificate, together, as of the end of each Fiscal Quarter, with
schedules setting forth the calculations supporting the computations
therein;
(d) Borrowing Base Report. As soon as available, and in any
event within thirty (30) days after the end of each month, a Borrowing
Base Report with the account aging report required thereby;
(e) Projections. As soon as available and in any event forty-
five (45) days after the beginning of each Fiscal Year of Holding,
Projections for the forthcoming Fiscal Year and a proforma projection of
the Holding's compliance with the financial covenants in this Agreement
for the same period;
(f) Management Letters. Promptly upon receipt thereof, a copy
of any management letter or written report submitted to Holding or any
Subsidiary by independent certified public accountants with respect to
the business, condition (financial or otherwise), operations, prospects,
or properties of Holding or any Subsidiary;
(g) Notice of Litigation. Promptly after the commencement
thereof, notice of all actions, suits, and proceedings before any
Governmental Authority or arbitrator affecting Holding or any Subsidiary
which, if determined adversely to Holding or such Subsidiary, could
reasonably be expected to have a Material Adverse Effect;
(h) Notice of Default. As soon as possible and in any event
within five (5) Business Days after an officer of Holding has knowledge
of the occurrence of each Default, a written notice setting forth the
details of such Default and the action that Holding has taken and
proposes to take with respect thereto;
(i) ERISA Reports. If requested by the Agent, promptly after
the filing or receipt thereof, copies of all reports, including annual
reports, and notices which Holding or any Subsidiary files with or
receives from the PBGC or the U.S. Department of Labor under ERISA; and
as soon as possible and in any event within five (5) Business Days after
Holding or any Subsidiary knows or has reason to know that any
Reportable Event or Prohibited Transaction has occurred with respect to
any Plan or that the PBGC or Holding or any Subsidiary has instituted or
will institute proceedings under Title IV of ERISA to terminate any
Plan, a certificate of the chief financial officer of Holding setting
forth the details as to such Reportable Event or Prohibited Transaction
or Plan termination and the action that Holding proposes to take with
respect thereto;
(j) Reports to Other Creditors. Promptly after the furnishing
thereof, copies of any notice, statement or report furnished to any
other party pursuant to the terms of any indenture, loan, credit or
similar agreement that governs Debt outstanding with a principal balance
in excess of Two Hundred Thousand Dollars ($200,000) not otherwise
required to be furnished to the Agent and the Banks pursuant to any
other clause of this Section;
(k) Notice of Material Adverse Effect. As soon as possible and
in any event within five (5) Business Days of the occurrence thereof,
written notice of any matter that could reasonably be expected to have a
Material Adverse Effect;
(l) Proxy Statements, Etc. As soon as available, one copy of
each financial statement, report, notice or proxy statement sent by
Holding or any Subsidiary to its stockholders generally and one copy of
each regular, periodic or special report, registration statement, or
prospectus filed by Holding or any Subsidiary with any securities
exchange or the Securities and Exchange Commission or any successor
agency;
(m) General Information. Promptly, such other information
concerning Holding or any Subsidiary as the Agent or any Bank may from
time to time reasonably request and which may be obtained without the
disclosure of materials protected by the attorney-client or other
privilege.
Section 11.2 Maintenance of Existence; Conduct of Business. Except
as permitted by Section 12.3, Holding will, and will cause each Subsidiary to,
preserve and maintain its corporate existence and all of its leases,
privileges, licenses, permits, franchises, qualifications, and rights that are
necessary in the ordinary conduct of its business and where the failure to so
preserve or maintain such leases and other rights would result in a Material
Adverse Effect. Holding will, and will cause each Subsidiary to, conduct its
business in an orderly and efficient manner in accordance with good business
practices.
Section 11.3 Maintenance of Properties. Holding will, and will
cause each Subsidiary to, maintain, keep, and preserve all of its material
properties necessary in the conduct of its business in good working order and
condition, ordinary wear, tear and casualties excepted.
Section 11.4 Taxes and Claims. Holding will, and will cause each
Subsidiary to, pay or discharge at or before maturity or before becoming
delinquent (a) all taxes, levies, assessments, and governmental charges
imposed on it or its income or profits or any of its property, 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
Holding nor any Subsidiary shall be required to pay or discharge any tax,
levy, assessment, or governmental charge (i) which is being contested in good
faith by appropriate proceedings diligently pursued, and for which adequate
reserves in accordance with GAAP have been established or (ii) if the failure
to pay the same would not result in a material Lien on the property of Holding
or any Subsidiary and would not otherwise result in a Material Adverse Effect.
Section 11.5 Insurance. Holding will, and will cause each
Subsidiary to, maintain insurance with financially sound and reputable
insurance companies in such amounts and covering such risks as are usually
carried by corporations engaged in similar businesses and owning similar
properties in the same general areas in which Holding and the Subsidiaries
operate, provided that in any event Holding will maintain and cause each
Subsidiary to maintain workers' compensation insurance, property insurance and
comprehensive general liability insurance reasonably satisfactory to the
Agent. Each general liability insurance policy shall name the Agent as
additional insured, each insurance policy covering Collateral shall name the
Agent as loss payee and shall provide that such policy will not be canceled or
materially changed without thirty (30) days prior written notice to the Agent.
Section 11.6 Keeping Books and Records. Holding will, and will
cause each Subsidiary to, maintain proper books of record and account in which
full, true, and correct entries in conformity with GAAP shall be made of all
dealings and transactions in relation to its business and activities.
Section 11.7 Compliance with Laws. Holding will, and will cause
each Subsidiary to, comply with all applicable laws (including, without
limitation, all Environmental Laws), rules, regulations, orders, and decrees
of any Governmental Authority or arbitrator other than (i) such noncompliance
which will not have a Material Adverse Effect and (ii) any such laws, rules,
regulations, orders, and decrees contested by appropriate actions or
proceedings diligently pursued, if adequate reserves in conformity with GAAP
with respect thereto are established to the reasonable satisfaction of Agent.
Section 11.8 Compliance with Agreements. Holding will, and will
cause each Subsidiary to, comply with all agreements, contracts, and
instruments binding on it or affecting its properties or business other than
such noncompliance which will not have a Material Adverse Effect.
Section 11.9 Further Assurances; Exception to Perfection and
Collateral Matters.
(a) Further Assurance. Holding will, and will cause each
Subsidiary to, execute and deliver such further documentation and take
such further action as may be requested by the Agent to carry out the
provisions and purposes of the Loan Documents and to create, preserve,
protect and perfect the Liens of the Agent for the benefit of itself and
the Banks in the Collateral; provided that prior to the occurrence of a
Default, neither Holding nor any Subsidiary shall be required to:
(i) file any financing statements to perfect the Agent's
Lien in fixtures with respect to any one parcel of property if the
aggregate book value of the fixtures located on such parcel of
property do not exceed Ten Thousand Dollars ($10,000) (Holding
represents to the Agent and the Banks that to its knowledge, other
than the Mortgaged Property located in Thomasville, Georgia, no
parcel of property owned by Holding or any Subsidiaries has
fixtures with a book value of Ten Thousand Dollars ($10,000) as of
the Closing Date);
(ii) obtain any Lien acknowledgments, control or agency
agreements from any institution holding a bank account identified
pursuant to the Borrower Security Agreement, Holding Security
Agreement or the applicable Subsidiary Security Agreement except
for the institution holding the accounts identified on
Schedule 11.9;
(iii) cause the Agent's Lien to be noted on any certificate
of title evidencing any equipment that, at the time of such
notation or the Obligated Party's acquisition, (i) is subject to a
lease or (ii) has a book value of less than Ten Thousand Dollars
($10,000) (Holding represents to the Agent and the Banks that to
its knowledge and as of the Closing Date, no single piece of
equipment has a book value equal to or greater than Ten Thousand
Dollars ($10,000));
(iv) obtain any landlord or mortgagee consents, waivers or
subordinations relating to the Lien of the Agent in a leasehold
estate or any inventory with respect to any property of Holding or
any Subsidiary other than the Mortgaged Property or unless, in the
case of inventory, such inventory is to be included as Eligible
Inventory; provided a landlord consent, waiver or subordination
does not need to be obtained with respect to the property located
at 125 National Road, Edison, New Jersey;
(v) obtain control over any security or commodity account
now or hereafter identified in or pursuant to the Borrower
Security Agreement, Holding Security Agreement or the applicable
Subsidiary Security Agreement; or
(vi) record any mortgage covering a leasehold estate.
If a Default occurs and Agent requests, then Holding shall take
such action as the Agent may reasonably request to perfect and protect
the Liens of the Agent in any of the foregoing Collateral described in
this clause (a).
(b) Mortgages; Title Insurance; Surveys
(i) Title Insurance. On the Closing Date (or within sixty
(60) days following delivery of any Mortgage with respect to
Additional Mortgaged Property that is owned in fee), Holding shall
deliver or cause to be delivered to Agent lender's title insurance
policies issued by title insurers reasonably satisfactory to Agent
(the "Mortgage Policies") in form and substance and in amounts
reasonably satisfactory to Agent assuring Agent that the Mortgages
which cover properties owned in fee simple are valid and
enforceable first priority mortgage liens on the respective
Mortgaged Property or Additional Mortgaged Property, free and
clear of all defects and encumbrances except as permitted by
Section 12.2. The Mortgage Policies shall be in form and
substance reasonably satisfactory to Agent and shall include an
endorsement insuring against the effect of future advances under
this Agreement, for mechanics' liens and for any other matter that
Agent may reasonably request, and shall provide for affirmative
insurance and such reinsurance as Agent may reasonably request.
In the case of each leasehold constituting Mortgaged Property or
Additional Mortgaged Property, Agent (for the benefit of Lenders)
shall have received a copy of the underlying lease, such estoppel
letters, consents and waivers from the landlords and
non-disturbance agreements from any holders of mortgages or deeds
of trust on such real estate as may have been requested by Agent,
which letters shall be in form and substance satisfactory to
Agent.
(ii) Additional Mortgaged Property. Agent may from time to
time designate real property or leasehold interests of Holding or
any Subsidiary after the date hereof as "Additional Mortgaged
Property", in which case Holding shall as promptly as possible
(and in any event within sixty (60) days after such designation)
deliver to Agent a fully executed Mortgage, in form and substance
satisfactory to Agent together with title insurance policies and
surveys as required by this Subsection 11.9(b). Holding agrees
that, following the taking of the actions with respect to any
Additional Mortgaged Property required by the immediately
preceding sentence, Agent shall have a valid and enforceable first
priority mortgage on the respective Additional Mortgaged Property,
free and clear of all defects and encumbrances except as permitted
by Section 12.2.
(iii) Surveys. On or before the Closing Date (or within
thirty (30) days following delivery of any Mortgage with respect
to Additional Mortgaged Property), Holding shall deliver or cause
to be delivered to Agent current surveys, certified by a licensed
surveyor, for all real property that is the subject of the
Mortgage Policies including Additional Mortgaged Property for
which a Mortgage Policy is issued. All such surveys shall be
sufficient to allow the issuer of the mortgage policy to issue a
lender's policy.
(iv) Appraisals. If requested by Agent or required by
applicable law, Holding shall deliver or cause to be delivered
from time to time to Agent a current appraisal of each Mortgaged
Property and each Additional Mortgaged Property, such appraisals
to be in form and substance satisfactory to Agent; provided that,
prior to an Event of Default, Agent may only require Borrower to
pay the costs of one (1) appraisal for each parcel of Mortgaged
Property and each Additional Mortgaged Property in any twenty-four
(24) month period.
(c) Subsidiary Pledge. Upon the creation or acquisition of any
Subsidiary, Holding shall cause such Subsidiary to execute and deliver
to Agent a Subsidiary Guaranty, a Subsidiary Security Agreement, a
Mortgage and such other documentation as the Agent may request to cause
such Subsidiary to evidence, perfect or otherwise implement the guaranty
and security for the repayment of the Obligations contemplated by a
Subsidiary Guaranty, Subsidiary Security Agreement and Mortgage. If any
Subsidiary is created or acquired after the Closing Date, the Borrower
shall execute and deliver to the Agent an amendment to the Borrower
Security Agreement describing as collateral thereunder the stock of or
other ownership interest in the new Subsidiary and the Borrower shall
deliver the certificates representing such stock or other interests to
the Agent together with undated stock or other powers duly executed in
blank.
Section 11.10 ERISA. Holding will, and will cause each Subsidiary
to, comply with all minimum funding requirements and all other material
requirements of ERISA, if applicable, so as not to give rise to any liability
which will have a Material Adverse Effect.
Section 11.11 Interest Rate Protection. By April 30, 1997, Borrower
will obtain and maintain acceptable interest rate protection in the form of an
interest rate swap, cap, collar or other similar mechanism satisfactory to the
Agent, designed to protect the Borrower against increases in interest rates,
for a minimum notional amount of fifty percent (50%) of the aggregate amount
of the outstanding Term A Loans and Term B Loans, for a minimum term of two
(2) years and protecting against increases in interest rate above a rate
equivalent to the LIBOR Rate plus no more than three percent (3%).
Section 11.12 Inspection; Bank Meeting. Holding shall permit any
authorized representatives of Agent to visit and inspect any of the properties
of Holding or any of the Subsidiaries, including its and their financial and
accounting records, and to make copies and take extracts therefrom, and to
discuss its and their affairs, finances and business with its and their
officers and certified public accountants, at such reasonable times during
normal business hours and as often as may be reasonably requested; provided
that as long as no Default exists, the Agent will not be permitted to visit
and inspect any property of Holding or of any Subsidiary more than two (2)
times in any fiscal year. After the occurrence and during the continuance of
a Default, Agent and any Bank may visit and inspect the properties of Holding
and of any Subsidiary as often as may be reasonably requested. Any Bank may,
at its own expense, accompany the Agent on any visit or inspection occurring
prior to the occurrence and continuance of a Default.
Section 11.13 Acquisition Agreements. Holding will, and will cause
each Subsidiary to, at its expense: (a) perform and observe all the terms and
provisions of the Southland Acquisition Documents and the Purchase Agreements
to be performed or observed by it, maintain such agreements in full force and
effect, enforce such agreements in accordance with their respective terms, and
take all action to such end as may be from time to time reasonably requested
by the Agent in each case, to the extent of prudent business judgment; (b)
furnish to the Agent promptly on receipt thereof, copies of all notices,
requests, and other documents received by it under or pursuant to the
Southland Acquisition Documents and the Purchase Agreements and (c) from time
to time (1) furnish to the Agent such information and requests regarding such
agreements as the Agent may reasonably request and (2) upon request of the
Agent make to any other party to any such agreement such demands and requests
for information and reports or for action as it is entitled to make
thereunder. Holding will not, and will not permit any Subsidiary to unless
required by applicable law: (a) cancel or terminate any of the Southland
Acquisition Documents or any Purchase Agreements or consent to or accept any
cancellation or termination thereof; (b) amend or otherwise modify any such
agreements or give any material consent, waiver or approval thereunder; (c)
waive any default under or breach of any such agreements in any material
respect; or (d) take any other action in connection with any such agreement
that would impair in any material respect the Agent and the Bank's value of
the interest or right of Holding or any Obligated Party thereunder or that
would impair the interest or rights of the Agent and the Banks.
Section 11.14 Asset Transfer. On or before May 31, 1997, Holding
shall take all action necessary to cause the Asset Transfer to occur and shall
cause the Asset Transfer to be consummated.
ARTICLE 12
Negative Covenants
Holding and Borrower covenant and agree that, as long as the Obligations
or any part thereof are outstanding or any Bank has any Commitment hereunder,
they will perform and observe the following negative covenants:
Section 12.1 Debt. Holding will not, and will not permit any
Subsidiary to, incur, create, assume, or permit to exist any Debt, except:
(a) Debt to the Banks pursuant to the Loan Documents;
(b) Debt evidenced by the Subordinated Loan Documents (and any
refinancings or replacements of all or a portion thereof so long as (i)
the weighted average maturity of such refinancing or replacement Debt is
equal to or longer than the Subordinated Notes, (ii) such refinancing or
replacement Debt is subordinated to the Obligations to the same or
greater extent as the Subordinated Notes are so subordinated, and (iii)
the covenants contained in any agreement evidencing such refinancing or
replacement Debt are not more onerous, taken as a whole, as the
covenants contained in the Subordinated Loan Documents); provided,
however, that the aggregate amount outstanding under the Subordinated
Notes (or any refinancing or replacement thereof) shall never exceed
Nine Million Dollars ($9,000,000) minus all principal payments made
under the Subordinated Notes;
(c) Debt described on Schedule 12.1 hereto (but excluding the
Previous Debt after the Closing Date), and any extensions, renewals or
refinancings of such existing Debt so long as (i) the principal amount
of such Debt after such renewal, extension or refinancing shall not
exceed the principal amount of such Debt which was outstanding
immediately prior to such renewal, extension or refinancing, and (ii)
such Debt shall not be secured by any assets other than assets securing
such Debt, if any, prior to such renewal, extension or refinancing;
provided that the Debt and other monetary obligations owed to Thomas J.
Gilligan may not be renewed, extended or refinanced except with advances
under the Revolving Loans and must be repaid in full on or before
April 30, 1997;
(d) Debt of a Subsidiary to Borrower; provided that (i) such
Debt must be evidenced by promissory notes which have been pledged to
the Agent, for the benefit of each Bank as security for the Obligations;
(ii) the proceeds of such Debt shall be used to finance the working
capital requirements of such Subsidiary or to finance a Permitted
Acquisition; and (iii) such Debt shall have such other terms and
conditions as the Agent may reasonably require;
(e) Guaranties incurred in the ordinary course of business with
respect to surety and appeal bonds, performance and return-of-money
bonds and other similar obligations;
(f) Debt of Borrower (including Capital Lease Obligations)
incurred after the Closing Date not to exceed One Million Five Hundred
Thousand Dollars ($1,500,000) in the aggregate at any time outstanding
secured by purchase money Liens permitted by Section 12.2(g);
(g) Debt constituting obligations to reimburse worker's
compensation insurance companies for claims paid by such companies on
Holding's or a Subsidiaries' behalf in accordance with the policies
issued to Holding and the Subsidiaries;
(h) Debt arising under the Transaction Documents; and
(i) Debt of Borrower other than that specifically described in
clauses (a) through (h) of this Section 12.1 (which may include Debt
incurred or assumed by Borrower in connection with a Permitted
Acquisition) which in the aggregate does not exceed One Million Dollars
($1,000,000) at any time outstanding.
Section 12.2 Limitation on Liens and Restrictions on Subsidiaries.
Holding will not, and will not permit any Subsidiary to, incur, create,
assume, or permit to exist any Lien upon any of its property, assets, or
revenues, whether now owned or hereafter acquired, except the following:
(a) Liens disclosed on Schedule 12.2 hereto or in the Mortgage
Policies; provided any Liens securing the Previous Debt will not be
permitted after the Closing Date and the Liens granted in favor of
Thomas J. Gilligan in the treasury shares of Southland will not be
permitted after the Debt or other obligations secured thereby has been
paid;
(b) Liens in favor of the Agent for the benefit of itself and
the Banks pursuant to the Loan Documents;
(c) Encumbrances consisting of minor easements, zoning
restrictions, or other restrictions on the use of real property that do
not (individually or in the aggregate) materially affect the value of
the assets encumbered thereby or materially impair the ability of
Holding or the Subsidiaries to use such assets in their respective
businesses, and none of which is violated in any material respect by
existing or proposed structures or land use;
(d) Liens (other than Liens relating to Environmental
Liabilities or ERISA) for taxes, assessments, or other governmental
charges that are not delinquent or which are being contested in good
faith and for which adequate reserves have been established;
(e) Liens of mechanics, materialmen, warehousemen, carriers,
landlords or other similar statutory Liens securing obligations that are
not yet due or are being contested in good faith by appropriate
proceedings diligently pursued and for which adequate reserves have been
established in accordance with GAAP and are incurred in the ordinary
course of business;
(f) Liens resulting from good faith deposits to secure payments
of worker's compensation or other social security programs or to secure
the performance of tenders, statutory obligations, surety and appeal
bonds, bids, contracts (other than for payment of Debt);
(g) Liens for purchase money obligations (including the rights
of lessors under capitalized leases) provided that: (i) the purchase of
the asset subject to any such Lien is permitted under Section 13.4
hereof; (ii) the Debt secured by any such Lien is permitted under
Section 12.1 hereof; and (iii) any such Lien encumbers only the asset so
purchased;
(h) Any attachment or judgment Lien not constituting an Event of
Default;
(i) Any interest or title of a lessor or sublessor under any
lease incurred in the ordinary course of business and not otherwise
prohibited by the terms of this Agreement; and
(j) Liens arising from filing UCC financing statements regarding
leases permitted by this Agreement.
Neither Holding nor any Subsidiary shall enter into or assume any agreement
(other than the Loan Documents, the Subordinated Loan Documents and the
Capitalization Documents) prohibiting the creation or assumption of any Lien
upon its properties or assets, whether now owned or hereafter acquired unless
such agreement permits the granting of Liens to secure the Obligations;
provided that, in connection with the creation of purchase money Liens,
Holding or the Subsidiary may agree that it will not permit any other Liens to
encumber the asset subject to such purchase money Lien. Except as provided
herein, Holding will not and will not permit any Subsidiaries directly or
indirectly to create or otherwise cause or suffer to exist or become effective
any consensual encumbrance or restriction of any kind on the ability of any
Subsidiary to: (1) pay dividends or make any other distribution on any of such
Subsidiary's capital stock owned by Holding or any Subsidiary; (2) subject to
subordination provisions, pay any Debt owed to Borrower or any other
Subsidiary; (3) make loans or advances to Holding or any Subsidiary; or (4)
transfer any of its property or assets to Borrower or any Subsidiary.
Section 12.3 Mergers, Etc. Holding will not, and will not permit
any Subsidiary to, become a party to a merger or consolidation, or purchase or
otherwise acquire all or a substantial part of the business or assets of any
Person or any shares or other evidence of beneficial ownership of any Person,
or wind-up, dissolve, or liquidate itself; provided that
(a) as long as no Default exists or would result therefrom and
provided Holding gives the Agent and the Banks prior written notice:
(i) Holding and the Subsidiaries may acquire shares or
other evidence of beneficial ownership of a Person in accordance
with the restrictions set forth in Subsection 12.5;
(ii) Borrower may make Permitted Acquisitions if, with
respect to each such acquisition:
(A) the Borrower complies with the conditions set
forth in Section 9.2 hereto on or prior to the date of the
consummation of such Permitted Acquisition; and
(B) the consideration paid by Borrower in connection
with such acquisition is:
(1) paid in cash which is (a) borrowed under
the Acquisition Commitments in accordance with the
terms thereof or (b) funded with proceeds which are
not required to be used to prepay the Loans under
Section 7.5(a)(iv) and are received from the issuance
of equity Securities of Holding; or
(2) financed with Debt of Borrower which must
be: (a) unsecured, (b) incurred by Borrower in
accordance with the restrictions of Section 12.1(h),
(c) owed to the sellers of the Target, and (d) made on
terms which are otherwise reasonably acceptable to the
Agent; or
(3) equity Securities of Holding issued in
accordance with Subsection 12.6(iv);
(iii) Holding may consummate the repurchases of stock,
options and warrants in accordance with Subsection 12.4(iii);
(iv) In connection with a Permitted Acquisition consummated
in accordance with the restrictions set out in Subsection 12.3(a),
Borrower may merge or consolidate with any other Person provided
the Borrower is the surviving Person;
(b) the Acquisition Merger and Asset Transfer may occur; and
(c) if no Default exists and Holding provides the Agent at least
ten (10) days prior written notice, any Subsidiary may merge or
consolidate with Borrower (provided Borrower is the surviving entity) or
with any wholly-owned Subsidiary directly owned by Borrower or, in
connection with a Permitted Acquisition consummated in accordance with
the restrictions set out in Section 12.3(a), any other Person that, in
each case is or becomes, simultaneously with such transaction, an
Obligated Party (by execution of a Subsidiary Guaranty, Subsidiary
Security Agreement and related documents) and a wholly-owned Subsidiary
directly owned by Borrower.
Section 12.4 Restricted Junior Payments. Holding will not and will
not permit any Subsidiary to directly or indirectly declare, order, pay, make
or set apart any sum for (a) any dividend or other distribution, direct or
indirect, on account of any shares of any class of stock of Holding or any
Subsidiary now or hereafter outstanding; (b) any redemption, conversion,
exchange, retirement, sinking fund or similar payment, purchase or other
acquisition for value, direct or indirect, of any shares of any class of stock
of Holding or any Subsidiary now or hereafter outstanding; or (c) any payment
made to retire, or to obtain the surrender of, any outstanding warrants,
options or other rights to acquire shares of any class of stock of Holding or
any Subsidiaries now or hereafter outstanding except:
(i) Subsidiaries owned directly by Borrower may make, declare
and pay dividends and make other distributions with respect to their
capital stock to the extent necessary to permit Borrower to pay the
Obligations and to permit Borrower to pay expenses incurred in the
ordinary course of business;
(ii) Holding may declare and pay dividends on any class of its
preferred stock payable solely in shares of such class of such preferred
stock;
(iii) as long as no Default exists or would result therefrom,
Holding may repurchase its common stock or any options to purchase its
common stock from its and the Subsidiaries' officers, directors and
employees who received such stock or options from an employee stock
option or other compensation plan established by Holding (including
repurchases arising as a result of the death, disability or termination
of any such officers, directors and employees but excluding any common
stock or options held by any such Person who is also an officer,
partner, director or employee of Rice Partners or its Affiliates);
provided that the aggregate amount paid for such repurchases in any
Fiscal Year does not exceed Five Hundred Thousand Dollars ($500,000);
and
(iv) Borrower may make, declare and pay dividends to Holding in
an amount necessary for Holding to make the repurchases permitted by the
foregoing clause (iii).
Section 12.5 Investments. Holding will not, and will not permit
any Subsidiary to, make or permit to remain outstanding any advance, loan,
extension of credit, or capital contribution to or investment in any Person,
or purchase or own any stocks, bonds, notes, debentures, or other securities
of any Person, or be or become a joint venturer with or partner of any Person,
except:
(a) in connection with a Permitted Acquisition consummated in
accordance with Section 12.3 hereto;
(b) Borrower and Holding may own stock of the Subsidiaries
existing on the Closing Date and notes payable by Subsidiaries in
accordance with the restrictions set forth in Section 12.1 hereto;
(c) readily marketable direct obligations of the United States
of America or any agency thereof with maturities of one year or less
from the date of acquisition;
(d) fully insured certificates of deposit with maturities of one
year or less from the date of acquisition issued by any commercial bank
operating in the United States of America having capital and surplus in
excess of Fifty Million Dollars ($50,000,000);
(e) commercial paper of a domestic issuer if at the time of
purchase such paper is rated in one of the two highest rating categories
of Standard and Poor's Corporation or Moody's Investors Service, Inc.;
(f) loans and advances to employees for business expenses
incurred in the ordinary course of business not to exceed Two Hundred
Fifty Thousand Dollars ($250,000) in the aggregate at any time
outstanding;
(g) if no Default exists, Borrower may make capital
contributions to or investments in, or purchase any stocks or other
equity Securities authorized to be issued under Section 12.6 of, a
wholly-owned Subsidiary directly owned by Borrower; provided that (i)
Borrower shall have complied with its obligation under Section 11.9
simultaneously with such contribution, investment or purchase, (ii) the
aggregate amount of such capital contributions, investments and
purchases in any one Subsidiary shall not exceed One Thousand Dollars
($1,000.00), and (iii) such capital contributions, investments and
purchases shall only be made in connection with a Permitted Acquisition
and for the purpose of capitalizing a new Subsidiary who will merge with
the applicable Target or who will acquire the assets of the applicable
Target;
(h) Holdings may make additional capital contributions to or
investments in or purchase any stocks or other equity Securities of
Borrower authorized to be issued under Section 12.6; provided that
Holding shall have complied with its obligation under Section 11.9
simultaneously with such contribution, investment or purchases; and
(i) loans, advances or investments other than those described in
clauses (a) through (h) of this Section 12.5 if the aggregate principal
amount of such loans and advances outstanding plus the aggregate
acquisition price of the outstanding investments never exceeds One
Hundred Thousand Dollars ($100,000).
Section 12.6 Limitation on Issuance of Capital Stock. Holding will
not, and will not permit any Subsidiary to, at any time issue, sell, assign,
or otherwise dispose of (a) any of its capital stock, (b) any securities
exchangeable for or convertible into or carrying any rights to acquire any of
its capital stock, or (c) any option, warrant, or other right to acquire any
of its capital stock; except:
(i) Holding may issue capital stock pursuant to the
exercise of the warrants purchased under the Stock and Warrant
Purchase Agreement and the conversion to common stock of any
shares of Holding's series A preferred stock;
(ii) Holding may issue additional preferred stock in
satisfaction of its obligations to pay dividends on its existing
Series A and Series B preferred stock;
(iii) Holding may (a) on or prior to the Closing Date, issue
or reserve for issuance common stock to directors in lieu of
and/or in addition to, director fees and (b) issue common stock
and options to acquire common stock to officers, employees and
directors of Holding or a Subsidiary pursuant to a stock option,
other compensation plan or director fee payment plan approved by
the board of directors; and
(iv) Holding may offer and issue its equity Securities
subject to Section 7.4(a)(iv) and Section 14.1(n).
Section 12.7 Transactions With Affiliates. Holding will not, and
will not permit any Subsidiary to, enter into any transaction, including,
without limitation, the purchase, sale, or exchange of property or the
rendering of any service, with any Affiliate of Holding or such Subsidiary,
except in the ordinary course of and pursuant to the reasonable requirements
of Holding's or such Subsidiary's business and upon fair and reasonable terms
no less favorable to Holding or such Subsidiary than would be obtained in a
comparable arms-length transaction with a Person not an Affiliate of Holding
or such Subsidiary.
Section 12.8 Disposition of Assets. Holding will not, and will not
permit any Subsidiary to, sell, lease, assign, transfer, or otherwise dispose
of any of its assets, except (a) dispositions of inventory in the ordinary
course of business; (b) dispositions of assets reasonably and in good faith
determined by Holding or such Subsidiary to be obsolete or no longer necessary
to its business; (c) the Asset Transfer may occur; and (d) dispositions of
assets other than those described in the foregoing clauses (a), (b) and (c) if
all the following conditions are satisfied: (i) the fair market value of the
assets disposed of in any single transaction or series of transactions does
not exceed Two Hundred Thousand Dollars ($200,000) and the aggregate fair
market value of the assets disposed of in any Fiscal Year does not exceed Four
Hundred Thousand Dollars ($400,000); (ii) no Default exists or would result
therefrom; (iii) the consideration received is at least equal to the fair
market value of such assets; (iv) the sole consideration received is cash; and
(v) the Net Proceeds of such Asset Disposition are applied as required by
Subsection 7.4.
Section 12.9 Sale and Leaseback. Holding will not, and will not
permit any Subsidiary to, enter into any arrangement with any Person pursuant
to which it leases from such Person real or personal property that has been or
is to be sold or transferred, directly or indirectly, by it to such Person.
Section 12.10 Lines of Business. Holding will not, and will not
permit any Subsidiary to, engage in any line or lines of business activity
other than the businesses in which they are engaged on the date hereof or a
business reasonably related thereto.
Section 12.11 Management Fees and Compensation. Holding will not
and will not permit any Subsidiaries directly or indirectly to pay any
management, consulting or similar fees to any Affiliate or to any director,
officer or employee of any Obligated Party except salary, wages, bonuses and
director fees paid in the ordinary course of business and the consulting fees
paid for Jeremiah M. Callahan's services as long as he is providing consulting
services or acting as the president or chief operating officer of Holding in
an amount not to exceed Five Thousand Dollars ($5,000) per week.
ARTICLE 13
Financial Covenants
Holding and Borrower covenant and agree that, as long as the Obligations
or any part thereof are outstanding or any Bank has any Commitment hereunder,
they will perform and observe the following financial covenants:
Section 13.1 Total Debt to EBITDA. As of the end of each Fiscal
Quarter during the periods set forth below beginning with the Fiscal Quarter
ending March 31, 1998, Holding shall not permit the ratio of Total Debt of
Holding determined on a consolidated basis which is outstanding as of the date
of determination to EBITDA for the twelve (12) month period (or portion
thereof since the Closing Date) then ending to exceed the ratio set forth
below opposite the applicable period below:
<TABLE>
<CAPTION>
Period
-------------------------------
From and
including Through Ratio
-------------- -------------- ---------------
<S> <S> <C>
3/31/98 6/30/98 4.50
7/1/98 9/30/98 4.25
10/1/98 12/31/98 4.00
1/1/99 6/30/99 3.75
7/1/99 9/30/99 3.50
10/1/99 12/31/99 3.25
1/1/00 6/30/00 3.00
7/1/00 9/30/00 2.75
10/1/00 2/29/04 2.50
</TABLE>
Section 13.2 Interest Coverage. Holding shall not permit the ratio
of Operating Cash Flow to cash interest expense of Holding and the
Subsidiaries determined on a consolidated basis, both calculated for the
twelve (12) month period (or portion thereof since the Closing Date) ending on
the last day of each Fiscal Quarter (beginning with the Fiscal Quarter ending
June 30, 1997) during the periods set forth below, to be less than the ratio
set forth below opposite the applicable period below:
<TABLE>
<CAPTION>
Period
-------------------------------
From and
including Through Ratio
-------------- -------------- ---------------
<S> <S> <C>
Closing date 6/30/97 1.50
7/1/97 9/30/97 1.85
10/1/97 3/31/98 2.00
4/1/98 9/30/98 2.25
10/1/98 3/31/99 2.50
4/1/99 9/30/99 2.75
10/1/99 3/31/00 3.00
4/1/00 9/30/00 3.25
10/1/00 2/29/04 3.50
</TABLE>
The phrase "Operating Cash Flow" means, for any period, the total of the
following for Holding and the Subsidiaries calculated on a consolidated basis
without duplication for such period: (a) EBITDA; minus (b) all Capital
Expenditures which are not financed with Debt permitted by Section 12.1(f) but
including Capital Expenditures financed with proceeds of the Revolving Loans.
Section 13.3 Fixed Charge Coverage. Holding 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 (or
portion thereof since the Closing Date) ending on the last day of each Fiscal
Quarter (beginning with the Fiscal Quarter ending June 30, 1997) to be less
than the ratio set forth below opposite the applicable period below:
<TABLE>
<CAPTION>
Period
-------------------------------
From and
including Through Ratio
-------------- -------------- ---------------
<S> <C> <C>
Closing date 6/30/97 1.10
7/1/97 6/30/98 1.15
7/1/98 9/30/99 1.20
10/1/99 2/29/04 1.25
</TABLE>
The phrase "Fixed Charges" means, for any period, the total of the following
for Holding and the Subsidiaries calculated on a consolidated basis without
duplication for such period: (A) interest expense; plus (B) cash federal and
state income taxes paid; plus (C) scheduled amortization of Debt paid or
payable (excluding, to the extent included, nonpermanent principal repayments
under the Revolving Loans); plus (D) the Dollar amount paid in connection with
repurchases of stock, options or warrants consummated in accordance with
Section 12.4.
Section 13.4 Capital Expenditure Limits. Holding shall not, and
shall not permit any Subsidiary to, make or incur Capital Expenditures during
a Fiscal Year in excess of an aggregate amount equal to the applicable Capital
Expenditure Limit for such Fiscal Year. The term "Capital Expenditure Limit"
means, for the Fiscal Years set forth below, the sum of (i) the Dollar amount
set forth in the table below opposite the applicable Fiscal Year ( the Dollar
amount as set forth for each Fiscal Year herein the "Yearly Limit") plus (ii)
fifty percent (50%) of the portion of the Yearly Limit from the immediately
preceding Fiscal Year which was not expended by Holding and Subsidiaries for
Capital Expenditures in such preceding Fiscal Year. In calculating compliance
with this Section 13.4, (a) Capital Expenditures made in a Fiscal Year shall
first be debited against the Yearly Limit for such Fiscal Year then debited
against the carryover of the Yearly Limit, if any, from the preceding Fiscal
Year and (b) 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.
<TABLE>
<CAPTION>
Period Amount
------------------------------------- ----------
<S> <C>
Closing Date through 12/31/97 $400,000
1998 Fiscal Year 500,000
1999 Fiscal Year 600,000
2000 Fiscal Year 700,000
2001 and each Fiscal
Year thereafter 800,000
</TABLE>
Section 13.5 EBITDA. As of the end of each Fiscal Quarter set
forth below, Holding shall not permit EBITDA for the twelve (12) month period
(or portion thereof since the Closing Date) then ending to be less than the
Dollar amount set forth below for such Fiscal Quarter end:
<TABLE>
<CAPTION>
Fiscal Quarter End Dollar Amount
---------------------- -------------
<S> <C>
6/30/97 $1,900,000
9/30/97 $3,800,000
12/31/97 $5,400,000
3/31/98 $6,250,000
6/30/98 $6,500,000
9/30/98 $6,750,000
12/31/98 $7,000,000
3/31/99 $7,250,000
6/30/99 $7,500,000
9/30/99 $7,750,000
12/31/99 $8,000,000
3/31/00 $8,250,000
6/30/00 $8,500,000
9/30/00 $8,750,000
12/31/00 $9,000,000
3/31/01 $9,250,000
6/30/01 $9,500,000
9/30/01 $9,700,000
12/31/01 and each Fiscal
Quarter thereafter $10,000,000
</TABLE>
Section 13.6 Net Worth. Holding will at all times maintain
Consolidated Net Worth (as defined below) in an amount not less than the sum
of (a) Twelve Million Dollars ($12,000,000) plus (b) seventy-five percent
(75%) of Holding's Net Income for each Fiscal Quarter to have completely
elapsed since the Closing Date; plus (c) one hundred percent (100%) of the net
cash proceeds of any sale of Securities or other contributions to the capital
of Holding received by Holding since the Closing Date, calculated without
duplication. If Net Income for a Fiscal Quarter is zero or less, no
adjustment to the requisite level of Consolidated Net Worth shall be made.
The phrase "Consolidated Net Worth" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as stockholders' equity on a
consolidated balance sheet of Holding and the Subsidiaries.
ARTICLE 14
Default
Section 14.1 Events of Default. Each of the following shall be
deemed an "Event of Default":
(a) The Borrower shall fail to pay (i) when due any principal
payable under any Loan Document or any part thereof; (ii) within three
(3) Business Days of the date due any interest or fees payable under the
Loan Documents or any part thereof; and (iii) within five (5) Business
Days after the date Borrower receives written notice of the failure to
pay when due any other Obligation or any part thereof.
(b) Any representation, warranty or certification made or deemed
made by the Borrower or any Obligated Party (or any of their respective
officers) in any Loan Document or in any certificate, report, notice, or
financial statement furnished at any time in connection with any Loan
Document shall be false, misleading, or erroneous in any material
respect when made or deemed to have been made.
(c) The Borrower shall fail to perform, observe, or comply with
any covenant, agreement, or term contained in Article 12 or Article 13
of this Agreement, Article IV of the Borrower Security Agreement or
Article 2 of any Mortgage to which it is a party. Any Subsidiary shall
fail to perform, observe or comply with any covenant, agreement or term
contained in Article IV of the Subsidiary Security Agreement to which it
is a party or Article 2 of any Mortgage to which it is a party. Holding
shall fail to perform, observe, or comply with any covenant, agreement,
or term contained in Article 12 or Article 13 of this Agreement,
Article IV of the Holding Security Agreement or Article 2 of any
Mortgage to which it is a party.
(d) Holding shall fail to perform, observe or comply with any
covenant, agreement or term contained in Section 11.1 of this Agreement
and such failure shall continue for ten (10) Business Days.
(e) The Borrower or any Obligated Party shall fail to perform,
observe, or comply with any other covenant, agreement, or term contained
in any Loan Document (other than covenants to pay the Obligations, the
covenants described in Subsections 14.1(c) and 14.1(d)) and such failure
shall continue for a period of thirty (30) Business Days after the
earlier of (i) the date the Agent or any Bank provides Borrower with
notice thereof or (ii) the date Holding should have notified the Agent
thereof in accordance with Subsection 11.1(h) hereof.
(f) The Borrower or any Obligated Party shall (i) apply for or
consent to the appointment of, or the taking of possession by, a
receiver, custodian, trustee, examiner, liquidator or the like of itself
or of all or a substantial part of its property, (ii) make a general
assignment for the benefit of its creditors, (iii) commence a voluntary
case under the United States Bankruptcy Code (as now or hereafter in
effect, the "Bankruptcy Code"), (iv) institute any proceeding or file a
petition seeking to take advantage of any other law relating to
bankruptcy, insolvency, reorganization, liquidation, dissolution,
winding-up, or composition or readjustment of debts, (v) fail to
controvert in a timely and appropriate manner, or acquiesce in writing
to, any petition filed against it in an involuntary case under the
Bankruptcy Code, (vi) admit in writing its inability to, or be generally
unable to pay its debts as such debts become due, or (vii) take any
corporate action for the purpose of effecting any of the foregoing.
(g) A proceeding or case shall be commenced, without the
application, approval or consent of the Borrower or any Obligated Party
in any court of competent jurisdiction, seeking (i) its reorganization,
liquidation, dissolution, arrangement or winding-up, or the composition
or readjustment of its debts, (ii) the appointment of a receiver,
custodian, trustee, examiner, liquidator or the like of the Borrower or
such Obligated Party or of all or any substantial part of its property,
or (iii) similar relief in respect of the Borrower or such Obligated
Party under any law relating to bankruptcy, insolvency, reorganization,
winding-up, or composition or adjustment of debts, and such proceeding
or case shall continue undismissed, or an order, judgment or decree
approving or ordering any of the foregoing shall be entered and continue
unstayed and in effect, for a period of sixty (60) or more days; or an
order for relief against the Borrower or any Obligated Party shall be
entered in an involuntary case under the Bankruptcy Code.
(h) The Borrower or any Obligated Party shall fail to discharge
within a period of thirty (30) days after the commencement thereof any
attachment, sequestration, forfeiture, or similar proceeding or
proceedings involving an aggregate amount in excess of Five Hundred
Thousand Dollars ($500,000) against any of its assets or properties.
(i) A final judgment or judgments for the payment of money in
excess of Five Hundred Thousand Dollars ($500,000) in the aggregate
shall be rendered by a court or courts against the Borrower or any
Obligated Party and the same shall not be discharged (or provision shall
not be made for such discharge), or a stay of execution thereof shall
not be procured, within thirty (30) days from the date of entry thereof
and the Borrower or the relevant Obligated Party shall not, within said
period of thirty (30) days, or such longer period during which execution
of the same shall have been stayed, appeal therefrom and cause the
execution thereof to be stayed during such appeal.
(j) The Borrower or any Obligated Party shall fail to pay when
due any principal of or interest on any Debt if the aggregate principal
amount of the affected Debt equals or exceeds Five Hundred Thousand
Dollars ($500,000) (other than the Obligations), or the maturity of any
such Debt shall have been accelerated, or any such Debt shall have been
required to be prepaid prior to the stated maturity thereof or any event
shall have occurred with respect to any Debt in the aggregate principal
amount equal to or in excess of Five Hundred Thousand Dollars ($500,000)
that permits any holder or holders of such Debt or any Person acting on
behalf of such holder or holders to accelerate the maturity thereof or
require any such prepayment. Without limiting the foregoing, an Event
of Default shall occur if any event of default shall occur under the
Subordinated Loan Documents which is not promptly cured or waived by
Rice Partners, F-Southland, L.L.C. and FF-Southland, L.P.
(k) This Agreement shall cease to be in full force and effect or
shall be declared null and void or the validity or enforceability
thereof shall be contested or challenged by the Borrower any Obligated
Party or the Borrower or any Obligated Party shall deny that it has any
further liability or obligation under any of the Loan Documents, or any
lien or security interest created by the Loan Documents shall for any
reason (other than the negligence of the Agent or the release thereof in
accordance with the Loan Documents) cease to be a valid, first priority
perfected security interest in and lien upon any of the Collateral
purported to be covered thereby.
(l) Any of the following events shall occur or exist with
respect to Holding or any ERISA Affiliate: (i) any Prohibited
Transaction involving any Plan; (ii) any Reportable Event with respect
to any Plan; (iii) the filing under Section 4041 of ERISA of a notice of
intent to terminate any Plan or the termination of any Plan; (iv) any
event or circumstance that might constitute grounds entitling the PBGC
to institute proceedings under Section 4042 of ERISA for the termination
of, or for the appointment of a trustee to administer, any Plan, or the
institution by the PBGC of any such proceedings; or (v) complete or
partial withdrawal under Section 4201 or 4204 of ERISA from a
Multiemployer Plan or the reorganization, insolvency, or termination of
any Multiemployer Plan; and in each case above, such event or condition,
together with all other events or conditions, if any, have subjected or
could in the reasonable opinion of Required Banks subject Holding to any
tax, penalty, or other liability to a Plan, a Multiemployer Plan, the
PBGC, or otherwise (or any combination thereof) which in the aggregate
exceed or could reasonably be expected to exceed One Million Dollars
($1,000,000).
(m) Any Person or group (as defined in Section 13(d)(3) or
14(d)(2) of the Exchange Act) shall become the direct or indirect
beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of
more than 49% of the total voting power of all classes of capital stock
then outstanding of Holding entitled (without regard to the occurrence
of any contingency) to vote in elections of directors of Holding.
(n) Either (1) Rice Partners ceases to beneficially own and
control, directly or indirectly, at least seventy percent (70%) of the
issued and outstanding shares of capital stock of Holding (determined on
a fully diluted basis) owned by Rice Partners on the Closing Date and
calculated after taking into account any combinations, subdivisions or
other transactions permitted hereby relating to common stock of the type
described in Section 2.08(a)(ii) and (iii) of the Stock and Warrant
Purchase Agreement, or (2) Rice Partners ceases to have the power to
control a majority of the members of the board of directors of Holding.
(o) Holding fails to own one hundred percent (100%) of the
issued and outstanding shares of Borrower. The fact that Thomas J.
Gilligan has a Lien on shares of capital stock of Southland which are
held in treasury shall not result in the occurrence of an Event of
Default under this clause (o) unless Thomas J. Gilligan forecloses on or
otherwise causes such treasury shares to be issued out of treasury.
(p) The Related Transaction shall fail to be consummated on the
Closing Date, or with respect to any funding under the Acquisition
Commitments, the proposed acquisition to be funded with the proceeds
thereof shall fail to be consummated on the date of such funding.
Section 14.2 Remedies. If any Event of Default shall occur and be
continuing, the Agent may (and if directed by Required Banks, shall) do any
one or more of the following:
(a) Acceleration. By notice to the Borrower, declare all
outstanding principal of and accrued and unpaid interest on the Notes
and all other amounts payable by the Borrower under the Loan Documents
immediately due and payable, and the same shall thereupon become
immediately due and payable, without further notice, demand,
presentment, notice of dishonor, notice of acceleration, notice of
intent to accelerate, protest, or other formalities of any kind, all of
which are hereby expressly waived by the Borrower and Holding.
(b) Termination of Commitments. Terminate the Commitments,
including, without limitation, the obligation of the Agent to issue
Letters of Credit, without notice to the Borrower or Holding.
(c) Judgment. Reduce any claim to judgment.
(d) Foreclosure. Foreclose or otherwise enforce any Lien
granted to the Agent for the benefit of itself and the Banks to secure
payment and performance of the Obligations in accordance with the terms
of the Loan Documents.
(e) Rights. Exercise any and all rights and remedies afforded
by the laws of the State of Texas or any other jurisdiction, by any of
the Loan Documents, by equity, or otherwise.
Provided, however, that upon the occurrence of an Event of Default under
Subsections 14.1(f) or 14.1(g) hereof, the Commitments of all of the Banks
shall automatically terminate (including, without limitation, the obligation
of the Agent to issue Letters of Credit), and the outstanding principal of and
accrued and unpaid interest on the Notes and all other amounts payable by the
Borrower under the Loan Documents shall thereupon become immediately due and
payable without notice, demand, presentment, notice of dishonor, notice of
acceleration, notice of intent to accelerate, protest, or other formalities of
any kind, all of which are hereby expressly waived by the Borrower and
Holding.
Section 14.3 Cash Collateral. If an Event of Default shall have
occurred and be continuing the Borrower shall, if requested by the Agent or
Required Banks, pledge to the Agent as security for the Obligations an amount
in immediately available funds equal to the then outstanding Letter of Credit
Liabilities, such funds to be held in a cash collateral account at the Agent
without any right of withdrawal by the Borrower.
Section 14.4 Performance by the Agent. If the Borrower or any
Obligated Party shall fail to perform any covenant or agreement in accordance
with the terms of the Loan Documents, the Agent may, at the direction of
Required Banks, perform or attempt to perform such covenant or agreement on
behalf of the Borrower or such Obligated Party. In such event, the Borrower
shall, at the request of the Agent, promptly pay any amount expended by the
Agent or the Banks in connection with such performance or attempted
performance to the Agent at the Principal Office, together with interest
thereon at the applicable Default Rate from and including the date of such
expenditure to but excluding the date such expenditure is paid in full.
Notwithstanding the foregoing, it is expressly agreed that neither the Agent
nor any Bank shall have any liability or responsibility for the performance of
any obligation of the Borrower or any Obligated Party under any Loan Document.
Section 14.5 Setoff. If an Event of Default shall have occurred
and be continuing, each Bank is hereby authorized at any time and from time to
time, without notice to the Borrower or Holding (any such notice being hereby
expressly waived by the Borrower and Holding), to set off and apply any and
all deposits (general, time, demand, provisional or final) at any time held
and other indebtedness at any time owing by such Bank to or for the credit or
the account of the Borrower or Holding against any and all of the obligations
of such party now or hereafter existing under any Loan Document, irrespective
of whether or not the Agent or such Bank shall have made any demand under such
Loan Documents and although such obligations may be unmatured. Each Bank
agrees promptly to notify the Borrower (with a copy to the Agent) after any
such setoff and application, provided that the failure to give such notice
shall not affect the validity of such setoff and application. The rights and
remedies of each Bank hereunder are in addition to other rights and remedies
(including, without limitation, other rights of setoff) which such Bank may
have.
Section 14.6 Continuance of Default. For purposes of all Loan
Documents, a Default shall be deemed to have continued and exist until the
Agent shall have actually received evidence satisfactory to Agent that such
Default shall have been remedied.
ARTICLE 15
The Agent
Section 15.1 Appointment, Powers and Immunities. Each Bank hereby
appoints and authorizes Banque Paribas to act as its agent hereunder and under
the other Loan Documents with such powers as are specifically delegated to the
Agent by the terms of the Loan Documents, together with such other powers as
are reasonably incidental thereto. Neither the Agent nor any of its
Affiliates, officers, directors, employees, attorneys, or agents shall be
liable for any action taken or omitted to be taken by any of them hereunder or
otherwise in connection with any Loan Document or any of the other Loan
Documents except for its or their own gross negligence or willful misconduct.
Without limiting the generality of the preceding sentence, the Agent (i) may
treat the payee of any Note as the holder thereof until it receives written
notice of the assignment or transfer thereof signed by such payee and in form
satisfactory to the Agent; (ii) shall have no duties or responsibilities
except those expressly set forth in the Loan Documents, and shall not by
reason of any Loan Document be a trustee or fiduciary for any Bank; (iii)
shall not be required to initiate any litigation or collection proceedings
under any Loan Document except to the extent requested by Required Banks; (iv)
shall not be responsible to the Banks for any recitals, statements,
representations or warranties contained in any Loan Document, or any
certificate or other documentation referred to or provided for in, or received
by any of them under, any Loan Document, or for the value, validity,
effectiveness, enforceability, or sufficiency of any Loan Document or any
other documentation referred to or provided for therein or for any failure by
any Person to perform any of its obligations thereunder; (v) may consult with
legal counsel (including counsel for the Borrower), independent public
accountants, and other experts selected by it and shall not be liable for any
action taken or omitted to be taken in good faith by it in accordance with the
advice of such counsel, accountants, or experts; and (vi) shall incur no
liability under or in respect of any Loan Document by acting upon any notice,
consent, certificate, or other instrument or writing believed by it to be
genuine and signed or sent by the proper party or parties. As to any matters
not expressly provided for by any Loan Document, the Agent shall in all cases
be fully protected in acting, or in refraining from acting, hereunder in
accordance with instructions signed by Required Banks, and such instructions
of Required Banks and any action taken or failure to act pursuant thereto
shall be binding on all of the Banks; provided, however, that the Agent shall
not be required to take any action which exposes it to personal liability or
which is contrary to any Loan Document or applicable law.
Section 15.2 Rights of Agent as a Bank. With respect to its
Commitment, the Loans made by it and the Note issued to it, Banque Paribas
(and any successor acting as Agent) in its capacity as a Bank hereunder shall
have the same rights and powers hereunder as any other Bank and may exercise
the same as though it were not acting as the Agent, and the term "Bank" or
"Banks" shall, unless the context otherwise indicates, include the Agent in
its individual capacity. The Agent and its Affiliates may (without having to
account therefor to any Bank) accept deposits from, lend money to, act as
trustee under indentures of, provide merchant banking services to, and
generally engage in any kind of banking, trust, or other business with
Holding, any Subsidiaries, any Obligated Party, and any other Person who may
do business with or own securities of Holding, any Subsidiary, or any
Obligated Party, all as if it were not acting as the Agent and without any
duty to account therefor to the Banks.
Section 15.3 Defaults. The Agent shall not be deemed to have
knowledge or notice of the occurrence of a Default (other than the non-payment
of principal of or interest on the Loans or of commitment fees) unless the
Agent has received notice from a Bank or the Borrower specifying such Default
and stating that such notice is a "Notice of Default." In the event that the
Agent receives such a notice of the occurrence of a Default, the Agent shall
give prompt notice thereof to the Banks (and shall give each Bank prompt
notice of each such non-payment). The Agent shall (subject to Section 15.1
hereof) take such action with respect to such Default as shall be directed by
Required Banks, provided that unless and until the Agent shall have received
such directions, the Agent may (but shall not be obligated to) take such
action, or refrain from taking such action, with respect to such Default as it
shall seem advisable and in the best interest of the Banks.
Section 15.4 Indemnification. THE BANKS HEREBY AGREE TO INDEMNIFY
THE AGENT AND PARIBAS CAPITAL MARKETS (BANQUE PARIBAS' SYNDICATION AGENT) FROM
AND HOLD THE AGENT HARMLESS AGAINST (TO THE EXTENT NOT REIMBURSED UNDER
SECTIONS 16.1 AND 16.2 HERETO, BUT WITHOUT LIMITING THE OBLIGATIONS OF THE
BORROWER UNDER SECTIONS 16.1 AND 16.2 HERETO), RATABLY IN ACCORDANCE WITH
THEIR RESPECTIVE COMMITMENT PERCENTAGES, ANY AND ALL LIABILITIES, OBLIGATIONS,
LOSSES, DAMAGES, PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS,
EXPENSES (INCLUDING ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE
WHATSOEVER WHICH MAY BE IMPOSED ON, INCURRED BY, OR ASSERTED AGAINST THE AGENT
IN ANY WAY RELATING TO OR ARISING OUT OF ANY OF THE LOAN DOCUMENTS OR ANY
ACTION TAKEN OR OMITTED TO BE TAKEN BY THE AGENT UNDER OR IN RESPECT OF ANY OF
THE LOAN DOCUMENTS; PROVIDED, THAT NO BANK SHALL BE LIABLE FOR ANY PORTION OF
THE FOREGOING TO THE EXTENT CAUSED BY THE AGENT'S GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE EXPRESS INTENTION
OF THE BANKS THAT THE AGENT SHALL BE INDEMNIFIED HEREUNDER FROM AND HELD
HARMLESS AGAINST ALL OF SUCH LIABILITIES, OBLIGATIONS, LOSSES, DAMAGES,
PENALTIES, ACTIONS, JUDGMENTS, DEFICIENCIES, SUITS, COSTS, EXPENSES (INCLUDING
ATTORNEYS' FEES), AND DISBURSEMENTS OF ANY KIND OR NATURE DIRECTLY OR
INDIRECTLY ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY
NEGLIGENCE OF THE AGENT. WITHOUT LIMITING ANY OTHER PROVISION OF THIS
SECTION, EACH BANK AGREES TO REIMBURSE THE AGENT PROMPTLY UPON DEMAND FOR ITS
PRO RATA SHARE (CALCULATED ON THE BASIS OF THE COMMITMENT PERCENTAGES) OF ANY
AND ALL OUT-OF-POCKET EXPENSES (INCLUDING ATTORNEYS' FEES) INCURRED BY THE
AGENT IN CONNECTION WITH THE PREPARATION, EXECUTION, DELIVERY, ADMINISTRATION,
MODIFICATION, AMENDMENT OR ENFORCEMENT (WHETHER THROUGH NEGOTIATIONS, LEGAL
PROCEEDINGS, OR OTHERWISE) OF, OR LEGAL ADVICE IN RESPECT OF RIGHTS OR
RESPONSIBILITIES UNDER, THE LOAN DOCUMENTS, TO THE EXTENT THAT THE AGENT IS
NOT REIMBURSED FOR SUCH EXPENSES BY THE BORROWER.
Section 15.5 Independent Credit Decisions. Each Bank agrees that
it has independently and without reliance on the Agent or any other Bank, and
based on such documentation and information as it has deemed appropriate, made
its own credit analysis of the Borrower and decision to enter into any Loan
Document and that it will, independently and without reliance upon the Agent
or any other Bank, and based upon such documents and information as it shall
deem appropriate at the time, continue to make its own analysis and decisions
in taking or not taking action under any Loan Document. Except as otherwise
specifically set forth herein, the Agent shall not be required to keep itself
informed as to the performance or observance by the Borrower or any Obligated
Party of any Loan Document or to inspect the properties or books of the
Borrower or any Obligated Party. Except for notices, reports and other
documents and information expressly required to be furnished to the Banks by
the Agent hereunder or under the other Loan Documents, the Agent shall not
have any duty or responsibility to provide any Bank with any credit or other
financial information concerning the affairs, financial condition or business
of the Borrower or any Obligated Party (or any of their Affiliates) which may
come into the possession of the Agent or any of its Affiliates.
Section 15.6 Several Commitments. The Commitments and other
obligations of the Banks under any Loan Document are several. The default by
any Bank in making a Loan in accordance with its Commitment shall not relieve
the other Banks of their obligations under any Loan Document. In the event of
any default by any Bank in making any Loan, each nondefaulting bank shall be
obligated to make its Loan but shall not be obligated to advance the amount
which the defaulting Bank was required to advance hereunder. No Bank shall be
responsible for any act or omission of any other Bank.
Section 15.7 Successor Agent. Subject to the appointment and
acceptance of a successor Agent as provided below, the Agent may resign at any
time by giving notice thereof to the Banks and the Borrower and the Agent may
be removed at any time by Required Banks if it has breached its obligations
under the Loan Documents. Upon any such resignation or removal, Required
Banks will have the right to appoint a successor Agent with the Borrower's
consent, which shall not be unreasonably withheld. If no successor Agent
shall have been so appointed by Required Banks and shall have accepted such
appointment within thirty (30) days after the retiring Agent's giving of
notice of resignation or the Required Banks' removal of the retiring Agent,
then the retiring Agent may, on behalf of the Banks, appoint a successor Agent
approved by the Borrower, which approval will not be unreasonably withheld,
which shall be a commercial bank organized under the laws of the United States
of America or any State thereof and having combined capital and surplus of at
least One Hundred Million Dollars ($100,000,000). Upon the acceptance of its
appointment as successor Agent, such successor Agent shall thereupon succeed
to and become vested with all rights, powers, privileges, immunities,
contractual obligation, and duties of the resigning or removed Agent,
including all obligations under any Letters of Credit, and the resigning or
removed Agent shall be discharged from its duties and obligations under the
Loan Documents, including, without limitation, its obligations under all
Letters of Credit. After any Agent's resignation or removal as Agent, the
provisions of this Article 15 shall continue in effect for its benefit in
respect of any actions taken or omitted to be taken by it while it was the
Agent.
Section 15.8 Agent Fee. The Borrower agrees to pay to the Agent on
the date hereof and on each anniversary of the date hereof the agent fee
described in that certain letter dated February 12, 1997 from Bank Paribas to
Rice Partners and Holding.
Section 15.9 Authorized Actions. Agent shall be authorized,
without any further action by any Bank to (a) subordinate or release the Liens
granted to Agent to secure the Obligations with respect to any equipment
purchased after the Closing Date, to any purchase money Liens granted therein
in accordance with the permissions set out in Section 12.2 and (b) release the
Agent's Liens in Collateral permitted to be sold hereunder.
ARTICLE 16
Miscellaneous
Section 16.1 Expenses. The Borrower hereby agrees to pay on demand
without duplication: (a) all costs and expenses of the Agent arising in
connection with the preparation, negotiation, execution, and delivery of the
Loan Documents, including, without limitation, the reasonable fees and
expenses of legal counsel for the Agent; (b) all costs and expenses of the
Agent arising in connection with assignments of the Loan Documents, the
preparation, negotiation, execution and delivery of any of the Loan Documents
executed and delivered after the Closing Date and any and all amendments or
other modifications to the Loan Documents, including, without limitation, the
reasonable fees and expenses of legal counsel for the Agent; (c) all fees,
costs and expenses of the Agent arising in connection with any Letter of
Credit, including the Agent's customary fees for amendments, transfers and
drawings on Letters of Credit; (d) all costs and expenses of the Agent in
connection with any Default and the enforcement of any Loan Document,
including, without limitation, the reasonable fees and expenses of legal
counsel for the Agent; (e) all fees, costs and expenses of any Bank (including
legal fees and expenses of counsel to any Bank) arising in connection with an
Event of Default and the enforcement of any Loan Document during the
continuance of an Event of Default; (f) all transfer, stamp, documentary, or
other similar taxes, assessments, or charges levied by any Governmental
Authority in respect of any Loan Document; (e) all costs, expenses,
assessments, and other charges incurred in connection with any filing,
registration, recording, or perfection of any security interest or Lien
contemplated by any Loan Document; and (g) all other costs and expenses
incurred by the Agent in connection with any Loan Document, including, without
limitation, all costs, expenses, and other charges incurred in connection with
obtaining any audit or appraisal in respect of the Collateral but subject to
Section 11.9(b)(iv).
Section 16.2 Indemnification. THE BORROWER SHALL INDEMNIFY THE
AGENT, PARIBAS CAPITAL MARKETS AND EACH BANK AND EACH AFFILIATE THEREOF AND
THEIR RESPECTIVE OFFICERS, DIRECTORS, EMPLOYEES, ATTORNEYS, AND AGENTS FROM,
AND HOLD EACH OF THEM HARMLESS AGAINST, ANY AND ALL LOSSES, LIABILITIES,
CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES
(INCLUDING ATTORNEYS' FEES) TO WHICH ANY OF THEM MAY BECOME SUBJECT WHICH
DIRECTLY OR INDIRECTLY ARISE FROM OR RELATE TO (A) ANY BREACH BY THE BORROWER
OR ANY OBLIGATED PARTY OF ANY REPRESENTATION, WARRANTY, COVENANT, OR OTHER
AGREEMENT CONTAINED IN ANY OF THE LOAN DOCUMENTS, (B) THE PRESENCE, RELEASE,
THREATENED RELEASE, DISPOSAL, REMOVAL, OR CLEANUP OF ANY HAZARDOUS MATERIAL
LOCATED ON, ABOUT, WITHIN, OR AFFECTING ANY OF THE PROPERTIES OR ASSETS OF
HOLDING OR ANY SUBSIDIARY, (C) THE USE OR PROPOSED USE OF ANY LETTER OF CREDIT
OR ANY PAYMENT OR FAILURE TO PAY WITH RESPECT TO ANY LETTER OF CREDIT, (D) ANY
AND ALL TAXES, LEVIES, DEDUCTIONS, AND CHARGES IMPOSED ON THE AGENT OR ANY
BANK IN RESPECT OF ANY LETTER OF CREDIT, OR (E) ANY INVESTIGATION, LITIGATION,
OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY THREATENED
INVESTIGATION, LITIGATION, OR OTHER PROCEEDING RELATING TO ANY OF THE
FOREGOING, THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY;
PROVIDED THAT THE PERSON ENTITLED TO BE INDEMNIFIED UNDER THIS SECTION SHALL
NOT BE INDEMNIFIED FROM OR HELD HARMLESS AGAINST ANY LOSSES, LIABILITIES,
CLAIMS, DAMAGES, PENALTIES, JUDGMENTS, DISBURSEMENTS, COSTS OR EXPENSES
(INCLUDING ATTORNEYS' FEES) ARISING OUT OF OR RESULTING FROM ITS GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT. WITHOUT LIMITING ANY PROVISION OF ANY LOAN
DOCUMENT, IT IS THE EXPRESS INTENTION OF THE PARTIES HERETO THAT EACH PERSON
TO BE INDEMNIFIED UNDER THIS SECTION SHALL BE INDEMNIFIED FROM AND HELD
HARMLESS AGAINST ANY AND ALL LOSSES, LIABILITIES, CLAIMS, DAMAGES, PENALTIES,
JUDGMENTS, DISBURSEMENTS, COSTS, AND EXPENSES (INCLUDING ATTORNEYS' FEES)
ARISING OUT OF OR RESULTING FROM THE SOLE OR CONTRIBUTORY NEGLIGENCE OF SUCH
PERSON.
Section 16.3 Limitation of Liability. None of the Agent, any Bank,
or any Affiliate, officer, director, employee, attorney, or agent thereof
shall have any liability with respect to, and the Borrower and, by the
execution of the Loan Documents to which it is a party, each Obligated Party,
hereby waives, releases, and agrees not to sue any of them upon, any claim for
any special, indirect, incidental, consequential or punitive damages suffered
or incurred by the Borrower or any Obligated Party in connection with, arising
out of, or in any way related to any of the Loan Documents, or any of the
transactions contemplated by any of the Loan Documents.
Section 16.4 No Duty. All attorneys, accountants, appraisers, and
other professional Persons and consultants retained by the Agent or any Bank
shall have the right to act exclusively in the interest of the Agent and the
Banks and shall have no duty of disclosure, duty of loyalty, duty of care, or
other duty or obligation of any type or nature whatsoever to Holding, any
Subsidiary or any of Holding's shareholders or any other Person.
Section 16.5 No Fiduciary Relationship. The relationship between
the Borrower and the Obligated Parties on the one hand and the Agent and each
Bank on the other is solely that of debtor and creditor, and neither the Agent
nor any Bank has any fiduciary or other special relationship with the Borrower
or any Obligated Parties, and no term or condition of any of the Loan
Documents shall be construed so as to deem the relationship between the
Borrower and the Obligated Parties on the one hand and the Agent and each Bank
on the other and any Bank to be other than that of debtor and creditor.
Section 16.6 Equitable Relief. The Borrower and Holding recognize
that in the event the Borrower or any Obligated Party fails to pay, perform,
observe, or discharge any or all of the obligations under the Loan Documents,
any remedy at law may prove to be inadequate relief to the Agent and the
Banks. Holding and the Borrower therefore agree that the Agent and the Banks,
if the Agent or the Required Banks so request, shall be entitled to temporary
and permanent injunctive relief in any such case without the necessity of
proving actual damages.
Section 16.7 No Waiver; Cumulative Remedies. No failure on the
part of the Agent or any Bank to exercise and no delay in exercising, and no
course of dealing with respect to, any right, power, or privilege under any
Loan Document shall operate as a waiver thereof, nor shall any single or
partial exercise of any right, power, or privilege under any Loan Document
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege. The rights and remedies provided for in the Loan
Documents are cumulative and not exclusive of any rights and remedies provided
by law.
Section 16.8 Successors and Assigns.
(a) This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
assigns. Neither Borrower nor Holding may assign or transfer any of its
rights or obligations hereunder or under any Loan Document without the
prior written consent of the Agent and all of the Banks. Any Bank may
sell participations to one or more banks or other institutions in or to
all or a portion of its rights and obligations under the Loan Documents
(including, without limitation, all or a portion of its Commitments, the
Loans owing to it and the Letter of Credit Liabilities which it has made
or in which it has a participating interest); provided, however, that
(i) such Bank's obligations under the Loan Documents (including, without
limitation, its Commitments) shall remain unchanged, (ii) such Bank
shall remain solely responsible to the Borrower for the performance of
such obligations, (iii) such Bank shall remain the holder of its Notes
and owner of its participation or other interests in Letter of Credit
Liabilities for all purposes of any Loan Document, (iv) the Borrower
shall continue to deal solely and directly with such Bank in connection
with such Bank's rights and obligations under the Loan Documents, and
(v) such Bank shall not sell a participation that conveys to the
participant the right to vote or give or withhold consents under any
Loan Document, other than the right to vote upon or consent to (1) any
increase of such Bank's Commitments, (2) any reduction of the principal
amount of, or interest to be paid on, the Loans or other Obligations of
such Bank, (3) any reduction of any commitment fee, letter of credit
fee, or other amount payable to such Bank under any Loan Document, or
(4) any postponement of any date for the payment of any amount payable
in respect of the Loans or other Obligations of such Bank.
(b) Holding, Borrower and each of the Banks agree that any Bank
(the "Assigning Bank") may at any time assign to one or more commercial
banks, savings and loan association, savings bank, finance company,
insurance company, pension fund, mutual fund, or other financial
institution (whether a corporation, partnership, or other entity)
(herein an "Eligible Assignee") all or a part of its rights and
obligations under the Loan Documents (including, without limitation, its
Commitments and Loans and participation interests) (each an "Assignee");
provided, however, that (i) the parties to each such assignment shall
execute and deliver to the Agent for its acceptance and recording in the
Register (as defined below), an Assignment and Acceptance, together with
the Notes subject to such assignment, and a processing and recordation
fee of Three Thousand Dollars ($3,000) payable by the assignor or
assignee (and not the Borrower); (ii) the Borrower and the Agent must
consent to such assignment, which consent shall not be unreasonably
withheld, with such consents to be evidenced by the Borrower's and the
Agent's execution of the Assignment and Acceptance; and (iii) except in
the case of an assignment of all of a Bank's rights and obligations
under the Loan Documents, the amount of the Commitments of the assigning
Bank being assigned or if any Commitment has terminated, the outstanding
principal amount of the related Loans, pursuant to each assignment
(determined as of the date of the Assignment and Acceptance with respect
to such assignment) shall in no event be less than Five Million Dollars
($5,000,000). Upon such execution, delivery, acceptance, and recording,
from and after the effective date specified in each Assignment and
Acceptance, which effective date shall be at least five (5) Business
Days after the execution thereof, or, if so specified in such Assignment
and Acceptance, the date of acceptance thereof by the Agent, (x) the
assignee thereunder shall be a party hereto as a "Bank" and, to the
extent that rights and obligations hereunder have been assigned to it
pursuant to such Assignment and Acceptance, have the rights and
obligations of a Bank hereunder and under the Loan Documents and (y) the
Bank that is an assignor thereunder shall, to the extent that rights and
obligations hereunder have been assigned by it pursuant to such
Assignment and Acceptance, relinquish its rights and be released from
its obligations under the Loan Documents (and, in the case of an
Assignment and Acceptance covering all or the remaining portion of a
Bank's rights and obligations under the Loan Documents, such Bank shall
cease to be a party thereto).
(c) The Agent shall maintain at its Principal Office a copy of
each Assignment and Acceptance delivered to and accepted by it and a
register for the recordation of the names and addresses of the Banks and
the Commitments of, and principal amount of the Loans owing to and
Letter of Credit Liabilities participated in by, each Bank from time to
time (the "Register"). The entries in the Register shall be conclusive
and binding for all purposes, absent manifest error, and Holding,
Borrower, the Agent, and the Banks may treat each Person whose name is
recorded in the Register as a Bank hereunder for all purposes under the
Loan Documents. The Register shall be available for inspection by the
Borrower or any Bank at any reasonable time and from time to time upon
reasonable prior notice.
(d) Upon its receipt of an Assignment and Acceptance executed by
an Assigning Bank and Assignee representing that it is an Eligible
Assignee, together with any Notes subject to such assignment, the Agent
shall, if such Assignment and Acceptance has been completed and is in
substantially the form of Exhibit "I" hereto, (i) accept such Assignment
and Acceptance, (ii) record the information contained therein in the
Register, and (iii) give prompt written notice thereof to the Borrower.
Within five (5) Business Days after its receipt of such notice the
Borrower, at its expense, shall execute and deliver to the Agent in
exchange for the surrendered Notes new Notes to the order of such
Eligible Assignee in an amount equal to the Commitments or Loans assumed
by it pursuant to such Assignment and Acceptance and, if the assigning
Bank has retained Commitments or Loans, Notes to the order of the
assigning Bank in an amount equal to the Commitments and Loans retained
by it hereunder (each such promissory note shall constitute a "Note" for
purposes of the Loan Documents). Such new Notes shall be in an
aggregate principal amount of the surrendered Notes, shall be dated the
effective date of such Assignment and Acceptance, and shall otherwise be
in substantially the form of the applicable Notes attached as Exhibits
hereto.
(e) Any Bank may, to the extent permitted by applicable law and
in connection with any assignment or participation or proposed
assignment or participation pursuant to this Section, disclose to the
assignee or participant or proposed assignee or participant, any
information relating to Holding or the Subsidiaries furnished to such
Bank by or on behalf of Holding or the Subsidiaries.
(f) In connection with the Agent's initial syndication of the
Loans, Borrower and Holding agree, to the extent permitted by applicable
law, to (i) provide the Agent all information (including pro forma
financial projections), in a form reasonably acceptable to the Agent,
necessary for the preparation of an information memorandum describing
Holding and the Subsidiaries, the Loans and any related transactions and
(ii) cause its management, at the request of the Agent, to be available
at reasonable times and from time to time to meet with potential lenders
and discuss Holding, the Subsidiaries, their respective businesses and
the transactions contemplated hereby.
Section 16.9 Survival. All representations and warranties made in
any Loan Document or in any document, statement, or certificate furnished in
connection with any Loan Document shall survive the execution and delivery of
the Loan Documents and no investigation by the Agent or any Bank or any
closing shall affect the representations and warranties or the right of the
Agent or any Bank to rely upon them. Without prejudice to the survival of any
other obligation of the Borrower hereunder, the obligations of the Borrower
under Article 8 hereof and Sections 16.1 and 16.2 hereof shall survive
repayment of the Notes and termination of the Commitments and the Letters of
Credit.
Section 16.10 ENTIRE AGREEMENT. THIS AGREEMENT, THE NOTES, AND THE
OTHER LOAN DOCUMENTS REFERRED TO HEREIN EMBODY THE FINAL, ENTIRE AGREEMENT
AMONG THE PARTIES HERETO AND SUPERSEDE ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF AND MAY NOT BE CONTRADICTED OR VARIED BY
EVIDENCE OF PRIOR, CONTEMPORANEOUS, OR SUBSEQUENT ORAL AGREEMENTS OR
DISCUSSIONS OF THE PARTIES HERETO. THERE ARE NO UNWRITTEN ORAL AGREEMENTS
AMONG THE PARTIES THERETO.
Section 16.11 Amendments. No amendment or waiver of any provision of
any Loan Document to which the Borrower or Holding is a party, nor any consent
to any departure by the Borrower or Holding therefrom, shall in any event be
effective unless the same shall be agreed or consented to by Required Banks,
the Borrower and Holding, and each such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given;
provided, that no amendment, waiver, or consent shall, unless in writing and
signed by all of the Banks, the Borrower and Holding, do any of the following:
(a) increase Commitments of the Banks; (b) reduce the principal of, or
interest on, the Notes, the Reimbursement Obligations, or any fees or other
amounts payable hereunder; (c) postpone any date fixed for any payment of
principal of, or interest on, the Notes, the Reimbursement Obligations, or any
fees or other amounts payable hereunder; (d) waive or amend any of the
conditions specified in Article 9 hereof; (e) change the percentage of the
Commitments or of the aggregate unpaid principal amount of the Notes or the
Letter of Credit Liabilities or the number of Banks which shall be required
for the Banks or any of them to take any action under any Loan Document; (f)
change any provision contained in this Section 16.11; (g) release any
Collateral except as permitted by Section 15.9 or release the Borrower or any
Obligated Party from liability; or (h) change any provision in Section 9.2 or
waive compliance with any such provisions. Notwithstanding anything to the
contrary contained in this Section, no amendment waiver, or consent shall be
made with respect to Sections 2.7 or Article 15 hereof without the prior
written consent of the Agent.
Section 16.12 Maximum Interest Rate.
(a) No interest rate specified in any Loan Document shall at
any time exceed the Maximum Rate. If at any time the interest rate (the
"Contract Rate") for any Obligation shall exceed the Maximum Rate,
thereby causing the interest accruing on such Obligation to be limited
to the Maximum Rate, then any subsequent reduction in the Contract Rate
for such Obligation shall not reduce the rate of interest on such
Obligation below the Maximum Rate until the aggregate amount of interest
accrued on such Obligation equals the aggregate amount of interest which
would have accrued on such Obligation if the Contract Rate for such
Obligation had at all times been in effect.
(b) No provision of any Loan Document shall require the
payment or the collection of interest in excess of the maximum amount
permitted by applicable law. If any excess of interest in such respect
is hereby provided for, or shall be adjudicated to be so provided, in
any Loan Document or otherwise in connection with this loan transaction,
the provisions of this Section shall govern and prevail and neither the
Borrower nor the sureties, guarantors, successors, or assigns of the
Borrower shall be obligated to pay the excess amount of such interest or
any other excess sum paid for the use, forbearance, or detention of sums
loaned pursuant hereto. In the event any Bank ever receives, collects,
or applies as interest any such sum, such amount which would be in
excess of the maximum amount permitted by applicable law shall be
applied as a payment and reduction of the principal of the Obligations;
and, if the principal of the Obligations has been paid in full, any
remaining excess shall forthwith be paid to the Borrower. In
determining whether or not the interest paid or payable exceeds the
Maximum Rate, the Borrower and each Bank shall, to the extent permitted
by applicable law, (a) characterize any non-principal payment as an
expense, fee, or premium rather than as interest, (b) exclude voluntary
prepayments and the effects thereof, and (c) amortize, prorate,
allocate, and spread in equal or unequal parts the total amount of
interest throughout the entire contemplated term of the Obligations so
that interest for the entire term does not exceed the Maximum Rate.
Section 16.13 Notices. All notices and other communications provided
for in any Loan Document to which the Borrower or any Obligated Party is a
party shall be given or made in writing and telecopied, mailed by certified
mail return receipt requested, or delivered to the intended recipient at the
"Address for Notices" specified below its name on the signature pages hereof
or with respect to Banks not parties to this Agreement on the Closing Date, in
its Assignment and Accepted and, if to an Obligated Party, at the address for
notices for Borrower; or, as to any party at such other address as shall be
designated by such party in a notice to each other party given in accordance
with this Section. Except as otherwise provided in any Loan Document, all
such communications shall be deemed to have been duly given when transmitted
by telecopy, subject to telephone confirmation of receipt, or when personally
delivered or, in the case of a mailed notice, three (3) Business Days after
being duly deposited in the mails, in each case given or addressed as
aforesaid; provided, however, notices to the Agent pursuant to Section 2.7 or
7.3 hereof shall not be effective until received by the Agent.
Section 16.14 Governing Law; Venue; Service of Process. This Agreement
shall be governed by and construed in accordance with the laws of the State of
Texas and the applicable laws of the United States of America. This Agreement
has been entered into in Dallas County, Texas, and shall be performable for
all purposes in Texas. ANY ACTION OR PROCEEDING AGAINST EITHER HOLDING OR
BORROWER UNDER OR IN CONNECTION WITH THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT
MAY BE BROUGHT IN ANY STATE OR FEDERAL COURT IN DALLAS OR HARRIS COUNTY,
TEXAS. EACH OF HOLDING AND BORROWER IRREVOCABLY (A) SUBMITS TO THE
NONEXCLUSIVE JURISDICTION OF SUCH COURTS, AND (B) WAIVES ANY OBJECTION IT MAY
NOW OR HEREAFTER HAVE AS TO THE VENUE OF ANY SUCH ACTION OR PROCEEDING BROUGHT
IN SUCH COURT OR THAT SUCH COURT IS AN INCONVENIENT FORUM. EACH OF HOLDING
AND BORROWER AGREES THAT SERVICE OF PROCESS UPON IT MAY BE MADE BY CERTIFIED
OR REGISTERED MAIL, RETURN RECEIPT REQUESTED, AT ITS ADDRESS SPECIFIED OR
DETERMINED IN ACCORDANCE WITH THE PROVISIONS OF SECTION 16.13 OF THIS
AGREEMENT. NOTHING IN THIS AGREEMENT OR ANY OTHER LOAN DOCUMENT SHALL AFFECT
THE RIGHT OF THE AGENT OR ANY BANK TO SERVE PROCESS IN ANY OTHER MANNER
PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF THE AGENT OR ANY BANK TO BRING
ANY ACTION OR PROCEEDING AGAINST THE BORROWER OR HOLDING OR WITH RESPECT TO
ANY OF ITS PROPERTY IN COURTS IN OTHER JURISDICTIONS. ANY ACTION OR
PROCEEDING BY BORROWER OR ANY OBLIGATED PARTY AGAINST THE AGENT OR ANY BANK
SHALL BE BROUGHT ONLY IN A COURT LOCATED IN DALLAS OR HARRIS COUNTY, TEXAS.
Section 16.15 Counterparts. This Agreement may be executed in one or
more counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same agreement.
Section 16.16 Severability. Any provision of any Loan Document held by
a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of any Loan Document and the effect thereof
shall be confined to the provision held to be invalid or illegal.
Section 16.17 Headings. The headings, captions, and arrangements used
in this Agreement are for convenience only and shall not affect the
interpretation of this Agreement.
Section 16.18 Non-Application of Chapter 15 of Texas Credit Code. The
provisions of Chapter 15 of the Texas Credit Code (Vernon's Texas Civil
Statutes, Article 5069-15) are specifically declared by the parties hereto not
to be applicable to any Loan Documents or to the transactions contemplated
thereby.
Section 16.19 Construction. The Borrower, each Obligated Party (by its
execution of the Loan Documents to which it is a party) the Agent and each
Bank acknowledges that each of them has had the benefit of legal counsel of
its own choice and has been afforded an opportunity to review the Loan
Documents with its legal counsel and that the Loan Documents shall be
construed as if jointly drafted by the parties thereto.
Section 16.20 Independence of Covenants. All covenants under the Loan
Documents shall be given independent effect so that if a particular action or
condition is not permitted by any of such covenants, the fact that it would be
permitted by an exception to, or be otherwise within the limitations of,
another covenant shall not avoid the occurrence of a Default if such action is
taken or such condition exists.
Section 16.21 WAIVER OF JURY TRIAL. TO THE FULLEST EXTENT PERMITTED BY
APPLICABLE LAW, EACH OF THE PARTIES HERETO HEREBY IRREVOCABLY AND EXPRESSLY
WAIVES 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 ANY OF THE LOAN DOCUMENTS OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE
ACTIONS OF THE AGENT OR ANY BANK IN THE NEGOTIATION, ADMINISTRATION, OR
ENFORCEMENT THEREOF.
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement
as of the day and year first above written.
JOTAN, INC.
By:________________________________
Shea E. Ralph
President
SHC ACQUISITION CORP.
By:________________________________
Shea E. Ralph
President and Chief Executive Officer
Address for Notices to Borrower or
any Obligated Party:
118 West Adams Street
Jacksonville, Florida 32202
Fax No.: (904) 353-0075
Telephone No.: (904) 353-2592
Attention: Mr. David Freedman
BANQUE PARIBAS, Houston Agency, as Agent
and as a Bank
Revolving Commitment:
$12,000,000.00
Acquisition Commitment: By: _______
$10,000,000.00 Pierre-Jean de Filippis
General Manager
Term A Commitment:
$9,000,000.00
By: ____________________________________
Term B Commitment: Kenneth E. Moore, Jr.
$8,000,000.00 Vice President
Address for Notices:
1200 Smith Street, Suite 3100
Houston, Texas 77002
Telecopy No.: (713) 659-4811
Telephone No.: (713) 659-3832
with a copy to:
2121 San Jacinto, Suite 930
Dallas, Texas 75201
Telecopy No.: (214) 969-0260
Telephone No.: (214) 969-0380
Lending Office for Prime Rate Accounts
1200 Smith Street, Suite 3100
Houston, Texas 77002
Lending Office for Libor Accounts
1200 Smith Street, Suite 3100
Houston, Texas 77002
<PAGE>
Southland Acknowledgment
By execution below, Southland (a) acknowledges that as a result of the
Acquisition Merger, Southland has succeeded to the rights and obligations of
Borrower under the Loan Documents, (b) assumes the Obligations and (c) agrees
to be bound by the Loan Documents as the Borrower.
SOUTHLAND HOLDING COMPANY
By:_____________________________________
Shea E. Ralph
President and Chief Executive Officer
<PAGE>
STATE OF GEORGIA
COUNTY OF FULTON
This instrument was acknowledged before me on February ___, 1997, by
Shea E. Ralph, President of Jotan, Inc., a Florida corporation, on behalf of
said corporation.
_________________________________________
Notary Public, State of Georgia
Commission Expires:______________________
Printed Name:____________________________
STATE OF GEORGIA
COUNTY OF FULTON
This instrument was acknowledged before me on February ___, 1997, by
Shea E. Ralph, President and Chief Executive Officer of SHC Acquisition Corp.,
a Florida corporation, on behalf of said corporation.
_________________________________________
Notary Public, State of Georgia
Commission Expires:______________________
Printed Name:____________________________
STATE OF GEORGIA
COUNTY OF FULTON
This instrument was acknowledged before me on February ___, 1997, by
Shea E. Ralph, President and Chief Executive Officer and Chairman of Southland
Holding Company, a Texas corporation, on behalf of said corporation.
_________________________________________
Notary Public, State of Georgia
Commission Expires:______________________
Printed Name:____________________________
<PAGE>
INDEX TO EXHIBITS
Exhibit Description of Exhibit
"A" Revolving Note
"B" Acquisition Note
"C" Term A Note
"D" Term B Note
"E" Borrowing Base Report
"F" Subsidiary Guaranty
"G" Holding Guaranty
"H" Holding Security Agreement
"I" Borrower Security Agreement
"J" Subsidiary Security Agreement
"K" Assignment and Acceptance
"L" Compliance Certificate
INDEX TO SCHEDULES
Schedule Description of Schedule
1.1(a) Mortgaged Property
1.1(b) Pro Forma
1.1(c) Previous Debt
10.2 Projections
10.5 Existing Litigation
10.14 Subsidiaries; Capitalization
10.22 Employee Matters
11.9 Pledged Deposit Accounts
12.1 Debt
12.2 Liens
<PAGE>
Schedule 1.1(a)
to
Jotan, Inc.
Credit Agreement
Mortgaged Property
The real property located at the following addresses:
1730 Colonial Drive
Thomasville, Georgia 31792
3001 Directors Row
Orlando Central Park #59
Orlando, Florida 32809
Orange County
3625 Oakcliff Road
Doraville, Georgia
Dekalb County
8620 Dorsey Road
Corridor North Industrial Park
Jessup, Maryland
Howard County
<PAGE>
Schedule 1.1(b)
to
Jotan, Inc.
Credit Agreement
Pro Forma
<PAGE>
Schedule 1.1(c)
to
Jotan, Inc.
Credit Agreement
Previous Debt
1. Revolving Note in the original principal amount of $2,000,000 made by
Holding in favor of the CIT Group/Credit Finance, Inc.
2. Term Note in the original principal amount of $525,000 made by Holding
in favor of Neel and Associates dated March 7, 1994.
3. Term Note in the original principal amount of $25,000 made by Holding in
favor of Neal and Associates dated March 7, 1994.
4. Debt of Southland to be repaid in accordance with the Southland Purchase
Agreement.
5. Promissory Note in the amount of $942,093 made by Southland Holding
Company in favor of Thomas J. Gilligan.
<PAGE>
Schedule 10.2
to
Jotan, Inc.
Credit Agreement
Projections
<PAGE>
Schedule 10.5
to
Jotan, Inc.
Credit Agreement
Existing Litigation
1. No. 96-16983; The February One Group, Inc. v. Jotan, Inc.; In the
Supreme Court of the State of New York, County of Suffolk. On July 18,
1996, The February One Group, Inc. ("February One") filed suit against
the Company in a dispute over the repayment of a loan that February One
made to the Company. The Company believes that it has an offsetting
claim against February One in a dispute over a failed financing attempt
by Coleman & Co. The Company believes that any liabilities to February
One are fully reflected on its books. The amount in dispute is $100,000
plus accrued interest.
2. No. CI96-2899, Division 40, Southland Container, Inc., Southland
Container, Inc. of Florida, Southland Container, Inc. of Georgia and
Southland Container, Inc. of North Carolina v. Eastern Seaboard
Packaging, Inc., Eastern Seaboard Packaging Fla., Inc., Charles Capen,
Bob O'Hara and various John Does; In the Circuit Court of the Ninth
District in and for Orange County, Florida.
3. MCHR No. 9601-0540, EEOC No. 12F960264; Vincent Kelly v. Southland
Container Incorporated of Maryland; currently before the Maryland
Commission on Human Relations.
4. See attached Exhibit 1 to this Schedule 10.5 for a list of open claims
under Southland or its subsidiaries insurance policies.
<PAGE>
Schedule 10.14
to
Jotan, Inc.
Credit Agreement
I. Subsidiaries; Capitalization
<TABLE>
<CAPTION>
Jurisdiction of Par Authorized Outstanding Percent
Company Incorportion Share Type Value Shares Shares Owner Owner-
- -------- ------------ ---------- ------ ---------- ---------- --------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Holding Florida Common $.01 40,000,000 5,679,411 Publicly N/A
Held
Preferred 10,000,000
Series B
Redeemable $.01 5,000,000 1,329,357 See Below N/A
$.01 5,000,000 50,000
Borrower Florida Common $.01 1,000 1,000 Holding 100%
Southland Texas Common $1.00 10,000,000 819,513 Holding 100%
Holding
Company
Atlantic Florida Common $1.00 5,000 100 Holding 100%
Bag & Paper
Company
Southland Texas Common $.01 1,000,000 500 Borrower 100%
Packaging,
Inc.
Southland Texas Common $1.00 500,000 12,600 Borrower 100%
Container,
Inc. of
Maryland
Southland Texas Common $.50 250,000 10,450 Borrower 100%
Container,
Inc. of
Georgia
Southland Texas Common $1.00 10,000 900 Borrower 100%
Container,
Inc. of
New Jersey
Southland Texas Common $.50 250,000 9,000 Borrower 100%
Container,
Inc. of
New York
Southland Texas Common $.50 250,000 10,450 Borrower 100%
Container,
Inc. of
North
Carolina
Southland Texas Common $.50 250,000 10,450 Borrower 100%
Container,
Inc. of
Florida
</TABLE>
<TABLE>
II. Equity Sponsor Ownership of Holding
<CAPTION>
Series A Series B Total Warrants
Company Preferred Preferred Common to acquire Common
- ------------------------ ---------- ---------- ---------- -----------------
<S> <C> <C> <C> <C>
A. Rice Partners None 40,000 None 12,096,929
B. F-Jotan, L.L.C. 1,329,357 None None None
C. F-Southland, L.L.C. None 5,000 None 1,557,030
D. FF-Southland, L.P. None 5,000 None 1,557,030
</TABLE>
III. Options, Warrants, etc.
1. Warrants disclosed in item II above issued on the Closing Date pursuant
to the Stock and Warrant Purchase Agreement.
2. That certain Shareholder Agreement dated as of February 28, 1997 among
Holding, Rice Partners, F-Southland, L.L.C., FF-Southland, L.P., F-
Jotan, L.L.C., and the other shareholders of Holding disclosed therein
and the rights to acquire stock set forth therein.
3. Holding currently has issued options and warrants to acquire no more
than 2,000,000 shares of Holding common stock issued or reserved for
issuance to present and management and directors of Holding pursuant to
a stock incentive program approved by the board of directors of Holding.
<PAGE>
Schedule 10.22
to
Jotan, Inc.
Credit Agreement
Employee Matters
The following individuals have employment agreements with Holding
governing salary and other compensation issues:
<TABLE>
<CAPTION>
Name Agreement Date Compensation Amount
- ------------------ ------------------ ---------------------------------
<S> <C> <C>
Shea Ralph November 22, 1996 Salary: $85,000 plus potential
bonuses and stock options
David Freedman November 22, 1996 Salary: $85,000 plus potential
bonuses and stock options
Al Thompson November 22, 1996 Salary: $85,000 plus potential
bonuses and stock options
</TABLE>
The following individuals have employment agreements with Southland
governing salary and other compensation issues:
<TABLE>
<CAPTION>
Name Agreement Date Compensation Amount
- ------------------ ------------------ ----------------------------------
<S> <C> <C>
John Becker February 28, 1997 $112,000/yr. plus potential
bonuses
Frederick Brown February 28, 1997 $112,000/yr. plus potential
bonuses
Charles J. Cook February 28, 1997 $112,000/yr. plus potential
bonuses
Daniel Bernard Lyons February 28, 1997 $112,000/yr. plus potential
bonuses
Robert Menzel February 28, 1997 $85,000/yr. plus potential
bonuses
Earl Carol Smith February 28, 1997 $112,000/yr. plus potential
bonuses
Gary R. Zimmerman February 28, 1997 $112,000/yr. plus potential
bonuses
</TABLE>
<PAGE>
Schedule 11.9
to
Jotan, Inc.
Credit Agreement
<TABLE>
Pledged Deposit Accounts
<CAPTION>
Account Depositor
- ----------------------------------------------- -----------
<S> <C>
1. First Union National Bank of Florida Holding
Acct. No. 20799000152061
Acct. No. 2079900152074
Acct. No. 2079900152090
Acct. No. 2079940002728
Acct. No. 2090000588080
Acct. No. 2090001397872
Acct. No. 2079900150911
Acct. No. 9981227327
2. Bank One Texas N.A. Southland/Borrower
Acct. No. 9930041378
Acct. No. 9932169843
3. NationsBank Southland Container, Inc.
Acct. No. 6062708862 of Maryland
Acct. No. 6063607170
4. NationsBank of (South), N.A. Southland Container, Inc.
Acct. No. 0109001173 of Georgia
Acct. No. 0105218474
</TABLE>
<PAGE>
Schedule 12.1
to
Jotan, Inc.
Credit Agreement
Debt
1. Promissory Note in the amount of $942,093 made by Southland Holding
Company in favor of Thomas J. Gilligan.
2. Capital Lease Obligations of Southland and its Subsidiaries disclosed
pursuant to Schedule 2.22(a)(ii) of the Southland Purchase Agreement.
3. Disputed indebtedness in the amount of $100,000 plus accrued interest
potentially owed to The February One Group, Inc.
<PAGE>
Schedule 12.2
to
Jotan, Inc.
Credit Agreement
<TABLE>
Liens
<CAPTION>
Debtor Jurisdiction Secured File File Collateral
Party Number Date or Type
- ----------- --------------- ------------- --------- -------- ----------------
<S> <C> <C> <C> <C> <C>
Southland Gwinett County, Transport 19954784 05/15/95 2-1985 Fruehauf
Container, Georgia International 28' PUP
Inc. of Pool, Inc.
Georgia
Southland New Jersey Citicorp 1643791 07/03/95 Mitsubishi
Container, Secretary of Dealer forklift
Inc. of New State Finance
Jersey
Southland New Jersey Citicorp 1638423 06/05/95 Mitsubishi
Container, Secretary of Dealer forklift
Inc. of New State Finance
Jersey
Southland New Jersey Citicorp 127370 06/22/95 Mitsubishi
Container, Secretary of Dealer forklift
Inc. of New State Finance
Jersey
Atlantic Bag Tennessee Toyota 94-306300 05/02/94 Forklift
& Paper Co., Secretary of Motor
Inc., d/b/a State Credit
Jotan Company Corp.
Jotan Thomasville Associates 94-2103 11/09/94 Forklift
Thomasville County, Leasing
Inc. Georgia Inc.
Atlantic Bag Florida Clark 93-175353 08/20/93 Forklift
& Paper Department of Credit
Company State Corporation
Atlantic Bag Florida Clark 93-206783 10/04/93 Forklift
& Paper Department of Credit
Company State Corporation
Southland N/A Thomas J. N/A N/A Treasury shares
Holding Gilligan of Southland
Company Holding Company
Southland DeKalb fed tax 5924/046 08/19/87 $1,101.69*
Container, County, lien tax lien
Inc. of Georgia
Georgia
Southland DeKalb fed tax 6296/362 11/22/88 $2,990.45*
Container, County, lien tax lien
Inc. of Georgia
Georgia
Southland Massachusetts state tax 32299 04/25/96 $3,191.49*
Container, Secretary of lien tax lien
Inc. of New State
Jersey
Atlantic Bag Dural County, judgement 95070956 $10,153
& Paper Florida judgement*
Company
Atlantic Bag Dural County, Drumheller 95144845 $4,237.46*
& Paper Florida Bag and
Company Supply, Inc.
</TABLE>
* The instruments creating these liens continue to be of record but the
taxes, judgments and other obligations secured thereby have been paid or
otherwise satisfied.
<PAGE>
EXHIBIT "A"
TO
JOTAN, INC.
CREDIT AGREEMENT
Revolving Note
<PAGE>
REVOLVING NOTE
$____________ Dallas, Texas ____________, 1997
FOR VALUE RECEIVED, the undersigned, SHC ACQUISITION CORP., a Florida
corporation (the "Borrower" who will merge with and into SOUTHLAND HOLDING
COMPANY and after such merger "Borrower" shall mean SOUTHLAND HOLDING
COMPANY), hereby promises to pay to the order of ___________________________
(the "Bank"), at the Principal Office of the Agent, in lawful money of the
United States of America and in immediately available funds, the principal
amount of ____________________________________________________________________
DOLLARS ($____________) or such lesser amount as shall equal the aggregate
unpaid principal amount of the Revolving Loans made by the Bank to the
Borrower under the Credit Agreement referred to below, on the dates and in the
principal amounts provided in the Credit Agreement, and to pay interest on the
unpaid principal amount of each such Revolving Loan, at such office, in like
money and funds, for the period commencing on the date of such Revolving Loan
until such Revolving Loan shall be paid in full, at the rates per annum and on
the dates provided in the Credit Agreement.
The Borrower hereby authorizes the Bank to record in its records the
amount of each Revolving Loan and Type of Accounts established under each
Revolving Loan and all Continuations, Conversions and payments of principal in
respect thereof, which records shall, in the absence of manifest error,
constitute prima facie evidence of the accuracy thereof; provided, however,
that the failure to make such notation with respect to any such Revolving Loan
or payment shall not limit or otherwise affect the obligations of the Borrower
under the Credit Agreement or this Revolving Note.
This Revolving Note is one of the Revolving Notes referred to in the
Credit Agreement dated as of February 28, 1997, among the Borrower, Jotan,
Inc., the Bank, the other banks named therein and Banque Paribas, as agent for
such banks ("Agent") (such Credit Agreement, as the same may be amended or
otherwise modified from time to time, being referred to herein as the "Credit
Agreement"), and evidences Revolving Loans made by the Bank thereunder. The
Credit Agreement, among other things, contains provisions for acceleration of
the maturity of this Revolving Note upon the happening of certain stated
events and for prepayments of Revolving Loans prior to the maturity of this
Revolving Note upon the terms and conditions specified in the Credit
Agreement. Capitalized terms used in this Revolving Note have the respective
meanings assigned to them in the Credit Agreement.
This Revolving Note shall be governed by and construed in accordance
with the laws of the State of Texas and the applicable laws of the United
States of America.
Except for any notices expressly required by the Loan Documents, the
Borrower and each surety, guarantor, endorser and other party ever liable for
payment of any sums of money payable on this Revolving Note jointly and
severally waive notice, presentment, demand for payment, protest, notice of
<PAGE>
protest and non-payment or dishonor, notice of acceleration, notice of intent
to accelerate, notice of intent to demand, diligence in collecting, grace and
all other formalities of any kind, and consent to all extensions without
notice for any period or periods of time and partial payments, before or after
maturity, and any impairment of any collateral securing this Revolving Note,
all without prejudice to the holder. The holder shall similarly have the
right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release any
such party or to release or substitute part or all of the collateral securing
this Revolving Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
SHC ACQUISITION CORP.
By:___________________________________
Name:_________________________________
Title:________________________________
STATE OF GEORGIA
COUNTY OF FULTON
This instrument was acknowledged before me on February ___, 1997, by
Shea E. Ralph, President and Chief Executive Officer of SHC Acquisition Corp.,
a Florida corporation, on behalf of said corporation.
_______________________________________
Notary Public, State of Georgia
Commission Expires:____________________
Printed Name:__________________________
<PAGE>
EXHIBIT "B"
TO
JOTAN, INC.
CREDIT AGREEMENT
Acquisition Note
<PAGE>
ACQUISITION NOTE
$____________ Dallas, Texas ____________, 1997
FOR VALUE RECEIVED, the undersigned, SHC ACQUISITION CORP., a Florida
corporation (the "Borrower" who will merge with and into SOUTHLAND HOLDING
COMPANY and after such merger "Borrower" shall mean SOUTHLAND HOLDING
COMPANY), hereby promises to pay to the order of _______________________
(the "Bank"), at the Principal Office of the Agent, in lawful money of the
United States of America and in immediately available funds, the principal
amount of _____________________________________________________ DOLLARS
($____________) or such lesser amount as shall equal the aggregate unpaid
principal amount of the Acquisition Loans made by the Bank to the Borrower
under the Credit Agreement referred to below, on the dates and in the
principal amounts provided in the Credit Agreement, and to pay interest on the
unpaid principal amount of each such Acquisition Loan, at such office, in like
money and funds, for the period commencing on the date of such Acquisition
Loan until such Acquisition Loan shall be paid in full, at the rates per annum
and on the dates provided in the Credit Agreement.
The Borrower hereby authorizes the Bank to record in its records the
amount and type of each Acquisition Loan and the Type of Accounts established
under each Acquisition Loan and all Continuations, Conversions and payments of
principal in respect thereto, which records shall, in the absence of manifest
error, constitute prima facie evidence of the accuracy thereof; provided,
however, that the failure to make such notation with respect to any such
Acquisition Loan, Accounts or payment shall not limit or otherwise affect the
obligations of the Borrower under the Credit Agreement or this Acquisition
Note.
This Acquisition Note is one of the Acquisition Notes referred to in the
Credit Agreement dated as of February 28, 1997, among the Borrower, Jotan,
Inc., the Bank, the other banks named therein and Banque Paribas, as agent for
such banks ("Agent") (such Credit Agreement, as the same may be amended or
otherwise modified from time to time, being referred to herein as the "Credit
Agreement"), and evidences Acquisition Loans made by the Bank thereunder. The
Credit Agreement, among other things, contains provisions for acceleration of
the maturity of this Acquisition Note upon the happening of certain stated
events and for prepayments of Acquisition Loans prior to the maturity of this
Acquisition Note upon the terms and conditions specified in the Credit
Agreement. Capitalized terms used in this Acquisition Note have the
respective meanings assigned to them in the Credit Agreement.
This Acquisition Note shall be governed by and construed in accordance
with the laws of the State of Texas and the applicable laws of the United
States of America.
Except for any notices expressly required by the Loan Documents, the
Borrower and each surety, guarantor, endorser and other party ever liable for
<PAGE>
payment of any sums of money payable on this Acquisition Note jointly and
severally waive notice, presentment, demand for payment, protest, notice of
protest and non-payment or dishonor, notice of acceleration, notice of intent
to accelerate, notice of intent to demand, diligence in collecting, grace and
all other formalities of any kind, and consents to all extensions without
notice for any period or periods of time and partial payments, before or after
maturity, and any impairment of any collateral securing this Acquisition Note,
all without prejudice to the holder. The holder shall similarly have the
right to deal in any way, at any time, with one or more of the foregoing
parties without notice to any other party, and to grant any such party any
extensions of time for payment of any of said indebtedness, or to release any
such party or release or substitute part or all of the collateral securing
this Acquisition Note, or to grant any other indulgences or forbearances
whatsoever, without notice to any other party and without in any way affecting
the personal liability of any party hereunder.
SHC ACQUISITION CORP.
By:__________________________________
Name:________________________________
Title:_______________________________
<PAGE>
EXHIBIT "C"
TO
JOTAN, INC.
CREDIT AGREEMENT
Term A Note
<PAGE>
TERM A NOTE
$________________ Dallas, Texas ____________, 1997
FOR VALUE RECEIVED, the undersigned, SHC ACQUISITION CORP., a Florida
corporation (the "Borrower" who will merge with and into SOUTHLAND HOLDING
COMPANY and after such merger "Borrower" shall mean SOUTHLAND HOLDING
COMPANY), hereby promises to pay to the order of ________________ (the
"Bank"), at the Principal Office of the Agent, in lawful money of the United
States of America and in immediately available funds, the principal amount of
______________________ ($___________) or such lesser amount as shall equal the
aggregate unpaid principal amount of the Term A Loans made by the Bank to the
Borrower under the Credit Agreement referred to below, on the dates and in the
principal amounts provided in the Credit Agreement, and to pay interest on the
unpaid principal amount of such Term A Loans, at such office, in like money
and funds, for the period commencing on the date of such Term A Loans until
such Term A Loans shall be paid in full, at the rates per annum and on the
dates provided in the Credit Agreement.
The Borrower hereby authorizes the Bank to record in its records the
amount of the Term A Loans and Type of Accounts established thereunder and all
Continuations, Conversions and payments of principal in respect thereto, which
records shall, in the absence of manifest error constitute prima facie
evidence of the accuracy thereof; provided, however, that the failure to make
such notation with respect to the Term A Loans, or such Accounts or payment
shall not limit or otherwise affect the obligations of the Borrower under the
Credit Agreement or this Term A Note.
This Term A Note is one of the Term A Notes referred to in the Credit
Agreement dated as of February 28, 1997, among the Borrower, Jotan, Inc., the
Bank, the other banks named therein and Banque Paribas, as agent for such
banks ("Agent") (such Credit Agreement, as the same may be amended or
otherwise modified from time to time, being referred to herein as the "Credit
Agreement") and evidences the Term A Loans made by the Bank thereunder. The
Credit Agreement, among other things, contains provisions for acceleration of
the maturity of this Term A Note upon the happening of certain stated events
and for prepayments of Term A Loans prior to the maturity of this Term A Note
upon the terms and conditions specified in the Credit Agreement. Capitalized
terms used in this Term A Note have the respective meanings assigned to them
in the Credit Agreement.
This Term A Note shall be governed by and construed in accordance with
the laws of the State of Texas and the applicable laws of the United States of
America.
Except for any notice expressly required by the Loan Documents, the
Borrower and each surety, guarantor, endorser and other party ever liable for
payment of any sums of money payable on this Term A Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, diligence in collecting, grace and all
<PAGE>
other formalities of any kind, and consent to all extensions without notice
for any period or periods of time and partial payments, before or after
maturity, and any impairment of any collateral securing this Term A Note, all
without prejudice to the holder. The holder shall similarly have the right to
deal in any way, at any time, with one or more of the foregoing parties
without notice to any other party, and to grant any such party any extensions
of time for payment of any of said indebtedness, or to release any such party
or to grant any other indulgences or forbearances whatsoever, without notice
to any other party and without in any way affecting the personal liability of
any party hereunder.
SHC ACQUISITION CORP.
By:___________________________________
Name:_________________________________
Title:________________________________
<PAGE>
EXHIBIT "D"
TO
JOTAN, INC.
CREDIT AGREEMENT
Term B Note
<PAGE>
TERM B NOTE
$________________ Dallas, Texas ____________, 1997
FOR VALUE RECEIVED, the undersigned, SHC ACQUISITION CORP., a Florida
corporation (the "Borrower" who will merge with and into SOUTHLAND HOLDING
COMPANY and after such merger "Borrower" shall mean SOUTHLAND HOLDING
COMPANY), hereby promises to pay to the order of ________________ (the
"Bank"), at the Principal Office of the Agent, in lawful money of the United
States of America and in immediately available funds, the principal amount of
______________________ ($___________) or such lesser amount as shall equal the
aggregate unpaid principal amount of the Term B Loans made by the Bank to the
Borrower under the Credit Agreement referred to below, on the dates and in the
principal amounts provided in the Credit Agreement, and to pay interest on the
unpaid principal amount of such Term B Loans, at such office, in like money
and funds, for the period commencing on the date of such Term B Loans until
such Term B Loans shall be paid in full, at the rates per annum and on the
dates provided in the Credit Agreement.
The Borrower hereby authorizes the Bank to record in its records the
amount of the Term B Loans and Type of Accounts established thereunder and all
Continuations, Conversions and payments of principal in respect thereto, which
records shall, in the absence of manifest error constitute prima facie
evidence of the accuracy thereof; provided, however, that the failure to make
such notation with respect to the Term B Loans, or such Accounts or payment
shall not limit or otherwise affect the obligations of the Borrower under the
Credit Agreement or this Term B Note.
This Term B Note is one of the Term B Notes referred to in the Credit
Agreement dated as of February 28, 1997, among the Borrower, Jotan, Inc., the
Bank, the other banks named therein and Banque Paribas, as agent for such
banks ("Agent") (such Credit Agreement, as the same may be amended or
otherwise modified from time to time, being referred to herein as the "Credit
Agreement") and evidences the Term B Loans made by the Bank thereunder. The
Credit Agreement, among other things, contains provisions for acceleration of
the maturity of this Term B Note upon the happening of certain stated events
and for prepayments of Term B Loans prior to the maturity of this Term B Note
upon the terms and conditions specified in the Credit Agreement. Capitalized
terms used in this Term B Note have the respective meanings assigned to them
in the Credit Agreement.
This Term B Note shall be governed by and construed in accordance with
the laws of the State of Texas and the applicable laws of the United States of
America.
Except for any notice expressly required by the Loan Documents, the
Borrower and each surety, guarantor, endorser and other party ever liable for
payment of any sums of money payable on this Term B Note jointly and severally
waive notice, presentment, demand for payment, protest, notice of protest and
non-payment or dishonor, notice of acceleration, notice of intent to
accelerate, notice of intent to demand, diligence in collecting, grace and all
<PAGE>
other formalities of any kind, and consent to all extensions without notice
for any period or periods of time and partial payments, before or after
maturity, and any impairment of any collateral securing this Term B Note, all
without prejudice to the holder. The holder shall similarly have the right to
deal in any way, at any time, with one or more of the foregoing parties
without notice to any other party, and to grant any such party any extensions
of time for payment of any of said indebtedness, or to release any such party
or to grant any other indulgences or forbearances whatsoever, without notice
to any other party and without in any way affecting the personal liability of
any party hereunder.
SHC ACQUISITION CORP.
By:___________________________________
Name:_________________________________
Title:________________________________
<PAGE>
EXHIBIT "F"
TO
JOTAN, INC.
CREDIT AGREEMENT
Subsidiary Guaranty
<PAGE>
GUARANTY AGREEMENT
(Subsidiary)
WHEREAS, SHC ACQUISITION CORP., a Florida corporation ("Borrower" who
will merge with and into SOUTHLAND HOLDING COMPANY and after such merger
"Borrower" shall mean Southland Holding Company) has entered into that certain
Credit Agreement dated February 28, 1997, among Borrower, Jotan, Inc., the
banks named therein ("Banks") and Banque Paribas, as agent for such Banks
("Agent") (such Credit Agreement, as it may hereafter be amended or otherwise
modified from time to time, being hereinafter referred to as the "Credit
Agreement" and capitalized terms not otherwise defined herein shall have the
same meaning as set forth in the Credit Agreement);
WHEREAS, the execution of this Guaranty Agreement is a condition to each
Bank's obligations under the Credit Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the undersigned, ________________, a
________________ corporation (the "Guarantor"), hereby irrevocably and
unconditionally guarantees to the Agent and the Banks the full and prompt
payment and performance of the Guaranteed Indebtedness (hereinafter defined),
this Guaranty Agreement being upon the following terms:
1. The term "Guaranteed Indebtedness", as used herein means all of
the "Obligations", as defined in the Credit Agreement and shall include any
and all post-petition interest and expenses (including attorneys' fees)
whether or not allowed under any bankruptcy, insolvency, or other similar law;
provided that the Guaranteed Indebtedness shall be limited to an aggregate
amount equal to the largest amount that would not render Guarantor's
obligations hereunder subject to avoidance under Section 544 or 548 of the
United States Bankruptcy Code or under any applicable state law relating to
fraudulent transfers or conveyances.
2. Guarantor under this Guaranty, and each guarantor under other
guaranties, if any, relating to the Credit Agreement (the "Related
Guaranties") which contain a contribution provision similar to that set forth
in this paragraph 2, together desire to allocate among themselves
(collectively, the "Contributing Guarantors"), in a fair and equitable manner,
their obligations arising under this Guaranty and the Related Guaranties.
Accordingly, in the event any payment or distribution is made by Guarantor
under this Guaranty or a guarantor under a Related Guaranty (a "Funding
Guarantor") that exceeds its Fair Share (as defined below), that Funding
Guarantor shall be entitled to a contribution from each of the other
Contributing Guarantors in the amount of such other Contributing Guarantor's
Fair Share Shortfall (as defined below), with the result that all such
contributions will cause each Contributing Guarantor's Aggregate Payments (as
defined below) to equal its Fair Share. "Fair Share" means, with respect to a
Contributing Guarantor as of any date of determination, an amount equal to
(i) the ratio of (x) the Adjusted Maximum Amount (as defined below) with
respect to such Contributing Guarantor to (y) the aggregate of the Adjusted
Maximum Amounts with respect to all Contributing Guarantors, multiplied by
<PAGE>
(ii) the aggregate amount paid or distributed on or before such date by all
Funding Guarantors under this Guaranty and the Related Guaranties in respect
of the obligations guarantied. "Fair Share Shortfall" means, with respect to
a Contributing Guarantor as of any date of determination, the excess, if any,
of the Fair Share of such Contributing Guarantor over the Aggregate Payments
of such Contributing Guarantor. "Adjusted Maximum Amount" means, with respect
to a Contributing Guarantor as of any date of determination, the maximum
aggregate amount of the obligations of such Contributing Guarantor under this
Guaranty and the Related Guaranties, in each case determined in accordance
with the provisions hereof and thereof; provided that, solely for purposes of
calculating the "Adjusted Maximum Amount" with respect to any Contributing
Guarantor for purposes of this paragraph 2, the assets or liabilities arising
by virtue of any rights to or obligations of contribution hereunder or under
any similar provision contained in a Related Guaranty shall not be considered
as assets or liabilities of such Contributing Guarantor. "Aggregate Payments"
means, with respect to a Contributing Guarantor as of any date of
determination, the aggregate amount of all payments and distributions made on
or before such date by such Contributing Guarantor in respect of this Guaranty
and the Related Guaranties (including, without limitation, in respect of this
paragraph 2 or any similar provision contained in a Related Guaranty). The
amounts payable as contributions hereunder and under similar provisions in the
Related Guaranties shall be determined as of the date on which the related
payment or distribution is made by the applicable Funding Guarantor. The
allocation among Contributing Guarantors of their obligations as set forth in
this paragraph 2 or any similar provision contained in a Related Guaranty
shall not be construed in any way to limit the liability of any Contributing
Guarantor hereunder or under a Related Guaranty. Each Contributing Guarantor
under a Related Guaranty is a third party beneficiary to the contribution
agreement set forth in this paragraph 2.
3. This instrument shall be an absolute, continuing, irrevocable and
unconditional guaranty of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its obligations hereunder
until the payment and performance in full of the Guaranteed Indebtedness. No
set-off, counterclaim, recoupment, reduction, or diminution of any obligation,
or any defense of any kind or nature which Borrower may have against Agent,
any Bank or any other party, or which Guarantor may have against Borrower,
Agent, any Bank or any other party, shall be available to, or shall be
asserted by, Guarantor against Agent, any Bank or any subsequent holder of the
Guaranteed Indebtedness or any part thereof or against payment of the
Guaranteed Indebtedness or any part thereof.
4. If Guarantor becomes liable for any indebtedness owing by Borrower
to Agent or any Bank by endorsement or otherwise, other than under this
Guaranty Agreement, such liability shall not be in any manner impaired or
affected hereby, and the rights of Agent and Banks hereunder shall be
cumulative of any and all other rights that Agent and Banks may ever have
against Guarantor. The exercise by Agent and Banks of any right or remedy
hereunder or under any other instrument, or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or remedy.
<PAGE>
5. In the event of default by Borrower in payment or performance of
the Guaranteed Indebtedness, or any part thereof, when such Guaranteed
Indebtedness becomes due, whether by its terms, by acceleration, or otherwise,
Guarantor shall promptly pay the amount due thereon to Agent and Banks without
notice or demand in lawful currency of the United States of America and it
shall not be necessary for Agent and Banks, in order to enforce such payment
by Guarantor, first to institute suit or exhaust its remedies against Borrower
or others liable on such Guaranteed Indebtedness, or to enforce any rights
against any collateral which shall ever have been given to secure such
Guaranteed Indebtedness. In the event such payment is made by Guarantor, then
Guarantor shall be subrogated to the rights then held by Agent and any Bank
with respect to the Guaranteed Indebtedness to the extent to which the
Guaranteed Indebtedness was discharged by Guarantor and, in addition, upon
payment by Guarantor of any sums to Agent and any Bank hereunder, all rights
of Guarantor against Borrower, any other guarantor or any Collateral arising
as a result therefrom by way of right of subrogation, reimbursement, or
otherwise shall in all respects be subordinate and junior in right of payment
to the prior indefeasible payment in full of the Guaranteed Indebtedness.
6. If acceleration of the time for payment of any amount payable by
Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject
to acceleration under the terms of the Guaranteed Indebtedness shall
nonetheless be payable by Guarantor hereunder forthwith on demand by Agent or
any Bank.
7. Guarantor hereby agrees that its obligations under this Guaranty
Agreement shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the release,
surrender, exchange, or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of Guarantor hereunder, or the full or partial release of any
other guarantor from liability for any or all of the Guaranteed Indebtedness;
(c) any disability of Borrower, or the dissolution, insolvency, or bankruptcy
of Borrower, Guarantor, or any other party at any time liable for the payment
of any or all of the Guaranteed Indebtedness; (d) any renewal, extension,
modification, waiver, amendment, or rearrangement of any or all of the
Guaranteed Indebtedness or any instrument, document, or agreement evidencing,
securing, or otherwise relating to any or all of the Guaranteed Indebtedness;
(e) any adjustment, indulgence, forbearance, waiver, or compromise that may be
granted or given by Agent or any Bank to Borrower, Guarantor, or any other
party ever liable for any or all of the Guaranteed Indebtedness; (f) any
neglect, delay, omission, failure, or refusal of Agent or any Bank to take or
prosecute any action for the collection of any of the Guaranteed Indebtedness
or to foreclose or take or prosecute any action in connection with any
instrument, document, or agreement evidencing, securing, or otherwise relating
to any or all of the Guaranteed Indebtedness; (g) the unenforceability or
invalidity of any or all of the Guaranteed Indebtedness or of any instrument,
document, or agreement evidencing, securing, or otherwise relating to any or
<PAGE>
all of the Guaranteed Indebtedness; (h) any payment by Borrower or any other
party to Agent or any Bank is held to constitute a preference under applicable
bankruptcy or insolvency law or if for any other reason Agent or any Bank is
required to refund any payment or pay the amount thereof to someone else; (i)
the settlement or compromise of any of the Guaranteed Indebtedness; (j) the
non-perfection of any security interest or lien securing any or all of the
Guaranteed Indebtedness; (k) any impairment of any collateral securing any or
all of the Guaranteed Indebtedness; (l) the failure of Agent or any Bank to
sell any collateral securing any or all of the Guaranteed Indebtedness in a
commercially reasonable manner or as otherwise required by law; (m) any change
in the corporate existence, structure, or ownership of Borrower; or (n) any
other circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower or Guarantor.
8. Guarantor represents and warrants to Agent and Banks as follows:
(a) All representations and warranties in the Credit Agreement
relating to Guarantor are true and correct.
(b) The value of the consideration received and to be received
by Guarantor as a result of Borrower, Agent and Banks entering into the
Credit Agreement and Guarantor executing and delivering this Guaranty
Agreement and the other Loan Documents to which it is a party is
reasonably worth at least as much as the liability and obligation of
Guarantor hereunder and thereunder, and such liability and obligation of
Guarantor and the Credit Agreement have benefitted and may reasonably be
expected to benefit Guarantor directly or indirectly.
(c) Guarantor has, independently and without reliance upon Agent
or any Bank and based upon such documents and information as Guarantor
has deemed appropriate, made its own analysis and decision to enter into
the Loan Documents to which it is a party.
(d) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition and
assets of Borrower and Guarantor is not relying upon Agent or the Banks
to provide (and neither the Agent nor any Bank shall have any duty to
provide) any such information to Guarantor either now or in the future.
9. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Bank has any commitment
under the Credit Agreement, Guarantor will comply with all covenants set forth
in the Credit Agreement specifically applicable to Guarantor.
10. When an Event of Default exists, Agent and Banks shall have the
right to set-off and apply against this Guaranty Agreement or the Guaranteed
<PAGE>
Indebtedness or both, at any time and without notice to Guarantor, any and all
deposits (general or special, time or demand, provisional or final) or other
sums at any time credited by or owing from Agent and Banks to Guarantor
whether or not the Guaranteed Indebtedness is then due and irrespective of
whether or not Agent or any Bank shall have made any demand under this
Guaranty Agreement. The rights and remedies of Agent and the Banks hereunder
are in addition to other rights and remedies (including, without limitation,
other rights of set-off) which Agent or any Bank may have.
11. Guarantor hereby agrees that the Subordinated Indebtedness (as
defined below) shall be subordinate and junior in right of payment to the
prior payment in full of all Guaranteed Indebtedness as herein provided. The
Subordinated Indebtedness shall not be payable, and no payment of principal,
interest or other amounts on account thereof, and no property or guarantee of
any nature to secure or pay the Subordinated Indebtedness shall be made or
given, directly or indirectly by or on behalf of any Debtor (hereafter
defined) or received, accepted, retained or applied by Guarantor unless and
until the Guaranteed Indebtedness shall have been paid in full in cash; except
that prior to occurrence of a Default, Guarantor shall have the right to
receive payments on the Subordinated Indebtedness made in the ordinary course
of business. After the occurrence and during the continuance of a Default, no
payments of principal or interest may be made or given, directly or
indirectly, by or on behalf of any Debtor or received, accepted, retained or
applied by Guarantor unless and until the Guaranteed Indebtedness shall have
been paid in full in cash; provided, however, that when such Default is cured
or waived, Guarantor's right to receive, accept, retain or apply payments on
Subordinated Indebtedness shall resume. If any sums shall be paid to
Guarantor by any Debtor or any other Person on account of the Subordinated
Indebtedness when such payment is not permitted hereunder, such sums shall be
held in trust by Guarantor for the benefit of Agent and the Bank and shall
forthwith be paid to Agent without affecting the liability of Guarantor under
this Guaranty Agreement and may be applied by Agent against the Guaranteed
Indebtedness in accordance with the Credit Agreement. Upon the request of
Agent, Guarantor shall execute, deliver, and endorse to Agent such
documentation as Agent may request to perfect, preserve, and enforce its
rights hereunder. For purposes of this Guaranty Agreement, the term
"Subordinated Indebtedness" means all indebtedness, liabilities, and
obligations of Borrower or any Obligated Party other than Guarantor (Borrower
and such Obligated Parties herein the "Debtors") to Guarantor, whether such
indebtedness, liabilities, and obligations now exist or are hereafter incurred
or arise, or are direct, indirect, contingent, primary, secondary, several,
joint and several, or otherwise, and irrespective of whether such
indebtedness, liabilities, or obligations are evidenced by a note, contract,
open account, or otherwise, and irrespective of the Person or Persons in whose
favor such indebtedness, obligations, or liabilities may, at their inception,
have been, or may hereafter be created, or the manner in which they have been
or may hereafter be acquired by Guarantor.
(a) Guarantor agrees that any and all Liens (including any
judgment liens), upon any Debtor's assets securing payment of any
Subordinated Indebtedness shall be and remain inferior and subordinate
to any and all Liens upon any Debtor's assets securing payment of the
Guaranteed Indebtedness or any part thereof, regardless of whether such
Liens in favor of Guarantor, Agent or any Bank presently exist or are
<PAGE>
hereafter created or attached. Without the prior written consent of
Agent, Guarantor shall not (i) file suit against any Debtor or exercise
or enforce any other creditor's right it may have against any Debtor, or
(ii) foreclose, repossess, sequester, or otherwise take steps or
institute any action or proceedings (judicial or otherwise, including
without limitation the commencement of, or joinder in, any liquidation,
bankruptcy, rearrangement, debtor's relief or insolvency proceeding) to
enforce any obligations of any Debtor to Guarantor or any Liens held by
Guarantor on assets of any Debtor.
(b) In the event of any receivership, bankruptcy,
reorganization, rearrangement, debtor's relief, or other insolvency
proceeding involving any Debtor as debtor, Agent shall have the right to
prove and vote any claim under the Subordinated Indebtedness and to
receive directly from the receiver, trustee or other court custodian all
dividends, distributions, and payments made in respect of the
Subordinated Indebtedness until the Guaranteed Indebtedness has been
paid in full in cash. Agent may apply any such dividends,
distributions, and payments against the Guaranteed Indebtedness in
accordance with the Credit Agreement.
(c) Guarantor agrees that all promissory notes, accounts
receivable, ledgers, records, or any other evidence of Subordinated
Indebtedness shall contain a specific written notice thereon that the
indebtedness evidenced thereby is subordinated under the terms of this
Guaranty Agreement.
12. No amendment or waiver of any provision of this Guaranty Agreement
or consent to any departure by the Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed by Agent and Required
Banks except as otherwise provided in the Credit Agreement. No failure on the
part of Agent or any Bank to exercise, and no delay in exercising, any right,
power, or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
13. Any acknowledgment or new promise, whether by payment of principal
or interest or otherwise and whether by Borrower or others (including
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against Agent or any Bank shall
have commenced to run, toll the running of such statute of limitations and, if
the period of such statute of limitations shall have expired, prevent the
operation of such statute of limitations.
14. This Guaranty Agreement is for the benefit of Agent and the Banks
and their successors and assigns, and in the event of an assignment of the
Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guaranty Agreement is binding not
only on Guarantor, but on Guarantor's successors and assigns.
<PAGE>
15. Guarantor recognizes that Agent and the Banks are relying upon
this Guaranty Agreement and the undertakings of Guarantor hereunder and under
the other Loan Documents to which it is a party in making extensions of credit
to Borrower under the Credit Agreement and further recognizes that the
execution and delivery of this Guaranty Agreement and the other Loan Documents
to which it is a party is a material inducement to Agent and the Banks in
entering into the Credit Agreement and continuing to extend credit thereunder.
Guarantor hereby acknowledges that there are no conditions to the full
effectiveness of this Guaranty Agreement or any other Loan Document to which
it is a party.
16. Any notice or demand to Guarantor under or in connection with this
Guaranty Agreement or any other Loan Document to which it is a party shall be
deemed effective if given to Guarantor, care of Borrower in accordance with
the notice provisions in the Credit Agreement.
17. Guarantor shall pay on demand all attorneys' fees and all other
costs and expenses incurred by Agent and Banks in connection with the
administration, enforcement, or collection of this Guaranty Agreement.
18. Guarantor hereby waives promptness, diligence, notice of any
default under the Guaranteed Indebtedness, demand of payment, notice of
acceptance of this Guaranty Agreement, presentment, notice of protest, notice
of dishonor, notice of the incurring by Borrower of additional indebtedness,
and all other notices and demands with respect to the Guaranteed Indebtedness
and this Guaranty Agreement.
19. The Credit Agreement, and all of the terms thereof, are
incorporated herein by reference, the same as if stated verbatim herein, and
Guarantor agrees that Agent and the Banks may exercise any and all rights
granted to any of them under the Credit Agreement and the other Loan Documents
without affecting the validity or enforceability of this Guaranty Agreement.
20. THIS GUARANTY AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT OF
GUARANTOR, AGENT AND BANKS WITH RESPECT TO GUARANTOR'S GUARANTY OF THE
GUARANTEED INDEBTEDNESS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY AGREEMENT IS INTENDED BY
GUARANTOR, AGENT AND BANKS AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS
OF THE GUARANTY AGREEMENT, AND NO COURSE OF DEALING AMONG GUARANTOR, AGENT AND
BANKS, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER
EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT
OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS
AMONG GUARANTOR, AGENT AND BANKS.
<PAGE>
EXECUTED as of the 28th day of February 1997.
GUARANTOR:
___________________________________
By:________________________________
Name:______________________________
Title:_____________________________
<PAGE>
EXHIBIT "G"
TO
JOTAN, INC.
CREDIT AGREEMENT
Holding Guaranty
<PAGE>
GUARANTY AGREEMENT
(Holding)
WHEREAS, SHC ACQUISITION CORP., a Florida corporation ("Borrower" who
will merge with and into SOUTHLAND HOLDING COMPANY and after such merger
"Borrower" shall mean SOUTHLAND HOLDING COMPANY) has entered into that certain
Credit Agreement dated February 28, 1997, among Borrower, Jotan, Inc., the
banks named therein ("Banks") and Banque Paribas, as agent for such Banks
("Agent") (such Credit Agreement, as it may hereafter be amended or otherwise
modified from time to time, being hereinafter referred to as the "Credit
Agreement" and capitalized terms not otherwise defined herein shall have the
same meaning as set forth in the Credit Agreement);
WHEREAS, the execution of this Guaranty Agreement is a condition to each
Bank's obligations under the Credit Agreement;
NOW, THEREFORE, for valuable consideration, the receipt and adequacy of
which are hereby acknowledged, the undersigned, JOTAN, INC., a Florida
corporation (the "Guarantor"), hereby irrevocably and unconditionally
guarantees to the Agent and the Banks the full and prompt payment and
performance of the Guaranteed Indebtedness (hereinafter defined), this
Guaranty Agreement being upon the following terms:
1. The term "Guaranteed Indebtedness", as used herein means all of
the "Obligations", as defined in the Credit Agreement and shall include any
and all post-petition interest and expenses (including attorneys' fees)
whether or not allowed under any bankruptcy, insolvency, or other similar law.
2. Guarantor under this Guaranty, and each guarantor under other
guaranties, if any, relating to the Credit Agreement (the "Related
Guaranties") which contain a contribution provision similar to that set forth
in this paragraph 2, together desire to allocate among themselves
(collectively, the "Contributing Guarantors"), in a fair and equitable manner,
their obligations arising under this Guaranty and the Related Guaranties.
Accordingly, in the event any payment or distribution is made by Guarantor
under this Guaranty or a guarantor under a Related Guaranty (a "Funding
Guarantor") that exceeds its Fair Share (as defined below), that Funding
Guarantor shall be entitled to a contribution from each of the other
Contributing Guarantors in the amount of such other Contributing Guarantor's
Fair Share Shortfall (as defined below), with the result that all such
contributions will cause each Contributing Guarantor's Aggregate Payments (as
defined below) to equal its Fair Share. "Fair Share" means, with respect to a
Contributing Guarantor as of any date of determination, an amount equal to
(i) the ratio of (x) the Adjusted Maximum Amount (as defined below) with
respect to such Contributing Guarantor to (y) the aggregate of the Adjusted
Maximum Amounts with respect to all Contributing Guarantors, multiplied by
(ii) the aggregate amount paid or distributed on or before such date by all
Funding Guarantors under this Guaranty and the Related Guaranties in respect
of the obligations guarantied. "Fair Share Shortfall" means, with respect to
<PAGE>
a Contributing Guarantor as of any date of determination, the excess, if any,
of the Fair Share of such Contributing Guarantor over the Aggregate Payments
of such Contributing Guarantor. "Adjusted Maximum Amount" means, with respect
to a Contributing Guarantor as of any date of determination, the maximum
aggregate amount of the obligations of such Contributing Guarantor under this
Guaranty and the Related Guaranties, in each case determined in accordance
withp the provisions hereof and thereof; provided that, solely for purposes of
calculating the "Adjusted Maximum Amount" with respect to any Contributing
Guarantor for purposes of this paragraph 2, the assets or liabilities arising
by virtue of any rights to or obligations of contribution hereunder or under
any similar provision contained in a Related Guaranty shall not be considered
as assets or liabilities of such Contributing Guarantor. "Aggregate Payments"
means, with respect to a Contributing Guarantor as of any date of
determination, the aggregate amount of all payments and distributions made on
or before such date by such Contributing Guarantor in respect of this Guaranty
and the Related Guaranties (including, without limitation, in respect of this
paragraph 2 or any similar provision contained in a Related Guaranty). The
amounts payable as contributions hereunder and under similar provisions in the
Related Guaranties shall be determined as of the date on which the related
payment or distribution is made by the applicable Funding Guarantor. The
allocation among Contributing Guarantors of their obligations as set forth in
this paragraph 2 or any similar provision contained in a Related Guaranty
shall not be construed in any way to limit the liability of any Contributing
Guarantor hereunder or under a Related Guaranty. Each Contributing Guarantor
under a Related Guaranty is a third party beneficiary to the contribution
agreement set forth in this paragraph 2.
3. This instrument shall be an absolute, continuing, irrevocable and
unconditional guaranty of payment and performance, and not a guaranty of
collection, and Guarantor shall remain liable on its obligations hereunder
until the payment and performance in full of the Guaranteed Indebtedness. No
set-off, counterclaim, recoupment, reduction, or diminution of any obligation,
or any defense of any kind or nature which Borrower may have against Agent,
any Bank or any other party, or which Guarantor may have against Borrower,
Agent, any Bank or any other party, shall be available to, or shall be
asserted by, Guarantor against Agent, any Bank or any subsequent holder of the
Guaranteed Indebtedness or any part thereof or against payment of the
Guaranteed Indebtedness or any part thereof.
4. If Guarantor becomes liable for any indebtedness owing by Borrower
to Agent or any Bank by endorsement or otherwise, other than under this
Guaranty Agreement, such liability shall not be in any manner impaired or
affected hereby, and the rights of Agent and Banks hereunder shall be
cumulative of any and all other rights that Agent and Banks may ever have
against Guarantor. The exercise by Agent and Banks of any right or remedy
hereunder or under any other instrument, or at law or in equity, shall not
preclude the concurrent or subsequent exercise of any other right or remedy.
5. In the event of default by Borrower in payment or performance of
the Guaranteed Indebtedness, or any part thereof, when such Guaranteed
Indebtedness becomes due, whether by its terms, by acceleration, or otherwise,
Guarantor shall promptly pay the amount due thereon to Agent and Banks without
notice or demand in lawful currency of the United States of America and it
<PAGE>
shall not be necessary for Agent and Banks, in order to enforce such payment
by Guarantor, first to institute suit or exhaust its remedies against Borrower
or others liable on such Guaranteed Indebtedness, or to enforce any rights
against any collateral which shall ever have been given to secure such
Guaranteed Indebtedness. In the event such payment is made by Guarantor, then
Guarantor shall be subrogated to the rights then held by Agent and any Bank
with respect to the Guaranteed Indebtedness to the extent to which the
Guaranteed Indebtedness was discharged by Guarantor and, in addition, upon
payment by Guarantor of any sums to Agent and any Bank hereunder, all rights
of Guarantor against Borrower, any other guarantor or any Collateral arising
as a result therefrom by way of right of subrogation, reimbursement, or
otherwise shall in all respects be subordinate and junior in right of payment
to the prior indefeasible payment in full of the Guaranteed Indebtedness.
6. If acceleration of the time for payment of any amount payable by
Borrower under the Guaranteed Indebtedness is stayed upon the insolvency,
bankruptcy, or reorganization of Borrower, all such amounts otherwise subject
to acceleration under the terms of the Guaranteed Indebtedness shall
nonetheless be payable by Guarantor hereunder forthwith on demand by Agent or
any Bank.
7. Guarantor hereby agrees that its obligations under this Guaranty
Agreement shall not be released, discharged, diminished, impaired, reduced, or
affected for any reason or by the occurrence of any event, including, without
limitation, one or more of the following events, whether or not with notice to
or the consent of Guarantor: (a) the taking or accepting of collateral as
security for any or all of the Guaranteed Indebtedness or the release,
surrender, exchange, or subordination of any collateral now or hereafter
securing any or all of the Guaranteed Indebtedness; (b) any partial release of
the liability of Guarantor hereunder, or the full or partial release of any
other guarantor from liability for any or all of the Guaranteed Indebtedness;
(c) any disability of Borrower, or the dissolution, insolvency, or bankruptcy
of Borrower, Guarantor, or any other party at any time liable for the payment
of any or all of the Guaranteed Indebtedness; (d) any renewal, extension,
modification, waiver, amendment, or rearrangement of any or all of the
Guaranteed Indebtedness or any instrument, document, or agreement evidencing,
securing, or otherwise relating to any or all of the Guaranteed Indebtedness;
(e) any adjustment, indulgence, forbearance, waiver, or compromise that may be
granted or given by Agent or any Bank to Borrower, Guarantor, or any other
party ever liable for any or all of the Guaranteed Indebtedness; (f) any
neglect, delay, omission, failure, or refusal of Agent or any Bank to take or
prosecute any action for the collection of any of the Guaranteed Indebtedness
or to foreclose or take or prosecute any action in connection with any
instrument, document, or agreement evidencing, securing, or otherwise relating
to any or all of the Guaranteed Indebtedness; (g) the unenforceability or
invalidity of any or all of the Guaranteed Indebtedness or of any instrument,
document, or agreement evidencing, securing, or otherwise relating to any or
all of the Guaranteed Indebtedness; (h) any payment by Borrower or any other
party to Agent or any Bank is held to constitute a preference under applicable
bankruptcy or insolvency law or if for any other reason Agent or any Bank is
<PAGE>
required to refund any payment or pay the amount thereof to someone else; (i)
the settlement or compromise of any of the Guaranteed Indebtedness; (j) the
non-perfection of any security interest or lien securing any or all of the
Guaranteed Indebtedness; (k) any impairment of any collateral securing any or
all of the Guaranteed Indebtedness; (l) the failure of Agent or any Bank to
sell any collateral securing any or all of the Guaranteed Indebtedness in a
commercially reasonable manner or as otherwise required by law; (m) any change
in the corporate existence, structure, or ownership of Borrower; or (n) any
other circumstance which might otherwise constitute a defense available to, or
discharge of, Borrower or Guarantor.
8. Guarantor represents and warrants to Agent and Banks as follows:
(a) The value of the consideration received and to be received
by Guarantor as a result of Borrower, Agent and Banks entering into the
Credit Agreement and Guarantor executing and delivering this Guaranty
Agreement and the other Loan Documents to which it is a party is
reasonably worth at least as much as the liability and obligation of
Guarantor hereunder and thereunder, and such liability and obligation of
Guarantor and the Credit Agreement have benefitted and may reasonably be
expected to benefit Guarantor directly or indirectly.
(b) Guarantor has, independently and without reliance upon Agent
or any Bank and based upon such documents and information as Guarantor
has deemed appropriate, made its own analysis and decision to enter into
the Loan Documents to which it is a party.
(c) Guarantor has adequate means to obtain from Borrower on a
continuing basis information concerning the financial condition and
assets of Borrower and Guarantor is not relying upon Agent or the Banks
to provide (and neither the Agent nor any Bank shall have any duty to
provide) any such information to Guarantor either now or in the future.
9. Guarantor covenants and agrees that, as long as the Guaranteed
Indebtedness or any part thereof is outstanding or any Bank has any commitment
under the Credit Agreement, Guarantor will comply with all covenants set forth
in the Credit Agreement specifically applicable to Guarantor.
10. Guarantor hereby agrees that the Subordinated Indebtedness (as
defined below) shall be subordinate and junior in right of payment to the
prior payment in full of all Guaranteed Indebtedness as herein provided. The
Subordinated Indebtedness shall not be payable, and no payment of principal,
interest or other amounts on account thereof, and no property or guarantee of
any nature to secure or pay the Subordinated Indebtedness shall be made or
given, directly or indirectly by or on behalf of any Debtor (hereafter
defined) or received, accepted, retained or applied by Guarantor unless and
until the Guaranteed Indebtedness shall have been paid in full in cash; except
that prior to occurrence of a Default, Guarantor shall have the right to
<PAGE>
receive payments on the Subordinated Indebtedness made in the ordinary course
of business. After the occurrence and during the continuance of a Default, no
payments of principal or interest may be made or given, directly or
indirectly, by or on behalf of any Debtor or received, accepted, retained or
applied by Guarantor unless and until the Guaranteed Indebtedness shall have
been paid in full in cash; provided, however, that when such Default is cured
or waived, Guarantor's right to receive, accept, retain or apply payments on
the Subordinated Indebtedness shall resume. If any sums shall be paid to
Guarantor by any Debtor or any other Person on account of the Subordinated
Indebtedness when such payment is not permitted hereunder, such sums shall be
held in trust by Guarantor for the benefit of Agent and the Bank and shall
forthwith be paid to Agent without affecting the liability of Guarantor under
this Guaranty Agreement and may be applied by Agent against the Guaranteed
Indebtedness in accordance with the Credit Agreement. Upon the request of
Agent, Guarantor shall execute, deliver, and endorse to Agent such
documentation as Agent may request to perfect, preserve, and enforce its
rights hereunder. For purposes of this Guaranty Agreement, the term
"Subordinated Indebtedness" means all indebtedness, liabilities, and
obligations of Borrower or any Obligated Party other than Guarantor (Borrower
and such Obligated Parties herein the "Debtors") to Guarantor, whether such
indebtedness, liabilities, and obligations now exist or are hereafter incurred
or arise, or are direct, indirect, contingent, primary, secondary, several,
joint and several, or otherwise, and irrespective of whether such
indebtedness, liabilities, or obligations are evidenced by a note, contract,
open account, or otherwise, and irrespective of the Person or Persons in whose
favor such indebtedness, obligations, or liabilities may, at their inception,
have been, or may hereafter be created, or the manner in which they have been
or may hereafter be acquired by Guarantor.
(a) Guarantor agrees that any and all Liens (including any
judgment liens), upon any Debtor's assets securing payment of any
Subordinated Indebtedness shall be and remain inferior and subordinate
to any and all Liens upon any Debtor's assets securing payment of the
Guaranteed Indebtedness or any part thereof, regardless of whether such
Liens in favor of Guarantor, Agent or any Bank presently exist or are
hereafter created or attached. Without the prior written consent of
Agent, Guarantor shall not (i) file suit against any Debtor or exercise
or enforce any other creditor's right it may have against any Debtor, or
(ii) foreclose, repossess, sequester, or otherwise take steps or
institute any action or proceedings (judicial or otherwise, including
without limitation the commencement of, or joinder in, any liquidation,
bankruptcy, rearrangement, debtor's relief or insolvency proceeding) to
enforce any obligations of any Debtor to Guarantor or any Liens held by
Guarantor on assets of any Debtor.
(b) In the event of any receivership, bankruptcy,
reorganization, rearrangement, debtor's relief, or other insolvency
proceeding involving any Debtor as debtor, Agent shall have the right to
prove and vote any claim under the Subordinated Indebtedness and to
receive directly from the receiver, trustee or other court custodian all
dividends, distributions, and payments made in respect of the
Subordinated Indebtedness until the Guaranteed Indebtedness has been
paid in full in cash. Agent may apply any such dividends,
distributions, and payments against the Guaranteed Indebtedness in
<PAGE>
accordance with the Credit Agreement.
(c) Guarantor agrees that all promissory notes, accounts
receivable, ledgers, records, or any other evidence of Subordinated
Indebtedness shall contain a specific written notice thereon that the
indebtedness evidenced thereby is subordinated under the terms of this
Guaranty Agreement.
11. No amendment or waiver of any provision of this Guaranty Agreement
or consent to any departure by the Guarantor therefrom shall in any event be
effective unless the same shall be in writing and signed by Agent and Required
Banks except as otherwise provided in the Credit Agreement. No failure on the
part of Agent or any Bank to exercise, and no delay in exercising, any right,
power, or privilege hereunder shall operate as a waiver thereof; nor shall any
single or partial exercise of any right, power, or privilege hereunder
preclude any other or further exercise thereof or the exercise of any other
right, power, or privilege. The remedies herein provided are cumulative and
not exclusive of any remedies provided by law.
12. Any acknowledgment or new promise, whether by payment of principal
or interest or otherwise and whether by Borrower or others (including
Guarantor), with respect to any of the Guaranteed Indebtedness shall, if the
statute of limitations in favor of Guarantor against Agent or any Bank shall
have commenced to run, toll the running of such statute of limitations and, if
the period of such statute of limitations shall have expired, prevent the
operation of such statute of limitations.
13. This Guaranty Agreement is for the benefit of Agent and the Banks
and their successors and assigns, and in the event of an assignment of the
Guaranteed Indebtedness, or any part thereof, the rights and benefits
hereunder, to the extent applicable to the indebtedness so assigned, may be
transferred with such indebtedness. This Guaranty Agreement is binding not
only on Guarantor, but on Guarantor's successors and assigns.
14. Guarantor recognizes that Agent and the Banks are relying upon
this Guaranty Agreement and the undertakings of Guarantor hereunder and under
the other Loan Documents to which it is a party in making extensions of credit
to Borrower under the Credit Agreement and further recognizes that the
execution and delivery of this Guaranty Agreement and the other Loan Documents
to which it is a party is a material inducement to Agent and the Banks in
entering into the Credit Agreement and continuing to extend credit thereunder.
Guarantor hereby acknowledges that there are no conditions to the full
effectiveness of this Guaranty Agreement or any other Loan Document to which
it is a party.
15. Any notice or demand to Guarantor under or in connection with this
Guaranty Agreement or any other Loan Document to which it is a party shall be
deemed effective if given to Guarantor, care of Borrower in accordance with
the notice provisions in the Credit Agreement.
<PAGEP
16. Guarantor shall pay on demand all attorneys' fees and all other
costs and expenses incurred by Agent and Banks in connection with the
administration, enforcement, or collection of this Guaranty Agreement.
17. Guarantor hereby waives promptness, diligence, notice of any
default under the Guaranteed Indebtedness, demand of payment, notice of
acceptance of this Guaranty Agreement, presentment, notice of protest, notice
of dishonor, notice of the incurring by Borrower of additional indebtedness,
and all other notices and demands with respect to the Guaranteed Indebtedness
and this Guaranty Agreement.
18. The Credit Agreement, and all of the terms thereof, are
incorporated herein by reference, the same as if stated verbatim herein, and
Guarantor agrees that Agent and the Banks may exercise any and all rights
granted to any of them under the Credit Agreement and the other Loan Documents
without affecting the validity or enforceability of this Guaranty Agreement.
19. THIS GUARANTY AGREEMENT EMBODIES THE FINAL, ENTIRE AGREEMENT OF
GUARANTOR, AGENT AND BANKS WITH RESPECT TO GUARANTOR'S GUARANTY OF THE
GUARANTEED INDEBTEDNESS AND SUPERSEDES ANY AND ALL PRIOR COMMITMENTS,
AGREEMENTS, REPRESENTATIONS, AND UNDERSTANDINGS, WHETHER WRITTEN OR ORAL,
RELATING TO THE SUBJECT MATTER HEREOF. THIS GUARANTY AGREEMENT IS INTENDED BY
GUARANTOR, AGENT AND BANKS AS A FINAL AND COMPLETE EXPRESSION OF THE TERMS
OF THE GUARANTY AGREEMENT, AND NO COURSE OF DEALING AMONG GUARANTOR, AGENT AND
BANKS, NO COURSE OF PERFORMANCE, NO TRADE PRACTICES, AND NO EVIDENCE OF PRIOR,
CONTEMPORANEOUS OR SUBSEQUENT ORAL AGREEMENTS OR DISCUSSIONS OR OTHER
EXTRINSIC EVIDENCE OF ANY NATURE SHALL BE USED TO CONTRADICT, VARY, SUPPLEMENT
OR MODIFY ANY TERM OF THIS GUARANTY AGREEMENT. THERE ARE NO ORAL AGREEMENTS
AMONG GUARANTOR, AGENT AND BANKS.
EXECUTED as of the 28th day of February 1997.
GUARANTOR:
JOTAN, INC.
By:________________________________
Name:______________________________
Title:_____________________________
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (this "Agreement") made
as of February 28, 1997, by and among JOTAN, INC., a Florida corporation (the
"Company"), RICE PARTNERS II, L.P., a Delaware limited partnership ("Rice"),
F-SOUTHLAND, L.L.C., a North Carolina limited liability company ("F-
Southland"), FF-Southland, L.P., a Delaware limited partnership ("FF-
Southland" and together with F-Southland, the "Southland Purchasers", which,
together with Rice are individually and collectively, as the context requires,
referred to herein as the "Purchaser"), F-JOTAN, L.L.C., a North Carolina
limited liability corporation ("F-Jotan"), and each of the SHAREHOLDERS named
on the signature pages hereto (individually and collectively, as the context
requires, the "Shareholder").
W I T N E S S E T H:
WHEREAS, each Shareholder owns beneficially and of record the number of
shares or share equivalents set forth under the signature of such Shareholder
on this Agreement of the issued and outstanding capital stock of the Company;
WHEREAS, F-Jotan, which is the owner of the 1,329,357 shares of the
Series A Preferred Stock of the Company as of the date hereof, will acquire
certain rights and benefits herein and in the Shareholder Agreement in
consideration of terminating certain of its existing contractual rights in
respect of the Company as more fully described in Section 11.18 of the
Shareholder Agreement;
WHEREAS, the Company has entered into a Note Purchase Agreement (the
"Note Agreement") dated of even date with this Agreement with each Purchaser;
WHEREAS, the Company and the Shareholder have entered into a Shareholder
Agreement (the "Shareholder Agreement") dated of even date with this Agreement
with each Purchaser and F-Jotan; and
WHEREAS, each Purchaser is willing to enter into and consummate the
transactions contemplated by the Note Agreement only if, among other things,
the Company, F-Jotan and each Shareholder enter into, and perform under, this
Agreement and the Shareholder Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Purchaser, F-
Jotan, the Shareholder, and the Company, intending to be legally bound, agree
as follows:
Article I
Definitions
As used in this Agreement, the following terms have the meanings
indicated:
Additional Securities. This term is defined in Section 2.08(a)(iv).
Adjustment Event. Any event in which (a) the Company issues any shares
of Capital Stock in an Adjustment Public Offering for consideration per
share that exceeds the amount received per share by any Holder in
connection with the exercise of the Call Option with respect to such
Holder; (b) any Person acquires Capital Stock in connection with the
acquisition of the beneficial ownership of more than fifty percent (50%)
of the voting securities of the Company, or acquires Capital Stock and
the right to elect a majority of the members of the Company's board of
directors for a consideration per share or unit that exceeds the amount
received per share by any such Holder in connection with the exercise of
such Call Option; (c) the Company sells all or a majority of its assets
or revenue or income generating capacity for such amount of
consideration that, if the Company were liquidated on the date that such
sale is consummated, the holders of any class of Capital Stock would
receive per share distributions exceeding the amount received per share
by any such Holder in connection with the exercise of such Call Option;
or (d) the Company participates in any merger, consolidation,
reorganization, share exchange, recapitalization, or similar transaction
or series of related transactions involving a change of control of the
Company or disposition of all or a majority of its assets or revenue or
income generating capacity, directly or indirectly, in which the holders
of any class of Capital Stock receive per share consideration for, or
distributions with respect to, their shares in an amount that exceeds
the amount received per share by such Holder in connection with the
exercise of such Call Option.
Adjustment Public Offering. Each public offering of shares of any class
of Capital Stock pursuant to a registration statement filed with the
Commission.
Affiliate. With respect to any Person, (a) a Person that, directly or
indirectly or through one or more intermediaries, controls, is
controlled by, or is under common control with, such Person; (b) any
Person of which such Person or such Person's spouse is an officer,
director, security holder, partner, or, in the case of a trust, the
beneficiary or trustee, and (c) any Person that is an officer, director,
security holder, partner, or, in the case of a trust, the beneficiary or
trustee of such Person. The term "control" as used with respect to any
Person, means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of such
Person, whether through the ownership of voting securities, by
contract, or otherwise.
Agreement. This term is defined in the preamble.
Appraised Value. The value determined in accordance with the following
procedures. For a period of thirty (30) days after the date of a
Valuation Event (the "Negotiation Period"), each party to this Agreement
agrees to negotiate in good faith to reach agreement upon the Appraised
Value of the securities or property at issue, as of the date of the
Valuation Event, which will be the fair market value of such securities
or property, without premium for control or discount for minority
interests, illiquidity, or restrictions on transfer. In the event that
the parties are unable to agree upon the Appraised Value of such
securities or other property by the end of the Negotiation Period, then
the Appraised Value of such securities or property will be determined
for purposes of this Agreement by an Appraiser. An "Appraiser" shall be
a recognized appraisal or investment firm with experience in making
determinations of value of the type required to be made under this
definition. If the Holders and the Company cannot agree on an Appraiser
within thirty (30) days after the end of the Negotiation Period, the
Company, on the one hand, and the Holders, on the other hand, shall each
select an Appraiser within forty (40) days after the end of the
Negotiation Period and those two Appraisers shall select within fifty
(50) days after the end of the Negotiation Period an independent
Appraiser to determine the fair market value of such securities or
property, without premium for control or discount for minority
interests. Such independent Appraiser shall be directed to determine
fair market value of such securities or property as soon as practicable,
but in no event later than thirty (30) days from the date of its
selection. The determination by an Appraiser of the fair market value
will be conclusive and binding on all parties to this Agreement.
Appraised Value of each share of Common Stock at a time when (i) the
Company is not a reporting company under the Exchange Act and (ii) the
Common Stock is not traded in the organized securities markets, will, in
all cases, be calculated by determining the Appraised Value of the
entire Company taken as a whole (plus the exercise price of all options,
warrants and other rights to acquire Capital Stock of the Company having
an exercise price per share less than the Fair Market Value of such
Capital Stock) and dividing that value by the sum of (x) the number of
shares of Common Stock then outstanding plus (y) the number of shares of
Common Stock Equivalents, without premium for control or discount for
minority interests, illiquidity, or restrictions on transfer. The costs
of the Appraiser or Appraisers will be borne by the Company. In no
event will the Appraised Value of the Common Stock or Other Securities
be less than the per share consideration received or receivable with
respect to the Common Stock or securities or property of the same class
as the Other Securities, as the case may be, in connection with a
pending transaction involving a sale, merger, recapitalization,
reorganization, consolidation, share exchange, dissolution of the
Company, sale or transfer of all or a majority of its assets or revenue
or income generating capacity, or similar transaction. The prevailing
market prices for any security or property will not be dispositive of
the Appraised Value thereof.
Appraiser. This term is defined in the definition of Appraised Value.
Average Market Value. The average of the Closing Prices for the
security in question for the thirty (30) trading days immediately
preceding the date of determination.
Book Value. With respect to shares of Common Stock, an amount equal to
the quotient determined by dividing (a) the sum of (x) the total
consolidated assets of the Company shown on the most recent regularly
prepared consolidated balance sheet of the Company prior to the date of
the Valuation Event in question minus (y) the total consolidated
liabilities of the Company as shown on the most recent regularly
prepared consolidated balance sheet of the Company prior to the date of
the Valuation Event by (b) the aggregate number of shares of Common
Stock and Common Stock Equivalents as of the date of the Valuation
Event. For the purposes of this Agreement, the Book Value of the shares
of Common Stock will be determined by the independent certified public
accountants then retained by the Company as described in Section 4.06.
Buyer. This term is defined in Section 6.02(a)(ii) of the Shareholder
Agreement.
Call Option. This term is defined in Section 5.01 of the Shareholder
Agreement.
Call Option Closing. This term is defined in Section 5.04 of the
Shareholder Agreement.
Call Option Period. This term is defined in Section 5.01 of the
Shareholder Agreement.
Capital Stock. As to any Person, its common stock and any other capital
stock of such Person authorized from time to time, and any other shares,
options, interests, participations, or other equivalents (however
designated) of or in such Person, whether voting or nonvoting,
including, without limitation, common stock, options, warrants,
preferred stock (including the Series A Preferred Stock), phantom stock,
stock appreciation rights, convertible notes or debentures, stock
purchase rights, and all agreements, instruments, documents, and
securities convertible, exercisable, or exchangeable, in whole or in
part, into any one or more of the foregoing.
Certificate. This term is defined in Section 2.01(a)(iii).
Closing Date. As of March 4, 1997.
Closing Price.
(a) If the primary market for the security in question is a
national securities exchange registered under the Exchange Act, the
National Association of Securities Dealers Automated Quotation System --
National Market System, or other market or quotation system in which
last sale transactions are reported on a contemporaneous basis, the last
reported sales price, regular way, of such security for such day, or, if
there has not been a sale on such trading day, the highest closing or
last bid quotation therefor on such trading day (excluding, in any case,
any price that is not the result of bona fide arm's length trading); or
(b) If the primary market for such security is not an exchange
or quotation system in which last sale transactions are
contemporaneously reported, the highest closing or last bona fide bid or
asked quotation by disinterested Persons in the over-the-counter market
on such trading day as reported by the National Association of
Securities Dealers through its Automated Quotation System or its
successor or such other generally accepted source of publicly reported
bid quotations as the Holders designate from time to time.
Common Stock. The common stock, $0.01 par value, of the Company.
Common Stock Equivalent. Any option, warrant, right, or similar
security exercisable into, exchangeable for, or convertible to Common
Stock.
Commission. The Securities and Exchange Commission and any successor
federal agency having similar powers.
Company. Jotan, Inc. and any successor or assign, and, unless the
context requires otherwise, the term Company includes any Subsidiary.
Co-Sell Shares. This term is defined in Section 6.02(d) of the
Shareholder Agreement.
Co-Sellers. This term is defined in Section 6.02(d) of the Shareholder
Agreement.
Dilution Fee. This term is defined in Article III of the Shareholder
Agreement.
Election Notice. This term is defined in Section 6.02(b) of the
Shareholder Agreement.
Employment Agreements. This term is defined in Section 11.1 of the Note
Agreement.
Excess Consideration. The amount that a Holder would have realized
following the Adjustment Event had the Call Option not been exercised by
the Company until such time, minus the amount that such Holder realized
due to the exercise of the Call Option; provided, however, that the
amount of Excess Consideration will in all events be deemed to be at
least zero.
Exchange Act. The Securities Exchange Act of 1934, as amended, and the
rules and regulations thereunder.
Exchange Common Stock. This term is defined in Section 7.12 of the
Shareholder Agreement.
Exchange Company. This term is defined in Section 7.12 of the
Shareholder Agreement.
Exchange Notice. This term is defined in Section 7.12 of the
Shareholder Agreement.
Exercise Price. The price per share specified in Section 2.03 as
adjusted from time to time pursuant to the provisions of this Agreement.
Fair Market Value.
(a) As to securities regularly traded in the organized
securities markets, the Average Market Value; and
(b) As to all securities not regularly traded in the securities
markets and other property, the fair market value of such securities or
property as determined in good faith by disinterested members of the
Board of Directors of the Company at the time it authorizes the
transaction (a "Valuation Event") requiring a determination of Fair
Market Value under this Agreement; provided, however, that, at the
election of the Holders or if there are no disinterested members of the
Board of Directors of the Company, the Fair Market Value of such
securities and other property will be the Appraised Value.
Holders. Each Purchaser, and all other Persons holding Registrable
Securities so long as such Purchasers or other Person holds Registrable
Securities, except that none of the Company, F-Jotan, any Shareholder or
any Affiliate of the Company, F-Jotan (other than the Southland
Purchasers) or the Shareholder will at any time be a Holder. Unless
otherwise provided in this Agreement, in each instance that any
Purchaser is required to request or consent to or otherwise approve an
action, such Purchaser will be deemed to have requested or consented to
or otherwise approved such action if the Holders of a
majority-in-interest of the Registrable Securities initially issued to
the Southland Purchasers and Rice on the date hereof so request, consent
or otherwise approve.
Indemnified Party. This term is defined in Section 6.01 hereof and in
Section 11.01 of the Shareholder Agreement.
Initial Holders. Each Purchaser and any Affiliate of such Purchaser to
which any of the Warrants or any part of or interest in the Warrants is
assigned.
Intellectual Property. This term is defined in Section 3.01(g).
Issuable Warrant Shares. Shares of Common Stock or Other Securities
issuable on exercise of the Warrants.
Issued Warrant Shares. Shares of Common Stock or Other Securities
issued on exercise of the Warrants.
Negotiation Period. This term is defined in the definition of Fair
Market Value.
New Securities. Any Capital Stock other than Warrant Shares and other
than the Permitted Stock.
Notes. All or any portion of any of the Senior Subordinated Notes (as
defined in the Note Agreement) and any and all documents evidencing the
indebtedness under the Notes and any refinancing, refunding, or
replacement of the Notes.
Note Agreement. This term is defined in the preamble and includes the
Note Purchase Agreement of even date with this Agreement among the
Company and each Purchaser and all documents evidencing indebtedness
thereunder or otherwise related to the Note Agreement as the same may be
amended from time to time, and any refinancing, refunding, or
replacements of the indebtedness under the Note Agreement.
Notice of Sale. This term is defined in Section 6.02(a) of the
Shareholder Agreement.
Other Securities. Any stock, other securities, property, or other
property or rights (other than Common Stock) that the Holders become
entitled to receive upon exercise of the Warrants.
Permitted Stock. Common Stock or options or warrants to acquire Common
Stock, constituting, in the aggregate, 2,000,000 shares or less of the
outstanding Common Stock issued or reserved for issuance to present and
future key management and directors of the Company pursuant to a stock
incentive program approved or to be approved by the board of directors.
Person. This term will be interpreted broadly to include any
individual, sole proprietorship, partnership, joint venture, trust,
unincorporated organization, association, corporation, company,
institution, entity, party, or government (whether national, federal,
state, county, city, municipal, or otherwise, including, without
limitation, any instrumentality, division, agency, body, or department
of any of the foregoing).
Preferred Shares. This term is defined in Section 2.01.
Preferred Stock. This term means collectively, Series A Preferred Stock
and Series B Preferred Stock.
Purchase Agreement. This term is defined in the preamble to the
Shareholder Agreement and includes this Agreement and all documents
related to this Agreement as this Agreement may be amended from time to
time.
Purchaser. This term is defined in the preamble.
Put Option. This term is defined in Section 4.01 of the Shareholder
Agreement.
Put Option Closing. This term is defined in Section 4.05 of the
Shareholder Agreement.
Put Option Period. This term is defined in Section 4.01 of the
Shareholder Agreement.
Put Price. This term is defined in Section 4.02 of the Shareholder
Agreement.
Put Shares. The Warrant Shares plus any other shares of Capital Stock
owned from time to time by a Holder which were issued in respect of the
Warrant Shares.
"Register," "registered," and "registration" refer to a registration
effected by preparing and filing a registration statement in compliance
with the Securities Act, and the declaration or ordering of the
effectiveness of such registration statement.
Registrable Securities. (a) The Issuable Warrant Shares, (b) the Issued
Warrant Shares and (c) the Preferred Shares that have not been
previously sold to the public.
Related Party. An entity wholly owned by a Selling Shareholder or one
or more Related Parties.
Selling Shareholder. This term is defined in Section 6.02 of the
Shareholder Agreement.
Securities Act. The Securities Act of 1933, as amended, and the rules
and regulations thereunder.
Senior Lenders. This term is defined in Section 11.1 of the Note
Agreement.
Series A Preferred Stock. Series A Convertible Preferred Stock, $0.01
par value, of the Company having the rights, restrictions, privileges
and preferences of the series of preferred stock designated as "Series A
Convertible Preferred Stock" set forth in the Certificate.
Senior Loan Agreement. This term is defined in Section 11.1 of the Note
Agreement.
Series B Preferred Stock. Series B Preferred Stock, $0.01 par value, of
the Company having the rights, restrictions, privileges and preferences
of the series of preferred stock designated as "Series B Preferred
Stock" set forth in the Certificate.
Shareholder. This term is defined in the preamble.
Shareholder Agreement. This term is defined in the preamble and
includes the Shareholder Agreement dated as of February 28, 1997 between
the Company, the Shareholder, F-Jotan and the Purchaser in substantially
the form attached to this Agreement as Annex A and incorporated in this
Agreement by reference.
Senior Subordination Agreement. This term is defined in Section 11.1 of
the Note Agreement.
Subsidiary. Each Person of which or in which the Company or its other
Subsidiaries own directly or indirectly fifty percent (50%) or more of
(i) the combined voting power of all classes of stock having general
voting power under ordinary circumstances to elect a majority of the
board of directors or equivalent body of such Person, if it is a
corporation or similar person; (ii) the capital interest or profits
interest of such Person, if it is a partnership, joint venture, or
similar entity; or (iii) the beneficial interest of such Person, if it
is a trust, association, or other unincorporated organization.
Valuation Event. This term is defined in the definition of Fair Market
Value.
Warrant A-1. Warrant A-1 referred to in Section 2.01(a)(i), dated as of
February 28, 1997, issued to Rice, and all Warrants issued upon the
transfer or division of, or in substitution for, such Warrant A-1.
Warrant A-2. Warrant A-2 referred to in Section 2.01(a)(ii), dated as
of February 28, 1997, issued to Rice, and all Warrants issued upon the
transfer or division of, or in substitution for, such Warrant A-2.
Warrant B-1. Warrant B-1 referred to in Section 2.01(b)(i), dated as of
February 28, 1997, issued to F-Southland, and all Warrants issued upon
the transfer or division of, or in substitution for, such Warrant B-1.
Warrant B-2. Warrant B-2 referred to in Section 2.01(b)(ii), dated as
of February 28, 1997, issued to F-Southland, and all Warrants issued
upon the transfer or division of, or in substitution for, such Warrant
B-2.
Warrant C-1. Warrant C-1 referred to in Section 2.01(c)(i), dated as of
February 28, 1997, issued to FF-Southland, and all Warrants issued upon
the transfer or division of, or in substitution for, such Warrant C-1.
Warrant C-2. Warrant C-2 referred to in Section 2.01(c)(ii), dated as
of February 28, 1997, issued to FF-Southland, and all Warrants issued
upon the transfer or division of, or in substitution for, such Warrant
C-2.
Warrants. Collectively, Warrant A-1, Warrant A-2, Warrant B-1, Warrant
B-2, Warrant C-1, Warrant C-2 and all Warrants issued upon the transfer
or the division of, or in substitution for, such Warrants.
Warrant Shares. The Issued Warrant Shares and the Issuable Warrant
Shares.
Article II
The Warrants and the Preferred Shares
2.01 The Warrants and the Preferred Shares.
(a) On the Closing Date, Rice agrees to purchase from the Company at
the purchase price set forth below, and the Company agrees to issue to Rice,
all in accordance with the terms and conditions of this Agreement:
(i) a Warrant A-1 (relating to the Notes) in substantially the
form attached to this Agreement as Annex B and incorporated in this
Agreement by reference to purchase, at a purchase price of $100, the
number of shares of Common Stock set forth beneath the name of Rice on
the signature page of this Agreement for such Warrant A-1;
(ii) a Warrant A-2 (relating to the Series B Preferred Stock) in
substantially the form attached to this Agreement as Annex C and
incorporated in this Agreement by reference to purchase, at a purchase
price of $100, the number of shares of Common Stock set forth beneath
the name of Rice on the signature page of this Agreement for such
Warrant A-2; and
(iii) 40,000 shares of Series B Preferred Stock, at a purchase
price of $8,000,000, having the rights, restrictions, privileges, and
preferences set forth in the articles of amendment of the Company's
articles of incorporation attached to this Agreement as Annex H (the
"Certificate").
(b) On the Closing Date, F-Southland agrees to purchase from the
Company, and the Company agrees to issue to F-Southland, all in accordance
with the terms and conditions of this Agreement:
(i) a Warrant B-1 (relating to the Notes) in substantially the
form attached to this Agreement as Annex D and incorporated in this
Agreement by reference to purchase, at a purchase price of $100 the
number of shares of Common Stock set forth beneath the name of F-
Southland on the signature page of this Agreement for such Warrant B-1;
(ii) a Warrant B-2 (relating to the Series B Preferred Stock) in
substantially the form attached to this Agreement as Annex E and
incorporated in this Agreement by reference to purchase, at a purchase
price of $100 the number of shares of Common Stock set forth beneath the
name of F-Southland on the signature page of this Agreement for such
Warrant B-2;
(iii) 5,000 shares of Series B Preferred Stock, at a purchase
price of $1,000,000, having the rights, restrictions, privileges, and
preferences set forth in the Certificate.
(c) On the Closing Date, the FF-Southland agrees to purchase from the
Company, and the Company agrees to issue to the FF-Southland, all in
accordance with the terms and conditions of this Agreement:
(i) a Warrant C-1 (relating to the Notes) in substantially the
form attached to this Agreement as Annex F and incorporated in this
Agreement by reference to purchase, at a purchase price of $100 the
number of shares of Common Stock set forth beneath the name of F-
Southland on the signature page of this Agreement for such Warrant C-1;
(ii) a Warrant C-2 (relating to the Series B Preferred Stock) in
substantially the form attached to this Agreement as Annex G and
incorporated in this Agreement by reference to purchase, at a purchase
price of $100 the number of shares of Common Stock set forth beneath the
name of F-Southland on the signature page of this Agreement for such
Warrant C-2;
(iii) 5,000 shares of Series B Preferred Stock, at a purchase
price of $1,000,000, having the rights, restrictions, privileges, and
preferences set forth in the Certificate.
The Company has, on or before the Closing Date, duly authorized the Series B
Preferred Stock being purchased and sold pursuant to the terms of this
Agreement by duly filing the Certificate with the Secretary of State of the
State of Florida. On the Closing Date, the Company will deliver to each of
Rice and the Southland Purchasers a certificate evidencing and representing
the shares of Series B Preferred Stock issued to each such Purchaser, which
certificate shall be issued in such Purchaser's name or in the name of its
designee. The shares of Series B Preferred Stock and Series A Preferred Stock
subject to the terms of this Agreement are sometimes referred to in this
Agreement collectively as the "Preferred Shares."
2.02 Legend. The Company will deliver to the appropriate Purchaser on
the Closing Date one or more certificates representing each of (i) Warrant A-
1, (ii) Warrant A-2, (iii) Warrant B-1, (iv) Warrant B-2, (v) Warrant C-1,
(vi) Warrant C-2 and (vii) the Series B Preferred Stock, purchased by Rice or
the Southland Purchasers, as the case may be, in such denominations as such
Purchaser requests. Such certificates will be issued in the respective
Purchaser's name or, subject to compliance with transfer and registration
requirements under applicable Federal and state securities laws, in the name
or names of its respective designee or designees. It is understood and agreed
that the certificates evidencing the Warrants will bear the following legends:
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF HAVE BEEN
ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR SALE IN CONNECTION
WITH THE DISTRIBUTION HEREOF. THIS WARRANT AND THE SECURITIES ISSUABLE
UPON EXERCISE HEREOF HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED, OR ANY STATE SECURITIES LAWS, INCLUDING, WITHOUT
LIMITATION, THE NORTH CAROLINA SECURITIES ACT, AS AMENDED, THE TEXAS
SECURITIES ACT OF 1957, AS AMENDED, AND THE GEORGIA SECURITIES ACT OF
1973, AS AMENDED, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES
LAWS."
"THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE HEREOF ARE
SUBJECT TO THE TERMS AND PROVISIONS OF A PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT AND A SHAREHOLDER AGREEMENT, EACH DATED AS OF
FEBRUARY 28, 1997, BY AND AMONG JOTAN, INC. (THE "COMPANY"), RICE
PARTNERS II, L.P., F-SOUTHLAND, L.L.C. AND FF-SOUTHLAND, L.P., F-JOTAN,
L.L.C. AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES TO SUCH
SHAREHOLDER AGREEMENT (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED,
AMENDED, OR RESTATED FROM TIME TO TIME, THE "AGREEMENTS"). COPIES OF
THE AGREEMENTS ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE COMPANY."
"THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13)
OF CODE SECTION 10-5-9 OF THE 'GEORGIA SECURITIES ACT OF 1973,' AND MAY
NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER
SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT."
It is further understood and agreed that the certificates evidencing the
Preferred Stock will bear substantially the same as the following legends:
"THESE SHARES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO
OR FOR SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THESE SHARES
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED,
OR ANY STATE SECURITIES LAWS, INCLUDING, WITHOUT LIMITATION, THE NORTH
CAROLINA SECURITIES ACT, AS AMENDED, THE TEXAS SECURITIES ACT OF 1957,
AS AMENDED, AND THE GEORGIA SECURITIES ACT OF 1973, AS AMENDED, AND MAY
NOT BE PLEDGED, SOLD, OFFERED FOR SALE, TRANSFERRED, OR OTHERWISE
DISPOSED OF IN THE ABSENCE OF REGISTRATION UNDER OR EXEMPTION FROM SUCH
ACT AND ALL APPLICABLE STATE SECURITIES LAWS."
"THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13)
OF CODE SECTION 10-5-9 OF THE 'GEORGIA SECURITIES ACT OF 1973,' AND MAY
NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER
SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT."
"THESE SHARES ARE SUBJECT TO THE TERMS AND PROVISIONS OF A PREFERRED
STOCK AND WARRANT PURCHASE AGREEMENT AND A SHAREHOLDER AGREEMENT, EACH
DATED AS OF FEBRUARY 28, 1997, BETWEEN JOTAN, INC. (THE "COMPANY"), RICE
PARTNERS II, L.P., F-JOTAN, L.L.C., AND F-SOUTHLAND, L.L.C., FF-
SOUTHLAND, L.P. AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES TO
SUCH SHAREHOLDER AGREEMENT (AS SUCH AGREEMENTS MAY BE SUPPLEMENTED,
MODIFIED, AMENDED, OR RESTATED FROM TIME TO TIME, THE "AGREEMENTS").
COPIES OF THE AGREEMENTS ARE AVAILABLE AT THE EXECUTIVE OFFICES OF THE
COMPANY."
2.03 Exercise Price. The Exercise Price per share will be $0.01 for
each share of Common Stock covered by the Warrants; provided, however, that in
no event will either (i) the aggregate Exercise Price for all of the shares of
Common Stock covered by Warrant A-1 exceed $100.00, (ii) the aggregate
Exercise Price for all of the shares of Common Stock covered by Warrant A-2
exceed $100.00, (iii) the aggregate Exercise Price for all of the shares of
Common Stock covered by Warrant B-1 exceed $100.00, (iv) the aggregate
Exercise Price for all of the shares of Common Stock covered by Warrant B-2
exceed $100.00, (v) the aggregate Exercise Price for all of the shares of
Common Stock covered by Warrant C-1 exceed $100.00 or (vi) the aggregate
Exercise Price for all of the shares of Common Stock covered by Warrant C-2
exceed $100.00, whether as a result of any change in the par value of the
Common Stock or Other Securities, as a result of any change in the number of
shares purchasable as provided in this Article II, or otherwise; provided,
further, that such limitation of the aggregate Exercise Price will have no
effect whatsoever upon the amount or number of Warrant Shares for which the
Warrants may be exercised.
2.04 Exercise of Warrants.
(a) Each of the Warrants may be exercised at any time or from
time to time on or after the Closing Date until the tenth (10th)
anniversary of the Closing Date, on any day that is a Business Day, for
all or any part of the number of Issuable Warrant Shares purchasable
upon its exercise. In order to exercise its Warrant, in whole or in
part, the Holder will deliver to the Company at the address designated
by the Company pursuant to Section 6.06, (i) a written notice of such
Holder's election to exercise its Warrant, which notice will specify the
number of Issuable Warrant Shares to be purchased pursuant to such
exercise, (ii) payment of the Exercise Price, in an amount equal to the
aggregate purchase price for all Issuable Warrant Shares to be purchased
pursuant to such exercise, and (iii) the Warrant. Such notice will be
substantially in the form of the Subscription Form appearing at the end
of the Warrants. Upon receipt of such notice, the Company will, as
promptly as practicable, and in any event within ten (10) business days,
execute, or cause to be executed, and deliver to such Holder a
certificate or certificates representing the aggregate number of full
shares of Common Stock and Other Securities issuable upon such exercise,
as provided in this Agreement. The stock certificate or certificates so
delivered will be in such denominations as may be specified in such
notice and will be registered in the name of such Holder, or, subject to
compliance with transfer and registration requirements under applicable
Federal and state securities laws, such other name as designated in such
notice. A Warrant will be deemed to have been exercised, such
certificate or certificates will be deemed to have been issued, and such
Holder or any other Person so designated or named in such notice will be
deemed to have become a holder of record of such shares for all
purposes, as of the date that such notice, together with payment of the
Exercise Price and the Warrant is received by the Company. If the
Warrant has been exercised in part, the Company will, at the time of
delivery of such certificate of certificates, deliver to such Holder a
new Warrant evidencing the rights of such Holder to purchase the number
of Issuable Warrant Shares with respect to which the Warrant has not
been exercised, which new Warrant will, in all other respects, be
identical with the Warrants, or, at the request of such Holder,
appropriate notation may be made on the original Warrant and the
original Warrant returned to such Holder.
(b) Payment of the Exercise Price will be made, at the option of
the Holder, by (i) company or individual check, certified or official
bank check, (ii) cancellation of any debt owed by the Company to the
Holder, or (iii) cancellation of Warrant Shares, valued at Fair Market
Value. If the Holder surrenders a combination of cash or cancellation
of any debt owed by the Company to the Holder or Warrants, the Holder
will specify the respective number of shares of Common Stock to be
purchased with each form of consideration, and the foregoing provisions
will be applied to each form of consideration with the same effect as if
the Warrant were being separately exercised with respect to each form of
consideration; provided, however, that a Holder may designate that any
cash to be remitted to a Holder in payment of debt be applied, together
with other monies, to the exercise of the portion of the Warrant being
exercised for cash.
2.05 Taxes. The issuance of any Common Stock or Other Securities upon
the exercise of any of the Warrants will be made without charge to any Holder
for any tax, other than income taxes assessed on such Holder, in respect of
such issuance.
2.06 Register. The Company will, at all times while any of the
Warrants or Preferred Shares remain outstanding, keep and maintain at its
principal office a register in which the registration, transfer, and exchange
of the Warrants and Preferred Shares will be provided for. The Company will
not at any time, except upon the dissolution, liquidation, or winding up of
the Company, close such register so as to result in preventing or delaying the
exercise or transfer, as the case may be, of any of the Warrants or Preferred
Shares.
2.07 Transfer and Exchange. The Warrants, all options and rights under
the Warrants, and the Preferred Shares are transferable, in whole or in part,
in person or by duly authorized attorney, on the books of the Company upon
surrender of the Warrants or the Preferred Shares, as the case may be, at the
principal offices of the Company, together with the form of transfer
authorization attached to the Warrants duly executed or by endorsement of the
certificates representing the Preferred Shares; provided, however, that such
transfers of the Warrants and Preferred Shares will be made only to Persons
that the transferor in good faith believes to be an "accredited investor" as
such term is defined in Regulation D under the Securities Act. Absent any
such transfer and subject to the Shareholder Agreement, the Company may deem
and treat the registered Holders of the Warrants or the Preferred Shares, as
the case may be, at any time as the absolute owners of the Warrants or the
Preferred Shares, as the case may be, for all purposes and will not be
affected by any notice to the contrary. If any of the Warrants or Preferred
Shares are transferred in part, the Company will, at the time of surrender of
such Warrant or Preferred Shares, as the case may be, issue to the transferee
a Warrant or a certificate for Preferred Shares, as the case may be, covering
the number of shares transferred and to the transferor a Warrant or a
certificate for Preferred Shares, as the case may be, covering the number of
shares not transferred. Notwithstanding the foregoing, each Purchaser agrees
that it will not effect a transfer of any of the Warrants to any Person or
Affiliate of such Person engaged in the type of business set forth on Annex I
attached hereto and incorporated herein by reference unless such transfer is
made in connection with a transaction resulting in a change of control of the
Company.
2.08 Adjustments to Number of Shares Purchasable.
(a) The Warrants will be exercisable for the number of shares of
Common Stock in such manner that, following the complete and full
exercise of the Warrants of each Holder, the amount of Common Stock
issued to all Holders will equal the aggregate number of shares of
Common Stock set forth beneath the name of the Purchaser on the
signature pages of this Agreement, as adjusted, to the extent necessary,
to give effect to the following events:
(i) In case at any time or from time to time, the
holders of any class of Common Stock or Common Stock Equivalent
have received, or (on or after the record date fixed for the
determination of shareholders eligible to receive) have become
entitled to receive, without payment therefor:
(A) consideration (other than cash) by
way of dividend or distribution; or
(B) consideration (including cash) by
way of spin-off, split-up, reclassification (including any
reclassification in connection with a consolidation or
merger in which the Company is the surviving corporation),
recapitalization, combination of shares into a smaller
number of shares, or similar corporate restructuring;
other than additional shares of Common Stock issued as a
stock dividend or in a stock-split (adjustments in respect of
which are provided for in Sections 2.08(a)(ii) and (iii)), then,
and in each such case, the Holders, on the exercise of Warrants,
will be entitled to receive for each share of Common Stock
issuable under the Warrants as of the record date fixed for such
distribution, the greatest per share amount of consideration
received by any holder of any class of Common Stock or Common
Stock Equivalent or to which such Holder is entitled less the
amount of any Dilution Fee actually and irrevocably paid to such
Holders. All such consideration receivable upon exercise of such
Warrant with respect to such a distribution will be deemed to be
outstanding and owned by such Holder for purposes of determining
the amount of consideration to which such Holder is entitled upon
exercise of the Warrant with respect to any subsequent
distribution.
(ii) If at any time there occurs any stock split,
stock dividend or distribution, reverse stock split, or other
subdivision of the Common Stock, then the number of shares of
Common Stock to be received by the Holder of the Warrant and the
Exercise Price, subject to the limitations set forth in this
Agreement, will be proportionately adjusted.
(iii) In case of any reclassification or change of
outstanding shares of any class of Common Stock or Common Stock
Equivalent (other than a change in par value, or from par value to
no par value, or from no par value to par value), or in the case
of any consolidation of the Company with, or merger or share
exchange of the Company with or into, another Person, or in case
of any sale of all or a majority of the property, assets,
business, income or revenue generating capacity, or goodwill of
the Company, the Company, or such successor or other Person, as
the case may be, will provide that the Holder of this Warrant will
thereafter be entitled to receive the highest per share kind and
amount of consideration received or receivable (including cash)
upon such reclassification, change, consolidation, merger, share
exchange, or sale by any holder of any class of Common Stock or
Common Stock Equivalent that this Warrant entitles the Holder to
receive immediately prior to such reclassification, change,
consolidation, merger, share exchange, or sale (as adjusted
pursuant to Section 2.08(a)(i) and otherwise in this Agreement).
Any such successor Person, which thereafter will be deemed to be
the Company for purposes of the Warrants, will provide for
adjustments that are as nearly equivalent as may be possible to
the adjustments provided for by this Section 2.08.
(iv) If at any time the Company issues or sells any
shares of any Common Stock or any Common Stock Equivalent at a per
unit or share consideration (which consideration will include the
price paid upon issuance plus the minimum amount of any exercise,
conversion, or similar payment made upon exercise or conversion of
any Common Stock Equivalent) less than the Exercise Price or the
then current Fair Market Value per share of Common Stock
immediately prior to the time such Common Stock or Common Stock
Equivalent is issued or sold (the "Additional Securities"), then:
(A) the Exercise Price will be reduced
(but not increased) to the lower of the prices calculated
by:
(I) dividing (x) an amount
equal to the sum of (1) the number of shares of Common
Stock outstanding on a fully diluted basis immediately
prior to such issuance or sale multiplied by the then
existing Exercise Price plus (2) the aggregate
consideration, if any, received by the Company upon
such issuance or sale, by (y) the total number of
shares of Common Stock outstanding immediately after
such issuance or sale on a fully diluted basis; and
(II) multiplying the then
existing Exercise Price by a fraction, the numerator
of which is (x) the sum of (1) the number of shares of
Common Stock outstanding on a fully diluted basis
immediately prior to such issuance or sale, multiplied
by the Fair Market Value per share of Common Stock
immediately prior to such issuance or sale, plus (2)
the aggregate consideration received by the Company
upon such issuance or sale, (y) divided by the total
number of shares of Common Stock outstanding on a
fully diluted basis immediately after such issuance or
sale, and the denominator of which is the Fair Market
Value per share of Common Stock immediately prior to
such issuance or sale (for purposes of this subsection
(II), the date as of which the Fair Market Value per
share of Common Stock will be computed will be the
earlier of the date upon which the Company will (aa)
enters into a firm contract for the issuance of such
shares, or (bb) issues such shares); and
(B) the number of shares of Common Stock
for which any of the Warrants may be exercised at the
Exercise Price resulting from the adjustment described in
subsection (A) above will be equal to the product of the
number of shares of Common Stock purchasable under such
Warrants immediately prior to such adjustment multiplied by
a fraction, the numerator of which is the Exercise Price in
effect immediately prior to such adjustment and the
denominator of which is the Exercise Price resulting from
such adjustment.
(v) In case any event occurs as to which the
preceding Sections 2.08(a)(i) through (iv) are not strictly
applicable, but as to which the failure to make any adjustment
would not fairly protect the purchase rights represented by the
Warrants in accordance with the essential intent and principles of
this Agreement, then, in each such case, the Holders may appoint
an independent investment bank or firm of independent public
accountants, which will give its opinion as to the adjustment, if
any, on a basis consistent with the essential intent and
principles established in this Agreement, necessary to preserve
the purchase rights represented by the Warrants. Upon receipt of
such opinion, the Company will promptly deliver a copy of such
opinion to the Holders and will make the adjustments described in
such opinion. The fees and expenses of such investment bank or
independent public accountants will be borne equally by the
Holders and the Company.
(b) The Company and the Shareholder will not by any action
including, without limitation, amending, or permitting the amendment of,
the charter documents, bylaws, or similar instruments of the Company or
through any reorganization, reclassification, transfer of assets,
consolidation, merger, share exchange, dissolution, issue or sale of
securities, or any other similar voluntary action, avoid or seek to
avoid the observance or performance of any of the terms of this
Agreement or the Warrants, but will at all times in good faith assist in
the carrying out of all such terms and in the taking of all such actions
as may be necessary or appropriate to protect the rights of the Holders
against impairment or dilution. Without limiting the generality of the
foregoing, each of the Company and the Shareholder will (i) take all
such action as may be necessary or appropriate in order that the Company
may validly and legally issue fully paid and nonassessable shares of
Common Stock and Other Securities, free and clear of all liens,
encumbrances, equities, and claims and (ii) use its best efforts to
obtain all such authorizations, exemptions, or consents from any public
regulatory body having jurisdiction as may be necessary to enable the
Company to perform its obligations under the Warrants. Without limiting
the generality of the foregoing, the Company represents and warrants
that the board of directors of the Company has determined the Exercise
Price to be adequate and the issuance of the Warrants to be in the best
interests of the Company.
(c) Any calculation under this Section 2.08 will be made to the
nearest one ten-thousandth of a share and the number of Issuable Warrant
Shares resulting from such calculation will be rounded up to the next
whole share of Common Stock or Other Securities comprising Issuable
Warrant Shares.
(d) The Company will not, and will not permit any Subsidiary to,
issue any Capital Stock other than Common Stock and Common Stock
Equivalents.
2.09 Lost, Stolen, Mutilated, or Destroyed Instruments. If any of the
Warrants or certificates for Preferred Shares are lost, stolen, mutilated, or
destroyed and if the Company receives a lost security affidavit containing an
indemnification from the Holder of such Warrant or Preferred Shares and
containing such other terms and providing for such bonding as may be
reasonably requested by the Company, the Company will issue a new Warrant or
certificate for Preferred Shares, as the case may be, of like denomination,
tenor, and date as the Warrant or certificate for Preferred Shares, as the
case may be, so lost, stolen, mutilated, or destroyed. Any such new Warrant
or certificate for Preferred Shares, as the case may be, will constitute an
original obligation of the Company, whether or not the allegedly lost, stolen,
mutilated, or destroyed Warrant or certificate for Preferred Shares, as the
case may be, is at any time enforceable by any Person.
2.10 Stock Legend. Without limiting the provisions of Section 2.02
hereof, the Warrants, the Warrant Shares and the Preferred Shares have not
been registered under the Securities Act or qualified under applicable state
securities laws. Accordingly, unless there is an effective registration
statement and qualification respecting the Warrants, the Warrant Shares or the
Preferred Shares, as the case may be, under the Securities Act or under
applicable state securities laws, the Preferred Shares and, at the time of
exercise of a Warrant, any stock certificate issued pursuant to the exercise
of a Warrant will bear the following legend:
"THE SHARES REPRESENTED BY THIS CERTIFICATE (A) HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES LAWS, AND MAY NOT BE PLEDGED, SOLD, OFFERED FOR SALE,
TRANSFERRED, OR OTHERWISE DISPOSED OF IN THE ABSENCE OF REGISTRATION
UNDER OR EXEMPTION FROM SUCH ACT AND ALL APPLICABLE STATE SECURITIES
LAWS, INCLUDING, WITHOUT LIMITATION, THE NORTH CAROLINA SECURITIES ACT,
AS AMENDED, THE TEXAS SECURITIES ACT OF 1957, AS AMENDED, AND THE
GEORGIA SECURITIES ACT OF 1973, AS AMENDED, AND (B) ARE SUBJECT TO THE
TERMS OF AND PROVISIONS OF A PREFERRED STOCK AND WARRANT PURCHASE
AGREEMENT AND A SHAREHOLDER AGREEMENT, EACH DATED AS OF FEBRUARY 28,
1997 AMONG JOTAN, INC. (THE "COMPANY"), RICE PARTNERS II, L.P., F-
SOUTHLAND, FF-SOUTHLAND, L.P., F-JOTAN, L.L.C. AND THE OTHER PARTIES
LISTED ON THE SIGNATURE PAGES OF SUCH SHAREHOLDER AGREEMENT (AS SUCH
AGREEMENTS MAY BE SUPPLEMENTED, MODIFIED, AMENDED, OR RESTATED FROM TIME
TO TIME, THE "AGREEMENTS"). COPIES OF THE AGREEMENTS ARE AVAILABLE AT
THE OFFICES OF THE COMPANY."
"THESE SECURITIES HAVE BEEN ISSUED OR SOLD IN RELIANCE ON PARAGRAPH (13)
OF CODE SECTION 10-5-9 OF THE 'GEORGIA SECURITIES ACT OF 1973,' AND MAY
NOT BE SOLD OR TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER
SUCH ACT OR PURSUANT TO AN EFFECTIVE REGISTRATION UNDER SUCH ACT."
All shares of Capital Stock of the Company subject to the Shareholder
Agreement will bear a legend to such effect.
Article III
Representations and Warranties
3.01 Representations and Warranties of the Company and the Shareholder.
The Company and the Shareholder severally and not jointly represent and
warrant to each Purchaser and F-Jotan that:
(a) The Company is a corporation duly organized and existing and
in good standing under the laws of its state of incorporation and is
qualified or licensed to do business in all other countries, states, and
jurisdictions the laws of which require it to be so qualified or
licensed. The Company has no Subsidiaries except as disclosed in
Schedule 4.16 to the Note Agreement or debt or equity investment in any
Person. Giving effect to the transactions contemplated herein, the
Shareholder owns beneficially and of record the number of shares in the
aggregate of the issued and outstanding capital stock or stock
equivalents of the Company on a fully converted and diluted basis as of
the Closing Date set forth under the signature of such Shareholder on
this Agreement, all being free and clear of all liens, claims and
encumbrances. Other than Purchaser and F-Jotan, and, except any other
stock issuable under any employee or director stock plan which
constitutes Permitted Stock, no Person has any rights, whether granted
by the Company or any other Person, to acquire any portion of the equity
interest of the Company or the assets of the Company.
(b) Each of the Company and the Shareholder has, and at all
times that this Agreement is in force will have, the right and power,
and is duly authorized, to enter into, execute, deliver, and perform
this Agreement, the Shareholder Agreement, and, in the case of the
Company, the Warrants, and the officers of Company executing and
delivering this Agreement, the Shareholder Agreement, and the Warrants
are duly authorized to do so. This Agreement, the Shareholder
Agreement, and the Warrants have been duly and validly executed, issued,
and delivered and constitute the legal, valid, and binding obligations
of Company and the Shareholder, enforceable in accordance with their
respective terms.
(c) The execution, delivery, and performance of this Agreement,
the Shareholder Agreement, and the Warrants will not, by the lapse of
time, the giving of notice, or otherwise, constitute a violation of any
applicable provision contained in the charter, bylaws, or organizational
documents of the Company or contained in any agreement, instrument, or
document to which the Company or the Shareholder is a party or by which
any of them is bound.
(d) As of the Closing Date, the authorized capital stock of the
Company consists of (i) 40,000,000 shares of Common Stock, of which
5,679,411 shares are issued and outstanding and (ii) 10,000,000 shares
of Preferred Stock, of which 1,329,357 shares of Series A Preferred
Stock are issued and outstanding and of which 50,000 shares of Series B
Preferred Stock are issued and outstanding. An aggregate of at least
14,960,003 shares of Common Stock are reserved for issuance on exercise
of the Warrants. All of the issued and outstanding shares of Common
Stock are, and upon issuance and payment therefor in accordance with the
terms of this Agreement, all of the outstanding Series B Preferred Stock
will be, validly issued, fully paid and nonassessable. The Common Stock
and Preferred Shares have been offered, issued, sold, and delivered by
Company free from preemptive rights, rights of first refusal,
antidilution rights, cumulative voting rights or similar rights (except
as otherwise provided in this Agreement or in the powers, designations,
rights and preferences of the Preferred Stock contained in the
Certificate) and in compliance with applicable federal and state
securities laws. Except pursuant to this Agreement and the Certificate
and except for the Permitted Stock, the Company is not obligated to
issue or sell any Capital Stock, and, except for this Agreement and the
Shareholder Agreement, neither the Company nor the Shareholder is party
to, or otherwise bound by, any agreement affecting the voting of any
Capital Stock. Except for the Shareholder Agreement, the Company is
not, nor will it be, a party to, or otherwise bound by, any agreement
obligating it to register any of its Capital Stock.
(e) The Preferred Shares and the shares of Common Stock and
other consideration issuable on exercise of the Warrants have been duly
and validly authorized and reserved for issuance and, when issued in
accordance with the terms of this Agreement or the Warrants, as the case
may be, will be validly issued, fully paid, and nonassessable and free
of preemptive rights, rights of first refusal, or similar rights.
(f) The Company has good, indefeasible, merchantable, and
marketable title to, and ownership of, all of its assets necessary for
the conduct of its business free and clear of all liens, pledges,
security interests, claims, or other encumbrances except those of Senior
Lender and those Liens set forth in Schedule 11.1(b) to the Note
Agreement.
(g) The Company has the exclusive right to use 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 used in or
necessary to its business as presently, or presently proposed to be,
conducted (the "Intellectual Property"), and the use by the Company of
the Intellectual Property does not infringe the rights of any other
Person except that Southland Holding Company has a non-exclusive right
to use the names "Southland" and "Southland Container" and similar trade
names. No other Person is infringing the rights of the Company in any
of the Intellectual Property in any material respect. The Company owes
no royalties, honoraria, or fees to any Person by reason of its use of
any of the Intellectual Property.
(h) There is not now, and at no time during the term of this
Agreement or the Shareholder Agreement will there be, any agreement,
arrangement, or understanding involving the Company or the Shareholder,
other than this Agreement, the Shareholder Agreement, and the documents
contemplated hereby and thereby, modifying, restricting, or in any way
affecting the rights of any security holder to vote securities of the
Company.
(i) Each of the representations and warranties made by the
Company pursuant to the Note Agreement and the Shareholder Agreement and
the Shareholder pursuant to the Shareholder Agreement is true and
correct in all material respects.
(j) None of the documents, instruments, or other information
furnished to the Purchaser by the Company or the Shareholder, contains
any untrue statement of a material fact or omits to state any material
fact necessary in order to make any statements made therein not
misleading. No representation, warranty, or statement made (i) by the
Company in this Agreement, the Note Agreement, or the Shareholder
Agreement, or (ii) by the Shareholder made in this Agreement or the
Shareholder Agreement, or in any applicable document, certificate,
exhibit or schedule attached hereto or thereto or delivered in
connection herewith or therewith, contains or, at the Closing Date, will
contain any untrue statement of a material fact, or, at the Closing
Date, omits or will omit to state a material fact necessary to make any
statements made herein or therein not misleading; provided, however,
that neither the Company nor the Shareholder make any representation or
warranty of any information of any type or kind whatsoever which, at the
time it was created, was forward-looking or projected except as
expressly required by the Note Agreement. There is no fact that
materially and adversely affects the condition (financial or otherwise),
results of operations, business, properties, or prospects of the Company
or any of its Subsidiaries that has not been disclosed in the documents
provided to the Purchaser.
(k) All required filings have been, or, when required, will be,
made and all exemptions under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, as amended, remain in full force and effect
under applicable federal and state securities laws, to consummate the
transactions contemplated hereby.
3.02 Representations and Warranties of the Purchaser. Each Purchaser
represents and warrants severally and not jointly to the Company, F-Jotan and
the Shareholder:
(a) It is a limited partnership or limited liability company, as
the case may be, duly organized, validly existing and in good standing
under the laws of the jurisdiction of its organization.
(b) It has the right and power and is duly authorized to enter
into, execute, deliver, and perform this Agreement and the Shareholder
Agreement, and its officers, managers or agents executing and delivering
this Agreement and the Shareholder Agreement are duly authorized to do
so. This Agreement and the Shareholder Agreement have been duly and
validly executed, issued, and delivered and constitute the legal, valid,
and binding obligation of such Purchaser, enforceable in accordance with
their respective terms.
(c) It (i) is an "accredited investor," as that term is defined
in Regulation D under the Securities Act; (ii) has such knowledge,
skill, and experience in business and financial matters, based on actual
participation, that it is capable of evaluating the merits and risks of
an investment in the Company and the suitability thereof as an
investment for each Purchaser; (iii) has received and reviewed all such
financial and other information and records of the Company as it
considered necessary or appropriate in deciding whether to purchase the
Preferred Shares and the Warrants and any securities issuable upon
exercise of the Warrants, and the Company and the Shareholder have made
available to it the opportunity to ask questions of, and to receive
answers and to obtain additional information from, representatives of
the Company and the Shareholder; (iv) all such additional information
has been provided to and reviewed by it; and (v) it has the ability to
bear the economic risks of losing its entire investment in the Preferred
Shares and the Warrants and any securities issuable upon exercise of the
Warrants.
(d) Except as otherwise contemplated by this Agreement and the
Shareholder Agreement, each Purchaser is acquiring its Series B
Preferred Stock, its portion of the Warrants and any securities issuable
upon exercise of the Warrants for investment for its own account and not
with a view to any distribution thereof in violation of applicable
securities laws.
(e) It agrees that the certificates representing its Preferred
Shares, its portion of the Warrants, and any Issued Warrant Shares will
bear the legends referenced in this Agreement, and such Preferred
Shares, Warrants or securities issuable upon exercise of the Warrants
and pursuant to the Shareholder Agreement, as the case may be, will not
be offered, sold, or transferred in the absence of registration or
exemption under applicable securities laws.
(f) It is not acquiring the Preferred Shares or the Warrants or
any securities issuable upon exercise of the Warrants based upon any
representation, oral or written, by the Company or the Shareholder or
any representative of the Company or the Shareholder with respect to the
future value of, income from, or tax consequences relating to, the
Preferred Shares or the Warrants or securities issuable upon exercise of
the Warrants, but rather upon an independent examination and judgment as
to the prospects of the Company. Further, it acknowledges that no
federal or state administrative entity responsible for securities
registration or enforcement has made any recommendation or endorsement
of the Preferred Shares or the Warrants or any securities issuable upon
exercise of the Warrants or any findings as to the fairness of an
investment in the Preferred Shares of the Warrants or any securities
issuable upon exercise of the Warrants.
(g) It has no current contract, undertaking, agreement,
arrangement or understanding with any Person to sell, transfer, grant
any participation in, or otherwise distribute any of the Preferred
Shares, the Warrants or any securities issuable upon exercise of the
Warrants to any Person.
3.03 Representation and Warranties of F-Jotan. F-Jotan represents and
warrants to the Company, the Shareholder and each Purchaser that, from and
after the Closing Date, it has no written or oral agreement with any Person
with respect to the Series A Preferred Stock that would be inconsistent with,
or otherwise limit or impair, the provisions or intent of this Agreement, the
Certificate or the Shareholder Agreement.
Article IV
Covenants
The Company covenants and agrees as follows:
4.01 Financial Statements. The Company will keep books of account and
prepare financial statements and will cause to be furnished to each Purchaser
and each other Holder (all of the foregoing and following to be kept and
prepared in accordance with United States generally accepted accounting
principles applied on a consistent basis):
(a) As soon as available, and in any event within one hundred
twenty (120) days after the end of each fiscal year of the Company,
beginning with the fiscal year ending December 31, 1996, (i) a copy of
the financial statements of the Company for such fiscal year containing
a consolidated and consolidating balance sheet, statement of income,
statement of shareholders' equity, and statement of cash flows, each as
at the end of such fiscal year and for the period then ended and in each
case setting forth in comparative form the figures for the preceding
fiscal year, all in reasonable detail and audited and certified by Ernst
& Young, or other independent certified public accountants of recognized
standing selected by the Company and consented to by the Holders and
(ii) 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 and a narrative description and explanation of any budget
variances. The annual audit report required by this Agreement will not
be qualified by or make reference to any disclosure that the Company may
not continue as a going concern or otherwise be qualified or limited
because of restricted or limited examination by the accountant of any
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 unaudited
consolidated and consolidating financial statements of the Company as of
the end of such calendar month and for the portion of the fiscal year
then ended, containing a balance sheet, a statement of retained
earnings, statement of income, and statement of cash flows, in each case
setting forth in comparative form the figures for the corresponding
period of the preceding fiscal year and all in reasonable detail,
including, without limitation, a comparison of the actual results during
such period to those originally budgeted by the Company prior to the
beginning of such fiscal period and for the fiscal year to date.
(c) Within forty-five (45) days after the beginning of each
fiscal year, 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, promptly
during each fiscal year, all revisions thereto approved by the board of
directors of the Company.
(d) Concurrently with the delivery of each of the financial
statements referred to in Section 4.01(a) and, on the request of any
Purchaser, Section 4.01(b), a certificate of an authorized officer of
the Company in form and substance satisfactory to the Holders (i)
certifying that the financial statements attached to such certificates
have been prepared in accordance with generally accepted accounting
principles consistently applied and fairly and accurately present
(subject to year-end audit adjustments) the consolidated and
consolidating financial condition and results of operations of the
Company at the date and for the period indicated therein, and (ii)
containing a narrative report of the business and affairs of the Company
that includes, but is not limited to, a discussion of the results of
operations compared to those originally budgeted for such period by the
Company prior to the beginning of such period.
(e) As soon as available, a copy of each (i) financial
statement, report, notice, or proxy statement sent by the Company to its
shareholders; (ii) regular, periodic, or special report, registration
statement, or prospectus filed by the Company with any securities
exchange, state securities regulator, or the Commission; (iii) material
order issued by any court, governmental authority, or arbitrator in any
material proceeding to which the Company is a party or to which any of
its assets is subject; (iv) press release or other statement made
available generally by the Company or the Shareholder to the public
generally concerning material developments in the business of the
Company; and (v) a copy of all correspondence, reports, and other
information sent by the Company to any holder of any indebtedness,
including, without limitation the Senior Lender.
(f) Promptly, such additional information concerning the Company
as any Holder may request, including, without limitation, auditor
management reports and audit "waive" lists.
4.02 Laws. The Company will comply, in all material respects, with all
applicable statutes, regulations, and orders of the United States, domestic
and foreign states, and municipalities, agencies, and instrumentalities of the
foregoing applicable to the Company.
4.03 Inspection. The Company will permit any representative designated
by a Holder to (a) visit and inspect any of the properties of the Company; (b)
examine the corporate and financial records of Company and make copies thereof
or extracts therefrom; and (c) discuss the affairs, finances, and accounts of
the Company with the directors, officers, key employees, and independent
accountants of the Company. The inspections, examinations and discussions
provided for in the preceding sentence shall be conducted during normal
business hours, shall be reasonable in scope and shall not disrupt or
adversely affect any aspect of the operations of the Company.
4.04 Certain Actions. Without the prior written consent of the
Holders, which consent may be withheld in the sole discretion of the Holders,
the Company will not, and will not permit any Subsidiary to:
(a) permit to occur any amendment, alteration, or modification
of the Bylaws of the Company, as constituted on the date of this
Agreement, the effect of which, in the sole judgment of the Holders,
would be to alter, impair, or affect adversely, either the rights and
benefits of the Holders or the duties and obligations of the Company
under this Agreement, the Warrants, the Certificate or the Shareholder
Agreement or permit to occur any amendment, alteration, or modification
of the Restated Articles of Incorporation or other charter or
organizational documents of the Company, as constituted on the date of
this Agreement except to the extent necessary to comply with Section
4.04(j) or 4.10;
(b) except as otherwise permitted in the Certificate or required
by the Shareholder Agreement, (i) declare or make any dividends or
distributions of its cash, stock, property, or assets or redeem, retire,
purchase, or otherwise acquire, directly or indirectly, any of the
Capital Stock or capital stock or securities of any Affiliate or any
Subsidiary of the Company, or any securities convertible or exchangeable
into Capital Stock or capital stock or securities of any Affiliate or
any Subsidiary of the Company or otherwise make any distribution on
account of the purchase, repurchase, redemption, put, call or other
retirement of any shares of Capital Stock of the Company or any
Subsidiary thereof or of any warrant, option or other right to acquire
such shares (except pursuant to the Purchase Documents or the
Certificate) (each as defined in Section 11.1 of the Note Agreement), or
(ii) make any payment or distribution on account of any Indebtedness of
the Company which is subordinate to the Senior Subordinated Notes
(except that Subsidiaries may make distributions to the Company), and
(iii) except as otherwise provided for in the Note Agreement, pay any
professional consulting or management fees or any other payments to any
shareholders of Parent or any Subsidiary; provided, however, that the
following shall be permitted as exceptions to the preceding provisions
of this clause (b): declare and make payments of (A) dividends in cash
from Subsidiaries of the Company to the Company to the extent necessary
to permit the Company or its Subsidiaries to pay the Senior Subordinated
Obligations (as defined in Section 11.1 of the Note Agreement) due and
payable from the Company or its Subsidiaries to each Purchaser, (B)
dividends or stock repurchases permitted by the Senior Loan Agreement
(as defined in Section 11.1 of the Note Agreement), and (C) dividends on
the Preferred Stock as provided in the Certificate and payments made
pursuant to the Purchase Documents (as defined in Section 11.1 of the
Note Agreement);
(c) effect any sale, lease, assignment, transfer, or other
conveyance of any material portion of the assets or operations or the
revenue or income generating capacity of the Company (other than
inventory in the ordinary course of business and other assets reasonably
and in good faith determined by the Company to be obsolete or no longer
necessary to the business of the Company and other asset dispositions
permitted by the Senior Loan Agreement including the Asset Transfer (as
defined in the Senior Loan Agreement)) or to take any such action that
has the effect of any of the foregoing;
(d) except for issuances of stock permitted by the Senior Loan
Agreement, the Permitted Stock, the Acquisition Merger, the Subsidiary
Mergers (each as defined in Section 11.1 of the Note Agreement) and the
other mergers permitted by the Senior Loan Agreement or pursuant to the
express terms of this Agreement or the Shareholder Agreement, issue or
sell, or otherwise dispose of any Capital Stock (including the Series B
Preferred Stock) or Capital Stock of any Subsidiary, dissolve or
liquidate, or effect any consolidation or merger involving the Company
or any Subsidiary or any reclassification, corporate reorganization,
stock split or reverse stock split, or other change of any class of
Capital Stock of the Company or of any Subsidiary;
(e) enter into any business that the Company or any Subsidiary
is not conducting on the date of this Agreement or acquire any
substantial business operation or assets (through a stock or asset
purchase or otherwise except for businesses and acquisitions permitted
by the Senior Loan Agreement);
(f) except for the employment agreements disclosed in Schedule
7.10 to the Note Agreement and except for Permitted Stock, enter into
any transaction or transactions with any director, officer, employee, or
shareholder of the Company, or any Affiliate or relative of the
foregoing except upon terms that, in the opinion of the Holders, are
fair and reasonable and that are, in any event, 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 the Company
or any Affiliate or related party of the foregoing, or advance any
monies to any such Persons, except for travel advances in the ordinary
course of business;
(g) except for the employment agreements disclosed in Schedule
7.10 to the Note Agreement, increase the amount of remuneration
permitted under Section 7.10 of the Note Agreement;
(h) except for (i) acquisitions permitted under the Note
Agreement and Section 9.2 of the Senior Loan Agreement, (ii) Permitted
Indebtedness (as defined in Section 11.1 of the Note Agreement), and
(iii) other capital contributions, permitted purchases, advances and
loans permitted by the Senior Loan Agreement, acquire any debt or equity
interest in any Person or establish or acquire a Subsidiary or make any
additional capital contribution or purchase any additional equity in any
Subsidiary or make any advances or loans to any Subsidiary or transfer
any technology or assets to any Subsidiary;
(i) except for the employment agreements disclosed in Schedule
7.10 of the Note Agreement, modify, amend, terminate or waive any
material provision of the Employment Agreements;
(j) allow the aggregate par value of the Capital Stock subject
to the Warrants from time to time to exceed the price payable upon
exercise of the Warrants, as adjusted from time to time; or
(k) obligate itself or otherwise agree to take, permit or enter
into any of the events described in subsections (a) through (j) above.
4.05 Records. The Company and each of its Subsidiaries will keep books
and records of account in which full, true, and correct entries will be made
of all dealings and transactions in relation to its business and affairs in
accordance with generally accepted accounting principles applied on a
consistent basis.
4.06 Accountants. The Company will retain independent public
accountants who will certify the consolidated and, at Purchaser's request,
consolidating financial statements of the Company and its Subsidiaries at the
end of each fiscal year, and in the event that the services of the independent
public accountants so selected, or any firm of independent public accounts
hereafter employed by Company or any Subsidiary, are terminated, the Company
will promptly thereafter notify each Holder and upon the Holders' request, the
Company will request the firm of independent public accountants whose services
are terminated to deliver (without liability for such firm) to each Holder a
letter of such firm setting forth the reasons for the termination of their
services and in its notice to each Holder the Company or such Subsidiary will
state whether the change of accountants was recommended or approved by the
board of directors of the Company or any Subsidiaries or any committee
thereof.
4.07 Existence. Except as otherwise expressly required or permitted by
the Note Agreement or this Agreement, the Company will maintain in full force
and effect its corporate existence, rights, and franchises and all licenses
and other rights to use Intellectual Property.
4.08 Notice.
(a) In the event of (i) any setting by the Company of a record
date with respect to the holders of any class of Capital Stock for the
purpose of determining which of such holders are entitled to dividends,
repurchases of securities or other distributions, or any right to
subscribe for, purchase or otherwise acquire any shares of Capital Stock
or other property or to receive any other right; or (ii) any capital
reorganization of the Company, or reclassification or recapitalization
of the Capital Stock or any transfer of all or a majority of the assets,
business, or revenue or income generating capacity of the Company, or
consolidation, merger, share exchange, reorganization, or similar
transaction involving the Company; or (iii) any voluntary or involuntary
dissolution, liquidation, or winding up of the Company; or (iv) any
proposed issue or grant by the Company of any Capital Stock, or any
right or option to subscribe for, purchase, or otherwise acquire any
Capital Stock (other than the issue of Issuable Warrant Shares upon
exercise of the Warrants), then, in each such event, the Company will
deliver or cause to be delivered to the Holders a notice specifying, as
the case may be, (A) the date on which any such record is to be set for
the purpose of such dividend, distribution, or right, and stating the
amount and character of such dividend, distribution, or right; (B) the
date as of which the holders of record will be entitled to vote on any
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, share exchange, conveyance, dissolution,
liquidation, or winding-up; (C) the date on which any such
reorganization, reclassification, recapitalization, transfer,
consolidation, merger, share exchange, conveyance, dissolution,
liquidation, or winding-up is to take place and the time, if any is to
be fixed, as of which the holders of record of any class of Capital
Stock will be entitled to exchange their shares of Capital Stock for
securities or other property deliverable upon such event; and (D) the
amount and character of any Capital Stock, property, or rights proposed
to be issued or granted, the consideration to be received therefor, and,
in the case of rights or options, the exercise price thereof, and the
date of such proposed issue or grant and the Persons or class of Persons
to whom such proposed issue or grant will be offered or made. Any such
notice will be deposited in the United States mail, postage prepaid, at
least thirty (30) days prior to the date therein specified, and
notwithstanding anything in this Agreement or the Warrants to the
contrary the Holders may exercise the Warrants within thirty (30) days
from the mailing of such notice. The Company shall, promptly on request
of a Holder, provide such other information as the Holders may
reasonably request.
(b) If there is any adjustment as provided above in Article II,
or if any Other Securities become issuable in lieu of shares of such
Common Stock upon exercise of the Warrants, the Company will immediately
cause written notice thereof to be sent to each Holder, which notice
will be accompanied by a certificate of the independent public
accountants of the Company setting forth in reasonable detail the basis
for the Holders' becoming entitled to receive such Other Securities, the
facts requiring any such adjustment in the number of shares receivable
after such adjustment, or the kind and amount of any Other Securities so
purchasable upon the exercise of the Warrants, as the case may be. At
the request of any Holder and upon surrender of the Warrant of such
Holder, the Company will reissue such Warrant of such Holder in a form
conforming to such adjustments.
4.09 Taxes. The Company will, and will cause its Subsidiaries to, file
all required tax returns, reports, and requests for refunds on a timely basis
and will, and will cause its Subsidiaries to, pay on a timely basis all taxes
imposed on either it or its Subsidiaries, as the case may be, or upon any of
its assets, income or franchises or those of its Subsidiaries, as the case may
be; provided, however, that neither the Company nor any Subsidiary shall be
required to pay or discharge any tax, levy, assessment, or governmental charge
(a) which is being contested in good faith by appropriate proceedings
diligently pursued, and for which adequate reserves in accordance with GAAP
(as defined in Section 11.1 of the Note Agreement) have been established or
(b) if the failure to pay the same would not (i) result in a material Lien (as
defined in Section 11.1 of the Note Agreement) on the property of the Company
or any Subsidiary and (ii) would not otherwise result in a Material Adverse
Effect (as defined in Section 11.1 of the Note Agreement).
4.10 Warrant Rights. The Company covenants and agrees that during the
term of this Agreement and so long as any of the Warrants are outstanding, (a)
the Company will at all times have authorized and reserved a sufficient number
of shares of Common Stock and Other Securities, to provide for the exercise in
full of the rights represented by the Warrants and the exercise in full of the
rights of the Holders under the Shareholder Agreement; (b) the Company will
not increase or permit to be increased the par value per share or stated
capital of the Issuable Warrant Shares or the consideration receivable upon
issuance of its Issuable Warrant Shares; and (c) in the event that the
exercise of the Warrants would require the payment by the Holder of
consideration for the Common Stock or Other Securities receivable upon such
exercise of less than the par or stated value of such Issuable Warrant Shares,
the Company and the Shareholder will promptly take such action as may be
necessary to change the par or stated value of such Issuable Warrant Shares to
an amount less than or equal to such consideration.
4.11 Board Observation and Membership. The Company will deliver to each
Holder a copy of the minutes of and all materials distributed at or prior to
all meetings of the board of directors (including the executive, compensation
or other committee thereof) or shareholders of the Company, certified as true
and accurate by the Secretary of the Company, promptly following each such
meeting. The Company will (a) permit each Holder to designate one (1) person
to attend all meetings of the Company's board of directors (including
executive, compensation or other committee meetings), (b) provide such
designees not less than twenty-one (21) calendar days' actual notice of all
regular meetings and seven (7) calendar days' actual notice of all special
meetings of the Company's board of directors (including the executive,
compensation or other committees thereof) or shareholders, (c) permit such
designees to attend such meetings as an observer, (d) permit Rice (or Rice's
representatives), so long as Rice is a Holder or owns any stock, warrants or
other equity interest in the Company, to designate not more than a majority in
number of the members of the board of directors and a majority in number of
the members of each committee thereof, (e) permit the Southland Purchasers (or
the Southland Purchasers' representative which may be F-Jotan or its
representatives), so long as the Southland Purchasers are Holders or otherwise
own, directly or indirectly, any Common Stock, Warrants or other beneficial or
equity interest in respect of the Capital Stock of the Company, to designate
one (1) individual to serve as a member of the Company's board of directors,
and provide to such designees a copy of all materials distributed at such
meetings or otherwise to the board of directors of the Company.
For so long as any Purchaser is a Holder or owns any stock, warrants or
other equity interest in the Company, at all times the board of directors will
consist of no more than seven (7) members (at least one of whom will be an
independent director selected by the board of directors); provided, however,
that if a majority of the board of directors shall at any time not consist of
Rice designees, the board of directors shall, on Rice's request, immediately
be increased in size so as to permit Rice to elect a majority of the board of
directors as contemplated herein and in paragraph B.4 of Section 4.2 of
Article IV of the Articles of Amendment of the Restated Articles of
Incorporation of the Company as in effect as of the Closing Date (as amended
from time to time with the approval of the board of directors) ("Articles").
Rice may designate one or more of its designees (but not necessarily all of
its designees at any one time) to serve on the Board of Directors at such time
or times as its shall determine in its sole discretion (such appointments, if
Rice so determines, at all times, to constitute at least a majority of the
board of directors).
Notwithstanding anything contained herein or in the Articles, if Rice
shall at any time own, directly or indirectly, less than ten (10%) percent of
the beneficial or other equity interest in respect of the Capital Stock of the
Company (subject to adjustments therein as contemplated by Section 2.08(a)(ii)
and (iii) hereof) that it acquires on the Closing Date, then the rights of
Rice, set forth in this Agreement, the Shareholder Agreement and the Articles
(as a Holder of Series B Preferred Stock), to designate a majority in number
of the board of directors shall expire and terminate on the first day of the
month next following such change in ownership, except that Rice may designate
one (1) individual to continue to serve as a member of the Company's board of
directors and as a member of each committee thereof, with all rights and
privileges attendant thereto, as contemplated herein, so long as Rice owns,
directly or indirectly, any beneficial or other equity interest in respect of
the Capital Stock of the Company.
Such meetings shall be held in person at least quarterly, and the
Company will cause its board of directors to call a meeting at any time upon
the request of any such designated observer on not more than two (2) occasions
per calendar year upon seven (7) calendar days' actual notice to the Company.
The Company agrees to compensate designees of Rice referred to in Subsection
(d) and designees of the Southland Purchasers referred to in Subsection (e)
above in the same manner as each of the other members of the Company's board
of directors and agrees to reimburse each individual referred to in
Subsections (a), (d) and (e) above for all reasonable expenses incurred in
traveling to and from such meetings and attending such meetings
4.12 Going Private Vote. If the Board of Directors shall resolve that
it is in the best interests of the Company to discontinue reporting to the
Securities and Exchange Commission as a public company in accordance with the
Securities Exchange Act of 1934, as amended, and the rules and regulations
promulgated thereunder ("going private"), such resolution shall take effect if
and only if the majority of the shareholders of the Company exclusive of Rice,
the Southland Purchasers and F-Jotan (the "Non-Purchaser Shareholders") shall
also approve such action. Notwithstanding the foregoing, such special voting
rights of the Non-Purchaser Shareholders shall not apply to any transaction in
which (a) the Company may sell all or any part of its assets or Capital Stock,
(b) Rice, the Southland Purchasers and/or F-Jotan may sell all or any part of
their respective Capital Stock of the Company, or (c) any of Rice, the
Southland Purchasers and/or F-Jotan may enter into any similar or related
transaction of any kind or description, it being the intent of the parties
hereto to address, in this Section 4.12, only the vote required by the Non-
Purchaser Shareholders for the consummation by the Company of a going private
transaction.
Article V
Conditions
The obligations of each Purchaser to effect the transactions
contemplated by this Agreement are subject to the following conditions
precedent:
5.01 Opinion. Each Purchaser will have received favorable opinions,
dated the Closing Date, from Alston & Bird and Foley & Lardner counsel for
Company covering matters raised by this Agreement, the Shareholder Agreement,
and such other matters as any Purchaser or its counsel may request, and
otherwise in form and substance satisfactory to each Purchaser and its
counsel.
5.02 Note Agreement Conditions. All of the conditions precedent to the
obligations of Purchaser under the Note Agreement will have been satisfied in
full.
5.03 Material Change. There will have occurred no material adverse
change in the business, prospects, results of operations, or condition,
financial or otherwise, of the Company.
5.04 Shareholder Agreement. The Company, F-Jotan and the Shareholder
will have entered into the Shareholder Agreement with Purchaser.
5.05 Representations and Agreements. Each representation and warranty
of the Company and the Shareholder set forth in this Agreement will be true
and correct in all material respects when made and as of the Closing Date, and
the Company and the Shareholder will have fully performed all their covenants
and agreements set forth in this Agreement in all material respects.
5.06 Proceedings; Consents. All proceedings taken in connection with
the transactions contemplated by this Agreement, and all documents necessary
to the consummation of this Agreement, will be satisfactory in form and
substance to the Purchaser and its counsel, and the Purchaser and its counsel
will have received certificates of compliance and copies (executed or
certified as may be appropriate) of all documents, instruments, and agreements
that the Purchaser or its counsel reasonably may request in connection with
the consummation of such transactions. All consents of any Person necessary
to the consummation of the transactions contemplated by this Agreement and the
Shareholder Agreement will have been received, be in full force and effect,
and not be subject to any onerous condition.
5.07 Reservation of Common Stock. The Purchaser will have received
evidence satisfactory to the Purchaser that the Company has reserved a
sufficient number of shares of Common Stock for the Purchaser to exercise the
Warrants and convert the Preferred Shares.
5.08 Origination Fee. The Company shall have paid to Rice an
origination fee of $200,000.00, F-Southland an origination fee of $25,000 and
FF-Southland an origination fee of $25,000, in immediately available funds, on
the Closing Date, which fee shall be deemed fully earned and nonrefundable on
the Closing Date.
5.09 Government Filings. All filings under (a) the Hart-Scott-Rodino
Act and (b) all applicable state and federal securities laws, rules and
regulations shall have been made and all requirements in connection therewith
shall have been met by the Company, each Purchaser and the Shareholder.
Article VI
Miscellaneous
6.01 Indemnification. In addition to any other rights or remedies to
which the Purchaser and the Holders may be entitled, the Company and the
Shareholder (solely with respect to the representations and warranties made by
him) severally and not jointly agree to and will indemnify and hold harmless
the Purchaser and F-Jotan, the Holders, and their Affiliates and their
respective successors, assigns, officers, directors, managers, employees,
attorneys, and agents (individually and collectively, an "Indemnified Party")
from and against any and all losses, claims, obligations, liabilities,
deficiencies, penalties, causes of action, damages, costs, and expenses
(including, without limitation, costs of investigation and defense, attorneys'
fees, and expenses), including, without limitation, those arising out of the
contributory negligence of any Indemnified Party, that the Indemnified Party
may suffer, incur, or be responsible for, arising or resulting from, to the
extent applicable, any misrepresentation, breach of warranty, or
nonfulfillment of any covenant or agreement on the part of the Company or the
Shareholder (solely with respect to the representations and warranties made by
him) under this Agreement, the Shareholder Agreement, or under any other
agreement to which the Company or the Shareholder is a party in connection
with this transaction, or from any misrepresentation in or omission from any
certificate or other instrument furnished or to be furnished to the Purchaser
or the Holders under this Agreement.
6.02 Default. It is agreed that a violation by any party of the terms
of this Agreement cannot be adequately measured or compensated in money
damages, and that any breach or threatened breach of this Agreement by a party
to this Agreement would do irreparable injury to the nondefaulting party. It
is, therefore, agreed that in the event of any breach or threatened breach by
a party to this Agreement of the terms and conditions set forth in this
Agreement, the nondefaulting party will be entitled, in addition to any and
all other rights and remedies that it may have in law or in equity, to apply
for and obtain injunctive relief requiring the defaulting party to be
restrained from any such breach or threatened breach or to refrain from a
continuation of any actual breach.
6.03 Integration. This Agreement, the Warrants and the Shareholder
Agreement constitute the entire agreement between the parties with respect to
the subject matter hereof and thereof and supersede all previous written, and
all previous or contemporaneous oral, negotiations, understandings,
arrangements, and agreements. This Agreement may not be amended or
supplemented except by a writing signed by Company, the Shareholder, and each
Holder.
6.04 Headings. The headings in this Agreement are for convenience and
reference only and are not part of the substance of this Agreement.
References in this Agreement to Sections and Articles are references to the
Sections and Articles of this Agreement unless otherwise specified.
6.05 Severability. The parties to this Agreement expressly agree that
it is not the intention of any of them to violate any public policy, statutory
or common law rules, regulations, or decisions of any governmental or
regulatory body. If any provision of this Agreement is judicially or
administratively interpreted or construed as being in violation of any such
policy, rule, regulation, or decision, the provision, section, sentence, word,
clause, or combination thereof causing such violation will be inoperative (and
in lieu thereof there will be inserted such provision, sentence, word, clause,
or combination thereof as may be valid and consistent with the intent of the
parties under this Agreement) and the remainder of this Agreement, as amended,
will remain binding upon the parties, unless the inoperative provision would
cause enforcement of the remainder of this Agreement to be inequitable under
the circumstances.
6.06 Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration, or other communication be given to or
served upon any of the parties by another, such notice, demand, request,
consent, approval, declaration, or other communication will be in writing and
addressed to the party to be notified as set forth below. 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 with written
acknowledgment of receipt (whether by noncertified mail, telecopy, telegram,
facsimile, express delivery, hand delivery or otherwise), whichever is
earlier.
If to Rice, at: Address of Rice beneath the name of Rice on the
signature pages of this Agreement
If to the Southland
Purchasers, at: Address of the Southland Purchasers beneath the
name of the Southland Purchasers on the
signature pages of this Agreement
with courtesy copies to: Wyrick, Robins, Yates & Ponton, L.L.P.
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607-7506
Attn: James M. Yates, Jr.
Facsimile: (919) 781-4865
If to F-Jotan, at: Address of F-Jotan beneath the name of F-Jotan
on the signature pages of this Agreement
Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
FAX: 214-939-6100
If to the Company, at: Jotan, Inc.
118 West Adams Street
Jacksonville, Florida 32202
Attn: President
Fax: 904-353-0075
with courtesy copies to: Alston & Bird
One Atlantic Center
1201 W. Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Stephen A. Opler, Esq.
Fax: 404-881-7777
If to the Shareholder, Address of such Shareholder beneath his/her name
on the signature pages of this Agreement
or to such other address as each party may designate for itself by like
notice. Notice to any Holder other than the Purchaser will be delivered as
set forth above to the address shown on the stock transfer books of the
Company or the Warrant Register unless such Holder has advised the Company in
writing of a different address to which notices are to be sent under this
Agreement.
Failure or delay in delivering courtesy copies of any notice, demand,
request, consent, approval, declaration, or other communication to the persons
designated above to receive copies of the actual notice will in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration, or other communication.
No notice, demand, request, consent, approval, declaration or other
communication will be deemed to have been given or received unless and until
it sets forth all items of information required to be set forth therein
pursuant to the terms of this Agreement.
6.07 Successors. This Agreement will be binding upon and inure to the
benefit of the parties and their respective successors and assigns; provided,
however, that no sale, assignment or other transfer by any party to this
Agreement of any of its Capital Stock or rights hereunder to another Person
will be valid and effective unless and until the transferee or assignee first
agrees in writing to be bound by the terms and conditions of this Agreement
and the Shareholders Agreement, and the agreements and instruments related
hereto and thereto, in a form and substance reasonably satisfactory to the
Company.
.
6.08 Remedies. The failure of any party to enforce any right or remedy
under this Agreement, or promptly to enforce any such right or remedy, will
not constitute a waiver thereof, nor give rise to any estoppel against such
party, nor excuse any other party from its obligations under this Agreement.
Any waiver of any such right or remedy by any party must be in writing and
signed by the party against which such waiver is sought to be enforced.
6.09 Survival. All warranties, representations, and covenants made by
any party in this Agreement or in any certificate or other instrument
delivered by such party or on its behalf under this Agreement will be
considered to have been relied upon by the party to which it is delivered and
will survive the Closing Date, regardless of any investigation made by such
party or on its behalf. All statements in any such certificate or other
instrument will constitute warranties and representations under this
Agreement.
6.10 Fees. Any and all fees, costs, and expenses, of whatever kind and
nature, including attorneys' fees and expenses, incurred by the Holders in
connection with the defense or prosecution of any actions or proceedings
arising out of or in connection with this Agreement will be borne and paid by
the Company within ten (10) days of demand by the Holders.
6.11 Counterparts. This Agreement may be executed in any number of
counterparts, which will individually and collectively constitute one
agreement.
6.12 Other Business. It is understood and accepted that the Purchaser,
F-Jotan, the Holders, and their Affiliates have interests in other business
ventures that may be in conflict with the activities of the Company and that
nothing in this Agreement will limit the current or future business activities
of such parties whether or not such activities are competitive with those of
the Company. The Company and the Shareholder agree that all business
opportunities that may be available to such parties in any field substantially
related to the business of the Company will be pursued exclusively through the
Company.
6.13 Choice of Law. THIS AGREEMENT WILL BE INTERPRETED AND THE RIGHTS
OF THE PARTIES DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES
APPLICABLE THERETO AND THE INTERNAL LAWS OF THE STATE OF FLORIDA APPLICABLE TO
AN AGREEMENT EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT
TO THE CHOICE-OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE
THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION.
6.14 Duties Among Holders. Each Holder agrees that no other Holder
will by virtue of this Agreement be under any fiduciary or other duty to give
or withhold any consent or approval under this Agreement or to take any other
action or omit to take any action under this Agreement, and that each other
Holder may act or refrain from acting under this Agreement as such other
Holder may, in its discretion, elect.
6.15 Waiver of Jury Trial. AFTER REVIEWING THIS SECTION 6.15 WITH ITS
COUNSEL, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, THE COMPANY, F-
JOTAN, EACH PURCHASER AND EACH SHAREHOLDER 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 OR ANY DOCUMENTS
ENTERED INTO IN CONNECTION HEREWITH OR THE TRANSACTIONS CONTEMPLATED HEREBY OR
THEREBY OR THE ACTIONS OF THE COMPANY, F-JOTAN, EACH PURCHASER AND EACH
SHAREHOLDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT HEREOF OR
THEREOF. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH PURCHASER TO
PURCHASE THE WARRANTS AND PREFERRED STOCK FROM THE COMPANY.
6.16 Continuation of Directors' and Officers' Insurance and
Indemnification. For a period of two (2) years from the Closing Date, the
Company shall maintain in effect $1,000,000 of directors' and officers'
insurance for the benefit of directors serving in the capacity of directors of
the Company immediately prior to the Closing Date. Such insurance shall be
provided to the extent that (a) such insurance remains commercially available,
(b) the Company may purchase substantially similar coverage as exists at the
Closing Date and (c) such insurance may be obtained at a reasonable cost to
the Company not to exceed $30,000 per annum. The Company shall also retain, in
effect for the same period, those written indemnification provisions that
exist in the articles of incorporation or bylaws of the Company on the Closing
Date for the benefit of such directors (or other written provisions reasonably
equivalent thereto in effect on the Closing Date that are acceptable to
Purchaser). All such insurance and indemnifications shall apply only to the
actual period of service of each director.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY:
JOTAN, INC.
BY:__________________________
Shea E. Ralph
Chief Executive Officer
118 West Adams Street
Jacksonville, Florida 32201
Attn: President
Fax: (904) 343-0075
RICE:
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:_________________________
Name: Jeffrey P. Sangalis
Its: Managing Director
5847 San Felipe, Suite 4350
Houston, Texas 77057
Attn: Jeffrey P. Sangalis
Fax: (713) 783-9750
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
40,000 Shares of Series B
Redeemable Preferred Stock
None Shares of Common Stock
2,515,203 Warrant A-1 Shares
9,581,726 Warrant A-2 Shares
<PAGE>
F-JOTAN, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its manager
By: Franklin Capital, L.L.C.,
its manager
By:___________________________
Jeremiah M. Callahan,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
1,329,357 Shares of Series A
Convertible Preferred Stock
None Shares of Common Stock
None Other Equity Interests
<PAGE>
THE SOUTHLAND PURCHASERS:
F-SOUTHLAND, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its manager
By: Franklin Capital, L.L.C,
its manager
By:_______________________________
Jeremiah M. Callahan,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
5,000 Shares of Series B
Redeemable Preferred Stock
None Shares of Common Stock
359,315 Warrant B-1 Shares
1,197,716 Warrant B-2 Shares
FF-SOUTHLAND, L.P.
By: FSFC Associates, L.P.,
Its general partner
By: Franklin Capital, L.L.C.,
Its general partner
By:_________________________
Jeremiah M. Callahan,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
5,000 Shares of Series B
Redeemable Preferred Stock
None Shares of Common Stock
359,315 Warrant C-1 Shares
1,197,716 Warrant C-2 Shares
<PAGE>
SHAREHOLDER:
David Freedman
___________________________________
OWNED ON CLOSING DATE:
None Shares of Common Stock
Owned on Closing Date
275,000 Common Stock Options
Shea E. Ralph
_____________________________________
OWNED ON CLOSING DATE:
950,000 Shares of Common Stock
Owned on Closing Date
33,000 Common Stock Options
<PAGE>
ANNEX H
[Non-Permitted Transfers]
[To be completed by Jotan]
______________________________________________________________________________
______________________________________________________________________________
SHAREHOLDER AGREEMENT
JOTAN, INC.
the "Company"
the Shareholders as set forth on the signature pages hereof
the "Shareholder"
and
[*]
Rice Partners II, L.P.
and
F-Jotan
the "Purchaser"
February __, 1997
______________________________________________________________________________
______________________________________________________________________________
SHAREHOLDER AGREEMENT
SHAREHOLDER AGREEMENT (the "Agreement") made as of February 28, 1997, by
and among JOTAN, INC., a Florida corporation (the "Company"), the SHAREHOLDERS
of the Company listed on the signature pages hereof (individually and
collectively, as the context requires, the "Shareholder"), RICE PARTNERS II,
L.P., a Delaware limited partnership ("Rice"), and F-SOUTHLAND, L.L.C., a
North Carolina limited liability company ("F-Southland"), FF-SOUTHLAND , L.P.,
a Delaware limited partnership ("FF-Southland" and together with F-Southland,
the "Southland Purchasers", which, together with Rice are individually and
collectively, as the context requires, referred to herein as the "Purchaser"),
F-JOTAN, L.L.C., a North Carolina limited liability company ("F-Jotan") and
each of the shareholders named on the signature pages hereto (individually and
collectively, as the context requires, the "Shareholder").
W I T N E S S E T H:
WHEREAS, each Shareholder owns beneficially and of record the number of
shares or share equivalents, set forth under the signature of such Shareholder
on this Agreement of the issued and outstanding capital stock of the Company;
WHEREAS, F-Jotan, which is the owner of the 1,329,357 shares of the
Series A Preferred Stock of the Company as of the date hereof, will acquire
certain rights and benefits herein and in the Purchase Agreement (as defined
below) in consideration of terminating certain of its existing contractual
rights in respect of the Company as more fully described in Section 11.18 of
this Agreement;
WHEREAS, the Company has entered into a Note Purchase Agreement (the
"Note Agreement") dated of even date with this Agreement with the Purchaser;
WHEREAS, the Company, each Purchaser, F-Jotan and the Shareholder have
entered into a Preferred Stock and Warrant Purchase Agreement (the "Purchase
Agreement") dated of even date with this Agreement with the Purchaser;
WHEREAS, the Purchaser is willing to enter into and consummate the
transactions contemplated by the Note Agreement only if, among other things,
the Company and the Shareholder enter into, and perform under, this Agreement
and the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing, the mutual covenants
contained in this Agreement, and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the Purchaser, the
Shareholder, and the Company, intending to be legally bound, agree as follows:
<PAGE>
Article I
Definitions
All terms used in this Agreement will have the meanings ascribed to them
in the Purchase Agreement unless otherwise specifically defined in this
Agreement.
For purposes of Articles II and VII of this Agreement only, the term
"Holder" (as defined in the Purchase Agreement) shall also mean and include F-
Jotan and the term "Registrable Securities" shall mean and include the Series
A Preferred Stock and the Common Stock issuable upon conversion of the Series
A Preferred Stock.
Article II
Holders' Preemptive Rights
2.01 Preemptive Right. The Company will not issue or sell any New
Securities without first complying with this Article II. The Company hereby
grants to each Holder the preemptive right to purchase, pro rata, all or any
part of the New Securities that the Company may, from time to time, propose to
sell or issue. In the event New Securities are offered or sold as part of a
unit with other New Securities, the preemptive right granted by this Article
II will apply to such units and not to the individual New Securities composing
such units. Each Holder's pro rata share for purposes of Article II is the
ratio that the number of shares of Common Stock issuable to such Holder upon
exercise of its Warrant and, in the case of F-Jotan, the number of shares of
Common Stock issuable upon conversion of its Series A Preferred Stock, plus
the number of shares of Common Stock that are Issued Warrant Shares or, in the
case of F-Jotan, converted Series A Preferred Stock, owned by such Holder
immediately prior to the issuance of the New Securities, bears to the sum of
(x) the total number of shares of Common Stock then outstanding, plus (y) the
number of shares of Common Stock issuable upon (1) exercise of all Warrants
and (2) the conversion of the Series A Preferred Stock then outstanding.
2.02 Notice to Holders. In the event the Company proposes to issue or
sell New Securities, it will give each Holder written notice of its intention,
describing the type of New Securities and the price and terms upon which the
Company proposes to issue or sell the New Securities. Each Holder will have
fifteen (15) days from the date of receipt of any such notice and such
information as the Holders may reasonably request to facilitate their
investment decision to agree to purchase up to its respective pro rata share
of the New Securities for the price (valued at Fair Market Value for any
noncash consideration) and upon the terms specified in the notice by giving
written notice to the Company stating the quantity of New Securities agreed to
be purchased.
2.03 Allocation of Unsubscribed New Securities. In the event a Holder
fails to exercise such preemptive right within such fifteen (15) day period,
the other Holders, if any, will have an additional five (5) day period to
purchase such Holder's portion not so agreed to be purchased in the same
proportion in which such other Holders were entitled to purchase the New
Securities (excluding for such purposes such nonpurchasing Holder).
Thereafter, the Company will have ninety (90) days to sell the New Securities
not elected to be purchased by the Holders at the same price and upon the same
<PAGE>
terms specified in the Company's notice described in Section 2.02. In the
event the Company has not sold the New Securities within such ninety (90) day
period, the Company will not thereafter issue or sell any New Securities
without first offering such securities in the manner provided above.
Article III
Dilution Fee
In the event that, during the term of the Warrants, the Company pays any
cash dividend or makes any cash distribution to any holder of any class of
its Capital Stock with respect to such Capital Stock, each Holder of the
Warrants will be entitled to receive in respect of its Warrant a dilution fee
in cash (the "Dilution Fee") on the date of payment of such dividend or
distribution, which Dilution Fee will be equal to the difference between (a)
the highest amount per share paid to any class of Capital Stock times the
number of Issued Warrant Shares then owned by such Holder plus the number of
Issuable Warrant Shares then owned by such Holder, and (b) the amount of such
dividend or distribution otherwise paid to such Holder as a result of its
ownership of Common Stock. This provision shall not apply to the payment of
cash dividends on the Series B Preferred Stock.
Article IV
Put Option
4.01 Grant of Option. The Company hereby grants to each Holder an
option to sell to the Company, and the Company is obligated to purchase from
each Holder under such option (the "Put Option"), all (or such portion as is
designated by any such Holder pursuant to Section 4.03 below) of the Put
Shares, subject to Section 4.06 below. The Put Option will be effective at
any time or times after the eighth (8th) anniversary of the date of this
Agreement, or at any time or times after the occurrence of any of the
following events (the "Put Option Period"):
(a) the payment or prepayment of all indebtedness, liabilities
and obligations owing by the Company to the Purchaser under the Note
Agreement;
(b) (i) a material change in the ownership in the Company other
than by Rice and the Southland Purchasers (for purposes of this
subsection a "change of ownership" means the circumstance that F-Jotan
shall own, directly or indirectly, five percent (5%) (subject to
adjustments therein as contemplated in Section 2.08(a) (ii) and (iii) of
the Purchase Agreement) less than (A) the Registrable Securities so
owned by such party on the Closing Date or (B) the number of shares of
issued and outstanding voting stock of the Company (without giving
effect to the issuance of any shares of Common Stock under the Warrants)
so owned by such party on the Closing Date, or (ii) 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 the
Company); or
(c) except as permitted by the Senior Loan Agreement as in effect
on the date hereof, a merger, consolidation, share exchange, or similar
transaction involving the Company or sale in one or more related
<PAGE>
transactions of all or a substantial portion of the assets, business, or
revenue or income generating operations of the Company or any
substantial change in the type of business conducted by the Company; or
(d) after the occurrence and during the continuance of an Event
of Default (as defined in the Note Agreement) pursuant to Sections
8.1(a), (b), (f) or (h) of the Note Agreement or any failure of the
Company in any material respect to perform any of its obligations
hereunder or under the Purchase Agreement; provided, however, that the
Put Option Period will continue with respect to such Event of Default or
other failure, even after the same has been cured, if notice of exercise
of the Put Option by such Holder is provided pursuant to this Article IV
during the continuance of such Event of Default or such other failure,
as the case may be.
The Company's obligations under this Article IV and the notes issued
pursuant to Section 4.04 hereof are subject to the provisions of the Senior
Subordination Agreement (as defined in Section 11.1 of the Note Agreement).
4.02 Put Price. In the event that any Holder exercises the Put Option,
the price (the "Put Price") to be paid to each such Holder pursuant to this
Agreement will be cash in the sum of the amount determined by multiplying the
higher of (a) the Book Value or (b) the Fair Market Value per share of Common
Stock as of the end of the month immediately preceding the date notice is
given of the exercise of the Put Option pursuant to Section 4.03 times the
number of shares of Common Stock for which the Put Option is being exercised
by such Holder plus the higher of (a) the Book Value or (b) the Fair Market
Value of the Other Securities issuable upon exercise of the portion of the
Warrants subject to the Put Option; provided, however, the Fair Market Value
(as opposed to the Book Value) shall only be utilized in determining such Put
Price if, for the thirty (30) consecutive days prior to the exercise of the
Put Option, the Common Stock has been trading on a national securities
exchange as its primary market (as contemplated in clause (a) of the
definition of Closing Price) with an average trading volume of at least
150,000 shares per day and an average market capitalization of the Company of
at least $50,000,000 (calculated on the basis of the product of (i) the
number of shares of registered Common Stock outstanding on the date of
determination and (ii) the reported closing prices of Common Stock quoted on
such exchange over the period of thirty (30) days prior to the date of
determination).
4.03 Exercise of Put Option. The Put Option may be exercised during
the Put Option Period with respect to all or any portion of the Put Shares.
Such option shall be exercised by such Holder giving notice to the Company and
each other Holder during the Put Option Period of the Holder's election to
exercise the Put Option, and the date of the Put Option Closing, which will be
not less than fifteen (15) nor more than ninety (90) days after the date of
such notice. The Company will provide each Holder desiring to exercise its
Put Option the name and address of each other Holder. Notwithstanding the
foregoing, if a Holder receives such notice of another Holder's exercise of
such other Holder's Put Option, the Holder receiving such notice may elect to
exercise its Put Option and designate a Put Option Closing simultaneous and
pari passu with that of such other Holder.
<PAGE>
4.04 Certain Remedies. In the event that the Company defaults in its
obligation to purchase all or any portion of the Put Shares upon exercise of
the Put Option, in addition to any other rights or remedies of each Holder,
the unpaid portion of the Put Price will bear interest at the highest rate
permitted by applicable law. The Company will, upon the request of any
Holder, execute and deliver to such Holder a promissory note in form and
substance satisfactory to such Holder evidencing such obligation.
4.05 Put Option Closing. The closing for the purchase and sale of all
or such portion of the Put Shares as to which the Holder has notified the
Company of its intention to exercise the Put Option, will take place at the
office of the Company on the date specified in such notice of exercise (a "Put
Option Closing"). At any Put Option Closing, to the extent applicable, the
Holder of the Put Shares will deliver the certificate or certificates
evidencing the Put Shares being purchased, duly endorsed in blank. In
consideration therefor, the Company will deliver to the Holder the Put Price,
which will be payable in cash.
4.06 Limitations on Puts. No Holder other than Rice may, without the
prior written consent of Rice, exercise its Put Option unless and until Rice
shall also exercise its Put Option under this Article IV. Rice shall have the
right, but not the obligation, if it does exercise its Put Option under this
Article IV, to require each other Holder, on twenty (20) days prior written
notice to such Holder, to exercise such Holder's Put Option on a pro rata
basis, with respect to all of the shares of Put Shares then owned, directly or
indirectly, by such Holder, on the same terms and at the same Put Option
Closing to be set forth in such notice.
Article V
Call Option
5.01 Grant of Option. Each Holder hereby severally grants to the
Company an option to require such Holder to sell to the Company, and each
Holder is obligated to sell to the Company under this option (the "Call
Option"), all (but not less than all) of its Warrant and its Warrant Shares.
The Call Option will be effective after the sixth (6th) anniversary of the
date of this Agreement (the "Call Option Period").
5.02 Call Price. In the event that the Company exercises the Call
Option, the exercise price to be paid in cash to each Holder will be equal to
the Put Price determined in accordance with Section 4.02, except that the Call
Option will be exercised with respect to all of the Warrants and all Warrant
Shares, and will be increased by an amount in cash equal to any Excess
Consideration received within one hundred eighty (180) days following the
exercise of the Call Option due to an Adjustment Event.
5.03 Exercise of Call Option. The Call Option may be exercised during
the Call Option Period with respect to all of the Warrants and the Warrant
Shares of the Holders, by the Company giving notice to each Holder during the
Call Option Period of the election of the Company to exercise the Call Option,
and the date of the Call Option Closing (as defined below), which in all
events will be within at least ten (10) days after the date of such notice.
<PAGE>
5.04 Call Option Closing. The closing for the purchase and sale of all
of the Warrants and Warrant Shares that the Company has elected to purchase
under this Agreement, will take place at the office of the Company, on the
date specified in such notice of exercise (the "Call Option Closing"). At the
Call Option Closing, the Holders of the Warrants will deliver the Warrants and
the certificate or certificates representing the Warrant Shares, duly endorsed
in blank. In consideration therefor, the Company will deliver to each Holder
the purchase price, which will be payable in immediately available funds.
Article VI
First Refusal; and Co-Sale Rights
6.01 Rights of Co-Sale. In the event that any Shareholder intends to
sell or transfer, directly or indirectly, any shares of any class of Capital
Stock held by it to any Person other than a Related Party, each Holder will
have the right to participate in such sale or transfer on the terms set forth
in this Article VI; provided, however, none of the provisions of this
Agreement will apply to any sale by a Shareholder of shares of Capital Stock
in a bona fide underwritten public offering under the Securities Act, so long
as all Holders have had an opportunity to participate in such offering
pursuant to the registration rights under this Agreement.
6.02 Method of Electing Sale; Allocation of Sales. No sale or transfer
by any Shareholder of any shares of Capital Stock will be valid unless the
transferee of such Capital Stock first agrees in writing to be bound by the
same terms and conditions that apply to the Shareholder under this Agreement
and the Purchase Agreement. In addition, before any shares of Capital Stock
held, directly or indirectly, by any Shareholder may be sold or transferred to
a Person other than a Related Party, the Shareholder (as such, the "Selling
Shareholder") will comply with the following provisions:
(a) The Selling Shareholder will deliver or cause to be
delivered a written notice (the "Notice of Sale") to each Holder and F-
Jotan at least fifteen (15) days prior to making any such sale or
transfer. The Company agrees to provide the Selling Shareholder with a
list of the names and addresses of each such Holder and F- Jotan for
such purpose. The Notice of Sale will include (i) a statement of the
Selling Shareholder's bona fide intention to sell or transfer; (ii) the
name and address of the prospective transferee (the "Buyer"); (iii) the
number of shares of Capital Stock of the Company to be sold or
transferred; (iv) the terms and conditions of the contemplated sale or
transfer; (v) the purchase price in cash that the Buyer will pay for
such shares of Capital Stock; (vi) the expected closing date of the
transaction; and (vii) such other information as the Holders may
reasonably request to facilitate their decision as to whether or not to
exercise the rights granted by this Article VI.
(b) Any Holder receiving the Notice of Sale may elect to
participate in the contemplated sale or transfer by exercising either
(i) its right of first refusal to purchase such Capital Stock pursuant
to Section 6.02(c) or (ii), its right to co-sell its Capital Stock
pursuant to Section 6.02(d). Either of such rights may be exercised in
the sole discretion of the Holder by delivering a written notice (an
"Election Notice") to the Company and the Selling Shareholder within
<PAGE>
fifteen (15) days after receipt of such Notice of Sale stating the
election of the Holder to exercise either its right of first refusal
pursuant to Section 6.02(c) or its right of co-sale pursuant to Section
6.02(d).
(c) Each Holder may elect to treat the Notice of Sale as an
irrevocable offer to sell to the Holder up to its pro rata share
(determined in a manner consistent with Article II, and including the
pro rata share of Capital Stock not purchased by other Holders) of the
number of shares of Capital Stock proposed to be sold to the Buyer on
the same per share terms and conditions as stated in the Notice of Sale.
Such offer will remain open for a period of fifteen (15) days from
delivery to the Shareholder of the Election Notice. Within such fifteen
(15) day period, the Holder may elect to accept such offer in whole or
in part by delivering to the Selling Shareholder written notice of its
irrevocable election to accept such offer. If the Holder irrevocably
accepts such offer, the closing of the purchase and sale will occur on
or before the twentieth (20th) business day following delivery of the
notice of acceptance. At such closing, the Holder will deliver the
consideration payable to the order of the Selling Shareholder, against
delivery by the Selling Shareholder of the Capital Stock being so
purchased, free and clear of all liens, claims, and encumbrances, other
than this Agreement, endorsed in good form for transfer to the Holder or
its designees. If a Holder does not accept such offer within the
fifteen (15) day period specified above, the offer to such Holder will
be deemed to have been rejected, and the Selling Shareholder, subject to
Section 6.02(d), will be free to sell or transfer such Capital Stock not
purchased by the Holders to the Buyer on the same terms set forth in the
Notice of Sale within ninety (90) days of the expiration of such fifteen
(15) day period. If the sale to the Buyer is not so consummated, the
terms of this Article VI will again be applicable to any sale or
transfer of Capital Stock by the Shareholder.
(d) Each Holder may elect to sell or transfer in the
contemplated transaction up to the total of the number of shares of
Capital Stock then held by it (including the Issuable Warrant Shares).
Promptly after the receipt of an Election Notice exercising such right,
the Selling Shareholder will use its best efforts to cause the Buyer to
amend its offer so as to provide for the Buyer's purchase, upon the same
terms and conditions as those contained in the Notice of Sale, of all of
the shares of Capital Stock (including the Issuable Warrant Shares)
elected to be sold (the "Co-Sell Shares") in such Election Notices. In
the event that the Buyer is unwilling to amend its offer to purchase all
of the Co-Sell Shares in addition to the shares of Capital Stock
described in the related Notice of Sale, if the Selling Shareholder
desires to proceed with the sale, the total number of shares that such
Buyer is willing to purchase will be allocated to the Selling
Shareholder and each Holder having given an Election Notice exercising
its right pursuant to this Section 6.02(d) (the "Co-Sellers") in
proportion to the aggregate number of shares of Capital Stock (including
Issuable Warrant Shares) held by each such Person; provided, however,
that no such Person will be so allocated a number of shares greater than
the number of shares that it has sought to sell to such Buyer in the
related Notice of Sale or Election Notice. All Capital Stock sold or
transferred by the Selling Shareholder and the Co-Sellers with respect
to a single Notice of Sale under Section 6.02(b) will be sold or
transferred to the Buyer in a single closing on the terms described in
such Notice of Sale, and each such share will receive the same per share
consideration. In the event that the Buyer for whatever reason,
declines to purchase any shares from any Holder delivering an Election
Notice, then (x) the Selling Shareholder will not be permitted to sell
or transfer any shares of Capital Stock to such Buyer and (y) the shares
of Capital Stock of the Selling Shareholder that were to have been sold
or transferred to the Buyer will be subject to the Holders' right of
first refusal pursuant to Section 6.02(c) for a period of fifteen (15)
days thereafter on the terms and conditions that the Buyer would have
purchased such shares of Capital Stock from the Selling Shareholder had
it not declined to purchase shares from the Co-Seller under this Section
6.02(d).
6.03 Sales to Related Parties. No sale or transfer of shares of
Capital Stock by the Shareholder to a Related Party will be subject to the
provisions of Section 6.02; provided, however, that such Related Party first
agrees to assume the obligations of the Shareholder (without relieving the
Shareholder of any obligations under this Agreement) under this Agreement with
respect to the shares of Capital Stock thereby acquired by it and to be bound
by the same terms and conditions that apply to the Shareholder under this
Agreement and the Purchase Agreement in a written instrument in a form and
substance satisfactory to the Holders.
6.04 Limitations on Co-Sales; F-Jotan Participation.
(a) Notwithstanding the foregoing, no Holder other than Rice
may, without the prior written consent of Rice, exercise its rights to
co-sell all or any part of its Capital Stock under this Article VI
unless and until Rice shall have been given any notice described in
Section 6.01 hereof (the "co-sale notice") prior to or concurrently with
any other Holder and shall have been given at least ten (10) days from
receipt of the co-sale notice to consult with the other Holders about
consummating the contemplated sale of their respective Capital Stock on
a pro rata basis.
(b) During such consultations, each Holder shall use reasonable
efforts to inform F-Jotan whether such Holder intends to offer its Co-
Sell Shares for sale; and, as soon as practicable, such Holder shall
advise F-Jotan in writing if it determines not to sell all of the Co-
Sale Shares which it is entitled to so sell (such shares to not be sold,
the "Opt-Out Shares") under this Article VI. F-Jotan shall then be
afforded the opportunity to sell a portion of its shares of Capital
Stock to the extent of such Opt-Out Shares as though F-Jotan is a Holder
under this Article IV with respect thereto and solely for the purposes
contemplated in this Section 6.04(b);
6.05 Termination. This Article VI shall terminate solely with respect
to any Shareholder who is an employee of the Company on the first day of the
month next following the date that the Company terminates the employment of
such Shareholder, as such an employee, without cause.
<PAGE>
Article VII
Liquidity
7.01 Required Registration. At any time, Rice may, upon not more than
two (2) occasions, make a written request to the Company requesting that the
Company effect the registration of a certain number of Registrable Securities
pro rata for the accounts of Rice and the Southland Purchasers based upon the
respective number of Registrable Securities held by them. If and when Rice
makes any such request for registration, it shall use its best efforts to also
have included therein the Registrable Securities held by F-Jotan; provided,
however, that if the managing underwriter or underwriters, if any, of the
offering of the Registrable Securities for which registration has been
demanded by Rice advises the Holders that the success of the offering would be
materially and adversely affected by the inclusion of Registrable Securities
of F-Jotan, then the amount of securities to be registered for the accounts of
the Holders shall be reduced first by reducing the Registrable Securities of
F-Jotan to be so included in such registration and then by reducing pro rata
the Registrable Securities held by Rice and the Southland Purchasers.
Notwithstanding the first sentence of this Section 7.01, the Southland
Purchasers or F-Jotan may, by such a written request, exercise any such demand
that Rice has not so requested for the benefit of Rice and the Southland
Purchasers under this Section 7.01 on the earliest date to occur (the "Cut-Off
Date") of (i) the date that Rice no longer owns, directly or indirectly, any
beneficial or other equity interest in respect of the Capital Stock of the
Company, (ii) the date which is one hundred eighty (180) days after all of
Rice's Issuable Warrant Shares have been duly registered to permit disposition
thereof in the public equity markets, and (iii) March 1, 2002. F-Jotan may,
upon not more than one (1) occasion, make an independent written request to
the Company requesting that the Company effect the registration of a certain
number of Registrable Securities; provided, however, that the Cut-Off Date
shall have occurred prior to making such request.
After receipt of any such a request, the Company will, as soon as
practicable, notify all Holders of such request and use its best efforts to
effect the registration of all Registrable Securities that the Company has
been so requested to register by Rice or F-Jotan for sale, all to the extent
required to permit the disposition (in accordance with the intended method or
methods thereof) of the Registrable Securities so registered. In no event
will any Person other than a Holder be entitled to include any shares of
Capital Stock in any registration statement filed pursuant to this Section
7.01.
7.02 Incidental Registration. If the Company at any time proposes to
file on its behalf or on behalf of any of its security holders a registration
statement under the Securities Act on any form (other than a registration
statement on Form S-4 or S-8 or any successor form unless such forms are being
used in lieu of or as the functional equivalent of, registration rights) for
any class that is the same or similar to Registrable Securities, it will give
written notice setting forth the terms of the proposed offering and such other
information as the Holders may reasonably request to all holders of
Registrable Securities at least thirty (30) days before the initial filing
with the Commission of such registration statement, and offer to include in
such filing such Registrable Securities as any Holder may request. Each
Holder of any such Registrable Securities desiring to have Registrable
Securities registered under this Section 7.02 will advise the Company in
writing within thirty (30) days after the date of receipt of such notice from
the Company, setting forth the amount of such Registrable Securities for which
<PAGE>
registration is requested. The Company will thereupon include in such filing
the number of Registrable Securities for which registration is so requested,
and will use its best efforts to effect registration under the Securities Act
of such Registrable Securities.
Notwithstanding the foregoing, if the managing underwriter or
underwriters, if any, of such offering deliver a written opinion to each
Holder of such Registrable Securities that the success of the offering would
be materially and adversely affected by the inclusion of the Registrable
Securities requested to be included, then the amount of securities to be
offered for the accounts of Holders will be reduced first by reducing the
Registrable Securities of F-Jotan to be registered in such offering and second
pro rata (according to the Registrable Securities proposed for registration)
to the extent necessary to reduce the total amount of securities to be
included in such offering to the amount recommended by such managing
underwriter or underwriters; provided, however, that if securities are being
offered for the account of other Persons as well as the Company, then with
respect to the Registrable Securities intended to be offered by Holders, the
proportion by which the amount of such class of securities intended to be
offered by Holders is reduced will not exceed the proportion by which the
amount of such class of securities intended to be offered by such other
Persons (other than the Company) is reduced.
7.03 Form S-3 Registrations. In addition to the registration rights
provided in Sections 7.01 and 7.02 above, if at any time the Company is
eligible to use Form S-3 (or any successor form) for registration of secondary
sales of Registrable Securities, Rice or, after the Cut-Off Date, any Holder
of Registrable Securities may request in writing that the Company register
shares of Registrable Securities on such form. Upon receipt of such request,
the Company will promptly notify all holders of Registrable Securities in
writing of the receipt of such request and each such Holder may elect (by
written notice sent to the Company within thirty (30) days of receipt of the
Company's notice) to have its Registrable Securities included in such
registration pursuant to this Section 7.03. Thereupon, the Company will, as
soon as practicable, use its best efforts to effect the registration on Form
S-3 of all Registrable Securities that the Company has so been requested to
register by such Holder for sale. The Company will use its best efforts to
qualify and maintain its qualification for eligibility to use Form S-3 for
such purposes.
7.04 Rule 144 Availability. Notwithstanding the foregoing, the Company
will not be obligated to register any Registrable Securities as to which
counsel acceptable to the Holders renders an opinion in form and substance
satisfactory to the Holders to the effect that such Registrable Securities are
freely saleable without limitation as to volume, manner of sale, or otherwise
under Rule 144 under the Securities Act.
7.05 Registration Procedures. In connection with any registration of
Registrable Securities under this Article VII, the Company will, as soon as
practicable:
(a) prepare and file with the Commission a registration
statement with respect to such Registrable Securities and use its best
efforts to cause such registration statement to become and remain
effective until the earlier of such time as all Registrable Securities
<PAGE>
subject to such registration statement have been disposed of or the
expiration of one hundred eighty (180) days.
(b) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities
Act with respect to the sale or other disposition of all Registrable
Securities covered by such registration statement until the earlier of
such time as all of such Registrable Securities have been disposed of or
the expiration of one hundred eighty (180) days (except with respect to
registrations effected on Form S-3 or any successor form, as to which no
such period shall apply);
(c) furnish to each Holder such number of copies of the
registration statement and prospectus (including, without limitation, a
preliminary prospectus) in conformity with the requirements of the
Securities Act (in each case including all exhibits) and each amendment
or supplement thereto, together with such other documents as any Holder
may reasonably request;
(d) use its best efforts to register or qualify the Registrable
Securities covered by such registration statement under such other
securities or blue sky laws of such jurisdictions within the United
States and Puerto Rico as each Holder reasonably requests, and do such
other acts and things as may be reasonably required of it to enable such
holder to consummate the disposition in such jurisdiction of the
securities covered by such registration statement;
(e) otherwise use its best efforts to comply with all applicable
rules and regulations of the Commission, and make available to its
securities holders, as soon as practicable, an earnings statement
covering the period of at least twelve months beginning with the first
month after the effective date of such registration statement, which
earnings statement will satisfy the provisions of Section 11(a) of the
Securities Act;
(f) provide and cause to be maintained a transfer agent and
registrar for Registrable Securities covered by such registration
statement from and after a date not later than the effective date of
such registration statement;
(g) if requested by the underwriters for any underwritten
offering of Registrable Securities on behalf of a Holder of Registrable
Securities pursuant to a registration requested by Rice under Section
7.01, the Company will enter into an underwriting agreement with such
underwriters for such offering, such agreement to contain such
representations and warranties by the Company and such other terms and
provisions as are customarily contained in underwriting agreements with
respect to secondary distributions, including, without limitation,
provisions with respect to indemnities and contribution as are
reasonably satisfactory to such underwriters and the Holders; the
Holders on whose behalf Registrable Securities are to be distributed by
such underwriters will be parties to any such underwriting agreement and
<PAGE>
the representations and warranties by, and the other agreements on the
part of, the Company to and for the benefit of such underwriters, will
also be made to and for the benefit of such Holders of Registrable
Securities; and no Holder of Registrable Securities will be required by
the Company to make any representations or warranties to or agreements
with the Company or the underwriters other than reasonable and customary
representations, warranties, or agreements regarding such Holder, such
Holder's Registrable Securities, such Holder's intended method or
methods of disposition, and any other representation required by law;
(h) furnish, at the written request of any Holder, on the date
that such Registrable Securities are delivered to the underwriters for
sale pursuant to such registration, or, if such Registrable Securities
are not being sold through underwriters, on the date that the
registration statement with respect to such Registrable Securities
becomes effective, (i) an opinion in form and substance reasonably
satisfactory to such Holders, and addressing matters customarily
addressed in underwritten public offerings, of the counsel representing
the Company for the purposes of such registration (who will not be an
employee of the Company and who will be satisfactory to such Holders),
addressed to the underwriters, if any, and to the selling Holders; and
(ii) a letter (the "comfort letter") in form and substance reasonably
satisfactory to such Holders, from the independent certified public
accountants of the Company, addressed to the underwriters, if any, and
to the selling Holders making such request (and, if such accountants
refuse to deliver the comfort letter to such Holders, then the comfort
letter will be addressed to the Company and accompanied by a letter from
such accountants addressed to such Holders stating that they may rely on
the comfort letter addressed to the Company); and
(i) during the period when the registration statement is
required to be effective, notify each selling Holder of the happening of
any event as a result of which the prospectus included in the
registration statement contains an untrue statement of a material fact
or omits to state any material fact required to be stated therein or
necessary to make the statements therein not misleading, and prepare a
supplement or amendment to such prospectus so that, as thereafter
delivered to the purchasers of such Registrable Securities, such
prospectus will not contain an untrue statement of a material fact or
omit to state any material fact required to be stated therein or
necessary to make the statements therein not misleading.
It will be a condition precedent to the obligation of the Company to
take any action pursuant to this Article VII in respect of the Registrable
Securities that are to be registered at the request of any Holder of
Registrable Securities that such Holder furnish to the Company such
information regarding the Registrable Securities held by such Holder and the
intended method of disposition thereof as is legally required in connection
with the action taken by the Company. The managing underwriter or
underwriters, if any, for any offering of Registrable Securities to be
registered pursuant to Section 7.01 or 7.03 will be selected by the Holders of
a majority of the Registrable Securities being so registered.
7.06 Allocation of Expenses. Except as provided in the following
sentence, the Company will bear all expenses arising or incurred in connection
with any of the transactions contemplated by this Article VII, including,
<PAGE>
without limitation, (a) all expenses incident to filing with the National
Association of Securities Dealers, Inc.; (b) registration fees; (c) printing
expenses; (d) accounting and legal fees and expenses; (e) expenses of any
special audits or comfort letters incident to or required by any such
registration or qualification; and (f) expenses of complying with the
securities or blue sky laws of any jurisdictions in connection with such
registration or qualification. Each Holder will severally bear the expense of
its underwriting fees, discounts, or commissions relating to its sale of
Registrable Securities.
7.07 Listing on Securities Exchange. If the Company lists any shares
of Capital Stock on any securities exchange or on the National Association of
Securities Dealers, Inc. Automated Quotation System or similar system, it
will, at its expense, list thereon, maintain and, when necessary, increase
such listing of, all Registrable Securities.
7.08 Holdback Agreements.
(a) If any registration pursuant to Section 7.02 is in
connection with an underwritten public offering, each Holder of
Registrable Securities agrees, if so required by the managing
underwriter, not to effect any public sale or distribution of
Registrable Securities (other than as part of such underwritten public
offering) during the period beginning seven (7) days prior to the
effective date of such registration statement and ending on the one
hundred eightieth (180th) day after the effective date of such
registration statement; provided, that each Shareholder and each Person
that is an officer, director, or beneficial owner of five percent (5%)
or more of the outstanding shares of any class of Capital Stock enters
into such an agreement.
(b) The Company and the Shareholder agree (i) not to effect any
public sale or distribution during the period seven (7) days (or such
longer period as may be prescribed by Rule 10b-6 under the Exchange Act)
prior to the effective date of the registration statement employed in
any underwritten public offering and ending on the one hundred eightieth
(180th) day after any such registration statement contemplated by
Sections 7.01 or 7.03 has become effective, except as part of such
underwritten public offering pursuant to such registration statement and
except pursuant to securities registered on Forms S-4 or S-8 of the
Commission or any successor forms, and (ii) use their best efforts to
cause each holder of its equity securities or any securities convertible
into or exchangeable or exercisable for any of such securities, in each
case purchased from the Company at any time after the date of this
Agreement (other than in a public offering), to agree not to effect any
such public sale or distribution of such securities during such period.
7.09 Rule 144. At all times, the Company will take such action as any
Holder may reasonably request, all to the extent required from time to time to
enable such Holder to sell shares of Registrable Securities without
registration pursuant to and in accordance with (a) Rule 144 under the
Securities Act, as such Rule may be amended from time to time, or (b) any
similar rule or regulation adopted by the Commission. Upon the request of any
Holder of Registrable Securities, the Company will deliver to such Holder a
written statement as to whether it has complied with such requirements.
<PAGE>
7.10 Rule 144A. The Company agrees that, upon the request of any
Holder or any prospective purchaser of a Warrant or Warrant Shares designated
by a Holder, the Company will promptly provide (but in any case within fifteen
(15) days of a request) to such Holder or potential purchaser, the following
information:
(a) a brief statement of the nature of the business of the
Company and any Subsidiaries and the products and services they offer;
(b) the most recent consolidated balance sheets and profit and
losses and retained earnings statements, and similar financial
statements of the Company for such part of the two preceding fiscal
years prior to such request as the Company has been in operation (such
financial information will be audited, to the extent reasonably
available); and
(c) such other information about the Company, any Subsidiaries,
and their business, financial condition, and results of operations as
the requesting Holder or purchaser of such Warrants requests in order to
comply with Rule 144A, as amended, and the antifraud provisions of the
federal and state securities laws.
The Company hereby represents and warrants to any such requesting Holder and
any prospective purchaser of Warrants or Warrant Shares from such Holder that
the information provided by the Company pursuant to this Section 7.10 will not
contain any untrue statement of a material fact or omit to state a material
fact necessary in order to make the statements made, in light of the
circumstances under which they were made, not misleading.
7.11 Limitations on Subsequent Registration Rights. From and after the
date of this Agreement, the Company will not, without the prior written
consent of the Holders, enter into any agreement with any holder or
prospective holder of any securities of the Company that would allow such
holder or prospective holder (a) to include such securities in any
registration filed under Section 7.01, unless under the terms of such
agreement, such holder or prospective holder may include such securities in
any such registration only to the extent that the inclusion of its securities
will not reduce the amount of the Registrable Securities of the Holders that
is included or (b) to make a demand registration that could result in such
registration statement being declared effective prior to the effectiveness of
the first registration statement effected under Section 7.01 or within one
hundred twenty (120) days of the effective date of any registration effected
pursuant to Section 7.01.
7.12 Exchange Rights. At the option of any Holder, any such Holder may
exchange its Warrant or Warrant Shares for fully paid and nonassessable shares
(calculated as to each exchange to the nearest one-thousandth (1/1000) of a
share and rounded upward) of common stock of any Affiliate or Subsidiary of
the Company that on the date of receipt of the Exchange Notice has a class of
capital stock registered under section 12 of the Exchange Act or within one
year and 120 days will have a class of capital stock so registered (not
subject to an effective stock pledge to an agent for the benefit of the Senior
<PAGE>
Lenders) (such Affiliate or Subsidiary will be referred to in this Agreement
as the "Exchange Company" and the common stock of such Affiliate or Subsidiary
will be referred to in this Agreement as "Exchange Common Stock"). Each
$1,000 worth of Warrants or Warrant Shares (valued at Fair Market Value on the
date the Exchange Notice was sent), will be exchangeable for $1,000 worth of
Exchange Common Stock (valued at Fair Market Value on the date that the
Exchange Notice was sent). To exchange Warrants or Warrant Shares into
Exchange Common Stock, the Holder will surrender at the principal office of
the Exchange Company the Warrants or certificate or certificates evidencing
the Warrant Shares duly endorsed or assigned to the Company, and give written
notice to the Company at such office that it elects to exchange such Warrants
or Warrant Shares (the "Exchange Notice"). Warrants or Warrant Shares will be
deemed to have been exchanged immediately prior to the close of business on
the day of the surrender for exchange in accordance with the foregoing
provisions, and the Person or Persons entitled to receive the Exchange Common
Stock issuable upon any such exchange will thereupon be treated for all
purposes as the record holder or holders of the Exchange Common Stock. As
promptly as practicable on or after the exchange date, the Exchange Company
will issue and deliver a certificate or certificates for the number of full
shares of Exchange Common Stock issuable upon exchange to the Person or
Persons entitled to receive such shares. Upon exchange of any Issued Warrant
Shares, the Company will pay or make with respect to Issued Warrant Shares any
dividends or other distributions that have been declared on the Warrant Shares
in kind or cash, as the case may be. If any Holder exchanges its Warrants or
Warrant Shares for shares of Exchange Common Stock pursuant to this Section
7.12, such Holder will have all of the rights set forth in this Article VII,
except that for the purposes of this Article VII the term "Company" will refer
instead to the Exchange Company and the term "Registrable Securities" will
refer to the shares of Exchange Common Stock held by such Holder.
7.13 Other Rights. The Company will not grant to any person any
registration rights without the consent of the Holders.
Article VIII
Directors
8.01 Voting Agreement. To ensure compliance with this Article VIII,
each of the Shareholder, Rice, the Southland Purchasers and F-Jotan hereby
irrevocably covenants and agrees to vote, or give or withhold consent with
respect to, all shares of Capital Stock now owned or later acquired by each of
them, all in accordance with the terms of this Article VIII. A counterpart of
this Agreement will be deposited with the Company at its principal place of
business or registered office and will be subject to the same right of
examination by a shareholder of the Company, in person or by agent or
attorney, as are the books and records of the Company.
8.02 Board of Directors. (a) So long as the provisions of this
Article VIII remain in effect, each (now or hereafter) party to this Agreement
other than Rice will, at the request of Rice or its designees, vote, or give
or withhold consent with respect to, all shares of Capital Stock now owned or
later acquired by such party so that at all times each and every individual
designated by Rice or its respective designees in accordance with (and subject
to the limitations in) Section 4.11 of the Purchase Agreement will be a
director of the Company; provided, however, that Rice will not have any
obligation to designate or cause any individual to serve on the board of
<PAGE>
directors of the Company. No director designated by Rice or its designee may
be removed without the prior written consent of Rice.
(b) So long as the provisions of this Article VIII remain in
effect, each (now or hereafter) party to this Agreement other than the
Southland Purchasers will, at the request of the Southland Purchasers or
its designee, vote, or give or withhold consent with respect to, all
shares of Capital Stock now owned or later acquired by such party so that
at all times the one individual designated by the Southland Purchasers or
their respective designee in accordance with Section 4.11 of the Purchase
Agreement (which may be F-Jotan or its designee) will be a director of the
Company; provided, however, that the Southland Purchasers will not have
any obligation to designate or cause any individual to serve on the board
of directors of the Company. No director designated by the Southland
Purchasers or its designee may be removed without the prior written
consent of the Southland Purchasers and F-Jotan.
(c) Any Purchaser or F-Jotan may, at any time, terminate its
rights under this Article VIII by providing written notice of such
termination to the Company.
8.03 Termination. The obligations contained in this Article VIII shall
terminate, solely with respect to any Shareholder who is an employee of the
Company, on the first day of the month next following the date that the
Company terminates the employment of such Shareholder, as such an employee,
without cause.
Article IX
Representations and Warranties; Covenants
9.01 Representations and Warranties and Covenants of the Company and
the Shareholder. Each of the representations and warranties set forth in
Section 3.01 of the Purchase Agreement and each of the covenants set forth in
Article IV of the Purchase Agreement are hereby restated and incorporated by
reference in this Agreement as though set forth in this Agreement, and is made
by the Company and the Shareholder as made in the Purchase Agreement for the
benefit of each Purchaser.
9.02 Representations and Warranties of the Purchaser. Each of the
representations and warranties of each Purchaser set forth in Section 3.02 of
the Purchase Agreement is hereby restated and incorporated by reference in
this Agreement as though set forth in this Agreement for the benefit of the
Company and the Shareholder.
Article X
Conditions
The obligations of each Purchaser to effect the transactions
contemplated by this Agreement are subject to the following conditions:
<PAGE>
10.01 Note Agreement and Purchase Agreement Conditions. All of the
conditions precedent to the obligations of each Purchaser under the Note
Agreement and the Purchase Agreement will have been satisfied in full or
waived.
10.02 Proceedings. All proceedings taken in connection with the
transactions contemplated by this Agreement, and all documents necessary to
the consummation thereof, will be reasonably satisfactory in form and
substance to each Purchaser and its counsel, and each Purchaser and its
counsel will have received copies (executed or certified as may be
appropriate) of all documents, instruments, and agreements that such Purchaser
or its counsel may request in connection with the consummation of such
transactions.
Article XI
Miscellaneous
11.01 Indemnification. In addition to any other rights or remedies to
which each Purchaser and the Holders may be entitled, the Company and the
Shareholder (solely with respect to the representations and warranties made by
him herein) severally but not jointly agree to and will indemnify and hold
harmless each Purchaser, the Holders, and their Affiliates and their
respective successors, assigns, officers, directors, managers, employees,
attorneys, and agents (individually and collectively, an "Indemnified Party")
from and against any and all losses, claims, obligations, liabilities,
deficiencies, diminutions in value, penalties, causes of action, damages,
out-of-pocket costs, including, without limitation, all such costs of
directors of the Company incurred in performing duties or services for or on
behalf of the Company, reasonable attorneys' fees, and expenses (including,
without limitation, costs and expenses of investigation and defense,
attorneys' fees and expenses) including, without limitation, those arising out
of the contributory negligence of any Indemnified Party, that any Indemnified
Party may suffer, incur, or be responsible for, arising or resulting from, to
the extent applicable, any misrepresentation, breach of warranty, or
nonfulfillment of any agreement made by or on the part of the Company or made
by the Shareholder (solely with respect to the representations and warranties
made by him herein) under this Agreement, the Purchase Agreement, or the other
Purchase Documents, the Acquisition Agreement (each as defined in Section 11.1
of the Note Agreement) or under any other agreement to which the Company or
the Shareholder is a party in connection with the transactions contemplated by
this transaction, or from any misrepresentation in or omission from any
certificate or other instrument furnished or to be furnished by the Company to
the Purchaser or the Holders under this Agreement. The foregoing
indemnification includes any such claims, actions, damages, costs and expenses
incurred by reason of the 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 and shall survive the expiration of
this Agreement or the irrevocable sale by each Purchaser of its interests in,
or the repayment of its loans to, the Company.
11.02 Default. It is agreed that a violation by any party of the terms
of this Agreement cannot be adequately measured or compensated in money
damages, and that any breach or threatened breach of this Agreement by a party
to this Agreement would do irreparable injury to the nonbreaching party. It
<PAGE>
is, therefore, agreed that in the event of any breach or threatened breach by
a party to this Agreement of the terms and conditions set forth in this
Agreement, the nondefaulting party will be entitled, in addition to any and
all other rights and remedies that it may have in law or in equity, to apply
for and obtain injunctive relief requiring the defaulting party to be
restrained from any such breach, or threatened breach or to refrain from a
continuation of any actual breach.
11.03 Integration. This Agreement, the Note Agreement and the Purchase
Agreement constitute the entire agreement among the parties with respect to
the subject matter hereof and thereof and supersede all previous written, and
all previous or contemporaneous oral, negotiations, understandings,
arrangements, and agreements. This Agreement may not be amended or
supplemented except by a writing signed by Company, the Shareholder, and each
Holder.
11.04 Headings. The headings in this Agreement are for convenience and
reference only and are not part of the substance of this Agreement.
References in this Agreement to Sections and Articles are references to the
Sections and Articles of this Agreement unless otherwise specified.
11.05 Severability. The parties to this Agreement expressly agree that
it is not their intention to violate any public policy, statutory or common
law rules, regulations, or decisions of any governmental or regulatory body.
If any provision of this Agreement is judicially or administratively
interpreted or construed as being in violation of any such policy, rule,
regulation, or decision, the provision, section, sentence, word, clause, or
combination thereof causing such violation will be inoperative (and in lieu
thereof there will be inserted such provision, sentence, word, clause, or
combination thereof as may be valid and consistent with the intent of the
parties under this Agreement) and the remainder of this Agreement, as amended,
will remain binding upon the parties to this Agreement, unless the inoperative
provision would cause enforcement of the remainder of this Agreement to be
inequitable under the circumstances.
11.06 Notices. Whenever it is provided herein that any notice, demand,
request, consent, approval, declaration, or other communication be given to or
served upon any of the parties by another, such notice, demand, request,
consent, approval, declaration, or other communication will be in writing and
will be deemed to have been validly served, given, or delivered (and "the date
of such notice" or words of similar effect will mean the date) five (5) days
after deposit in the United States mails, certified mail, return receipt
requested, with proper postage prepaid, or upon receipt thereof with written
acknowledgment of receipt (whether by non-certified mail, telecopy, telegram,
express or hand delivery, or otherwise), whichever is earlier, and addressed
to the party to be notified as follows:
If to the Rice, at: Address of Rice beneath the name of Rice on the
signature pages of this Agreement
If to F-Jotan, at: Address of F-Jotan beneath the name of F-Jotan
on the signature pages of this Agreement
<PAGE>
with courtesy copies to: Hughes & Luce, L.L.P.
1717 Main Street
Suite 2800
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
Fax: 214-939-6100
If to the Company, at: Jotan, Inc.
118 West Adams Street
Jacksonville, Florida 32202
Attn: President
Fax: (904) 353-0075
with courtesy copies to: Wyrick, Robins, Yates & Ponton, L.L.P.
4101 Lake Boone Trail, Suite 300
Raleigh, North Carolina 27607-7506
Attn: James M. Yates, Jr.
Fax: (919) 781-4865
with courtesy copies to: Alston & Bird, L.L.P.
One Atlanta Center
1201 W. Peachtree Street
Atlanta, Georgia 30309-3424
Attn: Stephen A. Opler
Fax: (404) 881-7777
If to the Shareholder, at: Address of such Shareholder beneath the
name of such Shareholder on the signature pages of this Agreement
or to such other address as each party may designate for itself by like
notice. Notice to any Holder other than the Purchaser will be delivered as
set forth above to the address shown on the stock transfer books of the
Company or the Warrant Register unless such Holder has advised the Company in
writing of a different address to which notices are to be sent under this
Agreement.
Failure or delay in delivering the courtesy copies of any notice,
demand, request, consent, approval, declaration, or other communication to the
persons designated above to receive copies of the actual notice will in no way
adversely affect the effectiveness of such notice, demand, request, consent,
approval, declaration, or other communication.
No notice, demand, request, consent, approval, declaration, or other
communication will be deemed to have been given or received unless and until
it sets forth all items of information required to be set forth therein
pursuant to the terms of this Agreement.
<PAGE>
11.07 Successors. This Agreement will be binding upon and inure to the
benefit of the parties and their respective successors and permitted assigns;
provided, however, that no sale, assignment or other transfer by any party to
this Agreement of any of its Capital Stock or rights hereunder to another
Person will be valid and effective unless and until the transferee or assignee
first agrees in writing to be bound by the terms and conditions of this
Agreement and the Purchase Agreement, and the agreements and instruments
related hereto and thereto, in a form and substance reasonably satisfactory to
the Company.
.
11.08 Remedies. The failure of any party to enforce any right or remedy
under this agreement, or to enforce any such right or remedy promptly, will
not constitute a waiver thereof, nor give rise to any estoppel against such
party, nor excuse any other party from its obligations under this Agreement.
Any waiver of any such right or remedy by any party must be in writing and
signed by the party against which such waiver is sought to be enforced.
11.09 Survival. All warranties, representations, and covenants made by
any party in this Agreement or in any certificate or other instrument
delivered by such party or on its behalf under this Agreement will be
considered to have been relied upon by the party to which it is delivered and
will survive the Closing Date, regardless of any investigation made by such
party or on its behalf. All statements in any such certificate or other
instrument will constitute warranties and representations under this
Agreement.
11.10 Fees. Any and all fees, costs, and expenses, of whatever kind and
nature, including attorneys' fees and expenses, incurred by the Holders in
connection with the defense or prosecution of any actions or proceedings
arising out of or in connection with this Agreement will, to the extent
provided in this Agreement, be borne and paid by the Company within ten (10)
days of demand by the Holders.
11.11 Counterparts. This Agreement may be executed in any number of
counterparts, which will individually and collectively constitute one
agreement.
11.12 Other Business. It is understood and accepted that each
Purchaser, the Holders, and their Affiliates have interests in other business
ventures that may be in conflict with the activities of the Company and that
nothing in this Agreement will limit the current or future business activities
of such parties whether or not such activities are competitive with those of
the Company. The Company and the Shareholder agree that all business
opportunities available to them in any field substantially related to the
business of the Company will be pursued exclusively through the Company.
11.13 Choice of Law. THIS AGREEMENT WILL BE DEEMED TO HAVE BEEN MADE IN
JACKSONVILLE, FLORIDA AND WILL BE INTERPRETED AND THE RIGHTS OF THE PARTIES
DETERMINED IN ACCORDANCE WITH THE LAWS OF THE UNITED STATES APPLICABLE THERETO
AND THE INTERNAL LAWS OF THE STATE OF FLORIDA APPLICABLE TO AN AGREEMENT
EXECUTED, DELIVERED AND PERFORMED THEREIN WITHOUT GIVING EFFECT TO THE CHOICE-
<PAGE>
OF-LAW RULES THEREOF OR ANY OTHER PRINCIPLE THAT COULD REQUIRE THE APPLICATION
OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION.
11.14 Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner of such Registrable
Securities, the beneficial owner of Registrable Securities may, at its
election, be treated as the Holder of such Registrable Securities for purposes
of any request or other action by any Holder or Holders of Registrable
Securities pursuant to this Agreement or any determination of any number or
percentage of shares of Registrable Securities held by any Holder or Holders
of Registrable Securities contemplated by this Agreement. If the beneficial
owner of any Registrable Securities so elects, the Company may require
assurances reasonably satisfactory to it of such owner's beneficial ownership
of such Registrable Securities. In no event will a Holder be required to
exercise its Warrant as a condition to the registration of such Warrant or
Registrable Securities thereunder.
11.15 Fiduciary Duties. The Company acknowledges and agrees that, for
so long as any Warrant is outstanding and regardless of whether the Holder has
exercised any portion of this its Warrant, (a) the officers and directors of
the Company will owe the same duties (fiduciary and otherwise) to the Holder
as are owed to a stockholder of the Company and (b) the Holder will be
entitled to all rights and remedies with respect to such duties or that are
otherwise available to a stockholder of the Company under the Florida General
Corporation Law, as amended from time to time.
11.16 Duties Among Holders. Each Holder agrees that no other Holder
will by virtue of this Agreement be under any fiduciary or other duty to give
or withhold any consent or approval under this Agreement or to take any other
action or omit to take any action under this Agreement, and that each other
Holder may act or refrain from acting under this Agreement as such other
Holder may, in its discretion, elect.
11.17 Confidentiality. Each Holder agrees to keep confidential any
information delivered by the Company to such Holder under this Agreement that
the Company clearly indicates in writing to be confidential information;
provided, however, that nothing in this Section 11.17 will prevent such Holder
from disclosing such information (a) to any Affiliate of such Holder or any
actual or potential purchaser, participant, assignee, or transferee of such
Holder's rights or obligations hereunder that agrees to be bound by the terms
of this Section 11.17, (b) upon order of any court or administrative agency,
(c) upon the request or demand of any regulatory agency or authority having
jurisdiction over such Holder, (d) that is in the public domain, (e) that has
been obtained from any Person that is not a party to this Agreement or an
Affiliate of any such party without breach by such Person of a confidentiality
obligation known to such Holder, (f) in connection with the exercise of any
remedy under this Agreement, or (g) to the certified public accountants for
such Holder. The Company agrees that such Holder will be presumed to have met
its obligations under this Section 11.17 to the extent that it exercises the
same degree of care with respect to information provided by the Company as it
exercises with respect to its own information of similar character.
<PAGE>
11.18 Termination and Release of Prior F-Jotan Agreements. F-Jotan, the
Company and the Investors (as defined below) hereby agree that, for good and
valuable consideration, receipt of which is hereby acknowledged, including
obtaining the rights set forth hereinabove and in the other Purchase
Documents, each of them hereby terminates, as of the date hereof, all of its
rights, remedies, indemnities, benefits, priorities and privileges, howsoever
described, in respect of the Company under the Prior Series A Documents and
forever releases the Company, as of the date hereof, from all obligations to
it thereunder. The "Prior Series A Documents" shall mean and refer to (i)
that certain Series A Convertible Preferred Stock Purchase Agreement, dated as
of May 16, 1996, among the Company, F-Jotan and the Investors listed in
Exhibit A to such agreement (the "Investors"), (ii) that certain Investors
Rights Agreement, dated as of May 16, 1996, among the Company, the holders of
the Series A Convertible Preferred Stock and the Investors, (iii) that certain
Stockholder Agreement, dated as of May 16, 1996, among the Company, the
holders of the Company's common stock listed on the signature pages to such
agreement and the Investors, and (iv) all agreements, instruments, documents
and certificates, including Stock Certificate Pa-1 For 1,265,823 Shares Of
Series A Preferred, executed and delivered and/or filed in connection
therewith, including without limitation, the Articles of Amendment of the
Restated Articles of Incorporation of the Company dated May 15, 1996.
<PAGE>
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY:
JOTAN, INC.
BY:_______________________________
NAME:_____________________________
TITLE:____________________________
118 West Adams Street
Jacksonville, Florida 32201
Attn: President
Fax: (904) 343-0075
RICE:
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:_________________________
Name: Jeffrey P. Sangalis
Its: Managing Director
5847 San Felipe, Suite 4350
Houston, Texas 77057
Attn: Jeffrey P. Sangalis
Fax: (713) 783-9750
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
40,000 Shares of Series B
Redeemable Preferred Stock
None Shares of Common Stock
2,515,203 Warrant A-1 Shares
9,581,726 Warrant A-2 Shares
<PAGE>
F-JOTAN, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its manager
By: Franklin Capital, L.L.C.,
its manager
By:___________________________
Jeremiah M. Callahan,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
1,329,357 Shares of Series A
Convertible Preferred Stock
None Shares of Common Stock
None Other Equity Interests
<PAGE>
THE SOUTHLAND PURCHASERS:
F-SOUTHLAND, L.L.C.
By: Franklin Street/Fairview Capital, L.L.C.,
its manager
By: Franklin Capital, L.L.C,
its manager
By:_______________________________
Jeremiah M. Callahan,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
5,000 Shares of Series B
Redeemable Preferred Stock
None Shares of Common Stock
359,315 Warrant B-1 Shares
1,197,716 Warrant B-2 Shares
FF-SOUTHLAND, L.P.
By: FSFC Associates, L.P.,
Its general partner
By: Franklin Capital, L.L.C.,
Its general partner
By:_________________________
Jeremiah M. Callahan,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
None Shares of Series A
Convertible Preferred Stock
5,000 Shares of Series B
Redeemable Preferred Stock
None Shares of Common Stock
359,315 Warrant C-1 Shares
1,197,716 Warrant C-2 Shares
<PAGE>
SHAREHOLDER:
David Freedman
___________________________________
OWNED ON CLOSING DATE:
None Shares of Common Stock
Owned on Closing Date
275,000 Common Stock Options
Shea E. Ralph
_____________________________________
OWNED ON CLOSING DATE:
950,000 Shares of Common Stock
Owned on Closing Date
33,000 Common Stock Options
AGREEMENT REGARING THE PURCHASE PRICE
ADJUSTMENT, BONUS AND ADDITONAL CONSIDERATION
This AGREEMENT REGARDING THE PURCHASE PRICE ADJUSTMENT, BONUS AND
ADDITONAL CONSIDERATION (this "Agreement") made and dated as of February 28,
1997 is executed by and among Jotan, Inc. ("Jotan"), SHC Acquisition Corp.
("Acquisition"). Lester G. Gegenheimer ("Gegenheimer"), John L. Sanders, Jr.
("Sanders") and William P. Blincoe, III ("Blincoe") (Gegenheimer, Sanders and
Blincoe collectively, the "Shareholders") and Southland Holding Company (the
"Company") begin all the parties to the Share Purchase Agreement entered into
on December 19, 1996 (the "Purchase Agreement"). Acquisition is the assignee
of Jotan's rights and obligations under the Purchase Agreement pursuant to the
certain Assignment of Rights Under Share Purchase Agreement of even date
herewith.
1. Section 1.04 of the Purchase Agreement provides the Interim Financial
Statements (as defined therein) will be prepared and used to calculate (i)
the amount of the Dividend Payment referred to in Section 1.04(a) of the
Purchase Agreement (the "Dividend") and (ii) the amount of the Purchase Price
adjustment described in Section 1.03 of the Purchase Agreement. Each of the
undersigned hereby agrees that the Company will not declare a dividend and all
references to the Dividend Payment and the last two sentences of section
1.04(a) shall be deemed to be deleted. The parties also agree that the
Purchase Price adjustment shall be calculated based on the Closing date
Financial Statements prepared in accordance with Section 1.04 shall be
determined and paid within ten (10) days after (i) the delivery of the Closing
Date Financial Statements as provided in Section 1.04 or (ii) the resolution
of and Objection thereto, if any, and that no Interim Financial Statements
will be prepared. All references to the Interim Financial Statements in
Section 1.03 shall be deemed to be replaced with a reference to the Closing
Date Financial Statements.
2. Sections 4.01(f) and 4.01(g) of the Purchase Agreement shall be deemed
to be deleted and the parties agree that the Company will not declare a
dividend to its Shareholders prior to the Closing.
3. The parties agree that the Company will authorize and declare a bonus in
the aggregate amount of $600,000 ($200,000 per Shareholder) (the "Bonus"),
which the parties agree shall be paid to the Shareholders by the Company as
soon as practical after the company completes the Closing Date Financial
Statements.
4. Each of the undersigned hereby waives any and all rights he or it may
have under the Purchase Agreement to receive (i) the Interim Financial
Statements, (ii) the Dividend Payment and (iii) the Purchase Price adjustment
that was to have been based on the Interim Financial Statements and paid on or
prior to the Closing Date, provided that the Shareholders in no respect waive
Purchaser's obligation to pay, and their right to receive, (A) the Purchase
Price adjustment that is based on the Aggregate Acquisition Amount of the
Minority Interests and (B) the additional consideration to be paid pursuant to
paragraph 5 of this Agreement. The parties agree that the Purchase Price
adjustment, that additional consideration and the Bonus will be paid as soon
as practicable after the Company completes the Closing Date Financial
Statements subject to Section 1.04(b) and the last sentence of Section
1.04(c).
5. The parties hereto agree and confirm that as soon as practicable after
receiving the Closing Date Financial Statements, the Company shall pay to
Messrs. Gegenheimer, Sanders, and Blincoe additional consideration in an
amount to each equal to such Shareholder's pro rata portion of the earnings of
<PAGE>
the company computed after Taxes and after deduction for earnings attributable
to the Minority Interests for the period from May 31, 1996 through the Closing
Date as set forth on the Closing Date Financial Statements, assuming that
there have been no changes in the assets or liabilities set forth on the
balance sheet included in the Closing Date Financial Statements from the
assets and liabilities set forth on the Balance Sheet, other than changes in
the ordinary course of business and consistent with past practice.
6. The parties agree that unless expressly and explicitly otherwise stated
in the Other Agreements, (i) the obligations, convenants and agreements of the
Shareholders under any such Other Agreement shall be the obligations,
convenants and agreements of the applicable party or parties severally (and
not jointly and severally) and (ii) the indemnification obligation of the
Agreements shall be limited so that the Shareholders shall severally (and not
jointly and severally) indemnify any of the Persons specified in Section 5.02
with respect to any Loss related to or arising from any breach of any covenant
or agreement made or to be performed pursuant to any Other Agreement.
7. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and it shall not be necessary in making
proof of this Agreement or the terms hereof to produce or account for more
than one of such counterparts provided that the counterpart bears the
signature of the party sought to be bound.
8. This Agreement shall be deemed to have been made and shall be construed
and interpreted in accordance with the laws of the State of Texas, without
regard to laws regarding choice or conflicts of laws.
9. Capitalized terms used in this Agreement and not defined have the
meaning ascribed to them in the Purchase Agreement.
(signatures on next page)
<PAGE>
IN WITNESS WHEREOF, each of the undersigned have caused this Amendment
to be executed under seal effective as of this 28th day of February, 1997.
PURCHASER:
Attest: JOTAN, INC.
_________________________________ By: ___________________________________
Its: _______________________ Title: ________________________________
[CORPORATE SEAL]
ACQUISITION:
Attest: SHC ACQUISITION CORP.
_________________________________ By: ___________________________________
Its: _______________________ Title: ________________________________
[CORPORATE SEAL]
THE COMPANY:
Attest: SOUTHLAND HOLDING COMPANY
_________________________________ By: ___________________________________
Its: _______________________ Title: _________________________________
[CORPORATE SEAL]
THE SHAREHOLDERS:
__________________________ (SEAL)
LESTER G. GENGENHEIMER
__________________________ (SEAL)
JOHN L. SANDERS, JR.
__________________________ (SEAL)
WILLIAM P. BLINCOE, III
AGREEMENT REGARDING OTHER CONSIDERATION
This AGREEMENT REGARDING OTHER CONSIDERATION ("Agreement") made and
dated as of February 28, 1997 is executed by and among Jotan, Inc. ("Jotan"),
SHC Acquisition Corp. ("Acquisition"), John L. Sanders, Jr. ("Sanders") and
Southland Holding Company (the "Company");
Whereas, Jotan, Acquisition, Sanders, the Company, Lester G. Gegenheimer
and William P. Blincoe, III are all the parties to that certain Share Purchase
Agreement entered into on December 19, 1996 (the "Purchase Agreement");
Whereas, Acquisition is the assignee of Jotan's rights and obligations
under the Purchase Agreement pursuant to that certain Assignment of Rights
Under Share Purchase agreement of even date herewith; and
Whereas, all the parties to the Purchase Agreement have entered into
that certain Agreement Regarding the Purchase Price Adjustment, Bonus and
Additional Consideration of even date herewith (the "Additional Consideration
Agreement");
Now Therefore, for and in consideration of Ten Dollars ($10) and for
other valuable consideration, the receipt and sufficiency of which is hereby
acknowledged by the parties hereto, the parties hereby agree as follows:
1. The parties hereto agree and confirm that as soon as practicable after
receiving the Closing Date Financial Statements (as such term is referred to
in the Additional Consideration Agreement), the Company shall pay to all of
the third-part minority shareholders of each its subsidiaries an amount to
each equal to their pro rata share of the earnings of the respective
subsidiary computed after Taxes (as applicable to such subsidiary) in
accordance with each such third-party minority shareholder's ownership
percentage for the period from may 31, 1996 through the Closing date as set
forth on the Closing date Financial Statements, assuming that there have been
no changes in the assets or liabilities set forth on the respective balance
sheets included in the Closing Date Financial Statements from the assets and
liabilities set forth on the respective balance sheets of each respective
subsidiary of the Company, other than changes in the ordinary course of
business and consistent with past practice.
2. This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original, and it shall not be necessary in making
proof of this Agreement or the terms hereof to produce or account for more
than one of such counterparts provided that the counterpart bears the
signature of the party sought to be bound.
3. This Agreement shall be deemed to have been made and shall be construed
and interpreted in accordance with the laws of the State of Texas, without
regard to laws regarding choice or conflicts of laws.
4. Capitalized terms used in this Agreement and not defined have the
meaning ascribed to them in the Purchase Agreement.
<PAGE>
IN WITMESS WHEREOF, each of the undersigned have caused this Agreement
to be executed under seal effective as of this 28th day of February, 1997.
PURCHASER:
Attest: JOTAN, INC.
_________________________________ By: __________________________________
Its: _______________________ Title: ________________________________
[CORPORATE SEAL]
ACQUISITION:
Attest: SHC ACQUISITION CORP.
_________________________________ By:___________________________________
Its: _______________________ Title:_________________________________
[CORPORATE SEAL]
THE COMPANY:
Attest: SOUTHLAND HOLDING COMPANY
__________________________________ By:___________________________________
Its: ________________________ Title:________________________________
[CORPORATE SEAL]
SANDERS:
__________________________ (SEAL)
JOHN L. SANDERS, JR.
ARTICLES OF AMENDMENT
TO RESTATED ARTICLES OF INCORPORATION
OF JOTAN, INC.
1. The name of the corporation is Jotan, Inc.
2. Article IV of the Restated Articles of Incorporation of the
Corporation is amended by deleting Section 4.2 therefrom in its entirety and
substituting therefor a new Section 4.2 in the form attached as Exhibit A
hereto and incorporated herein by reference.
3. These Articles of Amendment were duly adopted by the Board of
Directors of the Corporation, without shareholder action, on February 27, 1997
and shall be effective as of February 28, 1997. Shareholder action was not
required for the adoption of these Articles of Amendment.
IN WITNESS WHEREOF, the undersigned President of Jotan, Inc. has
executed these Articles of Amendment this 28th day of February, 1997.
_____________________________
Shea E. Ralph, Director
President of Jotan, Inc.
ATTEST:
__________________________________
David Freedman
Secretary of Jotan, Inc.
<PAGE>
EXHIBIT A
TO
ARTICLES OF AMENDMENT
OF RESTATED ARTICLES OF INCORPORATION
OF JOTAN, INC.
[Series A Convertible Preferred Stock and Series B Redeemable Preferred Stock]
A. Series A Convertible Preferred Stock
1. Designation and Amount. Pursuant to the authority set forth in
Section 4.1 of these Restated Articles of Incorporation of Jotan, Inc., the
Board of Directors of the Corporation established a series of the authorized
preferred stock of the Corporation on May 14, 1996, designated as Series A
Convertible Preferred Stock ("Series A Convertible Preferred Stock"),
consisting of 5,000,000 shares, and having the powers, preferences and
relative participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as set forth herein. Such number of
shares may be increased or decreased from time to time by resolution of the
Board of Directors; provided, however, that no decrease shall reduce the
number of shares of Series A Convertible Preferred Stock to a number less than
the number of shares of such series then issued and outstanding, plus the
number of shares of such series reserved for issuance upon the exercise of
outstanding rights, options or warrants or upon the conversion or exchange of
outstanding securities issued by the Corporation.
2. Dividends on Series A Convertible Preferred Stock.
(a) The record holders of the outstanding Series A Convertible
Preferred Stock shall receive on each Series A PIK Dividend Payment Date
during the Series A PIK Dividend Payment Period per share dividends in
additional fully paid and nonassessable shares of Series A Convertible
Preferred Stock legally available therefor (such dividend being herein
called "Series A PIK Dividends"). The Series A PIK Dividends shall be
paid by delivering to each record holder of Series A Convertible
Preferred Stock a number of shares of Series A Convertible Preferred
Stock (which number of shares shall be rounded to the nearest one-
thousandth of a share) equal to the number of shares of Series A
Convertible Preferred Stock held by such holder on the applicable Series
A PIK Record Date, multiplied by the Series A Annual Per Share PIK
Dividend Amount. Any additional shares of Series A Convertible
Preferred Stock issued pursuant to this paragraph shall be governed by
this Section 4.2 and shall be subject in all respects, except as to the
date of issuance and date from which Series A PIK Dividends accrue and
cumulate as set forth in paragraph A.2(b) of this Section 4.2, to the
same terms as the shares of Series A Convertible Preferred Stock issued
on the Initial Issue Date.
(b) On the Series A PIK Record Date immediately preceding each
Series A PIK Dividend Payment Date, the Board of Directors of the
Corporation shall be deemed to have declared Series A PIK Dividends on
the Series A Convertible Preferred Stock in accordance with paragraph
A.2(a) of this Section 4.2, payable on the next Series A PIK Dividend
Payment Date. Series A PIK Dividends on shares of Series A Convertible
Preferred Stock shall accrue at a rate per annum equal to eight percent
(8.0%) of one share of Series A Convertible Preferred Stock, cumulated
annually, and be cumulative from the date of issuance of such shares
through the Series A PIK Dividend Payment Period. Series A PIK
<PAGE>
Dividends shall be payable in arrears during the Series A PIK Dividend
Payment Period on each Series A PIK Dividend Payment Date, commencing on
the first Series A PIK Dividend Payment Date, and for shares issued as
Series A PIK Dividends, commencing on the first Series A PIK Dividend
Payment Date occurring after such shares are issued. If any Series A
PIK Dividend Payment Date occurs on a day that is not a Business Day,
any accrued Series A PIK Dividends otherwise payable on such Series A
PIK Dividend Payment Date shall be paid on the next succeeding Business
Day. Series A PIK Dividends shall be paid to holders of record of the
Series A Convertible Preferred Stock on each Series A PIK Dividend
Payment Date as their names shall appear on the share register of the
Corporation on the Series A PIK Record Date immediately preceding such
Series A PIK Dividend Payment Date. Series A PIK Dividends on Series A
PIK Dividends that are in arrears for any past Series A PIK Dividend
Periods shall accumulate as if the earlier Series A PIK Dividends had
been issued as provided above, and shall be accrued. Unpaid Series A
PIK Dividends may be paid at any time to holders of record on the Series
A PIK Record Date therefor.
(c) Each share of Series A Convertible Preferred Stock shall
rank junior to each share of Series B Redeemable Preferred Stock (the
"Series B Redeemable Preferred Stock") but prior to each share of Common
Stock with respect to the payment of dividends.
3. Liquidation Preference.
(a) Liquidation Preference. Each share of Series A Convertible
Preferred Stock shall be treated as being pari passu with each share of
Series B Redeemable Preferred Stock and prior to each share of Common
Stock with respect to the distribution of assets or surplus funds upon
any Liquidation. In the event of any Liquidation, the assets and funds
of the Corporation shall be ratably distributed among the holders of the
Series A Convertible Preferred Stock and the Series B Redeemable
Preferred Stock based on the total number of shares of such Preferred
Stock then held by all such holders. Upon any Liquidation and after
both the holders of the Series A Convertible Preferred Stock shall have
been paid the full Series A Preferential Amount and the Series B
Redeemable Preferred Stock shall have been paid the full Series B
Preferential Amount, the entire remaining assets and funds of the
Corporation legally available for distribution shall be distributed
ratably among the holders of the Common Stock.
(b) Consolidation; Merger. A consolidation, merger or share
exchange of the Corporation shall be treated as a Liquidation in
accordance with paragraph B.3(b) of Section 4.2.
<PAGE>
(c) Valuation of Securities. Any securities to be delivered
upon Liquidation shall be valued as follows:
(i) securities not subject to investment letter or other
similar restrictions on free marketability covered by paragraph
A.3(c)(ii) of this Section 4.2:
(A) if traded on a securities exchange, the value
shall be deemed to be the average of the closing prices of
the securities on such exchange over the 30-day period
ending three business days prior to the date of the Notice
(as defined in paragraph C.5 of this Section 4.2),
(B) if actively traded over-the-counter, the value
shall be deemed to be the average of the closing bid or sale
prices (whichever are applicable) over the 30-day period
ending three business days prior to the date of the Notice;
and
(C) if there is no active public market, the value
shall be the fair market value thereof, as reasonably
determined by the Board of Directors in good faith; and
(ii) the method of valuation of securities subject to
investment letter or other restrictions on free marketability
other than restrictions arising solely by virtue of a
shareholder's status as an affiliate or former affiliate of the
issuer or other participant in a transaction subject to Rule 145
promulgated under the Securities Exchange Act of 1934, as amended,
shall be to make an appropriate discount from the market value
determined as provided in clauses (A), (B) or (C) of paragraph
3(c)(i) of this Section 4.2, to reflect the adjusted fair market
value thereof, as reasonably determined by the Board of Directors
in good faith.
(d) Notice. Written Notice of any Liquidation shall state the
proposed effective date of any such transaction and the date on which
Conversion Rights (as defined in paragraph A.5 of this Section 4.2)
terminate as to such shares. Such notice shall be given not more thirty
(30) days prior to the effective date stated therein to the then holders
of record of the Preferred Stock.
4. Voting Right of Series A Convertible Preferred Stock. Except as
otherwise expressly provided herein or as required by law, the holder of each
share of Series A Convertible Preferred Stock shall be entitled to the number
of votes equal to the number of shares of Common Stock into which such share
of Series A Convertible Preferred Stock could then be converted and shall have
voting rights and powers equal to the voting rights and powers of the Common
Stock (except as otherwise expressly provided herein or as required by law,
voting together with the Common Stock as a single class) and shall be entitled
to notice of any shareholders' meeting in accordance with the Bylaws of the
Corporation. Fractional votes shall not, however, be permitted and any
fractional voting rights resulting from the above formula (after aggregating
<PAGE>
all shares of Common Stock into which shares of Series A Convertible Preferred
Stock held by each holder could be converted) shall be rounded to the nearest
whole number (with one-half being rounded upward).
5. Conversion. The holders of Series A Convertible Preferred Stock
shall have conversion rights as follows (the "Conversion Rights"):
(a) Right to Convert. Each share of Series A Convertible
Preferred Stock (including those issued pursuant to Series A PIK
Dividends) shall be convertible, at the option of the holder thereof, at
any time after the date of issuance of such share (but prior to (i) the
date(s) that Conversion Rights terminate as set forth in the Notice
issued pursuant to paragraph A.3(d) of this Section 4.2, if any, and
(ii) the redemption of such share by the Corporation pursuant to
paragraph A.6 of this Section 4.2), at the office of the Corporation or
any transfer agent for such stock, into such number of fully paid and
nonassessable shares of Common Stock as is determined by dividing the
Series A Initial Purchase Price Per Share, plus all declared but unpaid
dividends on each such share other than Series A PIK Dividends, by the
Series A Conversion Price (as defined below), determined as hereinafter
provided, in effect on the date the share is surrendered for conversion.
The initial conversion price per share for the Series A Convertible
Preferred Stock (the "Series A Conversion Price") shall be $0.78. Such
initial Series A Conversion Price shall be adjusted as hereinafter
provided.
(b) Automatic Conversion. Each share of Series A Convertible
Preferred Stock shall automatically be converted, at the then applicable
conversion rate, into shares of Common Stock immediately upon the vote
or written consent thereto of the holders of at least a majority of the
then-outstanding shares of Series A Convertible Preferred Stock.
(c) Mechanics of Voluntary Conversion. Before any holder of
Series A Convertible Preferred Stock shall be entitled to convert the
same into shares of Common Stock, such holder shall surrender the
certificate or certificates thereof, duly endorsed, at the office of the
Corporation, or of any transfer agent for such stock, and shall give
written notice to the Corporation at such office that it elects to
convert the same and shall state therein the name or names in which it
wishes the certificate or certificates for shares of Common Stock to be
issued. The Corporation shall, as soon as practicable thereafter and at
its expense, issue and deliver at such office to such holder a
certificate or certificates for the number of shares of Common Stock to
which it shall be entitled as aforesaid. Such conversion shall be
deemed to have been made immediately prior to the close of business on
the date of surrender of the shares of Series A Convertible Preferred
Stock to be converted, and the person or persons entitled to receive the
shares of Common Stock issuable upon such conversion shall be treated
for all purposes as the record holder or holders of such shares of
Common Stock on such date.
(d) Adjustments for Combinations or Subdivisions of Common
Stock. In the event that the Corporation at any time or from time to
time after the Series A Initial Issue Date shall declare or pay any
dividend on the Common Stock payable in Common Stock or in any right to
acquire Common Stock, or shall effect a subdivision of the outstanding
shares of Common Stock into a greater number of shares of Common Stock
(by stock split, stock dividend, reclassification or otherwise), or in
<PAGE>
the event the outstanding shares of Common Stock shall be combined or
consolidated, by reclassification or otherwise, into a lesser number of
shares of Common Stock, in each case without a corresponding adjustment
to the Series A Convertible Preferred Stock, then the Series A
Conversion Price in effect immediately prior to such event shall,
concurrently with the effectiveness of such event, be proportionately
decreased or increased, as appropriate.
(e) Adjustments to Conversion Price for Diluting Issues.
(i) Special Definitions. For purposes of this paragraph
A.5(e) of this Section 4.2, the following definitions apply:
(A) "Options" shall mean rights, options or warrants
to subscribe for, purchase or otherwise acquire either
Common Stock or Convertible Securities, as hereinafter
defined.
(B) "Convertible Securities" shall mean any
evidences of indebtedness, shares or other securities
directly or indirectly convertible into or exchangeable for
Common Stock.
(C) "Additional Shares of Common Stock" shall mean
all shares of Common Stock issued (or, pursuant to paragraph
A.5(e)(iii) of this Section 4.2, deemed to have been issued)
by the Corporation after the Series A Initial Issue Date,
other than shares of Common Stock issued or issuable:
(1) upon conversion of shares of Series A
Convertible Preferred Stock;
(2) by way of dividend or other distribution
on shares excluded from the definition of Additional
Shares of Common Stock by the foregoing clause (1);
(3) by way of any other issues consented to by
the holders of at least two-thirds (2/3) of the then
outstanding shares of the Preferred Stock;
(4) upon the issuance of the Series B
Redeemable Preferred Stock; or
(5) upon the issuance of Capital Stock in
respect of any Warrant (as defined in the Preferred
Stock and Warrant Purchase Agreement dated as of
February 28, 1997, among the Corporation, Rice
<PAGE>
Partners II, L.P., F - Jotan, L.L.C., F - Southland,
L.L.C., FF - Southland, L.P. and the shareholders
which are party signatories thereto).
(ii) No Adjustment of Conversion Price. No adjustment in
the Series A Conversion Price shall be made in respect of the
issuance of Additional Shares of Common Stock unless the
consideration per share for an Additional Share of Common Stock
issued or deemed to be issued by the Corporation is less than the
Series A Conversion Price in effect on the date of, and
immediately prior to such issue.
(iii) Deemed Issue of Additional Shares of Common Stock. In
the event the Corporation at any time or from time to time after
the Series A Initial Issue Date shall issue any Options or
Convertible Securities or shall fix a record date for the
determination of holders of any class of securities then entitled
to receive any such Options or Convertible Securities, then the
maximum number of shares (as set forth in the instrument relating
thereto without regard to any provisions contained therein for a
subsequent adjustment of such number) of Common Stock issuable
upon the exercise of such Options or, in the case of Convertible
Securities and Options therefor, the conversion or exchange of
such Convertible Securities, shall be deemed to be Additional
Shares of Common Stock issued as of the time of such issue or, in
case such a record date shall have been fixed, as of the close of
business on such record date, provided that Additional Shares of
Common Stock shall not be deemed to have been issued unless the
consideration per share (determined pursuant to paragraph
A.5(e)(v) of this Section 4.2) of such Additional Shares of Common
Stock would be less than the Series A Conversion Price in effect
on the date of and immediately prior to such issue, or such record
date, as the case may be. In any such case in which Additional
Shares of Common Stock are deemed to be issued:
(A) no further adjustments in the Series A
Conversion Price shall be made upon the subsequent issue of
Convertible Securities or shares of Common Stock upon the
exercise of such Options or conversion or exchange of such
Convertible Securities;
(B) if such Options or Convertible Securities by
their terms provide, with the passage of time or otherwise,
for any change in the consideration payable to the
Corporation, or change in the number of Common Stock
issuable, upon the exercise, conversion or exchange thereof,
the Series A Conversion Price computed upon the original
issue thereof (or upon the occurrence of a record date with
respect thereto), and any subsequent adjustments based
thereon, shall, upon any such change becoming effective, be
recomputed to reflect such change insofar as it affects such
Options or the rights of conversion or exchange under such
Convertible Securities (provided, however, that no such
adjustment of the Series A Conversion Price shall affect
Common Stock previously issued upon conversion of the Series
A Convertible Preferred Stock);
(C) upon the expiration of any such Options or any
rights of conversion or exchange under such Convertible
Securities that shall not have been exercised, the Series A
<PAGE>
Conversion Price computed upon the original issue thereof
(or upon the occurrence of a record date with respect
thereto), and any subsequent adjustments based thereon,
shall, upon such expiration, be recomputed as if:
(1) in the case of Convertible Securities or
Options, the only Additional Shares of Common Stock
issued were the shares of Common Stock, if any,
actually issued upon the exercise of such Options or
the conversion or exchange of such Convertible
Securities and the consideration received therefor was
the consideration actually received by the Corporation
for the issue of all such Options, whether or not
exercised, plus the consideration actually received by
the Corporation upon such exercise, or for the issue
of all such Convertible Securities that actually were
converted or exchanged, plus the additional
consideration, if any, actually received by the
Corporation upon such conversion or exchange; and
(2) in the case of Options for Convertible
Securities, only the Convertible Securities, if any,
actually issued upon the exercise thereof were issued
at the time of issue of such Options and the
consideration received by the Corporation for the
Additional Shares of Common Stock deemed to have been
then issued was the consideration actually received by
the Corporation for the issue of all such Options,
whether or not exercised, plus the consideration
deemed to have been received by the Corporation
(determined pursuant to paragraph A.5(e)(v) of this
Section 4.2) upon the issue of the Convertible
Securities with respect to which such Options were
actually exercised;
(D) no readjustment pursuant to clauses (B) or (C)
above shall have the effect of increasing the Series A
Conversion Price to an amount that exceeds the lower of (1)
such Series A Conversion Price on the original adjustment
date, or (2) such Series A Conversion Price that would have
resulted from any issuance of Additional Shares of Common
Stock between the original adjustment date and such
readjustment date;
(E) in the case of any Options that expire by their
terms not more than 30 days after the date of issue thereof,
no adjustment of the Series A Conversion Price shall be made
until the expiration or exercise of all such Options,
<PAGE>
whereupon such adjustment shall be made in the same manner
provided in clause (C) above; and
(F) if any such record date shall have been fixed
and such Options or Convertible Securities are not issued on
the date fixed therefor, the adjustment previously made in
the Series A Conversion Price that became effective on such
record date shall be canceled as of the close of business on
such record date, and shall instead be made on the actual
date of issuance, if any.
(iv) Adjustment of Conversion Price Upon Issuance of
Additional Shares of Common Stock. In the event the Corporation
shall issue Additional Shares of Common Stock (including
Additional Shares of Common Stock deemed to be issued pursuant to
paragraph A.5(e)(iii) of this Section 4.2) without consideration
or for a consideration per share less than the Series A Conversion
Price in effect on the date of and immediately prior to such
issue, then and in such event, such Series A Conversion Price
shall be reduced concurrently with such issue to a price
(calculated to the nearest cent) determined by the following
formula:
N + C
-----------
CP' = CP * N + AS
where:
CP' = the Series A Conversion Price as so adjusted;
CP = the former Series A Conversion Price;
N = the number of shares of Common Stock outstanding
immediately prior to such issuance (or deemed
issuance) assuming exercise or conversion of all
outstanding securities exercisable for or
convertible into Common Stock;
C = the number of shares of Common Stock that the
aggregate consideration received or deemed to be
received by the Corporation for the total number
of additional securities so issued or deemed to
be issued would purchase if the purchase price
per share were equal to the then existing
Conversion Price;
AS = the number of shares of Common Stock so issued
or deemed to be issued.
<PAGE>
Notwithstanding the foregoing, the Series A Conversion Price shall
not be so reduced at such time if the amount of such reduction
would be an amount less than $0.01, but any such amount shall be
carried forward and deduction with respect thereto made at the
time of and together with any subsequent reduction that, together
with such amount and any other amount or amounts so carried
forward, shall aggregate $0.01 or more.
(v) Determination of Consideration. For purposes of this
paragraph A.5(e) of this Section 4.2, the consideration received
by the Corporation for the issue of any Additional Shares of
Common Stock shall be computed as follows:
(A) Cash and Property. Such consideration shall:
(1) insofar as it consists of cash, be
computed at the aggregate amount of cash received by
the Corporation (before commissions or expenses)
excluding amounts paid or payable for accrued interest
or accrued dividends;
(2) insofar as it consists of property other
than cash, be computed at the fair value thereof at
the time of such issue, as reasonably determined in
good faith by the Board of Directors; and
(3) in the event Additional Shares of Common
Stock are issued together with other shares or
securities or other assets of the Corporation for
consideration that covers both, be the proportion of
such consideration so received, computed as provided
in clauses (1) and (2) above, as reasonably determined
in good faith by the Board of Directors; and
(B) Options and Convertible Securities. The
consideration per share received by the Corporation for
Additional Shares of Common Stock deemed to have been issued
pursuant to paragraph A.5(e)(iii) of this Section 4.2
relating to Options and Convertible Securities shall be
determined by dividing:
(1) the total amount, if any, received or
receivable by the Corporation as consideration for the
issue of such Options or Convertible Securities, plus
the minimum aggregate amount of additional
consideration (as set forth in the instruments
relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such
number) payable to the Corporation upon the exercise
of such Options or the conversion or exchange of such
Convertible Securities, or in the case of Options for
Convertible Securities, the exercise of such Options
<PAGE>
for Convertible Securities and the conversion or
exchange of such Convertible Securities by
(2) the maximum number of shares of Common
Stock (as set forth in the instruments relating
thereto, without regard to any provision contained
therein for a subsequent adjustment of such number)
issuable upon the exercise of such Options or the
conversion or exchange of such Convertible Securities.
(f) Other Distributions. In the event the Corporation shall at
any time or from time to time make or issue, or fix a record date for
the determination of holders of Common Stock entitled to receive a
dividend or other distribution payable in securities of the Corporation
or any of its subsidiaries, other than additional shares of Common
Stock, then in each such event provision shall be made so that the
holders of Series A Convertible Preferred Stock shall receive, upon the
conversion thereof, the securities of the Corporation that they would
have received had their stock been converted into Common Stock
immediately prior to such event.
(g) Adjustments. In case of any reorganization or any
reclassification of the capital stock of the Corporation, any
consolidation or merger of the Corporation with or into another entity
or entities or the conveyance of all or substantially all of the assets
of the Corporation, each share of Series A Convertible Preferred Stock
(other than shares of Series A Convertible Preferred Stock for which the
holder thereof has elected to receive the Series A Preferential Amount
pursuant to paragraph A.3 above) shall thereafter be convertible into
the number of shares of stock or other securities or property (including
cash) to which a holder of the number of shares of Common Stock
deliverable upon conversion of such share of Series A Convertible
Preferred Stock would have been entitled upon the record date of (or
date of, if no record date is fixed) such reorganization,
reclassification, consolidation, merger or conveyance; and, in any case,
appropriate adjustment (as reasonably determined by the Board of
Directors) shall be made in the application of the provisions herein set
forth with respect to the rights and interests thereafter of the holders
of such Series A Convertible Preferred Stock, to the end that the
provisions set forth herein shall thereafter be applicable, as nearly as
equivalent as is practicable, in relation to any shares of stock or the
securities or property (including cash) thereafter deliverable upon the
conversion of the shares of such Series A Convertible Preferred Stock.
(h) Certificates as to Adjustments. Upon the occurrence of each
adjustment or readjustment of the Series A Conversion Price pursuant to
this paragraph A.5 of this Section 4.2, the Corporation at its expense
shall promptly compute such adjustment or readjustment in accordance
with the terms hereof and prepare and furnish to each holder of Series A
Convertible Preferred Stock a certificate setting forth such adjustment
or readjustment and showing in detail the facts upon which such
adjustment or readjustment is based. The Corporation shall, upon the
written request at any time of any holder of Series A Convertible
Preferred Stock furnish or cause to be furnished to such holder a like
<PAGE>
certificate setting forth (i) such adjustments and readjustments, (ii)
the Series A Conversion Price at the time in effect, and (iii) the
number of shares of Common Stock and the amount, if any, of other
property that at the time would be received upon the conversion of
Series A Convertible Preferred Stock.
(i) Issue Taxes. The Corporation shall pay any and all issue
and other taxes that may be payable in respect of any issue or delivery
of shares of Common Stock on conversion of shares of Series A
Convertible Preferred Stock pursuant hereto; provided, however, that the
Corporation shall not be obligated to pay any transfer, stamp or income
taxes resulting from any transfer requested by any holder in connection
with any such conversion.
(j) Reservation of Stock Issuable Upon Conversion. The
Corporation shall at all times reserve and keep available out of its
authorized but unissued shares of Common Stock, solely for the purpose
of effecting the conversion of the shares of Series A Convertible
Preferred Stock, such number of its shares of Common Stock as shall from
time to time be sufficient to effect the conversion of all outstanding
shares of Series A Convertible Preferred Stock; and if at any time the
number of authorized but unissued shares of Common Stock shall not be
sufficient to effect the conversion of all then outstanding shares of
Series A Convertible Preferred Stock, the Corporation will take such
corporate action as may, in the opinion of its counsel, be necessary to
increase the authorized but unissued shares of Common Stock to such
number of shares as shall be sufficient for such purpose, including,
without limitation, engaging in best efforts to obtain the requisite
shareholder approval of any necessary amendment to the Corporation's
Articles of Incorporation.
Before taking any action that would cause an adjustment
reducing the Series A Conversion Price below the then par value of the
shares of Common Stock, as applicable, issuable upon conversion of the
Series A Convertible Preferred Stock or that would cause the effective
purchase price for the Series A Convertible Preferred Stock to be less
than the par value of the shares of Series A Convertible Preferred
Stock, the Corporation will take any corporate action that may, in the
opinion of its counsel, be necessary in order that the Corporation may
validly and legally issue fully paid and nonassessable shares of such
Common Stock at such adjusted Series A Conversion Price or effective
purchase price, as the case may be.
(k) Fractional Shares. No fractional shares shall be issued
upon the conversion of any share or shares of Series A Convertible
Preferred Stock. All shares of Common Stock (including fractions
thereof) issuable upon conversion of more than one share of Series A
Convertible Preferred Stock by a holder thereof shall be aggregated for
purposes of determining whether the conversion would result in the
issuance of any fractional share. If, after the aforementioned
aggregation, the conversion would result in the issuance of a fraction
of a share of Common Stock, the Corporation shall, in lieu of issuing
any fractional share, pay the holder otherwise entitled to such fraction
a sum in cash equal to the fair market value of such fraction on the
<PAGE>
date of conversion (as determined in good faith by the Board of
Directors).
6. Redemption.
(a) After (but only after) the redemption of all Series B
Redeemable Preferred Stock (as hereafter provided) or with the prior
written consent of two-thirds (2/3) of the holders of the Series B
Redeemable Preferred Stock, the Corporation, at its sole option, may
redeem all, but not less than all, of the then-outstanding shares of the
Series A Convertible Preferred Stock (including those issued as Series A
PIK Dividends) upon sixty (60) days' advance written notice to the
holders of the Series A Convertible Preferred Stock at a price per share
equal to the Series A Preferential Amount, after any time when (a) the
Average Price reflects as 25% premium over the initial Series A
Conversion Price (as adjusted for any combinations, consolidations,
recapitalizations, reorganizations, reclassifications, stock dividends
other than Series A PIK Dividends, stock splits and the like) and (b) a
credible financial advisor either underwrites the redemption of the
Series A Convertible Preferred Stock or opines that such redemption
and/or voluntary conversion of the Series A Convertible Preferred Stock
prior thereto pursuant to paragraph A.5(a) of this Section 4.2 and the
sale of all the Common Stock issued upon such conversion in a
commercially reasonable manner would not significantly impact the market
price of the Common Stock. If the redemption notice has been duly
given, each holder of shares of Series A Convertible Preferred Stock to
be redeemed shall be entitled to convert, on or prior to the redemption
date, such shares of Series A Convertible Preferred Stock into shares of
Common Stock in accordance with the terms of these Restated Articles of
Incorporation.
(b) The Company shall mail an appropriate Redemption Notice
stating the information to be set forth therein.
B. Series B Redeemable Preferred Stock
1. Designation and Amount. Pursuant to the authority set forth in
Section 4.1 of these Restated Articles of Incorporation of Jotan, Inc., the
Board of Directors of the Corporation established a series of the authorized
preferred stock of the Corporation, designated as Series B Redeemable
Preferred Stock ("Series B Redeemable Preferred Stock"), consisting of
5,000,000 shares, and having the powers, preferences and relative
participating, optional or other special rights, and qualifications,
limitations or restrictions thereof, as set forth herein. Such number of
shares may be increased or decreased from time to time by resolution of the
Board of Directors; provided, however, that no decrease shall reduce the
number of shares of Series B Redeemable Preferred Stock to a number less than
the number of shares of such series then issued and outstanding, plus the
number of shares of such series reserved for issuance upon the exercise of
outstanding rights, options or warrants or upon the conversion or exchange of
outstanding securities issued by the Corporation.
2. Dividends Series B Redeemable Preferred Stock.
<PAGE>
(a) The record holders of the outstanding Series B Redeemable
Preferred Stock shall receive be entitled to receive, as and when
declared by the Board of Directors out of funds legally available
therefor, on each Series B Dividend Payment Date during each Series B
Dividend Payment Period, cumulative cash dividends equal to the
applicable Series B Dividend Amount for such period. Past due payments
of the applicable Series B Dividend Amount shall bear interest at a rate
of 8% per annum or, if less, the highest rate then permitted by
applicable law. Notwithstanding the foregoing, the Board of Directors
in its discretion may decide to pay the accrued Series B Dividend Amount
in the form of Series B PIK Dividends as set forth below.
(b) If and to the extent that cash dividends are not declared
and paid as set forth in paragraph B.2(a) of this Section 4.2:
(i) The record holders of the outstanding Series B
Redeemable Preferred Stock shall receive on each Series B Dividend
Payment Date during the Series B Dividend Payment Period per share
dividends in additional fully paid and nonassessable shares of
Series B Redeemable Preferred Stock legally available therefor
(such dividend being herein called "Series B PIK Dividends"). The
Series B PIK Dividends shall be paid by delivering to each record
holder of Series B Redeemable Preferred Stock a number of shares
of Series B Redeemable Preferred Stock (which number of shares
shall be rounded to the nearest one-thousandth of a share) equal
to the number of shares of Series B Redeemable Preferred Stock
held by such holder on the applicable Series B Record Date,
multiplied by the applicable Series B Dividend Amount. Any
additional shares of Series B Redeemable Preferred Stock issued
pursuant to this paragraph shall be governed by this Section 4.2
and shall be subject in all respects, except as to the date of
issuance and date from which Series B PIK Dividends accrue and
cumulate as set forth in paragraph B.2(b) of this Section 4.2, to
the same terms as the shares of Series B Redeemable Preferred
Stock issued on the Initial Issue Date.
(ii) On the Series B Record Date immediately preceding each
Series B Dividend Payment Date, the Board of Directors of the
Corporation shall be deemed to have declared Series B PIK
Dividends on the Series B Redeemable Preferred Stock in accordance
with paragraph B.2(a) of this Section 4.2, payable on the next
Series B Dividend Payment Date. Series B PIK Dividends on shares
of Series B Redeemable Preferred Stock shall accrue at the
applicable Series B Dividend Amount through the Series B Dividend
Payment Period. Series B PIK Dividends shall be payable in
arrears during the Series B Dividend Payment Period on each Series
B Dividend Payment Date, commencing on the first Series B Dividend
Payment Date, and for shares issued as Series B PIK Dividends,
commencing on the first Series B Dividend Payment Date occurring
after such shares are issued.
<PAGE>
(c) If any Series B Dividend Payment Date occurs on a day that
is not a Business Day, any accrued Series B Dividend Amount otherwise
payable on such Series B Dividend Payment Date shall be paid on the next
succeeding Business Day. The applicable Series B Dividend Amount shall
be paid to holders of record of the Series B Redeemable Preferred Stock
on each Series B Dividend Payment Date as their names shall appear on
the share register of the Corporation on the Series B Record Date
immediately preceding such Series B Dividend Payment Date. Series B PIK
Dividends on Series B PIK Dividends that are in arrears for any past
Series B Dividend Periods shall accumulate as if the earlier Series B
PIK Dividends had been issued as provided above, and shall be accrued.
Unpaid Series B PIK Dividends may be paid at any time to holders of
record on the Series B Record Date therefor.
(d) If in respect of any past quarterly dividend period or
periods full dividends upon the outstanding shares of Series B
Redeemable Preferred Stock shall not have been paid, the amount of the
deficiency shall be fully paid or declared and set apart for payment
before any dividend shall be paid or set apart for payment upon any
shares of Junior Stock.
(e) Each share of Series B Redeemable Preferred Stock shall rank
prior to each share of Junior Stock, including Series A Convertible
Preferred Stock and Common Stock, with respect to the payment of
dividends.
3. Liquidation Preference.
(a) Liquidation Preference. Except as provided in paragraph
A.3(a) of this Section 4.2, each share of Series B Redeemable Preferred
Stock shall rank prior to each share of Junior Stock with respect to the
distribution of assets or surplus funds of the Corporation upon any
Liquidation. In the event of any Liquidation the holders of the Series
B Redeemable Preferred Stock shall be entitled to receive any
distribution of the assets or surplus funds of the Corporation as
provided in paragraph A.3(a) of this Section 4.2.
(b) Consolidation; Merger. A consolidation, merger or share
exchange of the Corporation with or into any other corporation or other
business entity in which the shareholders of the Corporation immediately
prior to the transaction do not own at least fifty percent (50%) of the
outstanding voting power of the surviving corporation or other business
entity immediately after such consolidation, merger or share exchange,
or a sale by the Corporation of all or substantially all of its assets
(other than to a corporation or other business entity in which the
shareholders of the Corporation immediately prior to the transaction own
at least fifty percent (50%) of the outstanding voting power of the
purchasing corporation or other business entity immediately after the
sale), shall, upon the receipt of written election by the Holders of at
least two thirds (2/3) of the outstanding shares of the Series B
Redeemable Preferred Stock, be deemed to be a Liquidation.
<PAGE>
(c) Valuation of Securities. Any securities to be delivered
upon Liquidation shall be valued as set forth in paragraph A.3(c) of
this Section 4.2.
(d) Notice. Notice of any Liquidation shall be given in
accordance with paragraph A.3(d) of this Section 4.2.
4. Election of Directors by Holders of Series B Redeemable
Preferred Stock.
(a) The holders of the Series B Redeemable Preferred Stock shall
have at all times the exclusive right (voting separately as a class) to
elect a majority in number of the directors of the Corporation (the
"Series B Directors"). Such right may be exercised by action of the
holders of a majority of the issued and outstanding shares of Series B
Redeemable Preferred Stock at a duly called meeting of the holders of the
Series B Redeemable Preferred Stock or by written consent of at least a
majority of the issued and outstanding Series B Redeemable Preferred
Stock. Upon written notice of exercise of the right to elect Series B
Directors pursuant to this paragraph B.4 of this Section 4.2 signed by the
holders of a majority of the issued and outstanding Series B Redeemable
Preferred Stock, or upon such action taken at a meeting of the holders of
the Series B Redeemable Preferred Stock, that action has been taken to
elect Series B Directors, the maximum authorized number of members of the
Board of Directors shall, to the extent necessary, automatically be
increased by the number of directors so elected (but not more than a
majority of the resulting number of directors) and the designees so
elected shall be deemed elected to fill the vacancies so created by vote
of the holders of the Series B Redeemable Preferred Stock.
(b) The President of the Corporation shall, within twenty (20) days
after delivery to the Corporation at its principal office of a written
request for a special meeting signed by the holders of a majority of the
issued and outstanding Series B Redeemable Preferred Stock, call a special
meeting of the holders of Series B Redeemable Preferred Stock to be held
as promptly as is practicable within ninety (90) days after the delivery
of such request for the purpose of electing Series B Directors.
(c) Each Series B Director shall hold office until the earliest to
occur of (i) the time at which no shares of Series B Preferred stock are
outstanding, (ii) his or her death, (iii) his or her resignation, (iv) his
or her removal, (v) his or her disqualification, (vi) his or her
retirement, or (vii) election by the holder of Series B Redeemable
Preferred Stock of a duly qualified successor at any annual or special
meeting of shareholders. Subject to the limitations of the preceding
sentence, Series B Directors shall serve until the next annual meeting of
the shareholders of the Corporation, at which time the holders of Series B
Redeemable Preferred Stock may elect successors to the Series B Directors.
(d) If the office of any Series B Director becomes vacant by reason
of death, resignation, retirement, disqualification, removal from office
or otherwise, the remaining Series B Director or Directors may choose a
successor who shall hold office for the unexpired term in respect of which
such vacancy occurred. Any Series B Director may be removed by, and shall
not be removed otherwise than by, vote of the Series B Redeemable
Preferred Stock. Until the exercise by the holder of the Series B
<PAGE>
Redeemable Preferred Stock of the rights and privileges set forth in this
paragraph B.4 of Section 4.2, the number of directors shall be such number
as may be provided for in the Bylaws, in a resolution of the Board of
Directors adopted in accordance with the Bylaws or by any action or
agreement under a shareholder or similar agreement.
5. Redemptions.
(a) Optional Redemption. The Series B Redeemable Preferred
Stock may be redeemed at the Company's option (subject to the legal
availability of funds) at any time and from time to time, in whole or in
part, but in any event in increments of not less than the lesser of (a)
$500,000.00 or (b) the amount necessary to redeem all Series B
Redeemable Preferred Stock, at a redemption price per share equal to the
following amounts, determined on the date of redemption:
<TABLE>
<CAPTION>
Redemption Date Price
_____________________________________________ ____________________________
<S> <C>
(i) On or after the Initial Issue Date and
before the first anniversary of
the Initial Issue Date 112.5% of the Series B
Preferential Amount
(ii) On or after the first anniversary of the
Initial Issue Date and before the second
anniversary of the Initial Issue Date 110.71% of the Series B
Preferential Amount
(iii) On or after the second anniversary of the
Initial Issue Date and before the third
anniversary of the Initial Issue Date 108.92% of the Series B
Preferential Amount
(iv) On or after the third anniversary of the
Initial Issue Date and before the fourth
anniversary of the Initial Issue Date 107.14% of the Series B
Preferential Amount
(v) On or after the fourth anniversary of the
Initial Issue Date and before the fifth
anniversary of the Initial Issue Date 105.36% of the Series B
Preferential Amount
(vi) On or after the fifth anniversary of the
Initial Issue Date 100% of the Series B
Preferential Amount
</TABLE>
(b) Mandatory Redemptions. On the eighth (8th) anniversary of
the Initial Issue Date, the Company shall redeem (subject to the legal
availability of funds) all shares of the Series B Redeemable Preferred
Stock issued and outstanding from time to time; provided, however, that
<PAGE>
if the Company fails to redeem any such shares at such anniversary, the
holders of such shares shall be entitled to all rights and remedies at
law or in equity.
(c) Continuing Obligations. In the event any redemption
required by this paragraph 5 is not completed for any reason, the
obligation of the Company to redeem all or a portion of the Series B
Redeemable Preferred Stock will continue until the earliest time as the
circumstance preventing such redemption no longer exists, at which time
the Company will redeem the Series B Redeemable Preferred Stock. The
Company will use its best efforts to make funds legally available for
such redemptions, including, without limitation, revaluing assets of the
Company.
(d) Redemption Notice. The Company shall mail an appropriate
Redemption Notice stating the information to be set forth therein.
(e) Surrender of Stock. On or before the Redemption Date, each
holder of Series B Redeemable Preferred Stock to be redeemed shall
surrender the certificate or certificates (if any) representing such
shares to the Company, in the manner and at the place designated in the
Redemption Notice, and thereupon the Series B Preferential Amount for
such shares shall be payable to the order of the person whose name
appears on such certificate or certificates (or that is entitled to such
payment if there is no certificate) as the owner thereof or such
person's designee, and each surrendered certificate shall be canceled
and retired. In the event fewer than all of the shares represented by
such certificate are redeemed, a new certificate shall be issued
representing the unredeemed shares.
(f) Termination of Rights. If the Redemption Notice is duly
given, and if by the Redemption Date the Series B Preferential Amount is
either paid or made irrevocably available for payment, then
notwithstanding that the certificates evidencing any of the shares of
Series B Redeemable Preferred Stock so called for redemption have not
been surrendered, all rights with respect to such shares shall forthwith
after the Redemption Date cease, except only the right of the holders to
receive the Series B Preferential Amount without interest upon surrender
of their certificates therefor.
(g) Redemption Pro Rata. In the event that fewer than all of
the outstanding shares of Series B Redeemable Preferred Stock are to be
redeemed, such shares to be redeemed shall be redeemed pro rata among
all holders thereof in accordance with the number of shares of Series B
Redeemable Preferred Stock owned.
(h) No Reissuance of Series B Redeemable Preferred Stock. No
Series B Redeemable Preferred Stock acquired by the Company by reason of
redemption, purchase, or otherwise will be reissued, and all such shares
will be canceled, retired and eliminated from the shares that the
Company will be authorized to issue.
<PAGE>
(i) Priority of Series B Redeemable Preferred Stock. Each share
of Junior Stock (including the Series A Convertible Preferred Stock and
Common Stock) shall rank junior to each share Series B Redeemable
Preferred Stock of with respect to the payment of redemptions, purchases
or other acquisitions of shares of stock and no monies shall be paid
into or set aside or made available for a sinking fund for such
redemptions, purchases or other acquisitions until and unless the Series
B Preferential Amount has been paid in full in connection with the
redemption of all issued and outstanding Series B Redeemable Preferred
Stock.
C. Restrictive and General Provisions
1. Protective Provisions. Notwithstanding paragraph B.4 of this
Section 4.2, except as otherwise required by law, so long as any Preferred
Stock remains outstanding (as adjusted, to the extent applicable, for any
combinations, consolidations, recapitalizations, reorganizations,
reclassifications, stock distributions, stock splits, stock dividends other
than Series A PIK Dividends and Series B PIK Dividends, if any, and the like),
the Corporation shall not, without the vote or written consent by the holders
of at least 2/3 (two-thirds) of the outstanding shares of Preferred Stock
(voting as one class):
(a) take any action that adversely alters or changes the rights,
preferences or privileges of the Preferred Stock as set forth in this
Amendment;
(b) increase or decrease the total number of authorized shares
of the preferred stock of the Corporation or the total number of such
shares of Preferred Stock designated as Series A Convertible Preferred
Stock and Series B Redeemable Preferred Stock;
(c) authorize or make any Restricted Payment except repurchases
of stock in accordance with the permissions granted in the Note Purchase
Agreement dated as February 28, 1997 among the Company, SHC Acquisition
Corp., and other parties named therein (as the same may be amended,
modified or supplemented from time to time);
(d) create or authorize any class or series of Capital Stock
ranking prior to or pari passu with the Series B Redeemable Preferred
Stock with respect of the payment of dividends or the distribution of
assets upon a Liquidation, or create or authorize any rights, options or
warrants exercisable for, or securities convertible into or exchangeable
for, shares of any such class or series of Capital Stock;
(e) except for Permitted Stock (as defined below), authorize the
issuance of the Corporation's equity securities at a price per share of
less than any of (i) the Series B Initial Purchase Price Per Share, (ii)
the Series A Initial Purchase Price Per Share or (iii) the Average Price
of such equity securities as of the date of the sale or grant, as
determined in good faith by the Board of Directors (taking into
consideration the terms of such sale or grant, the amount of securities
involved in the transaction, the liquidity of the investment, and such
other factors as the Board of Directors deems in good faith to be
appropriate); or
<PAGE>
(f) in any manner, whether by amendment hereof or of its Bylaws,
merger, reorganization, recapitalization, consolidation, sales of
assets, sale of stock, tender offer, dissolution or otherwise, take any
action, or permit any action to be taken, solely or primarily for the
purpose of increasing the value of any class of stock of the Corporation
if the effect of such action is to reduce the value of the Preferred
Stock.
For purposes of clause (e) above, "Permitted Stock" means Common Stock
or options or warrants to acquire Common Stock, constituting, in the
aggregate, of 2,000,000 shares or less of such stock as of February 28, 1997,
issued or reserved for issuance to present and future key management and
directors of the Corporation pursuant to a stock incentive program approved or
to be approved by the Board of Directors.
2. Common Stock Dividends. Subject to compliance with paragraph
A.2(a) and B.2 of this Section 4.2, the holders of the outstanding Common
Stock shall be entitled, when and if declared by the Board of Directors of the
Corporation, consistent with Florida law, to cash dividends and distributions
out of any assets of the Corporation at the time legally available for that
purpose. The right to dividends on any class of Common Stock shall not be
cumulative.
3. Voting of Common Stock Holders. Except as otherwise required by
law or as hereinafter provided, the Common Stock shall have one vote per
share.
4. No Impairment. The Corporation will not, by amendment of its
Articles of Incorporation or through any reorganization, transfer of assets,
consolidation, merger, dissolution, issue or sale of securities or any other
voluntary action, avoid or seek to avoid the observance or performance of any
of the terms to be observed or performed hereunder by the Corporation, but
will at all times in good faith assist in the carrying out of all the
provisions of this Section 4.2 and in the taking of all such action as may be
necessary or appropriate in order to protect the Conversion Rights of the
holders of Series A Convertible Preferred Stock and other rights of the
Preferred Stock set forth herein against impairment.
5. Communications; Other Notices. Any notice or communication
("Notice") required by the provisions of this Section 4.2 to be given to the
holders of shares of the Preferred Stock shall be deemed given upon confirmed
transmission by facsimile or telecopy or five (5) days after deposit in the
United States mail, postage prepaid, and addressed to each holder of record at
its address appearing on the books of the Corporation. Notwithstanding the
foregoing, if a shareholder to whom notice is to be given has an address of
record that is outside of the United States, than any notice to such
shareholder hereunder shall be deemed given upon confirmed transmission by
facsimile or telecopy or seven (7) days after deposit in the United States
mail, postage prepaid, and addressed to such holder at its address appearing
on the books of the Corporation.
6. Notice of Record Date. In the event of any taking by the
Corporation of a record of the holders of any class of securities for the
purpose of determining the holders thereof who are entitled to receive any
dividend or other distribution, any security or right convertible into or
<PAGE>
entitling the holder thereof to receive additional shares of Common Stock, or
any right to subscribe for, purchase or otherwise acquire any shares of stock
of any class or any other securities or property, or to receive any other
right, the Corporation shall mail to each holder of Preferred Stock, at least
twenty (20) days prior to the date specified therein, a notice specifying the
date (including the Series A PIK Record Date or the Series B Record Date) on
which any such record is to be taken for the purpose of such dividend,
distribution, security or right, and the amount and character of such
dividend, distribution, security or right.
7. General Priority. Except as provided in paragraph A.3 of this
Section 4.2, Series B Redeemable Preferred Stock shall rank senior to all
other Capital Stock.
D. DEFINITIONS.
Unless the context otherwise requires, the terms defined in this
paragraph D shall have, for all purposes of this Section 4.2, the meanings
herein specified (with terms defined in the singular having comparable
meanings when used in the plural).
"Average Price" shall mean the average of the closing prices of the
Common Stock over a period of thirty (30) consecutive days on the primary
securities exchange or market on which the Common Stock is traded.
"Business Day" shall mean a day other than a Saturday, a Sunday or any
other day on which banking institutions in Florida generally are not open for
business.
"Capital Stock" shall mean any and all shares, interests and
participations or other equivalents (however designated) of capital stock of
the Corporation, and includes all Common Stock and Preferred Stock.
"Junior Stock" shall mean Common Stock and any other class or series of
capital stock of the Corporation which ranks junior to the Series B Redeemable
Preferred Stock with respect to the payment of dividends or the distribution
of assets upon a Liquidation.
"Liquidation" shall mean any liquidation, dissolution or winding up of
the affairs of the Corporation (voluntary or involuntary).
"Preferred Stock" shall mean, collectively, the Series A Convertible
Preferred Stock and the Series B Redeemable Preferred Stock.
"Redemption Notice" shall mean a notice in writing, to be sent by the
Company not less than seven (7) days nor more than fourteen (14) days prior to
the date fixed for any redemption pursuant to paragraph A.6 or B.5(a) of this
Section 4.2, with postage prepaid, return receipt requested, to each holder of
shares of record of Series A Convertible Preferred Stock and/or Series B
Redeemable Preferred Stock to be redeemed, as the case may be, at such
holder's address last shown on the records of the Company. Such notice shall
state:
<PAGE>
(1) The total number of shares of Series A Convertible
Preferred Stock and/or Series B Redeemable Preferred Stock, as
the case may be, that the Company intends to redeem;
(2) The number of shares of Series A Convertible Preferred
Stock and/or Series B Redeemable Preferred Stock, as the case may
be, held by the holder thereof that the Company intends to
redeem;
(3) The Redemption Date of the Series A Convertible
Preferred Stock and/or Series B Redeemable Preferred Stock, as
the case may be, and the Series A Preferential Amount and Series
B Preferential Amount, as the case may be; and
(4) The time, place and manner in which the holder is to
surrender to the Company the certificate or certificates
representing the shares of Series A Convertible Preferred Stock
and/or Series B Redeemable Preferred Stock to be redeemed, as the
case may be.
"Restricted Payment" means any purchase, redemption, retirement or other
acquisition for value by the Corporation of its Capital Stock, except as
expressly permitted in this Amendment.
"Series A Annual Per Share PIK Dividend Amount" shall mean a fraction of
one share of Series A Convertible Preferred Stock equal to eight percent
(8.0%) per annum of one share of the Series A Convertible Preferred Stock,
prorated for any partial year.
"Series A Initial Issue Date" shall mean May 16, 1996, which is the date
that shares of Series A Convertible Preferred Stock were first issued by the
Corporation.
"Series A Initial Purchase Price Per Share" shall mean $1.58 per share
of Series A Convertible Preferred Stock.
"Series A PIK Dividends" shall mean the "paid-in-kind" dividends as set
forth in paragraph A.2 of this Section 4.2.
"Series A PIK Dividend Payment Date" shall mean the first day of each
January in each year during the Series A PIK Dividend Payment Period.
"Series A PIK Dividend Payment Period" shall mean the period from, and
including, the Initial Issue Date to, but not including, the date all the
outstanding Series A Convertible Preferred Stock is (a) converted into Common
Stock or (b) redeemed and the redemption price is paid in full pursuant to
paragraph 6 of this Section 4.2.
"Series A PIK Dividend Period" shall mean the period from and including,
the Initial Issue Date to, but not including, the first Series A PIK Dividend
Payment Date and thereafter, each annual period, including any Series A PIK
Dividend Payment Date to, but not including, the next Series A PIK Dividend
Payment Date.
<PAGE>
"Series A PIK Record Date" shall mean the date that is fifteen (15)
Business Days prior to any Series A PIK Dividend Payment Date.
"Series A Preferential Amount" shall mean, with respect to each share of
Series A Convertible Preferred Stock outstanding (including shares issued or
accrued as Series A PIK Dividends), the amount equal to the Series A Initial
Purchase Price Per Share (as adjusted for any combinations, consolidations,
recapitalizations, reorganizations, reclassifications, stock distributions,
stock splits, stock dividends and the like) plus all declared but unpaid
dividends thereon (excluding Series A PIK Dividends), and no more.
"Series B Dividend Amount" shall mean, (i) with respect to Series B PIK
Dividends, a fraction of one share of Series B Redeemable Preferred Stock
equal to eight percent (8.0%) per annum of one share of the Series B
Redeemable Preferred Stock prorated for any partial year, and (ii) with
respect to Series B Redeemable Preferred Stock cash dividends, a cash amount
equal to eight percent (8.0%) per annum of the Series B Initial Purchase Price
Per Share of all issued and outstanding shares of the Series B Redeemable
Preferred Stock, in each case computed on the basis of the actual days elapsed
in a year 360 days and cumulated quarterly.
"Series B Dividend Payment Date" shall mean the first day of each
January, March, June and September in each year during the Series B Dividend
Payment Period, commencing March 1, 1997.
"Series B Dividend Payment Period" shall mean the period from, and
including, the Initial Issue Date of such series to, but not including, the
date all the outstanding Series B Redeemable Preferred Stock is redeemed and
the redemption price is paid in full pursuant to paragraph B.6 of this Section
4.2.
"Series B Dividend Period" shall mean the period from and including, the
Series B Initial Issue Date of such series to, but not including, the first
Dividend Payment Date and thereafter, each calendar quarter period, including
any Series B Dividend Payment Date to, but not including, the next Series B
Dividend Payment Date.
"Series B Initial Issue Date" shall mean the date that shares of Series
B Redeemable Preferred Stock are first issued by the Corporation.
"Series B Initial Purchase Price Per Share" shall mean $200 per share of
Series B Redeemable Preferred Stock.
"Series B PIK Dividends" shall mean the "paid-in-kind" dividends as set
forth in paragraph B.2 of this Section 4.2.
"Series B Record Date" shall mean the date that is fifteen (15) Business
Days prior to any Dividend Payment Date.
<PAGE>
"Series B Preferential Amount" shall mean, with respect to each share of
Series B Redeemable Preferred Stock outstanding (including shares issued or
accrued as PIK Dividends), the amount equal to the Series B Initial Purchase
Price Per Share plus all accrued but unpaid dividends thereon (excluding
Series B PIK Dividends).
<PAGE>
