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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
The Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): April 16, 1998
JOTAN, INC.
(Exact name of registrant as specified in its charter)
Florida 0-24188 59-3181162
(State or other (Commission (IRS Employer
jurisdiction File No.) Identification No.)
of incorporation)
118 West Adams Street, Suite 900
Jacksonville, Florida 32202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number including area code: (904) 355-2592
N/A
(Former name or former address, if changed since last report)
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<PAGE>
Item 5. Other Events.
On April 14, 1998, the Company and the banks participating in the
Company's primary credit facilities (the "Banks") entered into a Fifth
Amendment to Credit Agreement (the "Fifth Amendment") whereby the Banks
waived prior defaults under the Credit Agreement and agreed to defer
defaulted interest payments and other scheduled interest payments through
July 31, 1998 in exchange for the Company's execution of interest deferral
notes. The Banks also agreed to defer scheduled principal payments until
March, 1999. The Company, however, shortened the terms of loans under the
Credit Agreement so that all principal and interest under loans from the
Banks will be due on February 28, 2001. In addition, the Company and the
Banks agreed to modifications of certain covenants contained in the Credit
Agreement. The Company's working capital revolving line of credit with
the Banks has been extended and renewed to meet the Company's
requirements.
As a condition to the Fifth Amendment, the Banks required Rice Partners
II, L.P. ("Rice") to loan the Company's wholly owned subsidiary, Southland
Container Packaging Corp. ("Southland") an additional $1,250,000 in
addition to Rice's January, 1998 purchase of $250,000 of the Series B
Redeemable Preferred Stock of the Company. In exchange for this loan,
Southland issued to Rice its 12.5% priority senior subordinated notes (the
"Priority Note"). Interest payments under the Priority Note are payable
with notes ("PIK Notes") rather than cash until the Banks' debt is repaid.
The Priority Note is junior to the Banks' debt but senior to the
subordinated notes of Southland (the "1997 Senior Subordinated Notes")
previously issued to Rice and F-Southland, L.L.C. and FF-Southland, L.P.,
entities associated with Franklin Street/Fairview Capital, L.L.C.
("Fairview"). In order to induce Rice to purchase the Priority Note, the
Company also agreed to issue to Rice immediately exercisable warrants for
the purchase (at a nominal exercise price) of 42,377,173 shares of the
Company's common stock. The Company also agreed to issue to Rice similar
warrants to purchase 8,475,638 shares of the Company's common stock as
additional consideration for Rice's purchase of $250,000 of Series B
Redeemable Preferred Stock in January, 1998. The total number of shares
of common stock provided under these warrants may be reduced if a fairness
opinion which has been requested from an independent financial advisor
indicates that the number of shares issuable under the warrants is not
fair to the Company's shareholders.
Rice and Fairview also agreed to waive defaults under the 1997 Senior
Subordinated Notes and to allow payment of defaulted and future interest
payments by the issuance of PIK Notes until repayment of the Banks' debt.
The Company, Southland, Rice and Fairview also agreed to amendments to
financial covenants in the documents underlying the 1997 Senior
Subordinated Notes consistent with the Fifth Amendment.
Certain of the Company's major suppliers have agreed to accept non-
interest bearing two year promissory notes of the Company to satisfy
certain accounts payable to such vendors and to continue to supply the
Company with the materials necessary for its business.
The Company has completed its search for a new chief executive officer.
Raleigh C. Minor, who has been serving as Interim Chief Executive Officer,
has been employed as the Company's President and Chief Executive Officer.
Item 7. Financial Statements and Exhibits.
(c) Exhibits
(10) Material Contracts:
(a) Fifth Amendment to Credit Agreement dated as of April 14,
1998 among the Company, Southland Container Packaging
Corp., each of the banks or other lending institutions
which are signatories thereto (collectively, the "Banks")
and Banque Paribas, individually as a Bank, and as agent
for the Banks (the "Agent").
(b) Priority Note Purchase Agreement dated as of April 14, 1998
between Southland Container Packaging Corp., the Company
and Rice Partners II, L.P.
(c) Priority Warrant Purchase Agreement dated as of April 14,
1998 between Jotan, Inc. and Rice Partners II, L.P.
(d) Priority Shareholder Agreement dated as of April 14, 1998
between the Company, Rice Partners II, L.P., F-Southland,
L.L.C., FF-Southland, L.P. and F-Jotan, L.L.C.
(e) Amendment No. 3 to Note Purchase Agreement dated as of
April 14, 1998 between Southland Container Packaging Corp.,
the Company, Rice Partners II, L.P., F-Southland, L.L.C.,
and FF-Southland, L.P.
(f) Amended and Restated Second Supplemental Preferred Stock
and Warrant Purchase Agreement dated as of April 14, 1998
between the Company, Rice Partners II, L.P., F-Southland,
L.L.C., FF-Southland, L.P., F-Jotan, L.L.C. and Shea E.
Ralph.
(g) Amended and Restated Second Supplemental Shareholder
Agreement dated as of April 14, 1998 between the Company,
Rice Partners II, L.P., F-Southland, L.L.C., FF-Southland,
L.P., F-Jotan, L.L.C. and Shea E. Ralph.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
JOTAN, INC.
(Registrant)
May 1, 1998 By: /s/ Edward L. Lipscomb
______________________________________
Edward L. Lipscomb
Vice President and Chief Financial
Officer
FIFTH AMENDMENT TO CREDIT AGREEMENT
-----------------------------------
THIS FIFTH AMENDMENT TO CREDIT AGREEMENT (the "Amendment"), dated as
of April 14, 1998, is among JOTAN, INC. ("Holding"), SOUTHLAND CONTAINER
PACKAGING CORP. (formerly Southland Holding Company, successor in interest
by merger to SHC Acquisition Corp., each of its own subsidiaries and
Atlantic Bag & Paper Company and herein the "Borrower"), each of the banks
or other lending institutions which are signatories hereto (collectively,
the "Banks") and BANQUE PARIBAS, individually as a Bank, and as agent for
the Banks (the "Agent").
RECITALS:
A. Holding, SHC Acquisition Corp., Agent and Banque Paribas, in its
individual capacity, entered into that certain Credit Agreement dated as
of February 28, 1997 (as amended by that certain letter amendment dated
April 30, 1997, that certain Second Amendment to Credit Agreement dated as
of June 20, 1997, that certain Third Amendment to Credit Agreement dated
as of August 19, 1997 and that certain Fourth Amendment dated as of
November 6, 1997, as so amended, the "Credit Agreement").
B. SHC Acquisition Corp. has merged with and into Southland Holding
Company, with Southland Holding Company surviving and assuming all the
obligations of SHC Acquisition Corp. under the Credit Agreement and the
Loan Documents (as defined in the Credit Agreement).
C. Banque Paribas has assigned certain of its rights and interests
under the Credit Agreement and the other Loan Documents to the other Banks
pursuant to those certain Assignment and Acceptances, each dated April 18,
1997.
D. Southland Holding Company has changed its name to Southland
Container Packaging Corp. and each Obligated Party (as defined in the
Credit Agreement) other than Holding has merged with and into Southland
Container Packaging Corp. with Southland Container Packaging Corp. as the
surviving entity. Southland Container Packaging Corp. is the only
Subsidiary (as defined in the Credit Agreement).
E. Prior to the date hereof, the Term A Commitment, the Term B
Commitment and the Acquisition Commitment of each Bank terminated so that
no further Term A Loans, Term B Loans or Acquisition Loans shall be made
by the Banks to the Borrower.
F. Certain Defaults and Events of Default (each as defined in the
Credit Agreement) have occurred and are continuing under the Credit
Agreement (collectively, the "Existing Defaults").
G. The Borrower and Holding have requested that the Agent and the
Banks waive the Existing Defaults and amend certain provisions of the
Credit Agreement in order to, among other things, defer the payment of
certain interest and principal with respect to the Loans, amend certain
covenants, and permit the incurrence of additional debt which is junior
and subordinate to the Obligations. The Banks have agreed to do so
subject to and on the terms and conditions of this Amendment and the
Credit Agreement, as amended hereby.
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:
ARTICLE 1
Definitions
Section 1.1 Definitions. Capitalized terms used in this
Amendment, to the extent not otherwise defined herein, shall have the same
meanings as in the Credit Agreement, as amended hereby.
ARTICLE 2
Amendments
Section 2.1 Amendment to Section 1.1. Section 1.1 of the Credit
Agreement is hereby amended as follows:
(a) Deleting the existing definition of "Borrowing Base" and
replacing it in its entirety with the following:
"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 (i) during the
period prior to March 31, 1999, eighty-five percent (85%) and (ii)
after March 31, 1999, eighty percent (80%), plus (b) Eligible
Inventory multiplied by thirty-five percent (35%), 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.
(b) Deleting the existing definition of EBITDA and replacing it
in its entirety with the following:
"EBITDA" means, for any period and any Person, the total of the
following each calculated without duplication for such Person on a
consolidated basis for such period: (a) Net Income; plus (b) any
provision for (or less any benefit from) income or franchise taxes
included in determining Net Income; plus (c) interest expense
deducted in determining Net Income; plus (d) amortization and
depreciation expense deducted in determining Net Income; plus (e)
other noncash charges deducted in determining consolidated net income
and not already deducted in accordance with clause (d) above or
clauses (b) and (c) of the definition of Net Income; plus (f) all
restructuring expenses, litigation or arbitration costs related to
recovery of the Golden State Litigation Proceeds or the Selling
Shareholder Proceeds, contingency allocations and other non-recurring
non-operating expenses, but, in each case, only to the extent such
amounts were deducted in calculating Net Income.
(c) Amending the definition of "Eligible Accounts" by deleting
clause (xvi) and replacing it in its entirety with the following:
(xvi) the account is not an Excluded Account. The term
"Excluded Account" means an account that has been identified by the
Agent or Administrative Agent (by fifteen (15) days prior written
notice to Holding) as being unacceptable for inclusion in the
Borrowing Base because the Agent or Administrative 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 or
Administrative Agent's judgment, in good faith and based on
information which, in its reasonable judgment, supports such
determination.
(d) Amending the definition of "Eligible Inventory" by deleting
clause (g) and replacing it in its entirety with the following:
(g) inventory that the Agent or Administrative Agent has
determined (by fifteen (15) days prior written notice to Holding) to
be unacceptable for inclusion in the Borrowing Base because the Agent
or Administrative 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 or Administrative Agent's judgment, in good faith
and based on information which, in its reasonable judgment, supports
such determination.
(e) Deleting the existing definition of "Interest Period" and
replacing it in its entirety with the following:
"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 next subsequent
month, 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 subsequent calendar month)
shall end on the last Business Day of the 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 Interest Period for any Libor Account
shall have a duration of less than or more 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 (d) 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.
(f) Amending the definition of "Notes" by deleting the word
"and" after "Term A Notes", replacing it with "," and inserting after
"Term B Notes" the phrase "and the Interest Deferral Notes."
(g) Amending the definition of "Obligations" by inserting after
the word "Agent" in the second line thereof ", the Administrative Agent".
(h) Deleting the existing definition of "Revolving Commitment"
and replacing it in its entirety with the following:
"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 such Bank's
Commitment Percentage of the maximum aggregate amount of the
Revolving Commitments of all Banks, as the same may be reduced or
terminated pursuant to Section 2.6, Section 7.4, Section 8.7 or
Section 14.2. The applicable Commitment Percentage of each Bank for
purposes hereof shall be as set forth on Exhibit Y.
The maximum aggregate amount of the Revolving Commitments of all
Banks equals Nine Million Five Hundred and Eighty Thousand Dollars
($9,580,000); provided that the aggregate amount of the Revolving
Commitments of all Banks may be increased to a maximum amount of
Twelve Million Dollars ($12,000,000) pursuant to Section 2.6A.
(i) Deleting the existing definition of "Revolving Termination
Date" and replacing it in its entirety with the following:
"Revolving Termination Date" means Febru-
ary 28, 2001.
(j) Deleting the existing definition of "Subordinated Loan
Documents" and replacing it in its entirety with the following:
"Subordinated Loan Documents" means the Note Purchase Agreement,
the Subordinated Notes, the guaranties issued pursuant to the Note
Purchase Agreement, all other promissory notes, guaranties and other
documentation executed and delivered pursuant to or in connection
with the Note Purchase Agreement and the Priority Senior Subordinated
Loan Documents; excluding, however, the Southland Acquisition
Documents, the Loan Documents and the Capitalization Documents.
(k) Deleting the existing definition of "Term A Termination
Date" and replacing it in its entirety with the following:
"Term A Termination Date" means February 28, 2001.
(l) Deleting the existing definition of "Term B Termination
Date" and replacing it in its entirety with the following:
"Term B Termination Date" means February 28, 2001.
(m) Adding the following new definitions in the appropriate
alphabetical order:
"Administrative Agent" means BankBoston, N.A., formerly The
First National Bank of Boston, acting on behalf of the Banks.
"Deferred Interest" means (a) all interest on the Loans that
accrued during the period from September 30, 1997 through March 31,
1998 in the aggregate amount of $1,120,198.00, (b) all interest on
the Loans at the Applicable Rate and all interest on the Interest
Deferral Notes at the Fixed Rate that accrues during the period from
April 1, 1998 through July 31, 1998, and (c) for the months of August
and September, 1998, the difference between (i) the sum of (A) the
amount of accrued interest on the Loans calculated at the Applicable
Rate for such months and (B) the amount of accrued interest on the
principal amount of the Interest Deferral Notes at the Fixed Rate for
such months, and (ii) the amount of accrued interest on the Loans and
on the principal amount of the Interest Deferral Notes calculated at
LIBOR for such months.
"Fixed Rate" means the rate of nine percent (9%) per annum.
"Golden State Litigation Proceeds" means all amounts received by
Holding, the Borrower or any Subsidiary as a result of or in
connection with any litigation commenced or claims asserted (whether
now existing or hereafter arising) by Holding, Borrower or any
Subsidiary against Golden State Container, Inc. n/k/a/ Victory
Packaging, Inc., David Rapson, Pete Dougherty, Fred Brown, Jeff
Barber, Mason Shelby, Ron Sheldon, Dawn Berti, Mike O'Malley, George
Miller, Cheryl Becker, Tomas Toro or any other former employees of
Holding or Borrower, or any of their respective successors and
assigns, less all attorneys fees and expenses actually paid or
accrued by Holding or the Borrower with respect to such litigation.
"Interest Deferral Notes" means the promissory notes to be
issued by the Borrower to the Banks for Deferred Interest pursuant to
Section 6.3, which shall be substantially in the form annexed hereto
as Exhibit X, and all amendments and modifications thereof.
"LIBOR" means 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) on July
31, 1998 by leading banks in the London interbank market of Dollar
deposits in immediately available funds having a thirty (30) day
term.
"1998 EBITDA" means EBITDA for Fiscal Year 1998, calculated on
the basis of audited financial statements for the Fiscal Year ending
December 31, 1998, which calculation has been certified by the
Borrower's independent certified public accountants.
"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.
"Priority Senior Subordinated Loan" means the subordinated loan
to be made by Rice Partners to Borrower in the aggregate principal
amount of $1.25 million, pursuant to the Priority Senior Subordinated
Loan Documents.
"Priority Senior Subordinated Loan Documents" means the Priority
Note Purchase Agreement dated as of April 14, 1998, by and among
Borrower, Holding and Rice Partners, the Priority Senior Subordinated
Notes (as defined therein), the guaranties issued pursuant thereto
and all purchase agreements, notes and other documentation executed
and delivered pursuant to or in connection with the Priority Senior
Subordinated Loan.
"Selling Shareholder Proceeds" means all amounts received by
Holding, Borrower or any Subsidiary from or with respect to (a) the
amounts deposited with NationsBank, N.A. (South) pursuant to the
Escrow and Depository Agreement, dated as of February 28, 1997, among
Holding, Borrower, certain former shareholders of Southland Holding
Company and NationsBank, N.A. (South), or (b) any arbitration, claim,
demand or proceeding commenced by or against the Borrower and/or
Holding (whether now existing or hereafter arising) and involving
Lester G. Gegenheimer, John L. Sanders, Jr., or William P. Blincoe,
less, in each case, (i) all attorneys fees and expenses actually paid
or accrued by Holding or the Borrower with respect to any litigation
or arbitration commenced to obtain such amounts, and (ii) all such
amounts received solely as a result of tax liabilities of the
Borrower or Holding arising prior to February 28, 1997 and which are
actually paid by the Borrower or Holding in satisfaction of such tax
liability.
"Settlement Date" means the weekly date selected by the
Administrative Agent on which the Administrative Agent and the Banks
shall settle amongst themselves to ensure that on such date each Bank
shall have its Commitment Percentage of all outstanding Revolving
Loans that are Prime Rate Accounts, provided that such date shall be
a Business Day on which each Bank is open for business.
Section 2.2 Amendment of Section 2.1. Section 2.1 of the
Credit Agreement is hereby amended by deleting it and replacing it in its
entirety with the following:
Section 2.1 Revolving Commitments. Subject to the terms and
conditions of 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, (b) the Outstanding Revolving Credit shall not
at any time exceed the lesser of (i) the aggregate Revolving
Commitments or (ii) the Borrowing Base, and (c) the amount of the
Outstanding Revolving Credit supported by Eligible Inventory shall
not exceed $3,500,000 at any time. 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; provided, however, that at
no time shall Revolving Loans subject to Libor Accounts exceed the
aggregate amount of Eight Million Dollars ($8,000,000). 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 2.3 New Section 2.6A. A new section is hereby inserted
in Article 2 of the Credit Agreement, after Section 2.6, as follows:
Section 2.6A Increase in Revolving Commitments. After March
31, 1999 and provided that no Default or Event of Default exists, the
Borrower shall have the right, by giving written notice to the Agent
and the Administrative Agent, to increase the Revolving Commitments,
subject in all respects to the same limitations set forth in Section
2.1, and subject to the following additional conditions: (i) if 1998
EBITDA is equal to at least $3,260,000, the aggregate Revolving
Commitments may be increased to a maximum of Ten Million Eighty
Thousand Dollars ($10,080,000); (ii) if 1998 EBITDA is equal to at
least $3,912,000, the aggregate Revolving Commitments may be
increased to a maximum of Eleven Million Eighty Thousand Dollars
($11,080,000); and (iii) if 1998 EBITDA is equal to at least
$4,347,000, the aggregate Revolving Commitments may be increased to a
maximum of Twelve Million Dollars ($12,000,000).
Section 2.4 Amendment of Section 2.7.
(a) Section 2.7(a) of the Credit Agreement is hereby amended by
deleting it and replacing it in its entirety with the following:
(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, (iii) the amount of
the Outstanding Revolving Credit supported by Eligible Inventory
shall not exceed $3,500,000 at any time; and (iv) 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) The third sentence of Section 2.7(b) of the Credit
Agreement is hereby amended by deleting it and replacing it in its
entirety with the following:
Each Letter of Credit shall have an expiration date that does not
extend beyond the earlier of (i) thirty (30) days from such Letter of
Credit's date of issuance and (ii) the 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.
Section 2.5 New Section 2.8. A new section is hereby inserted
in Article 2 of the Credit Agreement, after Section 2.7, as follows:
Section 2.8 Agreement Between Banks With Respect to Prime Rate
Accounts.
(a) Fund Disbursement. The Administrative Agent, for the
account of the Banks, shall disburse all Revolving Loans that are
Prime Rate Accounts to the Borrower. It is understood that for
purposes of advances to the Borrower and for purposes of this Section
2.8(a) the Administrative Agent is using the funds of the
Administrative Agent. Unless the Administrative Agent shall have
been notified in writing by any Bank prior to any advance to the
Borrower that such Bank will not make such Bank's Commitment
Percentage of such borrowing on such date available to the
Administrative Agent, the Administrative Agent may assume that such
Bank shall make such Commitment Percentage available to the
Administrative Agent on a Settlement Date, and the Administrative
Agent may, in reliance upon such assumption, make available to the
Borrower a corresponding amount. If such Bank's Commitment
Percentage is not in fact made available to the Administrative Agent
by such Bank on the Settlement Date, the Administrative Agent shall
be entitled to recover such amount with interest thereon at the rate
per annum applicable to such Revolving Loan hereunder, on demand,
from the Borrower without prejudice to any rights which the
Administrative Agent or the Borrower may have against such Bank
hereunder. Nothing contained in this subsection shall relieve any
Bank which has failed to make available its Commitment Percentage of
any borrowing hereunder from its obligation to do so in accordance
with the terms hereof. Nothing contained herein shall be deemed to
obligate the Administrative Agent to make available to the Borrower
the full amount of a requested advance when the Administrative Agent
has any notice (written or otherwise) that any Bank will not advance
its Commitment Percentage thereof.
(b) Payment by Banks. Prior to 1:00 p.m. New York time on each
Settlement Date, the Administrative Agent shall provide each Bank
obligated with respect to the Commitment with a settlement statement
that sets forth, for the period commencing on the prior Settlement
Date and ending at the close of the prior Business Day, the amount of
all borrowings of Revolving Loans that are Prime Rate Accounts and
all repayments, prepayments or Conversions of Revolving Loans that
are Prime Rate Accounts during such period. A certificate of the
Administrative Agent submitted to any Bank with respect to any amount
owing under this clause shall be conclusive, absent manifest error.
Prior to 4:30 p.m. New York time on each Settlement Date, the
Administrative Agent and the Banks shall each remit to the other, in
immediately available funds, all amounts necessary so as to ensure
that, as of the Settlement Date, the Banks shall have their
respective Commitment Percentages of all Revolving Loans that are
Prime Rate Accounts. As to that portion of the Revolving Loans
funded by the Administrative Agent on behalf of the Banks between
Settlement Dates, interest accrued during the period from funding
thereof by the Administrative Agent to the Settlement Date shall be
for the account of the Administrative Agent.
(c) Notice to Agent. The Administrative Agent shall provide to the
Agent, on a weekly basis, a statement setting forth all borrowings,
repayments and Conversions of Revolving Loans that are Prime Rate Accounts
during the prior week.
Section 2.6 Amendment of Section 4.3(a). Section 4.3(a) of the
Credit Agreement is hereby amended by deleting it and replacing it in its
entirety, with the following:
(a) Ten (10) principal installments due and payable on certain
Quarterly Payment Dates in accordance with the following schedule:
Amount of Principal
Installment Due
Quarterly Payments Dates and Payable
------------------------ -------------------
June 1997 $250,000
September 1997 $250,000
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
Section 2.7 Amendment of Section 5.3(a). Section 5.3(a) of the
Credit Agreement is hereby amended by deleting it and replacing it in its
entirety with the following:
(a) Ten (10) principal installments of $25,000 each due and
payable on each of the following Quarterly Payment Dates:
June 1997
September 1997
March 1999
June 1999
September 1999
December 1999
March 2000
June 2000
September 2000
December 2000
Section 2.8 Amendment of Section 6.1. Section 6.1 of the
Credit Agreement is hereby amended by adding a new sentence after clause
(b), as follows:
Notwithstanding the foregoing, for the months of August and September
1998, interest on all the Loans shall be paid at a rate equal to
LIBOR, and the amount by which interest paid at such rate is less
than the amount of interest actually accrued at the Applicable Rate
shall constitute Deferred Interest, and such Deferred Interest shall
be payable as provided herein.
Section 2.9 Amendment of Section 6.3. Section 6.3 of the
Credit Agreement is hereby amended by deleting it and replacing it in its
entirety with the following:
Section 6.3 Payment Dates. Except for the Deferred Interest,
accrued interest on the Loans and on the principal amount of the
Interest Deferral Notes shall be due and payable as follows: (i) in
the case of Loans subject to Prime Rate Accounts and the principal
amount of the Interest Deferral Notes, monthly on the last Business
Day of each month, and on the Termination Date of such Loan and the
maturity date of the Interest Deferral Notes; or (ii) in the case of
Loans subject to Libor Accounts and with respect to each such
Account, on the last day of the Interest Period with respect thereto
and on the Termination Date of such Loan. On or before April 20,
1998, the Borrower shall deliver to each Bank an Interest Deferral
Note reflecting that portion of the Deferred Interest attributable to
the period from September 30, 1997 through March 31, 1998 in the
respective amounts set forth for each Bank opposite its name on
Schedule 6.3. The Borrower shall execute and deliver to each Bank
(A) on or before August 11, 1998, an Interest Deferral Note in an
amount equal to such Bank's ratable share of the Deferred Interest
attributable to the period from April 1, 1998 through July 31, 1998,
and (B) on or before October 9, 1998, an Interest Deferral Note in an
amount equal to such Bank's ratable share of the Deferred Interest
attributable to the months of August and September, 1998. The
principal amount of each Interest Deferral Note shall bear interest
at the Fixed Rate commencing on the date such Interest Deferral Note
was required to be issued pursuant to this Section 6.3, and such
interest shall be due and payable in accordance with clause (i) of
this Section 6.3, and the principal amount of the Interest Deferral
Notes shall be due and payable on the Revolver Termination Date.
Section 2.10 Amendment of Section 6.5. Section 6.5 of the
Credit Agreement is hereby amended by deleting it and replacing it in its
entirety with the following:
Section 6.5 Conversions and Continuations of Accounts. Subject
to Sections 2.1 and 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 and the Administrative 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 2.11 Amendment of Section 7.1. Section 7.1 of the
Credit Agreement is hereby amended by deleting it and replacing it in its
entirety with the following:
Section 7.1 Borrowing Procedure. The Borrower shall give the
Agent and the Administrative Agent notice of each borrowing under the
Revolving Commitment in accordance with Section 7.3 hereof. The
Administrative Agent shall give each Bank obligated with respect to
such Commitment notice of the amount of any request for a Revolving
Loan that is a Libor Account not later than 1:00 p.m. New York time
on the effective date of such notice of borrowing. Not later than
4:30 p.m. New York time on the date specified for each borrowing of a
Libor Account under the Revolving Commitment, each Bank obligated
with respect to such Commitment will make available the amount of the
Revolving Loan to be made by it on such date to the Administrative
Agent, at its office 100 Federal Street, Boston, Massachusetts 02110,
in immediately available funds, for the account of the Borrower. The
Administrative Agent shall provide notice to the Banks with respect
to any Revolving Loans that are Prime Rate Accounts in accordance
with Section 2.8(b) hereof. The amounts to be funded by the
Administrative Agent shall, subject to the terms and conditions of
this Agreement, be made available to the Borrower by transferring the
same (a) to the Operating Account (as defined in Section 11.15(d)) or
(b) in immediately available funds by wire transfer, automated
clearinghouse debit or interbank transfer to a Person or Persons
designated by the Borrower in writing.
Section 2.12 Amendments to Section 7.3. Section 7.3 of the
Credit Agreement is hereby amended by deleting it and replacing it in its
entirety with the following:
Section 7.3 Certain Notices. Notices by the Borrower to the
Agent and the Administrative Agent of terminations or reductions of
Commitments, of prepayments or repayments of Loans and Interest
Deferral Notes and of Conversion and Continuation of Accounts shall
be irrevocable and shall be effective only if received by the Agent
and the Administrative Agent not later than 11:00 a.m. on the
Business Day prior to the date of the relevant termination,
reduction, prepayment, repayment, Conversion or Continuation;
provided, however, that notices of prepayment or repayment of Loans
subject to Libor Accounts and Conversions into or Continuations as
Libor Accounts shall only be effective if received by the Agent and
the Administrative Agent by 11:00 a.m. on the Business Day three days
prior to the relevant prepayment, repayment, Conversion or
Continuation. Notices by the Borrower to the Agent and the
Administrative Agent of borrowings of Loans subject to Prime Rate
Accounts shall be irrevocable and shall be effective only if received
by the Agent and the Administrative Agent not later than 11:00 a.m.
on the Business Day of the relevant borrowing. Notices by the
Borrower to the Agent and the Administrative Agent of borrowings of
Loans subject to Libor Accounts shall be irrevocable and shall be
effective only if received by the Agent and the Administrative Agent
not later than 11:00 a.m. on the Business Day three days prior to the
relevant borrowing. Any notices of the type described in this
Section 7.3 which are received by the Agent or the Administrative
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, the Interest Deferral Notes to
be prepaid or the Accounts to be Converted or Continued; (b) the
amount (subject to Sections 2.1 and 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; and (e) the date of borrowing,
Conversion, Continuation, or prepayment (which shall be a Business
Day). Except for notices of borrowings under Section 7.1, the Agent
shall notify the Banks of the contents of each such notice on the
date of its receipt of 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 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 2.13 Amendments to Sections 7.4.
(a) The second sentence of Section 7.4(a)(ii) of the Credit
Agreement is hereby amended by (i) inserting the words "and the Interest
Deferral Notes" after the word "Loans"; and (ii) deleting the phrase
"seventy-five percent (75%)" and inserting the phrase "fifty percent
(50%)" in lieu thereof.
(b) Section 7.4(a)(iii) of the Credit Agreement is hereby
amended by inserting the words "and the Interest Deferral Notes" after the
word "Loans" in the twelfth line thereof.
(c) Section 7.4(a)(iv) of the Credit Agreement is hereby
amended by inserting the words "and the Interest Deferral Notes" after the
word "Loans" in the sixteenth line thereof.
(d) Section 7.4(a) of the Credit Agreement is hereby amended by
inserting two new subsections after subsection (v), as follows:
(vi) Other Proceeds. In the event Borrower, Holding or any
Subsidiary receives any Selling Shareholder Proceeds or any Golden
State Litigation Proceeds, Borrower shall prepay the Loans in an
amount equal to all such amounts received by the Borrower, Holding or
any Subsidiary.
(vii) Concentration Account. All amounts in the Concentration
Account, other than Net Proceeds to be prepaid pursuant to Subsection
7.4(a)(iii), Selling Shareholder Proceeds and Golden State Litigation
Proceeds, shall be applied on a daily basis to reduce the Revolving
Loans. Application will be made upon the receipt of "collected
funds" at the Concentration Account on the Business Day of such
receipt if received no later than 1:00 p.m. and on the next
succeeding Business Day if received after 1:00 p.m. No checks,
drafts or other instrument received by the Administrative Agent shall
constitute final payment unless and until such instruments have
actually been collected.
(e) Section 7.4(a)(v) of the Credit Agreement is hereby amended
by deleting it and replacing it in its entirety with the following:
(v) Application of Mandatory Prepayments. Mandatory
prepayments made pursuant to Subsections 7.4(a)(ii), (iv) and (vi)
shall be applied as follows: (A) first to installments due under the
Term A Loans and Term B Loans, ratably, in inverse order of maturity
until such Loans are paid in full; (B) second to the Deferred
Interest Notes, ratably, until such Notes are paid in full; and (C)
third to the Revolving Loans, with such amounts being applied first
to repay outstanding Loans subject to a Prime Rate Account and then
to repay outstanding Loans subject to a Libor Account, with those
Loans subject to a Libor Account which have earlier expiring Interest
Periods being repaid prior to those which have later expiring
Interest Periods. Seventy-five percent (75%) of the mandatory
prepayments made pursuant to Subsection 7.4(a)(iii) shall be applied
as provided above in this clause (v) and twenty-five percent (25%)
thereof shall be applied to reduce the Revolving Loans in the same
fashion as provided in Subsection 7.4(a)(vii). Each prepayment under
Subsections 7.4(a)(ii), (iii), (iv) and (vi) shall be accompanied
with accrued interest on 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).
(f) Section 7.4(b) of the Credit Agreement is hereby amended by
deleting the first two sentences thereof and replacing them in their
entirety with the following:
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 Agent and Administrative Agent as
specified in Section 7.3 hereof, prepay or repay any Loan or Interest
Deferral Note or Deferred Interest in full or in part. Any optional
prepayment of the Acquisition Loans, Term A Loans, Term B Loans or
Interest Deferral Notes shall be accompanied with accrued interest on
the amount prepaid to the date of prepayment.
Section 2.14 Amendment of Section 7.6. Section 7.6 of the
Credit Agreement is hereby amended by inserting in clause (c) thereof the
words "or Interest Deferral Notes" after the word "Loans" each time it
appears.
Section 2.15 Amendment of Section 8.7. Section 8.7 of the
Credit Agreement is hereby amended by deleting it and replacing it in its
entirety with the following:
Section 8.7 Replacement 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, Borrower may notify Agent and such Bank (the "Affected
Bank") of its intention to obtain, at Borrower's expense, a
replacement Bank ("Replacement Bank") to purchase the Affected Bank's
Loans and Notes and its obligations under the Loan Documents.
Borrower shall, within thirty (30) days following the delivery of
such notice from Borrower cause the Replacement Bank to purchase the
Loans and Notes 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 and Notes 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. 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 not 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 under this Section 8.7 without its
consent.
Section 2.16 Amendment of Section 9.3. Section 9.3 of the
Credit Agreement is hereby amended by deleting the word "and" at the end
of Subsection 9.3 (b), deleting the period at the end of Subsection 9.3(c)
and replacing it with "; and" , and by adding the following new Subsection
9.3(d):
(d) Borrowing Base Report. The Agent and the Administrative
Agent shall have received the Borrowing Base Report required by
Section 11.1(d) in a timely fashion on the date of such borrowing.
Section 2.17 Amendment of Section 11.1.
(a) Subsection 11.1(d) of the Credit Agreement is hereby
amended by deleting it and replacing it in its entirety with the
following:
(d) Borrowing Base Report and Other Reports. On each Business
Day, before 11 a.m. New York time, a Borrowing Base Report. In
addition to being furnished to the Agent, a copy of the Borrowing
Base Report shall be sent concurrently directly to the Administrative
Agent. Holding shall also furnish on a weekly and monthly basis, as
applicable, such standard reports as to accounts receivable and
inventory as requested by the Administrative Agent.
(b) Subsection 11.1(m) of the Credit Agreement is hereby
amended to insert the following additional sentence at the end thereof:
Without limiting the foregoing, Holding and Borrower shall
communicate with the Banks on a monthly basis in writing and by
conference call in the manner and at the times agreed to by Holding,
the Borrower and the Agent.
(c) Section 11.1 of the Credit Agreement is hereby amended by
deleting the period at the end of Subsection 11.1(m) and replacing it with
";" and by adding the following new Subsection 11.1(n):
(n) 1999 Business Plan. On or before November 15, 1998, a
business plan for Fiscal Year 1999 that contains on a consolidating
basis, without limitation, pro forma balance sheets and statements of
income, retained earnings, and cash flow for Fiscal Year 1999, in
each case setting forth in comparative form the figures for Fiscal
Year 1998, projection of Holdings' compliance with the financial
covenants in this Agreement for Fiscal Year 1999, the assumptions
underlying the foregoing, and projections of availability under the
Revolving Loan, all in reasonable detail.
Section 2.18 Amendment of Article 11. Article 11 of the Credit
Agreement is hereby amended by adding the following new sections after
Section 11.14:
Section 11.15 Cash Management.
(a) Net Proceeds, Selling Shareholder Proceeds, Golden State
Litigation Proceeds. Holding and the Borrower shall, and Holding
shall cause each Subsidiary to, deposit immediately all cash, checks,
notes, drafts or other similar items of payment relating to or
constituting Net Proceeds, Selling Shareholder Proceeds or Golden
State Litigation Proceeds in a bank account in the name of and
subject to the exclusive dominion and control of the Agent and
maintained at the offices of the Administrative Agent (the
"Concentration Account"), such Concentration Account to be
established in accordance with an agreement in form and substance
reasonably satisfactory to the Agent and the Administrative Agent.
The Concentration Account shall be a cash collateral account, with
all cash, checks and other items of payment in such account securing
payment of the Obligations. Holding and the Borrower hereby grant
to the Agent and the Administrative Agent for the benefit of the
Banks a lien on and security interest in the Concentration Account
and all cash, checks and other items deposited or held therein, and
all of the foregoing shall constitute Collateral under and as defined
in the Holding Security Agreement and the Borrower Security
Agreement.
(b) Other Proceeds and Collections. Holding and the Borrower
shall, and Holding shall cause each Subsidiary to, deposit on the
date of receipt thereof or cause to be deposited directly all cash,
checks, notes, drafts or other items of payment relating to or
constituting proceeds derived from the sale or disposition of any
property or assets (other than as required by Subsection 11.15(a)
hereof) including, without limitation, all payments made by any
account debtors of Holding, the Borrower or any Subsidiary in respect
of any Accounts (as such term is defined in the Collateral
Documents), all amounts referred to in clauses (i) and (ii) of the
definition of "Selling Shareholder Proceeds", all amounts attributed
to attorneys fees and expenses referred to in the last clause of the
definition of "Golden State Litigation Proceeds", and any other
payments or monies, in the Concentration Account or one of the local
bank accounts listed on Schedule 11.15(b) of this Agreement (the
"Local Accounts"); provided, however, that all funds in the Local
Accounts shall at all times be pledged to the Agent for the benefit
of the Banks, and subject to the exclusive dominion and control of
the Agent pursuant to appropriate blocked account and/or lockbox
agreements in form and substance reasonably satisfactory to the Agent
and the Administrative Agent with the banks in which the Local
Accounts are maintained. Holding and Borrower shall cooperate in
causing all amounts deposited in the Local Accounts, when collected,
to be deposited via wire transfer, in immediately available funds,
into the Concentration Account. The Local Accounts shall be cash
collateral accounts, with all cash, checks and other items of payment
in such accounts securing payment of the Obligations. Holding and
the Borrower hereby grant to the Agent for the benefit of the Banks a
lien on and security interest in the Local Accounts and all cash,
checks and other items deposited or held therein, and all of the
foregoing shall constitute Collateral under and as defined in the
Holding Security Agreement and the Borrower Security Agreement.
(c) Concentration Account. All amounts deposited in the
Concentration Account shall be applied by the Banks against the
outstanding balance of the Term A Loans, the Term B Loans, the
Interest Deferral Notes or the Revolving Loans, as the case may be,
in accordance with Subsections 7.4(a)(v) or 7.4 (a)(vii), on the
Business Day such amounts are so deposited and credited, in imme-
diately available funds, to such account or on the next succeeding
Business Day if such amounts are so credited after 1:00 p.m. The
Administrative Agent may charge the Concentration Account with any
other Obligations, including any and all reasonable costs, expenses
and attorneys' fees which the Agent may incur in connection with the
exercise by or for the Agent of any of the rights or powers herein
conferred upon the Agent, or in the prosecution or defense of any
action or proceeding to enforce or protect any rights of the Agent in
connection with this Agreement or the Obligations. All amounts
charged to the Concentration Account shall be deemed Revolving Loans
for all purposes hereunder.
(d) Operating Account. Holding and the Borrower may maintain
in their names, jointly and severally, an account (the "Operating
Account") into which, from time to time, proceeds of Revolving Loans
may be deposited; provided, however, that all funds in the Operating
Account shall at all times be pledged to the Agent for the benefit of
the Banks, and subject to the exclusive dominion and control of the
Agent pursuant to appropriate blocked account and/or lockbox
agreements in form and substance reasonably satisfactory to the Agent
with the bank in which the Operating Account is maintained. The
Operating Account shall be a cash collateral account, with all cash,
checks and other items of payment in such account securing payment of
the Obligations. Holding and the Borrower hereby grant to the Agent
for the benefit of the Banks a lien on and security interest in the
Operating Account and all cash, checks and other items deposited or
held therein, and all of the foregoing shall constitute Collateral
under and as defined in the Holding Security Agreement and the
Borrower Security Agreement.
(e) Monthly Statement. After the end of each month, the
Administrative Agent shall promptly send the Borrower a statement
showing the accounting for the charges, loans, advances and other
transactions occurring with respect to Revolving Loans between the
Administrative Agent and the Banks and the Borrower during that
month. The monthly statements shall be deemed correct and binding
upon the Borrower and shall constitute an account stated between the
Borrower and the Administrative Agent and the Banks unless the
Administrative Agent receives a written statement of the exceptions
within thirty (30) days of the date of the monthly statement.
Section 11.16 Cash Management Arrangements. On or before April
30, 1998, the Agent and the Administrative Agent shall have received
satisfactory evidence that the Local Accounts, the Concentration
Account and the Operating Account have been established and are
operating in accordance with the requirements of Section 11.15 and
that the Borrower and Holding are in full compliance with the
requirements of Section 11.15.
Section 2.19 Amendment of Section 12.1.
(a) Subsection 12.1(i) of the Credit Agreement is hereby
amended by deleting it and replacing it in its entirety with the
following:
(i) Debt of Borrower other than that specifically described in
clauses (a) through (h) and (j) of this Section 12.1 which in the
aggregate does not exceed One Hundred Thousand Dollars ($100,000)
at any time outstanding.
(b) Section 12.1 of the Credit Agreement is hereby amended by
deleting the "and" at the end of Subsection 12.1(h), by deleting the
period at the end of Subsection 12.1(i) and replacing it with "; and" and
by adding the following new Subsection 12.1(j):
(j) the Priority Senior Subordinated Loan, and unsecured, non-
interest bearing promissory notes issued to trade creditors and the
Borrower's auditors.
Section 2.20 Amendment of Section 12.3. Section 12.3 of the
Credit Agreement is hereby amended by deleting it and replacing it in its
entirety with the following:
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.
Section 2.21 Amendment of Section 12.4.
(a) The first sentence of Section 12.4 of the Credit Agreement
is hereby amended by (i) inserting at the end of clause (b) after
"outstanding" the words "or any warrant issued with respect thereto;" and
(ii) deleting the "or" immediately preceding clause (c) and inserting a
new clause (d) after "outstanding" in clause (c) and before "except," as
follows:
; or (d) any payment of principal, cash interest or other amounts in
respect of the Subordinated Notes or the Priority Senior Subordinated
Loan or otherwise in respect of the Subordinate Debt (as such term is
defined in the Senior Subordination Agreement)
(b) Section 12.4 of the Credit Agreement is hereby amended by
adding "and" at the end of clause (i), deleting the semi-colon at the end
of clause (ii) and replacing it with ".", and by deleting clauses (iii)
and (iv) in their entirety.
Section 2.22 Amendment of Section 12.5. Section 12.5 of the
Credit Agreement is hereby amended by deleting Subsections 12.5(a) and
12.5(g) in their entirety and in each case inserting in lieu thereof
"Intentionally Omitted."
Section 2.23 Amendments of Article 13.
(a) Article 13 of the Credit Agreement is hereby amended by
deleting Sections 13.1, 13.2 and 13.6 in their entirety and inserting in
lieu thereof "Intentionally Omitted."
(b) Section 13.3 of the Credit Agreement is hereby amended by
deleting it and replacing it in its entirety with the following:
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 ending on the last day of each month (beginning
with the month ending January 31, 1999) to be less than 1:1. 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) cash
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 and scheduled principal payments with respect to the
unsecured promissory notes issued to trade creditors and Borrower's
auditors referred to in Section 12.1(j)).
(c) Section 13.4 of the Credit Agreement is hereby amended by
deleting it and replacing it in its entirety with the following:
Section 13.4 Capital Expenditure Limit. Holding shall not, and
shall not permit any Subsidiary to, make or incur Capital
Expenditures during the 1998 Fiscal Year in excess of the aggregate
amount of $400,000. In calculating compliance with this Section
13.4, 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.
(d) Section 13.5 of the Credit Agreement is hereby amended by
deleting it and replacing it in its entirety with the following:
Section 13.5 EBITDA. Holding shall not permit EBITDA for (a)
the nine month period ending September 30, 1998, to be less than
$2,009,000; and (b) the twelve month period ending December 31, 1998,
to be less than $2,825,000.
Section 2.24 Amendment to Section 14.1.
(a) Subsection 14.1(c) of the Credit Agreement is hereby
amended by deleting it and replacing it in its entirety with the
following:
(c) The Borrower shall fail to perform, observe, or comply with
any covenant, agreement, or term contained in Section 11.15,
Section 11.16, Article 12 or Article 13 of this Agreement,
Article IV of the Borrower Security Agreement or Article 2 of
the 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
Section 11.15, Section 11.16, 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.
(b) Section 14.1 of the Credit Agreement is hereby amended by
adding the following new Subsection after Subsection 14.1(p):
(q) Holding shall have failed to employ and have working on a
full-time basis a new Chief Executive Officer reasonably acceptable
to the Agent on or before May 31, 1998.
Section 2.25 Addition of Article 15A. The Credit Agreement is
hereby amended by inserting the following after Article 15:
ARTICLE 15A
The Administrative Agent
Section 15A.1 Appointment, Powers and Immunities. Each Bank
hereby appoints and authorizes BankBoston, N.A. or its designated
affiliate to act as its administrative agent hereunder and under the other
Loan Documents with such powers as are specifically delegated to the
Administrative Agent by the terms of the Loan Documents, together with
such other powers as are reasonably incidental thereto. Neither the
Administrative 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 Administrative 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 Administrative 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
Administrative 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 Administrative 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 15A.2 Rights of Administrative Agent as a Bank. With
respect to its Commitment, the Loans made by it and the Note issued to it,
BankBoston, N.A. (and any successor acting as Administrative 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 Administrative Agent, and the term "Bank" or "Banks"
shall, unless the context otherwise indicates, include the Administrative
Agent in its individual capacity. The Administrative 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 Administrative Agent and without any duty to account
therefor to the Banks.
Section 15A.3 Defaults. The Administrative Agent shall not be
deemed to have knowledge or notice of the occurrence of a Default (other
than the failure to deliver Borrowing Base Reports as required herein)
unless the Administrative Agent has received notice from a Bank or the
Borrower specifying such Default and stating that such notice is a "Notice
of Default."
Section 15A.4 Indemnification. THE BANKS HEREBY AGREE TO
INDEMNIFY THE ADMINISTRATIVE AGENT FROM AND HOLD THE ADMINISTRATIVE AGENT
HARMLESS AGAINST, 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
ADMINISTRATIVE AGENT IN ANY WAY RELATING TO OR ARISING OUT OF ITS ROLE AS
ADMINISTRATIVE AGENT OR ANY ACTION TAKEN OR OMITTED TO BE TAKEN BY THE
ADMINISTRATIVE 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 ADMINISTRATIVE AGENT'S GROSS NEGLIGENCE OR
WILLFUL MISCONDUCT. WITHOUT LIMITATION OF THE FOREGOING, IT IS THE
EXPRESS INTENTION OF THE BANKS THAT THE ADMINISTRATIVE 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
ADMINISTRATIVE AGENT. WITHOUT LIMITING ANY OTHER PROVISION OF THIS
SECTION, EACH BANK AGREES TO REIMBURSE THE ADMINISTRATIVE 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 ADMINISTRATIVE 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 ADMINISTRATIVE AGENT IS
NOT REIMBURSED FOR SUCH EXPENSES BY THE BORROWER.
Section 15A.5 Independent Credit Decisions. Each Bank
agrees that it has independently and without reliance on the
Administrative Agent, 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 Administrative Agent, 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 Administrative 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 Administrative Agent hereunder or under the other Loan
Documents, the Administrative 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 Administrative Agent or any of its
Affiliates.
Section 15A.6 Successor Administrative Agent. Subject to the
appointment and acceptance of a successor Administrative Agent as provided
below, the Administrative Agent may resign at any time by giving notice
thereof to the Banks and the Borrower and the Administrative 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 Administrative Agent. If
no successor Administrative Agent shall have been so appointed by Required
Banks and shall have accepted such appointment within thirty (30) days
after the retiring Administrative Agent's giving of notice of resignation
or the Required Banks' removal of the retiring Administrative Agent, then
the retiring Administrative Agent may, on behalf of the Banks, appoint a
successor Administrative Agent, 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 Administrative Agent, such successor Administrative Agent shall
thereupon succeed to and become vested with all rights, powers,
privileges, immunities, contractual obligation, and duties of the
resigning or removed Administrative Agent, and the resigning or removed
Administrative Agent shall be discharged from its duties and obligations
under the Loan Documents. After any Administrative Agent's resignation or
removal as Administrative Agent, the provisions of this Article 15A shall
continue in effect for its benefit in respect of any actions taken or
omitted to be taken by it while it was the Administrative Agent.
Section 15A.7 Administrative Agent Fee. The Borrower shall pay
to the Administrative Agent on April 22, 1998, a fee in the amount of
$21,000 for the period through September 30, 1998, and in the amount of
$3,500 per month thereafter, payable in advance on the first Business Day
of each month commencing on October 1, 1998, and all other normal and
customary fees and expenses of the Administrative Agent in connection with
the performance of its duties hereunder.
Section 2.26 Amendment of Section 16.8. Section 16.8 of the
Credit Agreement is hereby amended by deleting clauses (i) and (ii) of the
proviso and replacing them in their entirety with the following:
(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, except in the event of an assignment
to an Eligible Assignee that is an Affiliate of the Bank that is the
assignor, a processing and recordation fee of Three Thousand Dollars
($3,000) payable by the assignor or assignee (and not the Borrower);
(ii) except in the event of an assignment to an Eligible Assignee
that is an Affiliate of the Bank that is the assignor, 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; provided, however, that in the event of the occurrence of
an Event of Default, the consent of the Borrower shall not be
required; and
Section 2.27 Amendment of Section 16.11. Section 16.11 of the
Credit Agreement is hereby amended by deleting the "or" immediately
preceding clause (h), by deleting the period at the end of clause (h) and
replacing it with "; or" and by adding the following new clause (i):
(i) amend or waive compliance with any covenant contained in
Article 13.
Section 2.28 Exhibits. Exhibit E of the Credit Agreement is
hereby amended by deleting it and replacing it in its entirety with the
Exhibit which is annexed hereto as Exhibit A. Annexed hereto as Exhibit B
is new Exhibit X to the Credit Agreement which is referred to in the
definition of "Interest Deferral Notes." Annexed hereto as Exhibit C is
new Exhibit Y to the Credit Agreement which is referred to in the new
definition of "Revolving Commitment."
ARTICLE 3
Waiver
Section 3.1 Waiver of Existing Defaults. Subject to the terms and
conditions contained in this Amendment, the Agent and the Banks waive the
Existing Defaults and agree not to exercise any rights or remedies arising
as a result thereof. The waiver specifically described in this Section
3.1 shall not constitute and shall not be deemed a waiver of any Default
or Event of Default arising after the effectiveness of this Amendment or a
waiver of any rights or remedies arising as a result of such a Default or
Event of Default.
ARTICLE 4
Conditions
Section 4.1 Conditions Precedent. The effectiveness of this
Amendment including, without limitation, the waivers provided in Section
3.1 hereof, is subject to the satisfaction of the following conditions
precedent:
(a) The Agent shall have received confirmation satisfactory to
the Agent that Rice Partners shall have advanced to the Borrower the
entire principal amount of the Priority Senior Subordinated Loan, and
the Priority Senior Subordinated Loan Documents shall be in form and
substance satisfactory to the Agent.
(b) The Agent shall have received an amendment to the Note
Purchase Agreement in the form of Exhibit D hereto (the "Subdebt
Amendment") and an amendment to the Senior Subordination Agreement in
the form of Exhibit E hereto (the "Subordination Amendment") each
executed by the respective parties thereto. For purposes of any
restriction set out in the Senior Subordination Agreement, each Bank
and the Agent consents, for the benefit of Borrower, Holding and the
holders of the Subordinated Notes, to the execution and delivery of
the Subdebt Amendment.
(c) The representations and warranties contained herein and in
all other Loan Documents, as amended hereby, shall be true and
correct as of the date hereof as if made on the date hereof except to
the extent such representations and warranties expressly relate
solely to another date;
(d) After giving effect to this Amendment, no Default or Event
of Default shall exist;
(e) All proceedings taken in connection with the transactions
contemplated by this Amendment and all documents, instruments, and
other legal matters incident thereto, including, without limitation,
the Priority Senior Subordinated Loan Documents, shall be reasonably
satisfactory to Agent and its legal counsel, Weil, Gotshal & Manges
LLP;
(f) All holders of any warrants (or shares issued in respect of
such warrants) or similar instruments issued (or to be issued) by
Holding or Borrower shall have agreed not to exercise any rights to
require Holding or Borrower to purchase or otherwise acquire such
warrants (or shares issued in respect of such warrants) or similar
instruments as long as any Obligations are outstanding;
(g) Delivery of Interest Deferral Notes. Borrower shall have
executed and delivered to each Bank an Interest Deferral Note in the
respective amount and to the extent required by Section 6.3 of the
Credit Agreement;
(h) Holding and the Borrower shall have paid all fees and
expenses of Agent and the Banks incurred in the preparation,
negotiation and execution of this Amendment, subject to the
limitation set forth in Section 6.3 hereof;
(i) The Agent shall have received favorable opinions of
counsel for each of Holding and the Borrower in form and substance
satisfactory to the Agent; and
(j) The Agent shall have received confirmation satisfactory to
the Agent that Rice Partners has made a $250,000 equity investment in the
Borrower or Holding prior to the date hereof.
Section 4.2 Restructuring Fee. On or before February 28, 1999,
the Borrower shall pay to the Agent for the benefit of the Banks a
restructuring fee of $125,000. Borrower and Holding agree that the failure
to pay such restructuring fee as provided herein shall constitute an
immediate Event of Default under the Credit Agreement.
ARTICLE 5
Ratifications, Representations and Warranties, Release
Section 5.1 Ratifications. The terms and provisions set forth in
this Amendment shall modify and supersede all inconsistent terms and
provisions set forth in the Credit Agreement. The terms and provisions of
the Credit Agreement, as amended and modified by this Amendment and the
terms and provisions of the other Loan Documents are ratified and
confirmed and shall continue in full force and effect. Borrower, Holding,
Agent and each Bank agree that the Credit Agreement, as amended hereby,
and the other Loan Documents shall continue to be legal, valid, binding
and enforceable in accordance with their respective terms. Without in any
way limiting any of the foregoing, Holding hereby ratifies and confirms
all of the terms and provisions of the Holding Guaranty and the Holding
Security Agreement, and Borrower hereby ratifies and confirms all of the
terms and provisions of the Borrower Security Agreement.
Section 5.2 Representations and Warranties. Borrower and Holding
represent and warrant to Agent and each Bank that (i) the execution,
delivery and performance of this Amendment and all documents required
hereby or related hereto have been authorized by all requisite action on
the part of Borrower and Holding and will not violate the articles of
incorporation, bylaws or any similar governing document of any such
parties, (ii) the representations and warranties contained in the Credit
Agreement, as amended hereby, and any other Loan Document are true and
correct on and as of the date hereof as though made on and as of the date
hereof except to the extent those representations and warranties expressly
relate solely to another date, and (iii) Borrower and Holding are in full
compliance with all covenants, agreements, terms and provisions contained
in the Credit Agreement, as amended hereby, and the other Loan Documents.
Section 5.3 RELEASE. EACH OF BORROWER AND HOLDING HEREBY
ACKNOWLEDGES THAT IT HAS NO DEFENSE, COUNTERCLAIM, OFFSET, CROSS-
COMPLAINT, CLAIM OR DEMAND OF ANY KIND OR NATURE WHATSOEVER THAT CAN BE
ASSERTED TO REDUCE OR ELIMINATE ALL OR ANY PART OF ITS LIABILITY TO REPAY
THE OBLIGATIONS OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR
NATURE FROM THE AGENT OR THE BANKS. EACH OF BORROWER AND HOLDING, FOR
ITSELF AND ITS SUBSIDIARIES AND EACH OF ITS SUCCESSORS, ASSIGNS,
AFFILIATES, DIRECTORS, OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS, CONSULTANTS
AND ADVISORS OF OR TO ANY OF THE FOREGOING (COLLECTIVELY, THE "RELEASORS")
HEREBY ACQUITS, WAIVES, RELEASES AND DISCHARGES THE AGENT, EACH BANK AND
EACH OF THEIR RESPECTIVE SUCCESSORS, ASSIGNS, AFFILIATES, DIRECTORS,
OFFICERS, EMPLOYEES, AGENTS, ATTORNEYS, CONSULTANTS AND ADVISORS OF OR TO
ANY OF THE FOREGOING (COLLECTIVELY, THE "RELEASEES"), OF AND FROM ANY AND
ALL CLAIMS (INCLUDING, WITHOUT LIMITATION, ANY LIABILITIES, DAMAGES,
DEMANDS AND CAUSES OF ACTION TO THE EXTENT ARISING THEREFROM) WHATSOEVER,
IN LAW OR IN EQUITY, WHETHER KNOWN OR UNKNOWN, WHICH THE RELEASORS EVER
HAD, NOW HAVE, OR HEREINAFTER CAN, SHALL OR MAY HAVE AGAINST ANY RELEASEE
BY REASON OF ANY MATTER ARISING OUT OF OR RELATED TO THE CREDIT AGREEMENT,
THE OTHER LOAN DOCUMENTS, AND ANY AND ALL OTHER ACTIONS OR OMISSIONS
RELATING IN ANY WAY THERETO, IN EACH CASE LIMITED TO THE EXTENT
ORIGINATING PRIOR TO THIS AMENDMENT BECOMING EFFECTIVE.
ARTICLE 6
Miscellaneous
Section 6.1 Survival of Representations and Warranties. All
representations and warranties made in this Amendment or any other Loan
Document shall survive the execution and delivery of this Amendment and
the other Loan Documents, and no investigation by Agent or any Bank, or
any closing shall affect the representations and warranties or the right
of Agent and the Banks to rely upon them.
Section 6.2 Reference to Agreement. Each of the Loan Documents,
including the Credit Agreement and any and all other agreements,
documents, or instruments now or hereafter executed and delivered pursuant
to the terms hereof or pursuant to the terms of the Credit Agreement as
amended hereby, are hereby amended so that any reference in such Loan
Documents to the Credit Agreement shall mean a reference to the Credit
Agreement as amended hereby.
Section 6.3 Expenses of Agent and Banks. As provided in the
Credit Agreement, Borrower agrees to pay on demand all reasonable out-of-
pocket costs and expenses incurred by Agent and the Banks in connection
with the preparation, negotiation, and execution of this Amendment
(including attorneys' fees and expenses), such amount not to exceed
$150,000, in addition to amounts already paid.
Section 6.4 Severability. Any provision of this Amendment held by
a court of competent jurisdiction to be invalid or unenforceable shall not
impair or invalidate the remainder of this Amendment and the effect
thereof shall be confined to the provision so held to be invalid or
unenforceable.
Section 6.5 Applicable Law. This Amendment shall be governed by
and construed in accordance with the laws of the State of Texas.
Section 6.6 Successors and Assigns. This Amendment is binding
upon and shall inure to the benefit of Agent, the Banks, Borrower and
Holding and their respective successors and assigns, except neither
Borrower nor Holding may assign or transfer any of its rights or
obligations hereunder without the prior written consent of the Banks.
Section 6.7 Counterparts. This Amendment may be executed in one
or more counterparts and on telecopy counterparts, each of which when so
executed shall be deemed to be an original, but all of which when taken
together shall constitute one and the same agreement.
Section 6.8 Effect of Waiver. No consent or waiver, express or
implied, by Agent or any Bank to or for any breach of or deviation from
any covenant, condition or duty by Borrower or Holding shall be deemed a
consent or waiver to or of any other breach of the same or any other
covenant, condition or duty.
Section 6.9 Headings. The headings, captions, and arrangements
used in this Amendment are for convenience only and shall not affect the
interpretation of this Amendment.
Section 6.10 ENTIRE AGREEMENT. THIS AMENDMENT AND ALL OTHER
INSTRUMENTS, DOCUMENTS AND AGREEMENTS EXECUTED AND DELIVERED IN CONNECTION
WITH THIS AMENDMENT 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
THIS AMENDMENT, 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 ORAL AGREEMENTS AMONG THE PARTIES HERETO.
Executed as of the date first written above.
BORROWER and HOLDING:
JOTAN, INC.
SOUTHLAND CONTAINER PACKAGING CORP., formerly Southland Holding Company
and successor in interest to SHC Acquisition Corp. and each Obligated
Party (other than Holding)
By:______________________________________
Edward L. Lipscomb,
Vice President and Chief Financial
Officer for both companies
AGENT:
BANQUE PARIBAS, as Agent and as a Bank
By:______________________________________
Name:_______________________________
Title:______________________________
By:______________________________________
Name:_______________________________
Title:______________________________
BANKS:
BANKBOSTON, N.A., formerly The First
National Bank of Boston
By:______________________________________
Name:_______________________________
Title:______________________________
ANTARES LEVERAGED CAPITAL CORP
By:______________________________________
Name:_______________________________
Title:______________________________
BHF-BANK AKTIENGESELLSCHAFT
By:______________________________________
Name:_______________________________
Title:______________________________
By:______________________________________
Name:_______________________________
Title:______________________________
CREDITANSTALT AG, formerly known as
CREDITANSTALT-BANKVEREIN
By:______________________________________
Name:_______________________________
Title:______________________________
By:______________________________________
Name:_______________________________
Title:______________________________
STATE OF GEORGIA Section
Section
COUNTY OF Section
This instrument was acknowledged before me on ______________,
1998, by Edward L. Lipscomb, Vice President and Chief Financial Officer of
Jotan, Inc., on behalf of said corporation.
_________________________________
Notary Public, State of Georgia
Commission Expires:______________
Printed Name:____________________
STATE OF GEORGIA Section
Section
COUNTY OF Section
This instrument was acknowledged before me on ______________,
1998, by Edward L. Lipscomb, Vice President and Chief Financial Officer of
Southland Container Packaging Corp., on behalf of said corporation.
_________________________________
Notary Public, State of Georgia
Commission Expires:______________
Printed Name:____________________
THE TRANSFER OF AND PAYMENTS ON THE PRIORITY SENIOR SUBORDINATED NOTES
REFERENCED HEREIN ARE RESTRICTED BY AND SUBJECT TO THE TERMS AND
PROVISIONS OF THE SENIOR SUBORDINATION AGREEMENT DATED AS OF FEBRUARY 28,
1997, AS AMENDED, BY AND AMONG BANQUE PARIBAS, A BANK ORGANIZED UNDER THE
LAWS OF FRANCE ACTING THROUGH ITS HOUSTON, TEXAS AGENCY AS AGENT FOR
ITSELF AND THE OTHER SENIOR LENDERS, RICE PARTNERS II, L.P., A DELAWARE
LIMITED PARTNERSHIP, F-SOUTHLAND, L.L.C., A NORTH CAROLINA LIMITED
LIABILITY COMPANY, AND FF-SOUTHLAND, L.P., A DELAWARE LIMITED PARTNERSHIP
(AS SUCH AGREEMENT MAY BE FURTHER SUPPLEMENTED, MODIFIED, AMENDED OR
RESTATED FROM TIME TO TIME), A COPY OF WHICH IS ON FILE AT THE CHIEF
EXECUTIVE OFFICES OF THE COMPANY (THE "SENIOR SUBORDINATION AGREEMENT").
PRIORITY NOTE PURCHASE AGREEMENT
This Priority Note Purchase Agreement (this "Agreement"), dated as of
April 14, 1998, is by and among SOUTHLAND CONTAINER PACKAGING CORP., a
Texas corporation (as successor by merger to SHC Acquisition Corp., a
Florida corporation, and formerly called Southland Holding Company, herein
the "Company"), JOTAN, INC., a Florida corporation ("Parent") and RICE
PARTNERS II, L.P., a Delaware limited partnership ("Rice"), (Rice
sometimes being referred to herein as the "Purchaser"). Capitalized terms
used in this Agreement are defined in Section 11.1.
To induce Purchaser to purchase the Priority Senior Subordinated
Notes from the Company, and for good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties
hereto, intending to be legally bound, agree as follows.
I. DESCRIPTION OF PRIORITY SENIOR SUBORDINATED NOTES AND COMMITMENT
1.1 Description of Priority Senior Subordinated Notes. The Company
will authorize the issuance and sale of its Priority Senior Subordinated
Notes which shall be dated as of April 14, 1998, shall be in the aggregate
original principal amount of $1,250,000.00, and shall bear interest at the
fixed rate of 12.5% per annum; provided, however, that upon the occurrence
of a Potential Default under Section 8.1(a) hereof or any Event of
Default, and during the continuation thereof, the unpaid principal amount
of the Priority Senior Subordinated Notes shall bear interest at the rate
of 15.5% per annum. The Priority Senior Subordinated Notes shall be
substantially in the form attached hereto as Exhibit A. Interest on the
Priority Senior Subordinated Notes shall be computed on the basis of the
actual number of days elapsed over a 360 day year.
1.2 Commitment; Funding. Subject to the terms and conditions hereof
and on the basis of the representations and warranties hereinafter set
forth, the Company agrees to issue and sell to Purchaser, and Purchaser
agrees to purchase from the Company, Priority Senior Subordinated Notes in
the aggregate principal amount of One Million Two Hundred and Fifty
Thousand and no/100 Dollars ($1,250,000). Delivery of the Priority Senior
Subordinated Notes shall be made on the Closing Date in the offices of
Patton Boggs, L.L.P., 2200 Ross Avenue, Suite 900, Dallas, Texas 75201,
against payment of the purchase price thereof, in immediately available
funds, disbursed on the Closing Date as the Company shall designate in
writing or at such other location as the parties shall determine. The
Priority Senior Subordinated Notes will be delivered to the Purchaser in
fully registered form, and shall be issued in Purchaser's name or the name
of its nominee.
1.3 Use of Proceeds. The proceeds from the sale of the Priority
Senior Subordinated Notes shall be used solely to (a) provide working
capital and (b) pay all fees, costs and expenses payable pursuant to this
Agreement.
II. PAYMENT AND PREPAYMENT OF SENIOR SUBORDINATED OBLIGATIONS
2.1 Principal and Interest Payments. Principal and interest on the
Priority Senior Subordinated Notes shall be due and payable as follows:
(a) Principal, including the capitalized PIK Interest evidenced
by the PIK Notes, together with the accrued interest thereon, shall
be due and payable in full on the Termination Date.
(b) Interest shall be due and payable (i) on May 30, 1998 (for
the period from and including the Closing Date to but excluding May 30,
1998), (ii) and thereafter quarterly in arrears on the last Business
Day of each February, May, August and November, commencing August 31,
1998 and (iii) on the Termination Date; provided, however, that with
respect to interest payable pursuant to clauses (i) and (ii), the
Company shall satisfy its obligation to pay interest in cash on such
dates by the issuance to the Purchaser of one or more Priority Senior
Subordinated Notes substantially in the form of Exhibit A-1 to this
Agreement (each a "PIK Note") evidencing the Company's obligation to
pay such accrued interest (the "PIK Interest"). Each such PIK Note
shall be in an amount equal to the interest due on such respective
date and shall constitute the capitalization of the PIK Interest
evidenced thereby. The Company shall have no obligation to pay PIK
Interest due on such respective dates in cash. Purchaser
acknowledges that the PIK Notes delivered pursuant to this Section
2.1(b) are "Priority Subordinate Loan Documents" and the Obligations
evidenced thereby are "Subordinate Debt" as both such terms are
defined in the Senior Subordination Agreement. The PIK Notes shall
bear interest at a fixed rate of 12.5% per annum; provided, however,
that upon the occurrence of a Potential Default under Section 8.1
hereof or any Event of Default, and during the continuation thereof,
the unpaid principal amount of the PIK Notes shall bear interest at a
rate of 15.5% per annum. All accrued interest on the PIK Notes shall
be due and payable on the Termination Date.
2.2 Optional Prepayments. Upon payment in full of the Senior Debt
and the termination of all commitments of the Senior Lender with respect
thereto, at the Company's option and upon notice given as provided below,
the Company may, at any time and from time to time, prepay all or any part
of the principal of the Priority Senior Subordinated Notes, by payment of
the principal amount to be prepaid, plus (a) any accrued and unpaid
interest on the principal amount so prepaid, plus (b) any expenses and/or
damages for which Purchaser may be entitled to receive payment or
reimbursement hereunder, plus (c) a premium equal to the percentage of the
principal amount so prepaid which is applicable in accordance with the
following table based on the date on which such prepayment is made (a
"Prepayment Fee"):
Prepayment Date Premium
Closing Date through February 28, 1999 10.71%
March 1, 1999 through February 29, 2000 8.92%
March 1, 2000 through February 28, 2001 7.14%
March 1, 2001 through February 28, 2002 5.36%
March 1, 2002 and thereafter 0.00%
Each partial prepayment under this Section 2.2 shall be in a principal
amount of not less than $250,000 or, if greater than $250,000, then in
integral multiples of $100,000. Each prepayment under this Section 2.2
shall be applied first to any expenses or costs to which Purchaser may be
entitled, second to accrued and unpaid interest on the principal amount so
prepaid, third to any applicable Prepayment Fee, fourth to the principal,
and fifth to any damages to which Purchaser may be entitled. The amount of
any such prepayment may not be reborrowed by the Company. The Company
shall give notice of any optional prepayment to Purchaser not less than
fifteen (15) days nor more than sixty (60) days before the date for
prepayment, specifying in each such notice the date upon which such
prepayment is to be made and the principal amount (together with accrued
and unpaid interest, if any, thereon and any applicable Prepayment Fee) to
be prepaid on such date. Notice of prepayment having been so given, the
applicable prepayment amount shall become due and payable on the specified
prepayment date. The Company shall have no right to prepay the Priority
Senior Subordinated Notes except as provided in this Section 2.2 or in
Section 2.3.
2.3 Mandatory Prepayments. Any prepayment under this Section 2.3
shall be applied first to any expenses to which the Purchaser may be
entitled, second to accrued interest, third to any applicable Prepayment
Fee, fourth to the principal (including capitalized PIK Interest evidenced
by the PIK Notes), in the inverse order of maturities, and fifth to any
damages to which any Purchaser may be entitled. The amount of any such
mandatory prepayment may not be reborrowed by the Company. The Company
shall make mandatory prepayments to the Purchaser of the original
principal amount of the Priority Senior Subordinated Notes in each of the
following circumstances:
(a) If during any fiscal year after the Senior Debt is paid in
full and after all commitments of the Senior Lender with respect
thereto have been terminated, Parent or the Company shall sell or
otherwise dispose of (other than as permitted by Section 6.8 or
Section 7.3) any property or properties in excess of five percent
(5%) of its total assets (including as a result of a Casualty Event
(to the extent the net cash proceeds therefrom are not subsequently
applied or committed to apply toward replacement, restoration,
rebuilding or repair of the damaged property within ninety (90) days
after the receipt of such net cash proceeds)), then the Company shall
prepay the Priority Senior Subordinated Notes in an amount equal to
the lesser of (i) the aggregate net cash proceeds of such sale or
other disposition (minus the cost of any replacement assets or
properties purchased within ninety (90) days either before or after
such sale) or (ii) the aggregate amount of all Priority Senior
Subordinated Obligations (including any applicable Prepayment Fee)
such prepayment and premium to be made within ten (10) Business Days
of receipt of such net proceeds.
(b) In the event of any sale or other disposition of all or
substantially all of the stock or assets of Parent or the Company in
a single transaction or series of transactions or a Casualty Event
(to the extent not subsequently applied or committed to apply toward
replacement, restoration, rebuilding or repair of the damaged
property within 90 days after the receipt of such net cash proceeds),
the Company shall, after the Senior Debt has been paid in full and
after all commitments of the Senior Lender with respect thereto have
been terminated, prepay the Priority Senior Subordinated Notes in an
amount equal to the lesser of (i) the aggregate remaining net cash
proceeds of such sales or dispositions (minus the cost of any
replacement assets or properties purchased within ninety (90) days
either before or after such sale) or (ii) the aggregate amount of all
Priority Senior Subordinated Obligations (including any applicable
Prepayment Fees), such prepayment to be made within ten (10) Business
Days of receipt of such net proceeds.
2.4 Additional Payments. After payment in full of the Priority
Senior Subordinated Obligations, unless otherwise provided herein or in
the Other Agreements, all Senior Subordinated Obligations, shall be
payable by the Company to the holder thereof, in accordance with the
applicable terms thereof. Payment of fees and expenses due and payable on
the Closing Date to Purchaser and Purchaser's legal counsel shall be paid
in full on the Closing Date.
2.5 Liquidated Damages. Any Prepayment Fee payable pursuant to
Section 2.2 or Section 2.3 shall be payable as liquidated damages for loss
of the opportunity to recover loan origination expenses and profits over
the balance of the term of this Agreement and not as a penalty and the
Company acknowledges and agrees that such Prepayment Fees are a reasonable
estimate of such losses.
2.6 Direct Payment. The Company will pay all sums becoming due
hereunder and on the Priority Senior Subordinated Notes to Purchaser at
the address specified for Purchaser on Annex I hereto, by wire transfer in
U.S. Dollars of Federal Reserve Funds or other immediately available
funds, to the account specified for Purchaser on Annex I, or at such other
address or in such other form as Purchaser shall have designated by notice
to the Company at least five Business Days prior to the date of any
payment, in each case without presentment and without notations being made
thereon. All payments by the Company shall be made without set-off or
counterclaim. Any wire transfer shall identify such payment as "12.5%
Priority Senior Subordinated Notes/Southland Container Packaging Corp."
and shall identify the payment as interest and/or reimbursement of costs
and expenses, together with the applicable date or period to which it
relates.
2.7 Payments Payable on Business Days. Payments of all amounts due
hereunder or under the Priority Senior Subordinated Notes shall be made on
a Business Day. Any payment due on a day that is not a Business Day shall
be made on the next Business Day, together with all interest (if any)
accrued in the interim.
2.8 Interest Laws. Notwithstanding any provision to the contrary
contained in this Agreement or any Other Agreement, the Company shall not
be required to pay, and neither Purchaser shall be permitted to contract
for, take, reserve, charge or receive, any compensation which constitutes
interest under applicable law in excess of the maximum amount of interest
permitted by law ("Excess Interest"). If any Excess Interest is provided
for or determined by a court of competent jurisdiction to have been
provided for in this Agreement or in any Other Agreement or otherwise
contracted for, taken, reserved, charged or received, then in such event:
(a) the provisions of this Section 2.8 shall govern and control; (b) the
Company shall not be obligated to pay any Excess Interest; (c) any Excess
Interest that the Purchaser may have contracted for, taken, reserved,
charged or received hereunder shall be, at the Holders' option,
(i) applied as a credit against the outstanding principal balance of the
Priority Senior Subordinated Obligations or accrued and unpaid interest
(not to exceed the maximum amount permitted by law), (ii) refunded to the
payor thereof, or (iii) any combination of the foregoing; (d) the interest
provided for shall be automatically reduced to the maximum lawful rate
allowed from time to time under applicable law (the "Maximum Rate"), and
this Agreement and the Other Agreements shall be deemed to have been, and
shall be, reformed and modified to reflect such reduction; and (e) the
Company shall have no action against the Holder for any damages arising
due to any Excess Interest. If for any period of time interest on any
Priority Senior Subordinated Obligations is calculated at the Maximum Rate
rather than the applicable rate under this Agreement, and thereafter such
applicable rate becomes less than the Maximum Rate, the rate of interest
payable on such Priority Senior Subordinated Obligations shall remain at
the Maximum Rate until the Holder shall have received the amount of
interest which the Holder would have received during such period on such
Priority Senior Subordinated Obligations had the rate of interest not been
limited to the Maximum Rate during such period. All sums paid or agreed
to be paid hereunder or under the Other Agreements for the use,
forbearance or detention of sums due shall, to the extent permitted by
applicable law, be amortized, pro-rated, allocated and spread throughout
the full term of the Priority Senior Subordinated Obligations until
payment in full so that the rate or amounts of interest on account of the
Priority Senior Subordinated Obligations does not exceed the Maximum Rate.
The terms of this Section 2.8 shall be deemed incorporated into each Other
Agreement and any other document or instrument between the Company and any
Holder or directed to the Company by any Holder, whether or not specific
reference to this Section 2.8 is made.
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Purchaser represents and warrants to the Company as follows:
3.1 Existence. It is a limited partnership, duly organized, validly
existing and in good standing under the laws of the jurisdiction of its
organization.
3.2 Authority. It has the right and power and authority to enter
into, execute, deliver and perform its obligations under this Agreement,
and its partners, managers, officers or agents executing and delivering
this Agreement are duly authorized to do so. This Agreement has been duly
and validly executed and delivered and constitutes the legal, valid and
binding obligation of such Purchaser, enforceable in accordance with its
terms.
3.3 Investor Status. It (i) is an "accredited investor," as that
term is defined in Regulation D under the Securities Act of 1933, as
amended, or (ii) has such knowledge, skill, sophistication and experience
in business and financial matters, based on actual participation, that it
is capable of evaluating the merits and risks of the purchase of its
Priority Senior Subordinated Notes from the Company and the suitability
thereof for such Purchaser.
3.4 Investment for Own Account. Except as otherwise contemplated by
this Agreement, it is acquiring its Priority Senior Subordinated Notes for
investment for its own account and, in any event, not with a view to any
distribution thereof in violation of applicable securities laws.
3.5 Legend on Notes. It agrees that its Priority Senior
Subordinated Notes will bear the appropriate legends referencing
restrictions on transfer and will not be offered, sold or transferred in
the absence of registration or exemption under applicable securities laws.
IV. REPRESENTATIONS AND WARRANTIES OF PARENT AND THE COMPANY
To induce Purchaser to enter into this Agreement, Parent and the
Company represent and warrant to Purchaser that the following statements
are, and will be, true, correct and complete:
4.1 Corporate Existence and Authority. Each of the Parent and its
wholly owned subsidiary, the Company (a) is a corporation duly organized,
validly existing, and in good standing under the laws of its state of
incorporation, (b) has all requisite corporate power and authority to own
its assets and carry on its business as now conducted; and (c) is
qualified to do business in all jurisdictions in which the nature of its
business makes such qualification necessary and where failure to so
qualify would have a Material Adverse Effect. Parent and the Company each
has the corporate power and authority to execute, deliver, and perform its
respective obligations under this Agreement, the Purchase Documents, the
Senior Loan Documents, and all Other Agreements to which it is, or in
connection with the transactions contemplated hereby may become, a party.
4.2 Authorization and Compliance with Laws and Material Agreements.
The execution, delivery and performance by Parent and the Company of this
Agreement, the Purchase Documents, the Senior Loan Documents and the Other
Agreements to which each is or may in connection with the transactions
contemplated hereby become a party have been or prior to the consummation
of such transactions contemplated hereby will be duly authorized by all
requisite action on the part of Parent and the Company, and do not and
will not violate its respective Restated Articles of Incorporation,
Articles of Incorporation or Bylaws (each as amended to the date first
above written) or any law or any order of any court, governmental
authority or arbitrator, and do not and will not upon the consummation of
the transactions contemplated hereby, in any material respect, conflict
with, result in a breach of, or constitute a default under, or result in
the imposition of any Lien (except Permitted Liens) upon any assets of
Parent or the Company pursuant to the provisions of any loan agreement,
indenture, mortgage, security agreement, franchise, permit, license or
other instrument or agreement by which Parent or the Company or any of
their properties are bound. No authorization, approval or consent of, and
no filing or registration with, any court, governmental authority or third
Person is or will be necessary for the execution, delivery or performance
by Parent or the Company of this Agreement, the Purchase Documents, the
Senior Loan Documents, and the Other Agreements to which each is a party
or the validity or enforceability thereof other than those presently
obtained. Neither Parent nor the Company is (a) in violation of any term
of its Articles of Incorporation or Bylaws or (b) in material violation of
any material contract, agreement, judgment or decree or (c) in material
violation of any applicable laws, regulations or rules.
4.3 Rights in Properties; Liens. Parent and the Company have good
and marketable title to all material properties and assets reflected on
their balance sheets, and none of such properties or assets is subject to
any Liens, except Permitted Liens. Parent and the Company enjoy peaceful
and undisturbed possession under all leases necessary for the operation of
their other Properties, assets, and businesses and all such leases are
valid and subsisting and are in full force and effect. There exists no
default under any provision of any lease which would permit the lessor
thereunder to terminate any such lease or to exercise any rights under
such lease which, individually or together with all other such defaults,
could have a Material Adverse Effect. Each of Parent and the Company has
the right to use all of the Intellectual Property necessary to its
business as presently conducted, and Parent's and the Company's use of the
Intellectual Property does not infringe on the rights of any other Person
in any material respect. To the best of the Company's and Parent's
knowledge, no other Person is infringing the rights of Parent or the
Company in any of the Intellectual Property. Neither Parent nor the
Company owes any royalties, honoraria or fees to any Person by reason of
its use of the Intellectual Property.
4.4 Enforceability. This Agreement, the Purchase Documents, the
Senior Loan Documents and the Other Agreements to which Parent and the
Company is a party, when delivered, shall constitute the legal, valid and
binding obligations of Parent and the Company enforceable against Parent
and the Company in accordance with their respective terms.
4.5 Use of Proceeds; Margin Securities. Neither Parent nor the
Company is engaged principally, or as one of its important activities, in
the business of extending credit for the purpose of purchasing or carrying
margin stock (within the meaning of Regulations G, T, U or X of the Board
of Governors of the Federal Reserve System), and no part of the proceeds
of any extension of credit under this Agreement will be used to purchase
or carry any such margin stock or to extend credit to others for the
purpose of purchasing or carrying margin stock. Neither Parent, the
Company nor any Person acting on their behalf has taken any action that
might cause the transactions contemplated by this Agreement, the
Acquisition Documents, the Senior Loan Documents or any Other Agreements
to violate Regulations G, T, U or X or to violate the Securities Exchange
Act of 1934, as amended.
4.6 ERISA. All members of any Controlled Group have complied with
all applicable minimum funding requirements and all other applicable and
material requirements of ERISA and the Code, applicable to the Employee
Benefit Plans it or they sponsor or maintain, and there are no existing
conditions that would give rise to material liability thereunder. With
respect to any Employee Benefit Plan, all members of any Controlled Group
have made all contributions or payments to or under each Employee Benefit
Plan required by law, by the terms of such Employee Benefit Plan or the
terms of any contract or agreement. No Termination Event has occurred in
connection with any Pension Plan, and there are no unfunded benefit
liabilities, as defined in Section 4001(a)(18) of ERISA, with respect to
any Pension Plan which poses a risk of causing a Lien to be created on the
assets of Parent or the Company or which will result in the occurrence of
a Reportable Event. No member of any Controlled Group has been required
to contribute to a multiemployer plan, as defined in Section 4001(a)(3) of
ERISA, since September 2, 1974. No material liability to the Pension
Benefit Guaranty Corporation has been, or is expected to be, incurred by
any member of a Controlled Group. The term "liability," as referred to in
this Section 4.6, includes any joint and several liability. No prohibited
transaction under ERISA or the Code has occurred with respect to any
Employee Benefit Plan which could have a Material Adverse Effect or a
material adverse effect on the condition, financial or otherwise, of an
Employee Benefit Plan.
4.7 Subsidiaries and Capitalization. All the issued and outstanding
shares of capital stock of Parent and the Company are duly authorized,
validly issued, fully paid and nonassessable. The capitalization of
Parent and the Company on the Closing Date is set forth on Schedule 4.7.
No violation of any preemptive rights of shareholders of Parent or the
Company has occurred by virtue of the transactions contemplated under this
Agreement, the Purchase Documents, the Senior Loan Documents or any Other
Agreement. There are no outstanding contracts, options, warrants,
instruments, documents or agreements binding upon Parent or the Company
granting to any Person or group of Persons any right to purchase or
acquire shares of Parent's or the Company's capital stock, except
(i) pursuant to the Purchase Documents, and (ii) Permitted Stock (as
defined in the Purchase Documents).
4.8 Investment Company Act. Neither Parent, the Company, nor any
company controlling Parent or the Company is required to be registered as
an "investment company" within the meaning of the Investment Company Act
of 1940, as amended.
4.9 Public Utility Holding Company Act. Neither Parent nor the
Company is a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
4.10 Securities Laws. The Company has complied with or is exempt
from the registration and/or qualification requirements of all federal and
state securities or blue sky laws applicable to the issuance or sale of
the Priority Senior Subordinated Notes.
V. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
Purchaser's obligations hereunder shall be subject to (a) the
performance by each of Parent and the Company of its respective
obligations hereunder which by the terms hereof are to be performed at or
prior to delivery of the Priority Senior Subordinated Notes, and (b) the
satisfaction of the following conditions on or before the Closing Date:
5.1 Effectiveness of Senior Loan Amendment. The Senior Loan
Amendment shall have been duly executed and delivered by the parties
thereto and shall be on terms and conditions, including amortization
periods, satisfactory to the Purchaser. All conditions precedent to the
effectiveness of such amendment shall have been satisfied or waived with
Senior Lender's consent.
5.2 Effectiveness of the First Amendment to the Senior Subordination
Agreement. The First Amendment to Senior Subordination Agreement dated as
of April 14, 1998, shall have been duly executed and delivered by the
parties thereto, and shall be on terms and conditions which are
satisfactory to the Purchaser and Senior Lender.
5.3 Approval. Purchaser's investment committee shall have approved
the purchase of its Priority Senior Subordinated Notes on terms set forth
herein and in the Other Agreements.
5.4 Documents. Purchaser shall have received the following, each in
form and substance satisfactory to such Purchaser:
(a) Priority Senior Subordinated Notes. Its Priority Senior
Subordinated Notes issued in the name of Purchaser duly executed by the
Company;
(b) Warrant and Purchase Documents. The Warrant which shall be
duly issued and delivered by Parent to Purchaser in the denominations
specified in and in accordance with the fully executed Purchase Documents
and all other documents and instruments required pursuant thereto;
(c) Other Agreements. All Other Agreements, duly executed by
the parties thereto;
(d) General Certificate of the Company's Secretary or Assistant
Secretary. A certificate of the Secretary or Assistant Secretary of the
Company together with true, correct and complete copies of the following:
(i) Articles of Incorporation. The Articles of
Incorporation of the Company, including all amendments thereto,
certified by the Secretary of State of the state of its incorporation
and dated within thirty (30) days prior to the Closing Date;
(ii) Bylaws. The Bylaws of the Company, including all
amendments thereto;
(iii) Resolutions. The resolutions of the Board of
Directors of the Company authorizing the execution, delivery and
performance of this Agreement, the Purchase Documents, the Senior
Loan Amendment and the Other Agreements to which the Company is a
party;
(iv) Existence and Good Standing Certificates.
Certificates of the appropriate government officials of the state of
incorporation of the Company as to its existence and good standing,
and certificates of the appropriate government officials in each
state where the Company does business and where failure to qualify as
a foreign corporation would have a Material Adverse Effect, as to its
good standing and due qualification to do business in such state,
each dated within thirty (30) days prior to the Closing Date; and
(v) Incumbency. The names of the officers of the Company
authorized to sign this Agreement and the Other Agreements to be
executed by the Company, together with a sample of the true signature
of each such officer;
(g) General Certificate of Parent's Secretary or Assistant
Secretary. A certificate of the Secretary or Assistant Secretary of
Parent together with true, correct and complete copies of the following:
(i) Restated Articles of Incorporation. The Restated
Articles of Incorporation of Parent, including all amendments
thereto, certified by the Secretary of State of the state of its
incorporation;
(ii) Bylaws. The Bylaws of Parent, including all
amendments thereto;
(iii) Resolutions. The resolutions of the Board of
Directors of Parent authorizing (A) the execution, delivery and
performance of this Agreement, the Purchase Documents, the Senior
Loan Amendment, and the Other Agreements to which Parent is a party,
(B) the issuance of the Warrant to Purchaser, and (C) the reservation
of a sufficient number of Warrant Shares (as defined in the Purchase
Documents);
(iv) Existence and Good Standing Certificates.
Certificates of the appropriate government officials of the state of
incorporation of Parent as to its existence and good standing, and
certificates of the appropriate government officials in each state
where Parent does business and where failure to qualify as a foreign
corporation would have a Material Adverse Effect, as to its good
standing and due qualification to do business in such state, each
dated within thirty (30) days prior to the Closing Date; and
(v) Incumbency. The names of the officers of Parent
authorized to sign this Agreement and the Other Agreements to be
executed by Parent, together with a sample of the true signature of
each such officer;
(h) Senior Loan Amendment. Copies of the Senior Loan Amendment
and each document to be executed in connection therewith, and a
certificate of the Chief Executive Officer and Chief Financial Officer of
the Company and Parent certifying that all conditions precedent to the
effectiveness of the Senior Loan Amendment have been met or waived;
(i) Sources and Uses Certificate. A certificate in form and
substance satisfactory to Purchaser executed by the Chief Executive
Officer and Chief Financial Officer of the Company and Parent, setting
forth in reasonable detail the sources and uses of funds in the
transactions contemplated herein, in the Senior Loan Documents and in the
Other Agreements;
(j) Transaction Certificate. A certificate of the Chief
Executive Officer and the Chief Financial Officer of the Company and
Parent that, to the best of their knowledge after due investigation, all
conditions precedent to the effectiveness of this Agreement have been
satisfied or waived;
(k) Guaranty Agreements. A Parent Guaranty executed by Parent,
and a Company Guaranty executed by the Company;
(l) Additional Information, Other Documents and Agreements.
Such other information, documents, agreements, commitments and
undertakings as Purchaser or Purchaser's counsel shall reasonably request.
5.5 No Legislative Change. For the period from December 31, 1997 to
the Closing Date, there shall have been no law, act, rule, regulation or
order of any legislative, administrative or judicial body or official
which could prevent Purchaser from consummating the transactions
contemplated by this Agreement and the Other Agreements.
5.6 No Event of Default. No Event of Default or Potential Default
shall have occurred and be continuing.
5.7 Representations and Warranties. All representations and
warranties contained in this Agreement, the Senior Loan Amendment, the
Purchase Documents and the Other Agreements shall be true and correct on
the Closing Date.
VI. AFFIRMATIVE COVENANTS
The Company and Parent covenant and agree that, from the date hereof
and until the Priority Senior Subordinated Obligations have been finally
and irrevocably paid in full in accordance with the terms hereof and
thereof:
6.1 Financial Statements. Parent will furnish to Purchaser:
(a) As soon as available, and in any event within one hundred
twenty (120) days after the end of each fiscal year of Parent, beginning
with the fiscal year ending December 31, 1997, (i) a copy of the financial
statements of Parent for such fiscal year containing a consolidated and
consolidating balance sheet, statement of income, statement of
stockholders' equity, and statement of cash flow as at the end of such
fiscal year and for the fiscal year then ended, in each case setting forth
in comparative form the figures for the preceding fiscal year, together
with management's discussion and analysis of variances prepared by
Parent's management, all in reasonable detail and audited and certified by
Ernst & Young LLP or any other "Big Six" firm of independent certified
public accountants (or any other firm of independent certified public
accountants of recognized national standing selected by Parent and
consented to by the Holder provided that the Holder's consent shall not
unreasonably be withheld) to the effect that such financial statements
have been prepared in accordance with GAAP; (ii) a certificate delivered
to each Purchaser by such independent certified public accountants
confirming the calculations set forth in the officers' certificate
delivered simultaneously therewith in accordance with Section 6.2(a); and
(iii) a comparison of the actual results during such fiscal year to those
originally budgeted by the Company prior to the beginning of such fiscal
year, together with management's discussion and analysis of variances, as
well as, variances between actual results for such fiscal year and actual
results for the previous fiscal year. The annual audit report required
hereby shall not be qualified or limited because of restricted or limited
examination by the accountant of any material portion of any of the
records of the Company.
(b) As soon as available, and in any event within thirty (30)
days after the end of each calendar month, a copy of an unaudited
financial report of Parent and the Company as of the end of such calendar
month and for the portion of the fiscal year then ended, containing
balance sheets, statements of income, retained earnings and statements of
cash flow, in each case setting forth in comparative form the figures for
the corresponding period of the preceding fiscal year, together with
management's discussion and analysis of variances all in reasonable
detail, including, without limitation, a comparison of the actual results
during such period to those originally budgeted by Parent and the Company
prior to the beginning of such fiscal period and for the fiscal year to
date.
(c) Forty-five (45) days after the beginning of each fiscal
year of Parent, an annual budget or business plan for such fiscal year,
including a projected consolidated and consolidating balance sheet, income
statement, and cash flow statement for such year (and any underlying
assumptions), and, promptly during each fiscal year, all revisions thereto
approved by the board of directors of Parent.
6.2 Certificates; Other Information. Parent will furnish to
Purchaser all of the following:
(a) Concurrently with the delivery of each of the financial
statements referred to in Section 6.1(a) and Section 6.1(b), a certificate
of an authorized officer of the Company and Parent in the form of the
officer's certificate attached hereto as Exhibit B (i) stating that, to
the knowledge of such officer, no Event of Default or Potential Default
has occurred and is continuing or, if such officer has knowledge of an
Event of Default or Potential Default, the nature thereof and specifying
the steps taken or proposed to remedy such matter, (ii) stating that the
financial statements attached have been prepared in accordance with GAAP
and fairly and accurately present (subject to year-end audit adjustments,
for the annual certificates) the financial condition and results of
operations of Parent and the Company at the date and for the period
indicated therein, (iii) containing summaries of accounts payable agings,
accounts receivable agings, and inventory, (iv) containing a schedule of
the outstanding Indebtedness for borrowed money of Parent and the Company
describing in reasonable detail each such debt issue or loan outstanding
and the principal amount and amount of accrued and unpaid interest with
respect to each such debt issue or loan, (v) containing management's
discussion and analysis of the business and affairs of Parent and the
Company which includes, but is not limited to, a discussion of the results
of operations compared to those originally budgeted for such period, and
(vi) a report detailing (A) all matters affecting the value,
enforceability or collectibility of any material portion of its assets
including, without limitation, the Company's reclamation or repossession
of, or the return to the Company of, a material amount of goods and
material claims or disputes asserted by any customer or other obligor, and
(B) any material adverse change in the relationship between Parent or the
Company and any of its material suppliers or customers.
(b) As soon as available, (i) a copy of each financial
statement, report, notice or proxy statement sent by Parent to its
stockholders in their capacity as stockholders, (ii) a copy of each
regular, periodic or special report, registration statement, or prospectus
filed by Parent with any securities exchange or the Securities and
Exchange Commission or any successor agency, (iii) any material order
issued by any court, governmental authority, or arbitrator in any material
proceeding to which Parent or the Company is a party, (iv) copies of all
press releases and other statements made available generally by Parent or
the Company to the public generally concerning material developments in
Parent's or the Company's business, and (v) a copy of all correspondence
and reports sent by Parent or the Company to the Senior Lender outside of
the ordinary course of business.
(c) Promptly, such additional information concerning Parent and
the Company as Purchaser may reasonably request.
6.3 Books and Records; Accounting System. Parent and the Company
will, keep (a) proper books of record and account in which full, true and
correct entries will be made of all dealings or transactions of or in
relation to its business and affairs; (b) set up on its books accruals
with respect to all taxes, assessments, charges, levies and claims; and
(c) on a reasonably current basis set up on its books from its earnings
allowances against doubtful receivables, advances and investments and all
other proper accruals (including, without limitation, by reason of
enumeration, accruals for premiums, if any, due on required payments and
accruals for depreciation, obsolescence, or amortization of properties),
which should be set aside from such earnings in connection with its
business. All determinations pursuant to this subsection shall be made in
accordance with, or as required by, GAAP consistently applied. Parent and
the Company will, maintain a modern system of accounting established and
administered in accordance with sound business practices to permit
preparation of consolidated financial statements in conformity with GAAP.
6.4 Financial Disclosure. The Company and Parent hereby irrevocably
authorize and direct all accountants and auditors employed by them at any
time during the term of this Agreement to exhibit and deliver to Purchaser
copies of any of their respective financial statements, trial balances or
other accounting records of any sort in the accountant's or auditor's
possession, and to disclose to Purchaser any information they may have
concerning either party's financial status and business operations. Each
of the Company and Parent hereby irrevocably authorizes all federal, state
and municipal authorities to furnish to Purchaser copies of reports or
examinations relating to the Company or Parent, whether made by the
Company, Parent or otherwise.
6.5 Disclosure of Material Matters. Parent and the Company will,
promptly upon learning thereof, report to Purchaser (a) all matters
materially affecting the value, enforceability or collectibility of any
material portion of its assets including, without limitation, changes to
significant contracts, schedules of equipment, changes of significant
equipment or real property, the reclamation or repossession of, or the
return to the Company or Parent, a material amount of goods and material
claims or disputes asserted by any customer or other obligor, and (b) any
material adverse change in the relationship between Parent or the Company
and any of its suppliers or customers.
6.6 Performance of Obligations. Parent and the Company will duly
and punctually pay and perform their obligations, as applicable, under
this Agreement, the Purchase Documents and the Other Agreements to which
each is a party.
6.7 Preservation of Existence and Conduct of Business. Parent and
Company will each preserve and maintain its corporate existence and all of
its leases, privileges, franchises, qualifications and rights that are
necessary or useful in the ordinary conduct of its business and where
failure to do so would have a Material Adverse Effect, and conduct its
business as presently conducted in an orderly and efficient manner in
accordance with good business practices.
6.8 Maintenance of Properties. Parent and the Company will each
operate and maintain in good condition and repair (ordinary wear and tear
excepted) and replace as necessary, all of its material assets and
properties which are necessary in accordance with sound business practices
in the proper conduct of its business so that the value and operating
efficiency of its assets and properties are maintained and preserved.
Parent and the Company will, at all times, maintain the Intellectual
Property material to its business in full force and effect, and will
defend and protect the Intellectual Property against all material adverse
claims.
6.9 Payment of Taxes and Claims. Parent and the Company will pay or
discharge, at or before maturity or before becoming delinquent (a) all
taxes, levies, assessments, vault, water and sewer rents, rates, charges,
levies, permits, inspection and license fees and other governmental and
quasi-governmental charges and any penalties or interest for nonpayment
thereof, heretofore or hereafter imposed or which may become a Lien upon
any property owned by Parent or the Company or arising with respect to the
occupancy, use, possession or leasing thereof (collectively the
"Impositions") and (b) all lawful claims for labor, material, and
supplies, which, if unpaid, might become a Lien upon any of its Property;
provided, however, that neither Parent nor the Company will be required to
pay or discharge any claim for labor, material, or supplies or any
Imposition (i) which is being contested in good faith by appropriate
actions or proceedings diligently pursued, and for which adequate reserves
in conformity with GAAP with respect thereto have been established to the
reasonable satisfaction of the Holder, and (ii) if the failure to pay or
discharge the same would not result in a Material Adverse Effect.
6.10 Compliance with Laws. Parent and the Company will comply with
all acts, rules, regulations and orders of any legislative, administrative
or judicial body or official applicable to the operation of Parent's or
the Company's business if noncompliance with such acts, rules, regulations
or orders could have a Material Adverse Effect; provided, however, Parent
or the Company may contest or dispute any acts, rules, regulations, orders
and directions of those bodies or officials by appropriate actions or
proceedings diligently pursued, if adequate reserves in conformity with
GAAP with respect thereto are established to the reasonable satisfaction
of the Holder.
6.11 Payment of Leasehold Obligations. Each of the Parent and the
Company will, at all times, pay, when and as due, its rental obligations
under all leases under which it is a tenant or lessee, and shall otherwise
comply, in all material respects, with all other terms of such leases and
keep them in full force and effect and, at the request of the Holder, will
provide evidence of its having done so; provided, however, Parent or the
Company may contest or dispute its obligations under such leases by
appropriate actions or proceedings diligently pursued if adequate reserves
in conformity with GAAP with respect thereto are established.
6.12 Insurance; Casualty Event. Parent and the Company will
maintain, with financially sound, reputable and solvent companies,
insurance policies acceptable to the Holder (a) insuring its assets
against loss by fire, explosion, theft and other risks and casualties as
are customarily insured against by companies engaged in the same or a
similar business, and (b) insuring Parent and the Company against
liability for personal injury and property damages relating to its assets,
such policies to be in such amounts and covering such risks as are usually
insured against by companies engaged in the same or a similar business,
and insuring such other matters as may from time to time be reasonably
requested by the Holder. Parent and Company will provide copies of all
such insurance policies to Purchaser within ten (10) days following
Purchaser's request for the same. Parent and the Company will (i) pay, or
cause to be paid, all premiums for such insurance at least thirty (30)
days before such premiums become due, (ii) furnish to Purchaser
satisfactory proof of the timely making of such payments, (iii) deliver
all renewal policies to Purchaser at least five (5) days before the
expiration date of each expiring policy, (iv) cause such policies to
require the insurer to give notice to Purchaser of termination of any such
policy at least thirty (30) days before such termination is to be
effective and (v) immediately deliver written notice to Purchaser of any
Casualty Event. If Parent or the Company fails to provide and pay for any
such insurance, Purchaser may, at its option, but shall not be required
to, pay the same and charge Parent or the Company therefor.
6.13 Inspection Rights. At any reasonable time and from time to
time, Parent and the Company will, permit representatives of Purchaser to
examine and make copies of the books and records of, and visit and inspect
the properties of, Parent and the Company, and to discuss the business,
operations, and financial condition of Parent and the Company with its
respective officers and employees and with its independent certified
public accountants. Such examinations and inspections may include, but
are not limited to, audits of the application of proceeds from the
Priority Senior Subordinated Notes. In accordance with the terms of
Section 12.1 hereof, Parent will promptly reimburse Purchaser for all
expenses incurred by representatives of Purchaser in connection with such
inspections.
6.14 Notices. Parent and the Company will promptly, but in any event
within two (2) Business Days after first becoming aware thereof, notify
Purchaser via telephone, subsequently confirmed or, if requested by
Purchaser, in writing of:
(a) the commencement of any event, including but not limited
to, any action, suit, or proceeding against Parent or the Company, that
could have a Material Adverse Effect, which notice shall specify the
nature of such event and what action Parent or the Company has taken or is
taking or proposes to take with respect thereto;
(b) the occurrence of an event of default, or an event which
with the passage of time or giving of notice or both constitutes an event
of default under the Senior Loan Documents, Junior Note Documents or under
any instrument or agreement evidencing any other Indebtedness of Parent or
the Company, which notice shall specify the nature of such event,
condition or default and what action Parent or the Company has taken or is
taking or proposes to take with respect thereto; or
(c) The occurrence of an Event of Default or a Potential
Default, which notice shall specify the nature of such event, condition or
default and what action Parent or the Company has taken or is taking or
proposes to take with respect thereto.
Any notification required by this Section 6.14 shall be accompanied by a
certificate of the Chief Executive Officer or Chief Financial Officer
setting forth the details of the specified events and the action which
Parent or the Company proposes to take with respect thereto.
6.15 Additional Notices. Immediately upon receipt by Parent or the
Company, Parent or the Company will provide each Purchaser with copies of
all notices (including notices of default), statements and financial
information, including notices of default, received from the Senior Lender
under the Senior Loan Agreement, Junior Lenders under the Junior Note
Documents, and any other creditor or lessor with respect to the
acceleration of the maturity of any item of Indebtedness for borrowed
money or the repossession of property from Parent or the Company.
6.16 Amendments. Parent and Company will promptly provide Purchaser
with copies of all proposed amendments to the Senior Loan Documents,
Junior Note Documents, and of all other loan agreements to which Parent or
such Subsidiary is a party.
6.17 Further Assurances. Parent and the Company will execute and
deliver to Purchaser from time to time, upon demand, such supplemental
agreements, statements, assignments and transfers, or instructions or
documents as Purchaser may request, in order that the full intent of this
Agreement and the Other Agreements may be carried into effect.
6.18 Compliance with ERISA and the Code. Parent and the Company will
comply, and will cause each other member of any Controlled Group to
comply, with all minimum funding requirements, and all other material
requirements, of ERISA and the Code, if applicable, to any Employee
Benefit Plan it or they sponsor or maintain, so as not to give rise to any
liability thereunder. Parent and the Company will, pay and will cause
each other member of any Controlled Group to pay when due any amount
payable by it to the Pension Benefit Guaranty Corporation. Promptly after
the filing thereof, Parent and the Company shall furnish to each Purchaser
with regard to each Employee Benefit Plan, copies of each annual report
required to be filed pursuant to Section 104 of ERISA in connection with
each such plan for each plan year.
6.19 Compliance with Regulations G, T, U and X. Neither the Company,
Parent nor any Person acting on their behalf will take any action which
might cause this Agreement, the Priority Senior Subordinated Notes, the
Purchase Documents, the Senior Loan Documents or any Other Agreements to
violate, and the Company and Parent will take all actions necessary to
cause compliance with, Regulations G, T, U and X of the Board of Governors
of the Federal Reserve System and the Securities Exchange Act of 1934, in
each case as now in effect or as the same may hereafter be in effect.
6.20 Fiscal Year. The Company and Parent will cause their fiscal
year to be the twelve month period ending on December 31 of each year.
6.21 Environmental Costs.
(a) Parent and the Company hereby indemnify and hold Purchaser
harmless from and against any liability, loss, damage, suit, action or
proceeding pertaining to solid or hazardous waste materials or other
waste-like or toxic substances, including, but not limited to, claims of
any federal, state or municipal government or quasi-governmental agency or
any third person, whether arising under any federal, state or municipal
law or regulation, or tort, contract or common law that relates to Parent
and the Company.
(b) To the extent the laws of the United States or any state in
which property, leased or owned, of Parent or the Company provide that a
Lien upon the property of Parent or the Company may be obtained for the
removal of Polluting Substances which have been released, no later than
sixty (60) days after notice is given by any Holder to the Company, the
Company shall deliver to each Purchaser a report issued by a qualified,
third party environmental consultant selected by the Company and approved
by such Holder as to the existence of any Polluting Substances located
upon or beneath the specified property, leased or owned by Parent or the
Company. To the extent any such Polluting Substance is located therein or
thereunder that either (i) subjects the property to Lien or (ii) requires
removal to safeguard the health of any Person, Parent and the Company
will, remove, or cause to be removed, such Lien and such Polluting
Substance at Parent's and the Company's expense.
6.22 Financial Covenants.
(a) Fixed Charge Coverage. Parent shall not permit the ratio of
Operating Cash Flow to Fixed Charges computed on the basis of the
Operating Cash Flow and Fixed Charges for the twelve (12) month period
ending on the last day of each month (beginning with the month ending
January 31, 1999) to be less than the ratio of 0.9:1.
(b) EBITDA. Parent shall not permit EBITDA for the nine (9) month
period ending September 30, 1998, to be less than $2,009,000 and for the
twelve (12) month period ending December 31, 1998, to be less than
$2,825,000.
VII. NEGATIVE COVENANTS
Parent and the Company covenant and agree that from the date hereof
until the Priority Senior Subordinated Obligations have been finally and
irrevocably paid in full in accordance with the terms hereof and thereof,
without the prior consent of the Holder:
7.1 Indebtedness. Parent and the Company will not, create, incur,
issue, assume, guarantee or otherwise become liable for any Indebtedness
except (a) Permitted Indebtedness; (b) any extension, renewal or
refinancing of any Permitted Indebtedness (other than the Senior Debt) on
such terms and conditions as are, on the whole, no more onerous to Parent
or the Company than the terms and conditions of such Permitted
Indebtedness on the date of such extension, renewal or refinancing; and
(c) any replacement or refinancing of the Senior Debt; provided that
(i) the interest rate on such refinancing shall be no greater than the
interest rate permitted by the Senior Subordination Agreement, (ii) the
amortization of principal on such refinancing shall be for no shorter
period, and for no greater annual amounts, than the amortization provided
for in the Senior Loan Agreement, (iii) the amount so replaced or
refinanced shall be no greater than the maximum amount permitted to be
outstanding under the Senior Loan Agreement on the date of such
replacement or refinancing, (iv) the collateral security for such
replacement or refinancing does not extend to assets other than those
contemplated by the Senior Loan Agreement (and proceeds thereof) and
(v) the other terms and conditions of such replacement or refinancing are,
on the whole, no more onerous to the Company than the terms of the Senior
Loan Agreement with such amendments thereto permitted by the Senior
Subordination Agreement. Any Permitted Indebtedness which is subordinated
to the Priority Senior Subordinated Obligations shall continue to be
subordinated to the Priority Senior Subordinated Obligations on terms and
conditions satisfactory to the Purchaser.
7.2 Limitation on Liens. Parent and the Company will not incur,
create, assume, or permit to exist any Lien upon any of its property,
assets, or revenues, including, but not limited to, its shares of capital
stock, whether now owned or hereafter acquired, except Permitted Liens.
7.3 Merger, Acquisition, Dissolution and Sale of Assets. Parent and
the Company will not (a) become a party to a merger or consolidation,
(b) purchase or otherwise acquire all or a substantial part of the assets
of any Person or any shares or other evidence of beneficial ownership of
any Person, (c) dissolve or liquidate, (d) form, acquire or permit the
existence of any Subsidiary or Subsidiaries other than the Subsidiaries in
existence on the date hereof and those permitted to be created under the
terms of the Senior Loan Agreement, and (e) sell, assign or transfer any
of its assets, except (i) the transfer of all assets of Parent (other than
the stock of the Company) to the Company, (ii) sales of inventory in the
ordinary course of business, (iii) sales of other assets reasonably and in
good faith determined by the Company to be obsolete or no longer necessary
to the Company's business, and (iv) asset dispositions permitted by the
Senior Loan Agreement,
7.4 Restricted Payments. Parent and the Company will not at any time
make or become obligated to make, directly or indirectly, any
(a) declaration of any dividend on, or any other payment or distribution
in respect of, any shares of capital stock of the Company; except (i)
dividends in cash from the Company to Parent to the extent necessary to
permit Parent to first pay the Priority Senior Subordinated Obligations
due and payable from Parent to Purchaser, (ii) dividends in cash from the
Company to Parent to the extent necessary to permit Parent to pay the
Senior Subordinated Obligations due and payable from Parent, and (iii)
other dividends permitted by the Senior Loan Agreement, (b) except as
otherwise provided for herein, any professional consulting or management
fees or any other payments to any shareholders of Parent, (c) payment or
distribution on account of the purchase, repurchase, redemption, put, call
or other retirement of any shares of capital stock of Parent or of any
warrant, option or other right to acquire such shares (except pursuant to
the Purchase Documents or the Certificate and as permitted by the Senior
Loan Agreement), or (d) payment or distribution on account of any
Indebtedness of the Company which is subordinate to the Priority Senior
Subordinated Notes.
7.5 Loans and Investments. Except for Permitted Investments, Parent
and the Company will not make any advance, loan, extension of credit, or
capital contribution to or investment in, or purchase any stock, bonds,
notes, debentures, or other securities of any Person.
7.6 Transactions with Affiliates. Except as contemplated by this
Agreement and the Other Agreements, Parent and the Company will not enter
into any transaction with any director, officer, employee, shareholder, or
Affiliate of Parent, except, on prior approval by the Company's board of
directors of the terms which shall be fair and reasonable and be at least
as favorable as would result in a comparable arm's-length transaction with
a Person not a director, officer, employee, shareholder or Affiliate of
Parent, as the case may be.
7.7 Capital Expenditure Limit. Parent and the Company shall not
make or incur an aggregate amount of all Capital Expenditures during
Fiscal Year 1998 in excess of $400,000. In calculating compliance with
this Section 7.7, the aggregate amount of all payments due under a Capital
Lease for the entire term thereof (excluding, however, the interest
portion of capitalized lease payments) shall be considered expended in
full on the date that the Capital Lease is entered into.
7.8 Modification of Senior Loan Agreement. Parent and the Company
will not agree or consent to any modification, amendment or waiver of any
of the terms or provisions of the Senior Loan Documents without the prior
written consent of the Holder except such amendments and waivers which can
be made to the Senior Loan Documents without the consent of the Purchaser
under the terms of the Senior Subordination Agreement.
VIII. EVENTS OF DEFAULT AND REMEDIES THEREFOR
8.1 Events of Default. The occurrence of any one or more of the
following events shall constitute an "Event of Default":
(a) (i) the Company shall fail to pay when due (whether upon
acceleration or otherwise), any principal payable under the Priority
Senior Subordinated Notes, (ii) the Company shall fail to pay within three
(3) Business Days of the date due any interest payable under the Priority
Senior Subordinated Notes or this Agreement, or (iii) the Company or
Parent shall fail to pay within five (5) Business Days after receipt of
notice of failure to pay (whether by acceleration or otherwise), any other
Priority Senior Subordinated Obligations;
(b) the Company or Parent shall fail to pay when due (following
the expiration of applicable notice and cure periods, if any), whether
upon acceleration or otherwise, any Indebtedness (excluding for purposes
of this Section 8.1(b) only the Senior Debt), individually or in the
aggregate, having an unpaid principal amount in excess of $750,000;
(c) The Company or Parent, as the case may be, shall fail to
perform or observe any (i) obligation, agreement, covenant, term or
condition (other than the obligation to make payment) contained (A) in the
Priority Senior Subordinated Notes; (B) in Section 6.1 of this Agreement,
and such default is not cured or otherwise waived within fifteen (15) days
after written notice thereof is provided to Parent or Company, as the case
may be, or (C) in this Agreement (excluding the obligations, agreements,
covenants, terms or conditions governed by Sections 8.1(a), 8.1(c)(i)(A)
and (B) above), and such default is not cured or otherwise waived within
thirty (30) days after written notice thereof is provided to Parent or
Company, as the case may be or (ii) material obligation, agreement,
covenant, term or condition (other than the obligation to make payment
which is covered by Section 8.1(a) above) contained in the Other
Agreements and such default is not cured or otherwise waived within thirty
(30) days after written notice thereof is provided to Parent or Company,
as the case may be;
(d) Parent or the Company shall fail in any material respect to
comply with any material agreement, indenture, mortgage, deed of trust, or
other agreement (excluding the Senior Loan Documents and the Other
Agreements) binding on it or affecting its properties or business, unless
a waiver or consent has been obtained therefor;
(e) any representation, warranty or other material information
whatsoever made or provided by the Company or Parent in connection with
this Agreement or the Other Agreements or otherwise to induce Purchaser to
purchase the Priority Senior Subordinated Notes, or Warrant was incorrect
or misleading in any material respect, when made;
(f) the Parent or the Company shall become subject to an Event
of Bankruptcy;
(g) any judgment or order for payment of money shall be
rendered against Parent or the Company which exceeds an uninsured amount
of $750,000.00 and either (i) enforcement proceedings shall have been
commenced by any creditor upon such judgment or order, or (ii) there shall
be a period of thirty (30) consecutive days during which a stay of
enforcement of such judgment or order, by reason of a pending appeal or
otherwise, shall not be in effect;
(h) the Senior Debt shall have been accelerated or the holders
thereof shall have commenced an action to foreclose on the liens securing
the Senior Debt;
(i) Parent shall cease to directly own and control one hundred
percent (100%) of the aggregate number of shares of capital stock of the
Company;
(j) the occurrence of a material change in ownership in Parent
(for purposes of this subsection a "change in ownership" means those
circumstances in which (i) F-Jotan, L.L.C. shall own, directly or
indirectly, five percent (5%) less than (A) the Registrable Securities (as
defined in the Purchase Agreement as defined in the Junior Note Documents)
so owned by such party on March 4, 1997 or (B) the number of shares of
issued and outstanding voting stock of Parent (without giving effect to
the issuance of any shares of Common Stock under the Warrants or the
conversion of the Series A Preferred Stock) so owned by such party on
March 4, 1997, (ii) Rice or the Southland Purchasers shall cease to
beneficially own or control, directly or indirectly, at least seventy
percent (70%) of the issued and outstanding shares of capital stock of the
Company (determined on a fully diluted basis) owned by Rice or the
Southland Purchasers, as the case may be, on March 4, 1997, or (iii) Rice
shall not have the legal right or ability, directly or through its
Subsidiaries, to elect a majority of the members of the board of directors
of Parent);
(k) Parent or the Company shall revoke or attempt to revoke its
guaranty agreement executed in favor of Purchaser, or shall repudiate its
liability thereunder or shall fail to comply in any material respect with
the terms thereof; or
(l) an Event of Default shall occur and be continuing under the
Junior Note Documents.
8.2 Remedies of Holder upon Occurrence of Event of Default. When
any Event of Default described in Section 8.1 above, other than any Event
of Default described in clause (f) thereof, has occurred and is
continuing, the majority-in-interest of the Holders may (in addition to
any other right, power or remedy permitted to the Holder by law) declare
the entire amount of the Priority Senior Subordinated Obligations,
including, without limitation, the entire principal, Prepayment Fee (if
any) and all interest accrued then outstanding under the Priority Senior
Subordinated Notes, to be, and the same shall thereupon become, forthwith
due and payable, without any presentment, demand, protest, notice of
default, notice of intention to accelerate, notice of acceleration or
other notice of any kind, all of which are hereby expressly waived, and in
such event the Company shall (subject to the terms of the Senior
Subordination Agreement) forthwith pay to the Holder an amount equal to
one hundred percent (100%) of the amount thereof. When any Event of
Default described in clause (f) of Section 8.1 above shall occur, all of
the Priority Senior Subordinated Obligations, including, without
limitation, the entire principal, Prepayment Fee (if any), and all accrued
interest then outstanding under the Priority Senior Subordinated Notes,
shall thereupon be forthwith due and payable without any presentment,
demand, protest, notice of default, notice of intention to accelerate,
notice of acceleration or other notice of any kind (including any notice
by the Holder of the Priority Senior Subordinated Notes), all of which are
hereby expressly waived by Parent and the Company, and the Company will
(subject to the terms of the Senior Subordination Agreement) forthwith pay
to each Holder an amount equal to one hundred percent (100%) of the amount
thereof. The provisions of this Section 8.2 are solely for the benefit of
the Holder and neither the Company nor any other Person shall have any
rights with respect to or be entitled to enforce this Section 8.2. If, at
any time or times, an Event of Default shall have occurred and be
continuing under the Priority Senior Subordinated Notes, this Agreement or
any Other Agreement, Rice (so long as it is a Holder) may act as the
representative of and, as such, shall consult with any other Holder in
connection with any action to be taken with respect to such default and/or
with respect to the enforcement of their rights and remedies.
8.3 Annulment of Acceleration. The provisions of the foregoing
Section 8.2 are subject to the condition that, if all or any part of the
Priority Senior Subordinated Obligations have been declared or have
otherwise become immediately due and payable by reason of the occurrence
of any Event of Default, Purchaser may, by written instrument delivered to
the Company (an "Annulment Notice"), rescind and annul such declaration
and the consequences thereof as to the Priority Senior Subordinated
Obligations, provided that (a) at the time such Annulment Notice is
delivered no judgment or decree has been entered for the payment of any
monies due pursuant to such Priority Senior Subordinated Obligations in
connection therewith, and (b) all arrears of interest and all other sums
payable on such Priority Senior Subordinated Obligations in connection
therewith (except any principal, interest or Prepayment Fee which has
become due and payable solely by reason of such declaration under
Section 8.2 hereof) shall have been duly paid or deferred by the Holder;
and provided further, that no such rescission and annulment shall extend
to or affect any subsequent default or Event of Default or impair any
right consequent thereto, and shall not be deemed a waiver of the Event of
Default giving rise to the acceleration unless specifically waived in
writing by the Holder.
8.4 Payment of Priority Senior Subordinated Obligations. Subject to
the terms of the Senior Subordination Agreement: (a) Purchaser shall have
the right, which is absolute and unconditional, to receive payment of the
interest as provided in this Agreement on its Priority Senior Subordinated
Notes and payment of all other Priority Senior Subordinated Obligations on
the date when due and, upon the occurrence and continuance of an Event of
Default, Rice shall have the right, which is absolute and unconditional,
to institute suit against Parent or the Company on behalf of the Holder
for the enforcement of any such payment, and (b) such rights shall not be
impaired without the Holder's prior written consent.
8.5 Remedies. Subject to the terms of the Senior Subordination
Agreement, if any Event of Default shall occur and be continuing,
Purchaser may exercise any right or remedy it has at law, in equity or
under this Agreement or any Other Agreement. No right or remedy conferred
upon or reserved to Purchaser under this Agreement or any Other Agreement
is intended to be exclusive of any other right or remedy, and every right
and remedy shall be cumulative and in addition to every other right or
remedy given hereunder or now or hereafter existing under any applicable
law. Every right and remedy given by this Agreement or by applicable law
to any Holder may be exercised from time to time and as often as may be
deemed expedient by such Holder.
8.6 Conduct No Waiver. No course of dealing on the part of
Purchaser, nor any delay or failure on the part of Purchaser to exercise
any of its rights, shall operate as a waiver of such right or otherwise
prejudice such Purchaser's rights, powers and remedies. If the Company
fails to pay, when due, the principal of, Prepayment Fee (if any) or the
interest on, the Priority Senior Subordinated Notes, or fails to comply
with any other provision of this Agreement, the Company shall pay to the
Holder, to the extent permitted by law, on demand, such further amounts as
shall be sufficient to cover the cost and expenses, including, but not
limited to, reasonable attorney's fees, incurred by Purchaser in
collecting any sums due on the Priority Senior Subordinated Notes or in
otherwise enforcing any of such Purchaser's rights.
IX. SUBORDINATION
9.1 Notwithstanding any provision in this Agreement to the contrary,
the Indebtedness evidenced by the Priority Senior Subordinated Notes shall
be subordinate to the Senior Debt, and Purchaser's rights and remedies
hereunder shall be subordinate to the rights and remedies of the Senior
Lender, all in accordance with the terms of the Senior Subordination
Agreement. Nothing contained in this Section 9.1 or elsewhere in this
Agreement, in the Priority Senior Subordinated Notes or the Senior
Subordination Agreement is intended to or shall impair, as between the
Company and Purchaser, the obligations of the Company, which are absolute
and unconditional, to pay to Purchaser the principal of, Prepayment Fee
(if any) and interest on the Priority Senior Subordinated Notes and all
other Priority Senior Subordinated Obligations as and when the same shall
become due and payable in accordance with their terms, or is intended to
or shall affect the relative rights of Purchaser and creditors of the
Company other than the holders of the Senior Debt.
9.2 Notwithstanding any provision in this Agreement to the contrary,
the Indebtedness evidenced by the Senior Subordinated Notes shall be
subordinate in right of payment to all regularly scheduled payments of
interest and principal with respect to the Priority Senior Subordinated
Notes and Priority Senior Subordinated Obligations, and any rights and
remedies of the holders of the Senior Subordinated Notes shall be
subordinate to the rights and remedies of the Purchaser all in accordance
with the terms of the Senior Subordination Agreement. Nothing contained
in this Section 9.2 or elsewhere in this Agreement, in the Priority Senior
Subordinated Notes or the Senior Subordination Agreement is intended to or
shall impair, as between the Company and any holder of the Senior
Subordinated Notes, the obligations of the Company, which are absolute and
unconditional, to pay to such holder the principal of, Prepayment Fee (if
any) and interest on the Senior Subordinated Notes and all other Senior
Subordinated Obligations as and when the same shall become due and payable
in accordance with their terms, or is intended to or shall affect the
relative rights of such holder and creditors of the Company other than the
holders of the Senior Debt and the Purchaser.
X. FORM OF PRIORITY SENIOR SUBORDINATED NOTES, REGISTRATION, TRANSFER
AND REPLACEMENT
10.1 Form of Priority Senior Subordinated Notes. The Priority Senior
Subordinated Notes initially delivered under this Agreement will be fully
registered notes in the form attached hereto as Exhibit A. The Priority
Senior Subordinated Notes are issuable only in fully registered form.
10.2 Priority Senior Subordinated Notes Register. The Company shall
cause to be kept at the principal office a register for the registration
and transfer of the Priority Senior Subordinated Notes. The names and
addresses of the Holder of the Priority Senior Subordinated Notes, the
transfer thereof and the names and addresses of the transferees of the
Priority Senior Subordinated Notes shall be recorded in such register.
10.3 Issuance of New Priority Senior Subordinated Notes upon Exchange
or Transfer. Upon surrender for exchange or registration of transfer of
any Priority Senior Subordinated Notes at the office of the Company
designated for notices in accordance with Section 12.3 hereof, the Company
shall execute and deliver, at its expense, one or more new Priority Senior
Subordinated Notes of any authorized denomination requested by the Holder
of the surrendered Priority Senior Subordinated Notes, each dated the date
to which interest has been paid on the Priority Senior Subordinated Notes
so surrendered (or, if no interest has been paid, the date of the
surrendered Priority Senior Subordinated Notes), but in the same aggregate
unpaid principal amount as the surrendered Priority Senior Subordinated
Notes, and registered in the name of such Person or Persons as shall be
designated in writing by such Holder. Every Priority Senior Subordinated
Notes surrendered for registration of transfer shall be duly endorsed, or
be accompanied by a written instrument of transfer duly executed, by the
Holder of such Priority Senior Subordinated Notes or by his attorney duly
authorized in writing.
10.4 Replacement of Priority Senior Subordinated Notes. Upon receipt
of evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of a Priority Senior Subordinated Notes and, in the case of
any such loss, theft or destruction, upon delivery of a bond of indemnity
in such form and amount as shall be reasonably satisfactory to the Company
or, in the event of such mutilation upon surrender and cancellation of
such Priority Senior Subordinated Notes, the Company, without charge to
the Holder thereof, will make and deliver a new Priority Senior
Subordinated Note of like tenor and the same series in lieu of such lost,
stolen, destroyed or mutilated Priority Senior Subordinated Note. If any
such lost, stolen or destroyed Priority Senior Subordinated Notes is owned
by any Purchaser or any other Holder whose credit is satisfactory to the
Company, then the affidavit of an authorized officer of such owner setting
forth the fact of loss, theft or destruction and of its ownership of the
Priority Senior Subordinated Note at the time of such loss, theft or
destruction shall be accepted as satisfactory evidence thereof, and no
further indemnity shall be required as a condition to the execution and
delivery of a new Priority Senior Subordinated Note, other than a written
agreement of such owner (in form reasonably satisfactory to the Company)
to indemnify the Company.
XI. INTERPRETATION OF AGREEMENT
11.1 Certain Terms Defined. When used in this Agreement, the terms
set forth below are defined as follows:
"Affiliate" means any Person directly or indirectly controlling,
controlled by, or under common control with, the Person in question.
A Person shall be deemed to control a corporation if such Person
possesses, directly or indirectly, the power to direct or cause the
direction of the management and policies of such corporation, whether
through the ownership of voting securities, by contract, or
otherwise.
"Agreement" means this Priority Note Purchase Agreement, including
all schedules and exhibits hereto, as the same may be modified,
supplemented, extended and/or amended from time to time.
"Annulment Notice" is defined in Section 8.3.
"Business Day" means each day of the week except Saturdays, Sundays,
and days on which banking institutions are authorized by law to close
in the States of Florida and Texas.
"Capital Expenditures" means, for any period, all expenditures of
Parent and the Company which are classified as capital expenditures
in accordance with GAAP including all such expenditures associated
with Capital Lease Obligations but excluding, to the extent included,
any such expenditures made in connection with an acquisition funded
with the proceeds of the advances made or held by any Senior Lender
pursuant to Section 3.1 of the Senior Loan Agreement.
"Capital Lease Obligations" means, as to any Person, the obligations
of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal
property, which obligations are required to be classified and
accounted for as a capital lease on a balance sheet of such Person
under GAAP. For purposes of this Agreement, the amount of such
Capital Lease Obligations shall be the capitalized amount thereof,
determined in accordance with GAAP.
"Casualty Event" means any of the following events: (a) the
destruction of any Property or other tangible assets of Parent or the
Company, or the occurrence of damage to such Property or assets,
which in each case renders the repair or replacement thereof
uneconomic; (b) the requisition of title to such Property or assets
by any governmental authority for a period of more than 6 months;
(c) the constructive total loss with respect to such Property or
assets; or (d) the loss of quiet title to any real property owned or
leased by Parent or the Company to the extent that such loss
constitutes an insurable loss or otherwise interferes with the normal
and customary use of such real estate in the ordinary course of
business.
"Certificate" is defined in Article I of the Purchase Agreement.
"Closing Date" means the date on which all of the conditions stated
in Article V of this Agreement have been met to Purchaser's
satisfaction and the purchase price for the Priority Senior
Subordinated Notes has been paid, but in any event not later than
April 20, 1998.
"Code" means the Internal Revenue Code of 1986, as amended and in
effect from time to time, and the regulations promulgated thereunder.
"Common Stock" means the $.01 par value common stock of Parent.
"Company" means Southland Container Packaging Corp., a Texas
corporation, the successor by merger to SHC Acquisition Corp., a
Florida corporation, and formerly called Southland Holding Company,
and shall include its Subsidiaries, if any.
"Company Guaranty" means the guaranty of Company in favor of the
Purchaser, in form and substance satisfactory to Purchaser, as the
same may be amended or otherwise modified from time to time.
"Controlled Group" means any group of organizations within the
meaning of Section 414(b), (c), (m) or (o) of the Code of which
Parent or the Company is a member.
"Dollars" and "$" mean lawful money of the United States of America.
"EBITDA" means, for any period and any Person, the total of the
following each calculated without duplication for such Person on a
consolidated basis for such period: (a) Net Income; plus (b) any
provision for (or less any benefit from) income or franchise taxes
included in determining Net Income; plus (c) interest expense
deducted in determining Net Income; plus (d) amortization and
depreciation expense deducted in determining Net Income; plus (e)
other noncash charges deducted in determining consolidated net income
and not already deducted in accordance with clause (d) above or
clauses (b) and (c) of the definition of Net Income; plus (f) all
restructuring expenses, litigation or arbitration costs related to
recovery of proceeds of the Golden State Litigation or the Selling
Shareholder Arbitration, contingency allocations and other non-
recurring non-operating expenses, but, in each case, only to the
extent such amounts were deducted in calculating Net Income.
"Employee Benefit Plan" means any employee benefit plan, as defined
in Section 3(3) of ERISA, which is, previously has been or will be
established or maintained by any member of a Controlled Group.
"Environmental Laws" means all federal, state, or local laws,
ordinances, rules, regulations, interpretations and orders of courts
or administrative agencies or authorities relating to pollution or
protection of the environment (including, without limitation, ambient
air, surface water, ground water, land surface, and subsurface
strata), and other laws relating to (a) Polluting Substances or
(b) the manufacture, processing, distribution, use, treatment,
handling, storage, disposal, or transportation of Polluting
Substances.
"ERISA" means the Employee Retirement Income Security Act of 1974, as
amended and in effect from time to time, and the regulations
promulgated thereunder.
"Event of Bankruptcy" means any of (a) the filing by a Person of a
voluntary petition in bankruptcy under any provision of any
bankruptcy law or a petition to take advantage of any insolvency act,
(b) the admission in writing by Parent or the Company of its
inability to pay its debts generally as they become due, (c) the
appointment of a receiver or receivers for all or a material part of
a Person's assets with the consent of such Person, (d) the filing of
any bankruptcy, arrangement or reorganization petition by or, with
the consent of a Person, against such Person under any provision of
any bankruptcy law, (e) a receiver, liquidator or trustee of a Person
or a substantial part of its assets shall be appointed pursuant to
the Federal Bankruptcy Code by the order of a court of competent
jurisdiction which shall not be dismissed or stayed within thirty
(30) days, or (f) an involuntary petition to reorganize or liquidate
a Person pursuant to the Federal Bankruptcy Code shall be filed
against such Person and shall not be dismissed or stayed within
thirty (30) days.
"Event of Default" is defined in Section 8.1.
"Excess Interest" is defined in Section 2.8.
"Fiscal Year" means a twelve (12) month period ending December 31.
"Fiscal Quarters" means the three (3) month periods falling in each
Fiscal Year ending March 31, June 30, September 30 and December 31.
"Fixed Charges" means, for any period, the total of the following for
Parent and the Company calculated on a consolidated basis without
duplication for such period: (A) cash interest expense; plus (B) cash
federal and state income taxes paid; plus (C) scheduled amortization
of Indebtedness paid or payable (excluding, to the extent included,
nonpermanent principal repayments under the Revolving Loans (as
defined in the Senior Loan Agreement) and scheduled principal
payments with respect to the unsecured promissory notes issued to
trade creditors and the Company's auditors).
"GAAP" means generally accepted accounting principles, applied on a
consistent basis, as set forth in Opinions of the Accounting
Principles Board of the American Institute of Certified Public
Accountants and/or in statements of the Financial Accounting
Standards Board and/or their respective successors and which are
applicable in the circumstances as of the date in question, provided,
that neither Parent nor any Subsidiary may change the use or
application of any accounting method, practice or principle without
the prior written consent of the Holder, which consent may require
that an adjustment be made to any and all the financial covenants and
the capital expenditure covenant set forth herein. Accounting
principles are applied on a "consistent basis" when the accounting
principles observed in a current period are comparable in all
material respects to those accounting principles applied in a
preceding period.
"Golden State Litigation" means any litigation commenced or claims
asserted (whether now existing or hereafter arising) by the Parent,
Company or any Subsidiary against Golden State Container, Inc. n/k/a
Victory Packaging, Inc., David Rapson, Pete Dougherty, Fred Brown,
Jeff Barber, Mason Shelby, Ron Sheldon, Dawn Berti, Mike O'Malley,
George Miller, Cheryl Becker, Tomas Toro or any other former
employees of Parent, or the Company or any of their respective
successors and assigns.
"Holder" when used in reference to the Priority Senior Subordinated
Notes and/or the Priority Senior Subordinated Obligations, means the
Person or Persons who, at the time of determination, is the lawful
owner of all or a portion of Priority Senior Subordinated Notes or an
obligee of all or a portion of the Priority Senior Subordinated
Obligations. Unless otherwise provided in this Agreement, in each
instance that the Holder is required to request or consent in concert
to or otherwise express approval of an action, the Holder will be
deemed to have requested or consented to such action or given such
approval if the Holders of a majority-in-interest of the Priority
Senior Subordinated Notes so request, consent or approve.
"Impositions" is defined in Section 6.9.
"Indebtedness" means for any Person: (a) all indebtedness, whether
or not represented by bonds, debentures, notes, securities, or other
evidences of indebtedness, for the repayment of money borrowed,
(b) all indebtedness representing deferred payment of the purchase
price of property or assets, (c) all indebtedness under any lease
which, in conformity with GAAP, is required to be capitalized for
balance sheet purposes and leases of property or assets made as a
part of any sale and lease-back transaction if required to be
capitalized, (d) all indebtedness under guaranties, endorsements,
assumptions, or other contractual obligations, including any letters
of credit, or the obligations in respect of, or to purchase or
otherwise acquire, indebtedness of others, (e) all indebtedness
secured by a Lien existing on property owned, subject to such Lien,
whether or not the indebtedness secured thereby shall have been
assumed by the owner thereof, (f) trade accounts payable more than
one hundred twenty (120) days past due, and (g) all amendments,
renewals, extensions, modifications and refundings of any
indebtedness or obligations referred to in clauses (a), (b), (c),
(d), (e) or (f).
"Intellectual Property" means all patents, patent rights, patent
applications, licenses, inventions, trade secrets, know-how,
proprietary techniques (including processes and substances),
trademarks, service marks, trade names and copyrights.
"Junior Lenders" means Rice Partners II, L.P., F-Southland, L.L.C.,
and FF-Southland, L.P., solely for purposes of and as defined in,
that certain Note Purchase Agreement dated as of February 28, 1997.
"Junior Note Documents" means that certain Note Purchase Agreement
dated February 28, 1997, and the amendments thereto, together with
all documents, agreements, notes and instruments delivered pursuant
thereto in connection with or arising from the purchase of the Senior
Subordinated Notes and equity interests related thereto.
"Lien" means any lien, mortgage, security interest, tax lien, pledge,
encumbrance, financing statement, or conditional sale or title
retention agreement, or any other interest in property designed to
secure the repayment of Indebtedness or any other obligation, whether
arising by agreement, operation of law, or otherwise.
"Material Adverse Effect" means (a) a material adverse effect upon
the business, operations, properties, assets or condition (financial
or otherwise) of Parent or the Company or (b) the impairment of the
ability of any party to perform its obligations under this Agreement
or any of the Other Agreements to which it is a party or of Purchaser
to enforce or collect any of the Priority Senior Subordinated
Obligations. In determining whether any individual event would
result in a Material Adverse Effect, notwithstanding that such event
does not of itself have such effect, a Material Adverse Effect shall
be deemed to have occurred if the cumulative effect of such event and
all other then existing events would result in a Material Adverse
Effect.
"Maximum Rate" is defined in Section 2.8.
"Net Income" means, for any period and any Person, such Person's
consolidated net income (or loss), but excluding: (a) the income of
any other Person (other than its subsidiaries) in which such Person
or any of its subsidiaries has an ownership interest, unless received
by such Person or its subsidiary in a cash distribution; (b) any
after-tax gains or losses attributable to asset disposition; and (c)
to the extent not included in clauses (a) and (b) above, any after-
tax extraordinary, non-cash or nonrecurring gains or losses.
"Operating Cash Flow" means, for any period, the total of the
following for Parent and the Company calculated on a consolidated
basis without duplication for such period: (a) EBITDA; minus (b) all
Capital Expenditures which are not financed with Indebtedness of the
Company permitted by Section 12.1(f) of the Senior Loan Agreement but
including Capital Expenditures financed with proceeds of the
Revolving Loans (as defined in the Senior Loan Agreement).
"Other Agreements" means the Priority Senior Subordinated Notes, the
Purchase Documents, Parent Guaranty, Company Guaranty and all other
agreements, instruments and documents (including, without limitation,
notes, guarantees, powers of attorney, consents, assignments,
contracts, notices, subordination agreements and all other written
matter), and all renewals, modifications and extensions thereof,
whether heretofore, now or hereafter executed by or on behalf of
Parent and/or any Subsidiary of the Company and delivered to and for
the benefit of Purchaser or any Person participating with Purchaser
in the Priority Senior Subordinated Notes with respect to this
Agreement or any of the transactions contemplated by this Agreement.
The Other Agreements shall not include any Senior Loan Documents.
"Parent" means Jotan, Inc., a Florida corporation and, unless the
context requires otherwise, shall include its Subsidiaries, if any.
"Parent Guaranty" means the guaranty of Parent in favor of Purchaser,
in form and substance satisfactory to Purchaser, as the same may be
amended or otherwise modified from time to time.
"Pension Plan" means any employee pension benefit plan, as defined in
Section 3(2) of ERISA, which is, was or will be established or
maintained by any member of the Controlled Group.
"Permitted Indebtedness" means (a) any Indebtedness in favor of the
Senior Lender under the Senior Loan Agreement and created pursuant
thereto, (b) any Indebtedness in favor of any Holder and/or the Other
Agreements and created pursuant thereto, (c) any Indebtedness in
favor of the Junior Lenders under the Junior Note Documents and
created pursuant thereto, (d) purchase money Indebtedness of the
Company (including Capital Lease Obligations) incurred after February
28, 1997 not to exceed $1,500,000 in the aggregate at any time
outstanding secured by purchase money Liens permitted hereunder
subject to the limitations placed on Capital Expenditures in Section
7.7, (e) the other Indebtedness set forth on Schedule 11.1(a) and
approved by the Purchaser, (f) guaranties by Parent or Company of
such Indebtedness and (g) any other Indebtedness permitted by the
Senior Loan Agreement.
"Permitted Investments" means the following:
(a) securities issued or directly and fully guaranteed or
insured by the United States Government or any agency or
instrumentality thereof (provided that the full faith and credit of
the United States Government is pledged in support thereof), having
maturities of not more than twelve (12) months from the date of
acquisition;
(b) time deposits and certificates of deposit (i) of any
commercial bank incorporated in the United States of recognized
standing having capital and surplus in excess of $100,000,000 with
maturities of not more than twelve months from the date of
acquisition or (ii) which are fully insured by the Bank Insurance
Fund with maturities of not more than twelve (12) months from the
date of acquisition;
(c) commercial paper issued by any Person incorporated in the
United States rated at least A-1 or the equivalent thereof by
Standard & Poor's Corporation or at least P-1 or the equivalent
thereof by Moody's Investors Service, Inc. and in each case maturing
not more than twelve (12) months after the date of acquisition;
(d) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in
clauses (a) through (c) above; or
(e) advances, loans, extensions of credit or capital
contributions and investments permitted by the Senior Loan Agreement.
"Permitted Liens" means (a) Liens in favor of the Senior Lender under
the Senior Loan Documents created in accordance with the terms
thereof as in effect on the date hereof, (b) Liens securing purchase
money Indebtedness incurred to finance the acquisition of capital
assets by the Company, subject to the limitations placed on Capital
Expenditures in Section 7.7 hereof, but only so long as (i) such Lien
attaches only to the asset so financed, (ii) the Indebtedness secured
by such Lien does not exceed one hundred percent (100%) of the
purchase price, including installation and freight, of the asset so
financed and (iii) no Event of Default or Potential Default has
occurred and is continuing, (c) Liens for property taxes not yet due,
(d) materialmen's, mechanics', worker's, repairmen's, employees' or
other like Liens arising against the Company in the ordinary course
of business, in each case which are either not delinquent or are
being contested in good faith and by appropriate actions or
proceedings conducted with due diligence and for the payment of which
adequate reserves in accordance with GAAP have been established with
respect thereto, (e) deposits to secure payment of worker's
compensation, unemployment insurance or other social security
benefits and (f) Liens disclosed on Schedule 11.1(b) and replacements
of such Liens so long as such Lien does not extend beyond the
property or asset then subject to such Lien and (g) other Liens
permitted by the Senior Loan Agreement.
"Person" means any individual, sole proprietorship, corporation,
business trust, unincorporated organization, association, company,
partnership, joint venture, governmental authority (whether a
national, federal, state, county, municipality or otherwise, and
shall include without limitation any instrumentality, division,
agency, body or department thereof), or other entity.
"PIK Interest" is defined in Section 2.1(b).
"PIK Notes" is defined in Section 2.1(b).
"Potential Default" means the occurrence of any condition or event
which, with the passage of time or giving of notice or both, would
constitute an Event of Default.
"Preferred Stock" means, collectively, the $0.01 par value Series A
Convertible Preferred Stock and the $0.01 par value Series B
Redeemable Preferred Stock of Parent.
"Prepayment Fee" is defined in Section 2.2 and includes any
Prepayment Fee arising as a result of the Holder's exercise of their
rights and remedies under Section 8.2.
"Priority Senior Subordinated Notes" means the term promissory notes
issued to Purchaser pursuant to this Agreement, including all PIK
Notes issued as evidence of the Company's obligation to pay PIK
Interest pursuant to Section 2.1(b) hereof, together with all
renewals, modifications, extensions, substitutions and replacements
thereof.
"Priority Senior Subordinated Obligations" means and includes any and
all Indebtedness and/or liabilities of Parent, Company or any
Subsidiary to Purchaser of every kind, nature and description, direct
or indirect, secured or unsecured, joint, several, joint and several,
absolute or contingent, due or to become due, now existing or
hereafter arising under this Agreement or any Other Agreement
(regardless of how such Indebtedness or liabilities arise or by what
agreement or instrument they may be evidenced or whether evidenced by
any agreement or instrument) and all obligations of Parent, Company,
or Subsidiary to Purchaser to perform acts or refrain from taking any
action under any of the aforementioned documents, together with all
renewals, modifications, extensions, increases, substitutions or
replacements of any such Indebtedness.
"Priority Shareholder Agreement" means that certain Priority
Shareholders' Agreement dated as of the date hereof among Parent,
Purchaser, and the other parties thereto, as the same may be amended,
modified, extended or restated from time to time.
"Property" means all real property owned, leased or operated by
Parent or any Subsidiary thereof.
"Purchase Agreement" means that Priority Warrant Purchase Agreement
dated as of April 14, 1998 executed by and between Parent and
Purchaser and the other parties named therein, with respect to the
issuance to Purchaser of the Warrant.
"Purchase Documents" means, collectively, (a) the Warrant, (b) the
Purchase Agreement, and (c) the Priority Shareholder Agreement dated
as of April 14, 1998 executed by Purchaser, Parent and the other
parties named therein, as each of the foregoing may be amended from
time to time.
"Purchaser" means Rice, together with its transferees, successors and
assigns of the Priority Senior Subordinated Notes or the Priority
Senior Subordinated Obligations and any nominees on whose behalf any
of the foregoing purchase or otherwise acquire any of such
Indebtedness of the Company, and shall include, but not be limited
to, each and every "Holder" as defined herein.
"Reportable Event" means (i) any of the events set forth in Sections
4043(b) (other than a merger, consolidation or transfer of assets in
which no Pension Plan involved has any unfunded benefit liabilities),
4068(f) or 4063(a) of ERISA, (ii) any event requiring any member of
the Controlled Group to provide security under Section 401(a)(29) of
the Code, or (iii) any failure to make payments required by
Section 412(m) of the Code.
"Securities" means any stock, shares, options, warrants, voting trust
certificates, or other instruments evidencing an ownership interest
or a right to acquire an ownership interest in a Person or any bonds,
debentures, notes or other evidences of indebtedness, secured or
unsecured.
"Selling Shareholder Arbitration" means any arbitration, claim,
demand or proceeding commenced by or against the Company and/or
Parent (whether now existing or hereafter arising) and involving
Lester G. Gegenheimer, John L. Sanders, Jr., and William P. Blincoe,
as sellers of all of the issued and outstanding capital stock of the
Company to Parent's designee as of February 28, 1997.
"Senior Agent" means Banque Paribas, a bank organized under the laws
of France, as agent for the Senior Lenders, and its successors and
assigns.
"Senior Debt" shall have the same meaning as set forth in the Senior
Subordination Agreement.
"Senior Lender" means individually and collectively, as the context
requires, the Persons who are now or may from time to time become
lenders under the Senior Loan Agreement, and any Person or Persons
who replaces or refinances the Senior Debt under the terms set forth
in Section 7.1(c).
"Senior Loan Agreement" means the Credit Agreement by and among
Parent, the Company, the Senior Agent and the Senior Lender, dated as
of the February 28, 1997, as amended by that certain letter amendment
dated April 30, 1997, that certain Second Amendment to Credit
Agreement dated as of June 20, 1997, that certain Third Amendment to
Credit Agreement dated as of August 20, 1997, that certain Fourth
Amendment to Credit Agreement dated as of November 6, 1997, and that
certain Fifth Amendment to Credit Agreement dated as of April 14,
1998 and as further amended from time to time in accordance with the
express provisions of the Senior Subordination Agreement, and all
documents and instruments delivered pursuant thereto in connection
with the loans and advances made thereunder.
"Senior Loan Amendment" means the Fifth Amendment to Credit Agreement
by and among Parent, the Company, the Senior Agent, and the Senior
Lender dated as of April 14, 1998, and all documents and instruments
delivered pursuant thereto or in connection therewith.
"Senior Loan Documents" means the Senior Loan Agreement and all
amendments thereto, including the Senior Loan Amendment, the "Loan
Documents" (as defined in the Senior Loan Agreement), and all
agreements, documents and instruments executed in connection
therewith or contemplated thereby, and all amendments to all the
foregoing.
"Senior Subordinated Notes" means the term promissory notes issued to
each Junior Lender pursuant to the Junior Note Documents, together
with all renewals, modifications, extensions, substitutions and
replacements thereof.
"Senior Subordinated Obligations" means and includes any and all
Indebtedness and/or liabilities of Parent, the Company and any
Subsidiary to each Purchaser under the Junior Note Documents of every
kind, nature and description, direct or indirect, secured or
unsecured, joint, several, joint and several, absolute or contingent,
due or to become due, now existing or hereafter arising, under such
Junior Note Documents (regardless of how such Indebtedness or
liabilities arise or by what agreement or instrument they may be
evidenced or whether evidenced by any agreement or instrument) and
all obligations of Parent, Company, and any Subsidiary to each
Purchaser to perform acts or refrain from taking any action under any
of the aforementioned documents, together with all renewals,
modifications, extensions, increases, substitutions or replacements
of any of such Indebtedness.
"Senior Subordination Agreement" means that certain Senior
Subordination Agreement dated as of February 28, 1997, by and among
the Senior Agent, Rice Partners II, L.P., F-Southland, L.L.C., and
FF-Southland, L.P., as amended as of April 14, 1998, and as the same
may be further amended, modified, extended or restated from time to
time, including as amended by that certain First Amendment to Senior
Subordination Agreement dated as of April 14, 1998.
"Subsidiary" means any Person of which or in which the Company and
its other Subsidiaries or Parent and its Subsidiaries, as the context
requires, own directly or indirectly fifty percent (50%) or more of
(a) the combined voting power of all classes having general voting
power under ordinary circumstances to elect a majority of the board
of directors or equivalent body of such Persons, if it is a
corporation, (b) the capital interest or profits interest of such
Person, if it is a partnership, joint venture or similar entity, or
(c) the beneficial interest of such Person if it is a trust,
association or other unincorporated organization.
"Termination Date" means the earliest to occur of (a) February 28,
2003, (b) the date on which the Priority Senior Subordinated Notes
are accelerated pursuant to Article VIII or (c) the date on which the
Priority Senior Subordinated Obligations are paid in full.
"Termination Event" means (a) a Reportable Event, (b) the termination
of a Pension Plan which has unfunded benefit liabilities (including
an involuntary termination under Section 4042 of ERISA), (c) the
filing of a Notice of Intent to Terminate a Pension Plan, (d) the
initiation of proceedings to terminate a Pension Plan under
Section 4042 of ERISA or (e) the appointment of a trustee to
administer a Pension Plan under Section 4042 of ERISA.
"Transfer" is defined in Section 12.5 hereof.
"Transferee" means any Person to whom a Transfer is made.
"Warrants" is defined in the Purchase Documents and shall be
denominated as set forth therein.
Terms which are defined in other Sections of this Agreement shall have the
meanings specified therein. All other terms contained in this Agreement
shall have, when the context so indicates, the meanings provided for by
the Uniform Commercial Code as adopted and in force in the State of
Florida, as from time to time in effect.
11.2 Accounting Principles. Where the character or amount of any
asset or liability or item of income or expense is required to be
determined or any consolidation or other accounting computation is
required to be made for the purposes of this Agreement, the same shall be
done, unless specified otherwise, in accordance with GAAP, except where
such principles are inconsistent with the requirements of this Agreement.
11.3 Directly or Indirectly. Where any provision in this Agreement
refers to action to be taken by any Person, or which such Person is
prohibited from taking, such provision shall be applicable whether the
action in question is taken directly or indirectly by such Person.
11.4 References. When used in this Agreement, the words "hereof",
"herein" and "hereunder" and words of similar import shall refer to this
Agreement as a whole and not to any particular provision of this
Agreement, and the words "Article", "Section", "subsection", "clause",
"Annex", "Schedule" and "Exhibit" refer to Articles, Sections, subsections
and clauses of, and Annexes, Schedules and Exhibits to, this Agreement
unless otherwise specified.
XII. MISCELLANEOUS
12.1 Expenses. The Company agrees to pay (a) all out-of-pocket
expenses of Purchaser (including reasonable fees, expenses and
disbursements of each Purchaser's counsel) in connection with the
preparation, negotiation, enforcement, operation and administration of
this Agreement, the Priority Senior Subordinated Notes, the Other
Agreements, or any documents executed in connection therewith, or any
waiver, modification or amendment of any provision hereof or thereof; and
(b) if an Event of Default occurs, all court costs and costs of
collection, including, without limitation, reasonable fees, expenses and
disbursements of counsel employed in connection with any and all
collection efforts. The attorneys' fees arising from such services,
including those of any appellate proceedings, and all expenses, costs,
charges and other fees incurred by such counsel or Purchaser in any way or
respect arising in connection with or relating to any of the events or
actions described in this Article XII shall be payable by the Company to
Purchaser, on demand, and shall be additional Priority Senior Subordinated
Obligations. Without limiting the generality of the foregoing, such
expenses, costs, charges and fees may include: recording costs, appraisal
costs, paralegal fees, costs and expenses; accountants' fees, costs and
expenses; court costs and expenses; photocopying and duplicating expenses;
court reporter fees, costs and expenses; long distance telephone charges;
air express charges, telegram charges; facsimile charges; secretarial
overtime charges; and expenses for travel, lodging and food paid or
incurred in connection with the performance of such legal services. The
Company agrees to indemnify Purchaser from and hold it harmless against
any documentary taxes, assessments or charges made by any governmental
authority by reason of the execution and delivery by the Company or any
other Person of this Agreement, the Other Agreements, and any documents
executed in connection therewith.
12.2 Indemnification. IN ADDITION TO AND NOT IN LIMITATION OF THE
OTHER INDEMNITIES PROVIDED FOR HEREIN OR IN ANY OTHER AGREEMENTS, THE
COMPANY HEREBY INDEMNIFIES AND AGREES TO HOLD HARMLESS PURCHASER AND ANY
OTHER HOLDERS, AND EVERY AFFILIATE OF ANY OF THE FOREGOING, AND THEIR
RESPECTIVE OFFICERS, DIRECTORS, MANAGERS, EMPLOYEES AND AGENTS, FROM ANY
CLAIMS, ACTIONS, DAMAGES, COSTS, ATTORNEYS' FEES AND EXPENSES (INCLUDING
ANY OF THE SAME ARISING OUT OF THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE
PERSON TO BE INDEMNIFIED) TO WHICH ANY OF THEM MAY BECOME SUBJECT, INSOFAR
AS SUCH LOSSES, LIABILITIES, CLAIMS, ACTIONS, DAMAGES, COSTS AND EXPENSES
ARISE FROM OR RELATE TO THIS AGREEMENT OR THE OTHER AGREEMENTS, OR ANY OF
THE TRANSACTIONS CONTEMPLATED THEREBY, OR FROM ANY INVESTIGATION,
LITIGATION, OR OTHER PROCEEDING, INCLUDING, WITHOUT LIMITATION, ANY
THREATENED INVESTIGATION, LITIGATION OR OTHER PROCEEDING RELATING TO ANY
OF THE FOREGOING, OR FROM ANY VIOLATION OR CLAIM OF VIOLATION OF ANY
APPLICABLE ENVIRONMENTAL LAWS WITH RESPECT TO ANY REAL OR PERSONAL
PROPERTY, OR FROM ANY GOVERNMENTAL OR JUDICIAL CLAIM, ORDER OR JUDGMENT
WITH RESPECT TO ANY REAL OR PERSONAL PROPERTY OF THE COMPANY, OR FROM ANY
BREACH OF THE WARRANTIES, REPRESENTATIONS OR COVENANTS CONTAINED IN THIS
AGREEMENT OR THE OTHER AGREEMENTS. THE FOREGOING INDEMNIFICATION INCLUDES
ANY SUCH CLAIMS, ACTIONS, DAMAGES, COSTS, AND EXPENSES INCURRED BY REASON
OF THE SOLE OR CONTRIBUTORY NEGLIGENCE OF THE PERSON TO BE INDEMNIFIED,
BUT EXCLUDES ANY OF THE SAME INCURRED BY REASON OF SUCH PERSON'S GROSS
NEGLIGENCE OR WILLFUL MISCONDUCT.
12.3 Notices. Except as otherwise expressly provided herein, all
communications provided for hereunder shall be in writing and delivered or
mailed by the United States mails, certified mail, return receipt
requested, (a) if to Purchaser, addressed to the Purchaser at the address
specified on Annex I hereto or to such other addresses as the Purchaser
may in writing designate, (b) if to any other Holder, addressed to such
Holder at such address as such Holder may in writing designate, and (c) if
to Parent or any Subsidiary, addressed to Parent at the address set forth
next to its name on the signature pages hereto or to such other address as
Parent may in writing designate. Notices shall be deemed to have been
validly served, given or delivered (and "the date of such notice" or words
of similar effect shall mean the date) five (5) days after deposit in the
United States mails, certified mail, return receipt requested, with proper
postage prepaid, or upon actual receipt thereof (whether by noncertified
mail, telecopy, telegram, facsimile, express delivery or otherwise),
whichever is earlier.
12.4 Reproduction of Documents. This Agreement and all documents
relating hereto, including, without limitation (a) consents, waivers and
modifications which may hereafter be executed, (b) documents received by
the Purchaser at the closing of the purchase of the Priority Senior
Subordinated Notes, and (c) financial statements, certificates and other
information previously or hereafter furnished to Purchaser, may be
reproduced by the Purchaser by any photographic, photostatic, microfilm,
microcard, miniature photographic or other similar process and Purchaser
may destroy any original document so reproduced. The Company agrees and
stipulates that any such reproduction which is legible shall be admissible
in evidence as the original itself in any judicial or administrative
proceeding (whether or not the original is in existence and whether or not
such reproduction was made by the Company in the regular course of
business) and that any enlargement, facsimile or further reproduction of
such reproduction shall likewise be admissible in evidence; provided that
nothing herein contained shall preclude the Company from objecting to the
admission of any reproduction on the basis that such reproduction is not
accurate, has been altered, is otherwise incomplete or is otherwise
inadmissible.
12.5 Assignment, Sale of Interest. Neither Parent nor the Company
may sell, assign or transfer this Agreement, or the Other Agreements or
any portion thereof, including, without limitation, Parent's or the
Company's rights, title, interests, remedies, powers and/or duties
hereunder or thereunder. Parent and the Company hereby consent to Rice's
participation, sale, assignment, transfer or other disposition
(collectively, a "Transfer"), at any time or times hereafter at the
Company's expense, of this Agreement, or the Other Agreements to which
Parent or any Subsidiary is a party, or of any portion hereof or thereof,
including, without limitation, Rice's rights, title, interests, remedies,
powers and/or duties hereunder or thereunder; provided, however, that
except in the case of an assignment of all of Purchaser's rights under
this Agreement and the Priority Senior Subordinated Notes, the outstanding
principal amount of the Priority Senior Subordinated Notes of the
assigning Purchaser being assigned, pursuant to each assignment shall in
no event be less than Five Hundred Thousand Dollars ($500,000). In
connection with any Transfer, Parent and the Company agree to cooperate
fully with Rice and any potential Transferee. Such cooperation shall
include, but is not limited to, cooperating with any audits or other due
diligence investigation undertaken by any potential Transferee.
12.6 Successors and Assigns. This Agreement will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns.
12.7 Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and do not constitute a part
of this Agreement.
12.8 Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original, and
it shall not be necessary in making proof of this Agreement to produce or
account for more than one such counterpart or reproduction thereof
permitted by Section 12.3.
12.9 Reliance on and Survival Provisions. All covenants,
representations and warranties made by Parent and the Company herein and
in any certificates delivered pursuant hereto, whether or not in
connection with a closing, (a) shall be deemed to be material and to have
been relied upon by Purchaser, notwithstanding any investigation
heretofore or hereafter made by Purchaser or on Purchaser's behalf, and
(b) shall survive the delivery of this Agreement and the Priority Senior
Subordinated Notes until all obligations of Parent and the Company under
this Agreement shall have been satisfied.
12.10 Integration and Severability. This Agreement embodies the
entire agreement and understanding between Purchaser, Parent and the
Company, and supersedes all prior agreements and understandings relating
to the subject matter hereof. In case any one or more of the provisions
contained in this Agreement or in the Priority Senior Subordinated Notes,
or any application thereof, shall be invalid, illegal or unenforceable in
any respect, the validity, legality and enforceability of the remaining
provisions contained herein and therein, and any other application
thereof, shall not in any way be affected or impaired thereby.
12.11 Law Governing. ALL OBLIGATIONS, RIGHTS AND REMEDIES
HEREUNDER, SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE INTERNAL LAWS OF THE STATE OF FLORIDA, WITHOUT GIVING
EFFECT TO THE CHOICE-OF-LAW RULES THEREOF. THE PRIORITY SENIOR
SUBORDINATED NOTES SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN
ACCORDANCE WITH THE LAWS OF THE STATE SPECIFIED THEREIN. PURCHASER
RETAINS ALL RIGHTS UNDER THE LAWS OF THE UNITED STATES OF AMERICA,
INCLUDING THOSE RELATING TO THE CHARGING OF INTEREST.
12.12 Waivers; Modification. NO PROVISION OF THIS AGREEMENT MAY
BE WAIVED, AMENDED, CHANGED OR MODIFIED, OR THE DISCHARGE THEREOF
ACKNOWLEDGED, ORALLY, BUT ONLY BY AN AGREEMENT IN WRITING SIGNED BY THE
PARTY AGAINST WHOM THE ENFORCEMENT OF ANY WAIVER, CHANGE, MODIFICATION OR
DISCHARGE IS SOUGHT.
12.13 Waiver of Jury Trial. AFTER REVIEWING THIS SECTION 12.13
WITH ITS COUNSEL, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW,
PARENT, THE COMPANY AND PURCHASER HEREBY KNOWINGLY, INTELLIGENTLY AND
INTENTIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AGREEMENT, THE PRIORITY SENIOR SUBORDINATED NOTES OR ANY DOCUMENTS ENTERED
INTO IN CONNECTION THEREWITH OR THE TRANSACTIONS CONTEMPLATED THEREBY OR
THE ACTIONS OF PURCHASER IN THE NEGOTIATION, ADMINISTRATION, OR
ENFORCEMENT THEREOF. THIS PROVISION IS A MATERIAL INDUCEMENT FOR
PURCHASER TO PURCHASE THE PRIORITY SENIOR SUBORDINATED NOTES FROM THE
COMPANY.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, Parent, the Company and Purchaser have caused this
Agreement to be executed and delivered by their respective officers
thereunto duly authorized.
PARENT:
JOTAN, INC.
By:____________________________
Edward L. Lipscomb,
Chief Financial Officer
Address for Notices for Parent and all Subsidiaries:
118 West Adams Street
Jacksonville, Florida 32202
Attn: Mr. Edward L. Lipscomb
Facsimile: (904) 353-0075
with a copy to:
Foley & Lardner
The Green Leaf Building
200 Laura Street
Jacksonville, Florida 32202-3527
P.O. Box 240
Jacksonville, Florida 32201-0240
Attn: Julie Davis
Facsimile: (904) 359-8700
COMPANY:
SOUTHLAND CONTAINER PACKAGING
CORP.
By:____________________________
Edward L. Lipscomb,
Chief Financial Officer
PURCHASER:
RICE PARTNERS II, L.P.
By: Rice Capital Group IV,
L.P., Its general partner
By: RMC Fund Management,
L.P., Its general partner
By: Rice Mezzanine Corporation, its
general partner
By:____________________________
Jeffrey P. Sangalis
Managing Director
<PAGE>
STATE OF __________ ]
]
COUNTY OF ________ ]
This instrument was acknowledged before me on this ___ day of
_____________, 1998 by Edward L. Lipscomb, Chief Financial Officer of
Jotan, Inc.
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
STATE OF _________ ]
]
COUNTY OF ________ ]
This instrument was acknowledged before me on this ___ day of
_____________, 1998 by Edward L. Lipscomb, Chief Financial Officer of
Southland Container Packaging Corp.
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
STATE OF __________ ]
]
COUNTY OF ________ ]
This instrument was acknowledged before me on this ___ day of
_____________, 1998 by Jeffrey P. Sangalis, Managing Partner of Rice
Mezzanine Corporation, as general partner of RMC Fund Management, L.P., as
general partner of Rice Capital Group IV, L.P. as general partner for Rice
Partners II, L.P.
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
<PAGE>
Annex I
to
Note Purchase Agreement
Information Concerning Rice
Rice: Rice Partners II, L.P.
Principal Amount of
Priority Senior Subordinated Notes: $1,250,000.00
Denomination of Warrants:
To be determined in accordance with the Purchase Documents.
Address for notices:
Rice Partners II, L.P.
c/o Rice Capital Group IV, L.P.
5847 San Felipe, Suite 4350
Houston, Texas 77057
Attn: Jeffrey P. Sangalis
Facsimile: (713) 783-9750
and with a copy to:
Patton Boggs, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
Facsimile: (214) 871-2688
Payments to be made
by wire transfer to:
Southwest Bank of Texas, N.A.
Houston, Texas
ABA Routing #113011258
Accounting #9048545
For the Account of:
Rice Partners II, L.P.
Money Market Account #9020012
re: Southland Container Packaging Corp.
12.5% Senior Subordinated Note
<PAGE>
Schedule 4.7
to
Note Purchase Agreement
Capitalization
<PAGE>
Exhibit A
to
Priority Note Purchase Agreement
Form of Priority Senior Subordinated Note
<PAGE>
Exhibit A-1
to
Priority Note Purchase Agreement
Priority Senior Subordinated Notes
Form of PIK Note
<PAGE>
Exhibit B
to
Note Purchase Agreement
Form of Officer's Compliance Certificate
PRIORITY WARRANT PURCHASE AGREEMENT
PRIORITY WARRANT PURCHASE AGREEMENT (this "Agreement") made as of
April 14, 1998 by and between JOTAN, INC., a Florida corporation (the
"Company") and RICE PARTNERS II, L.P., a Delaware limited partnership
("Rice" or "Purchaser").
W I T N E S S E T H:
WHEREAS, Rice will acquire certain rights and benefits herein and in
the Priority Shareholder Agreement (as hereinafter defined) in
consideration of providing additional financing to the Southland Container
Packaging Corp. ("Southland") pursuant to the terms of the Priority Note
Purchase Agreement entered into by and among the Company, Southland and
Rice dated of even date with this Agreement (the "Priority Note
Agreement") and as more fully described in Section 11.18 of the Priority
Shareholder Agreement;
WHEREAS, the Company, F-Southland, L.L.C. and FF-Southland, L.P.
(collectively, the "Southland Purchasers"), F-Jotan, L.L.C. ("F-Jotan")
and Shea E. Ralph (the "Shareholder") have entered into a Priority
Shareholder Agreement dated of even date with this Agreement (the
"Priority Shareholder Agreement") with Rice; and
WHEREAS, Rice is willing to enter into and consummate the
transactions contemplated by the Priority Note Agreement only if, among
other things, the Company and Southland enter into, and perform under,
this Agreement and the Priority 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, Rice 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
Holders 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
Holders 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 Holders 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 Priority
Shareholder Agreement.
Call Option. This term is defined in Section 5.01 of the Priority
Shareholder Agreement.
Call Option Closing. This term is defined in Section 5.04 of the
Priority Shareholder Agreement.
Call Option Period. This term is defined in Section 5.01 of the
Priority 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,
warrant, preferred stock (including the Series A Preferred Stock and
Series B 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.
Closing Date. As of April 14, 1998.
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
Priority Shareholder Agreement.
Co-Sellers. This term is defined in Section 6.02(d) of the Priority
Shareholder Agreement.
Dilution Fee. This term is defined in Article III of the Priority
Shareholder Agreement.
Election Notice. This term is defined in Section 6.02(b) of the
Priority Shareholder Agreement.
Excess Consideration. The amount that 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
Priority Shareholder Agreement.
Exchange Company. This term is defined in Section 7.12 of the
Priority Shareholder Agreement.
Exchange Notice. This term is defined in Section 7.12 of the
Priority 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. Rice, and all other Persons holding Registrable Securities
so long as Rice or such other Person holds Registrable Securities,
except that none of the Company, F-Jotan, the Southland Purchasers,
Shareholder or any Affiliate of the Company, F-Jotan, the Southland
Purchasers or the Shareholder will at any time be Holders. Unless
otherwise provided in this Agreement, in each instance that Rice is
required to request or consent to or otherwise approve an action,
Rice 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 Rice hereunder so request,
consent or otherwise approve.
Indemnified Party. This term is defined in Section 6.01 hereof and
in Section 12.01 of the Priority Shareholder Agreement.
Initial Holders. Rice and any Affiliate of Rice to which the Warrant
or any part of or interest in the Warrant 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 Warrant.
Issued Warrant Shares. Shares of Common Stock or Other Securities
issued on exercise of the Warrant.
Negotiation Period. This term is defined in the definition of Fair
Market Value.
New Securities. Any Capital Stock other than the Warrant Shares,
Warrant Shares as defined in the Other Purchase Agreements (as
defined in the preamble of the Priority Shareholder Agreement) and
other than the Permitted Stock.
Notice of Sale. This term is defined in Section 6.02(a) of the
Priority 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 Warrant.
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 of the Other
Purchase Agreements.
Preferred Stock. This term means collectively, Series A Preferred
Stock and Series B Preferred Stock.
Priority Note. All or any portion of the Priority Senior
Subordinated Note (as defined in the Priority Note Agreement) and any
and all documents evidencing the indebtedness under the Priority Note
and any refinancing, refunding, or replacement of the Priority Note.
Priority Note Agreement. This term is defined in the preamble and
includes the Priority Note Purchase Agreement of even date with this
Agreement among the Company, Southland and Rice and all documents
evidencing indebtedness thereunder or otherwise related to the
Priority Note Agreement as the same may be amended from time to time,
and any refinancing, refunding, or replacements of the indebtedness
under the Priority Note Agreement.
Priority Purchase Agreement. This term is defined in the preamble to
the Priority Shareholder Agreement and includes this Agreement and
all documents related to this Agreement as this Agreement may be
amended from time to time.
Priority Shareholder Agreement. This term as used and defined in the
preamble means the Priority Shareholder Agreement dated as of April
14, 1998, among the Company, the Shareholder, F-Jotan, the Southland
Purchasers and the Purchaser in substantially the form attached to
this Agreement as Annex A and incorporated in this Agreement by
reference.
Purchaser. This term is defined in the preamble.
Put Option. This term is defined in Section 4.01 of the Priority
Shareholder Agreement.
Put Option Closing. This term is defined in Section 4.05 of the
Priority Shareholder Agreement.
Put Option Period. This term is defined in Section 4.01 of the
Priority Shareholder Agreement.
Put Price. This term is defined in Section 4.02 of the Priority
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, and (b) the
Issued Warrant Shares.
Related Party. An entity wholly owned by a Selling Shareholder or
one or more Related Parties.
Rice. The term is defined in the Preamble.
Selling Shareholder. This term is defined in Section 6.02 of the
Priority Shareholder Agreement.
Securities Act. The Securities Act of 1933, as amended, and the
rules and regulations thereunder.
Senior Lender. This term is defined in Section 11.1 of the Priority
Note Agreement.
Senior Loan Agreement. This term is defined in Section 11.1 of the
Priority Note Agreement.
Senior Subordination Agreement. This term is defined in Section 11.1
of the Priority 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
Restated Articles of Incorporation of the Company, as amended.
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 Restated Articles of Incorporation
of the Company, as amended.
Shareholder. This term is defined in the preamble.
Southland. Southland Container Packaging Corp., a Texas corporation,
is the wholly-owned subsidiary of the Company, successor by merger to
SHC Acquisition Corp. and formerly called Southland Holding Company
(also successor by merger to Atlantic Bag & Paper Company and all the
subsidiaries of Southland Holding Company existing on February 28,
1997).
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 or Priority Warrant. The Priority Warrant referred to in
Section 2.01(a) issued to Rice pursuant to Sections 2.01(a) and 4.13
hereof, and all Warrants issued upon the transfer or division of, or
in substitution for, such Warrant.
Warrant Shares. The Issued Warrant Shares and the Issuable Warrant
Shares in respect of the Priority Warrant.
Article II
The Warrant
2.01 The Warrant.
(a) On the Closing Date, Rice agrees to purchase from the Company at
the purchase price of $100, and the Company agrees to issue to Rice for
such price, all in accordance with the terms and conditions of this
Agreement, including Section 4.13 hereof, a Warrant (relating to the
Priority Note) in substantially the form attached to this Agreement as
Annex B and incorporated in this Agreement by reference, to purchase the
number of shares of Common Stock set forth beneath the name of Rice on the
signature page of this Agreement for such Warrant, which may be adjusted
pursuant to Section 4.13 below;
2.02 Legend. The Company will deliver to Rice on the Closing Date
one or more certificates representing the Warrant purchased by Rice in
such denominations as Rice requests. Such certificates will be issued in
the name of Rice 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 Warrant will bear the
following legends:
"THIS PRIORITY 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 PRIORITY
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, AND THE TEXAS SECURITIES ACT OF
1957, 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 PRIORITY WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE
HEREOF ARE SUBJECT TO THE TERMS AND PROVISIONS OF A PRIORITY WARRANT
PURCHASE AGREEMENT, DATED AS OF APRIL 14, 1998, BETWEEN RICE PARTNERS
II, L.P. ("RICE") AND JOTAN, INC. (THE "COMPANY"), AND A PRIORITY
SHAREHOLDER AGREEMENT, DATED AS OF APRIL 14, 1998, BY AND AMONG THE
COMPANY, RICE, F-SOUTHLAND, L.L.C., FF-SOUTHLAND, L.P., F-JOTAN,
L.L.C. AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES TO SUCH
PRIORITY 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 Warrant; provided, however, that
in no event will the aggregate Exercise Price for all of the shares of
Common Stock covered by the Warrant 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 Warrant may be exercised.
2.04 Exercise of Warrant.
(a) The Warrant may be exercised at any time or from time to
time on or after the Closing Date until March 4, 2005, 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 Holders of such Warrant 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 Warrant. 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 Holders 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 Holders, or, subject to compliance
with transfer and registration requirements under applicable Federal
and state securities laws, such other name as designated in such
notice. The Warrant will be deemed to have been exercised, such
certificate or certificates will be deemed to have been issued, and
such Holders or any other Person so designated or named in such
notice will be deemed to have become holders 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 Holders a new Warrant evidencing the rights of such
Holders 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 Warrant,
or, at the request of such Holders, appropriate notation may be made
on the original Warrant and the original Warrant returned to such
Holders.
(b) Payment of the Exercise Price will be made, at the option
of the Holders, by (i) company or individual check, certified or
official bank check, (ii) cancellation of any debt owed by the
Company to the Holders, or (iii) cancellation of Warrant Shares,
valued at Fair Market Value. If the Holders surrenders a combination
of cash or cancellation of any debt owed by the Company to the
Holders of the Warrant, the Holders 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 Holders may designate that any
cash to be remitted to Holders 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 the Warrant will be made without charge to any
Holders for any tax, other than income taxes assessed on such Holders, in
respect of such issuance.
2.06 Register. The Company will, at all times while the Warrant
remains outstanding, keep and maintain at its principal office a register
in which the registration, transfer, and exchange of the Warrant 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 the Warrant.
2.07 Transfer and Exchange. The Warrant and all options and rights
under the Warrant are transferable in whole or in part, as to all or any
part of the Issuable Warrant Shares purchasable upon its exercise, by the
Holders of the Warrant, in person or by duly authorized attorney, on the
books of the Company upon surrender of the Warrant at the principal
offices of the Company, together with the form of transfer authorization
attached to the Warrant duly executed; provided, however, that such
transfer of the Warrant 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 Priority Shareholder Agreement, the Company
may deem and treat the registered Holders of the Warrant at any time as
the absolute owners of the Warrant for all purposes and will not be
affected by any notice to the contrary. If the Warrant is transferred in
part, the Company will, at the time of surrender of such Warrant issue to
the transferee a Warrant covering the number of shares transferred and to
the transferor a Warrant covering the number of shares not transferred.
Notwithstanding the foregoing, Rice agrees that it will not effect a
transfer of the Warrant to any Person or Affiliate of such Person engaged
in the type of business set forth on Annex I attached to the Other
Purchase Agreement (as defined in the Priority Shareholder Agreement) 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 Warrant will be exercisable for the number of shares of
Common Stock in such manner that, following the complete and full
exercise of the Warrant, 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 the
Warrant, will be entitled to receive for each share of Common
Stock issuable under the Warrant as of the record date fixed for
such distribution, the greatest per share amount of
consideration received by any holders of any class of Common
Stock or Common Stock Equivalent or to which such Holders 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
Holders for purposes of determining the amount of consideration
to which such Holders 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 Holders 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 Holders of the
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 holders of
any class of Common Stock or Common Stock Equivalent that the
Warrant entitles the Holders 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 Warrant, 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 the Warrant 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 Warrant
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
Warrant 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 Warrant.
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 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 Warrant, 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, the Company will (i) take all such
action as may be necessary or appropriate in order that the Company
may validly and legally issue in respect of the Warrant 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 Warrant. Without limiting the generality of the foregoing,
the Company represents and warrants that the board of directors of
the Company has determined, subject to compliance with Section 4.13
hereof, the Exercise Price to be adequate and the issuance of the
Warrant 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.
(e) Notwithstanding the issuance of the Priority Warrant, there
shall be no adjustments under this Section 2.08 or the Certificate
(as defined in Section 4.04 below) with respect to such issuance.
2.09 Lost, Stolen, Mutilated, or Destroyed Instruments. If the
Warrant is lost, stolen, mutilated, or destroyed and if the Company
receives a lost security affidavit containing an indemnification from the
Holders of such Warrant 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 of like denomination, tenor, and date as the
Warrant so lost, stolen, mutilated, or destroyed. Any such new Warrant
will constitute an original obligation of the Company, whether or not the
allegedly lost, stolen, mutilated, or destroyed Warrant is at any time
enforceable by any Person.
2.10 Stock Legend. Without limiting the provisions of Section 2.02
hereof, the Warrant, and the Warrant 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 Warrant and the Warrant Shares under the
Securities Act or under applicable state securities laws, 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, AND THE TEXAS SECURITIES ACT OF 1957, AS AMENDED,
AND (B) ARE SUBJECT TO THE TERMS OF AND PROVISIONS OF A PRIORITY
WARRANT PURCHASE AGREEMENT BETWEEN JOTAN, INC. (THE "COMPANY") AND
RICE PARTNERS II, L.P. ("RICE"), DATED AS OF APRIL 14, 1998, AND A
PRIORITY SHAREHOLDER AGREEMENT, DATED AS OF APRIL 14, 1998, AMONG
COMPANY, RICE, F-SOUTHLAND, L.L.C., FF-SOUTHLAND, L.P., F-JOTAN,
L.L.C. AND THE OTHER PARTIES LISTED ON THE SIGNATURE PAGES OF SUCH
PRIORITY 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."
All shares of Capital Stock of the Company subject to the Priority
Shareholder Agreement will bear a legend to such effect.
Article III
Representations and Warranties
3.01 Representations and Warranties of the Company. The Company
represents and warrants to Rice 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 except where the failure to qualify or be
licensed could have a Material Adverse Effect (as defined in the
Priority Note Agreement). The Company has no Subsidiaries (other
than Southland) or debt or equity investment in any other Person.
Other than Rice, the Southland Purchasers 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.
(b) The Company 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
Priority Shareholder Agreement, the Priority Warrant, and the
officers of Company executing and delivering this Agreement, the
Priority Shareholder Agreement, and the Priority Warrant are duly
authorized to do so; provided, however that the exercise of the
Priority Warrant and the performance of the Company's obligations in
connection therewith are subject to (i) approval of the holders of
Common Stock voting as a class to an amendment to the Restated
Articles of Incorporation of the Company increasing the authorized
Common Stock to an appropriate amount in accordance with applicable
state and securities laws (the "Common Shareholder Approval"); and
(ii) approval of two-thirds of holders of Preferred Stock of the
Company voting as a class in accordance with applicable state and
securities laws ("Preferred Shareholder Approval") and the filing of
such amendment with the Florida Secretary of State; and (iii) the
consent to and waiver of certain rights of F-Jotan and the Southland
Purchasers (collectively, the "Fairview Entities") under the Other
Shareholder Agreements (as defined the Priority Shareholder
Agreement), as amended from time to time (including any preemptive
rights contained therein) and under the Other Purchase Agreements (as
defined in the Priority Shareholder Agreement) of concurrent date
therewith and related agreements, as all have been amended from time
to time. Subject to the foregoing, this Agreement, the Priority
Shareholder Agreement, and the Priority Warrant have been, or will
be, duly and validly executed, issued, and delivered and constitute
the legal, valid, and binding obligations of Company, enforceable in
accordance with their respective terms.
(c) The execution, delivery, and performance of this Agreement,
the Priority Shareholder Agreement, and the Priority Warrant 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; provided that, the Common Shareholder Approval and the
Preferred Shareholder Approval are obtained and the Company's
Restated Articles of Incorporation are amended in accordance with the
Common Shareholder Approval and the Preferred Shareholder Approval.
(d) As of the Closing Date, the authorized capital stock of the
Company will consist of (i) 40,000,000 shares of Common Stock, of
which 21,396,813 shares are issued and outstanding and (ii)
10,000,000 shares of Preferred Stock, of which 1,437,705 shares of
Series A Preferred Stock are issued and outstanding and of which
64,375 shares of Series B Preferred Stock are issued and outstanding.
An aggregate of at least 3,620,473 shares of Common Stock are
reserved for issuance on exercise of the First Supplemental Warrant;
an aggregate of at least 8,475,638 shares of Common Stock are
reserved for issuance on exercise of the Second Supplemental Warrant;
an aggregate of at least 42,377,173 shares of Common Stock, subject
to compliance with the Section 4.13(b) below, will be reserved for
issuance on exercise of the Priority Warrant. All of the issued and
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable. The Common Stock has 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 (w) as otherwise provided in this Agreement, or (x) in
the powers, designations, rights and preferences of the Preferred
Stock contained in the Restated Articles of Incorporation of the
Company, as amended, or (y) as provided in the Shareholder Agreement,
dated as of February 28, 1997, as amended, among F-Jotan, the
Southland Purchasers, the Shareholder, the Company and Rice, as
amended and supplemented (the "Other Shareholder Agreements") and in
compliance with applicable federal and state securities laws. Except
(1) pursuant to this Agreement, the Other Purchase Agreements (as
defined in the preamble of the Priority Shareholder Agreement) and
related Warrants and the Other Shareholder Agreements and (2) for the
Permitted Stock, (A) the Company is not obligated to issue or sell
any Capital Stock, and, except for this Agreement and the Other
Shareholder Agreements, and (B) the Company is not a party to, or
otherwise bound by, any agreement affecting the voting of any Capital
Stock. Except for the Priority Shareholder Agreement and the Other
Shareholder Agreements, 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 shares of Common Stock and other consideration issuable
on exercise of the Priority Warrant when issued in accordance with
the terms of this Agreement or the Warrant, 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 Permitted Liens (as defined the Priority 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 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 Priority Shareholder Agreement will there be, any
agreement, arrangement, or understanding involving the Company, other
than this Agreement, the Priority Shareholder Agreement, the Other
Shareholder Agreements 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 Priority Note Agreement is true and correct
in all material respects.
(j) None of the documents, instruments, or other information
furnished to Rice by the Company, 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 by the Company in this
Agreement, the Priority Note Agreement, or the Priority 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 Priority 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 Rice.
3.02 Representations and Warranties of Rice. Rice represents and
warrants to the Company:
(a) Rice is a limited partnership duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its organization.
(b) Rice has the right and power and is duly authorized to
enter into, execute, deliver, and perform this Agreement and the
Priority Shareholder Agreement, and its officers, managers or agents
executing and delivering this Agreement and the Priority Shareholder
Agreement are duly authorized to do so. This Agreement and the
Priority Shareholder Agreement have been duly and validly executed,
issued and delivered and constitute the legal, valid, and binding
obligation of Rice, enforceable in accordance with their respective
terms.
(c) Rice (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, (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 Warrant and any securities issuable upon exercise of the Warrant,
and the Company has made available to it the opportunity to ask
questions of, and to receive answers and to obtain additional
information from, representatives of the Company; (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 the Warrant and any securities issuable upon
exercise of the Warrant.
(d) Except as otherwise contemplated by this Agreement and the
Priority Shareholder Agreement, Rice is acquiring the Priority
Warrant and any securities issuable upon exercise of the Priority
Warrant for investment for its own account and not with a view to any
distribution thereof in violation of applicable securities laws.
(e) Rice agrees that the certificates representing the Priority
Warrant and any Issued Warrant Shares will bear the legends
referenced in this Agreement, and the Priority Warrant or securities
issuable upon exercise of the Priority Warrant and pursuant to the
Priority 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) Rice is not acquiring the Priority Warrant or any
securities issuable upon exercise of the Priority Warrant based upon
any representation, oral or written, by the Company or any
representative of the Company with respect to the future value of,
income from, or tax consequences relating to, the Priority Warrant or
securities issuable upon exercise of the Priority Warrant, 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 the Priority
Warrant or any securities issuable upon exercise of the Priority
Warrant or any findings as to the fairness of an investment of the
Priority Warrant or any securities issuable upon exercise of the
Priority Warrant.
(g) Rice has no current contract, undertaking, agreement,
arrangement or understanding with any Person to sell, transfer, grant
any participation in, or otherwise distribute the Priority Warrant or
any securities issuable upon exercise of the Priority Warrant to any
Person.
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 Rice
and each other Holders (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, 1997, (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 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
Rice, 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 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 holders of any indebtedness,
including, without limitation the Senior Lender.
(f) Promptly, such additional information concerning the
Company as any Holders 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. For so long as the Second Supplemental Warrant
or the Warrant Shares remain outstanding, 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 Warrant, the Restated Articles of
Incorporation of the Company (sometimes called the "Certificate") or
the Priority 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(h) or 4.10;
(b) except as otherwise permitted in the Certificate or
required by the Priority Shareholder Agreement or the Other
Shareholder Agreements, (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) (as defined in Section 11.1 of the Priority Note Agreement
or the Certificate), or (ii) make any payment or distribution on
account of any Indebtedness (as defined in such Priority Note
Agreement) of the Company which is subordinate to the Senior
Subordinated Notes (as defined in Section 11.1 of the Original Note
Agreement (as defined in the Priority Shareholder Agreement)), and
the Priority Note (except that Subsidiaries may make distributions to
the Company), and (iii) except as otherwise provided for in the
Priority Note Agreement or the Original Note Agreement, pay any
professional consulting or management fees or any other payments to
any shareholder 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 Priority Senior Subordinated Obligations (as defined in Section
11.1 of the Priority Note Agreement) and the Senior Subordinated
Obligations (as defined in Section 11.1 of the Original Note
Agreement) due and payable from the Company or its Subsidiaries to
Rice, and (B) dividends or stock repurchases permitted by the Senior
Loan Agreement (as defined in Section 11.1 of the Priority 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 or any
Subsidiary 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, or pursuant to the express terms of
this Agreement or the Other Shareholder Agreement, issue or sell, or
otherwise dispose of any Capital 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 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 (i) Permitted Indebtedness (as defined in
Section 11.1 of the Priority Note Agreement), and (ii) 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;
(h) allow the aggregate par value of the Capital Stock subject
to the Warrant from time to time to exceed the price payable upon
exercise of the Warrant, as adjusted from time to time; or
(i) obligate itself or otherwise agree to take, permit or enter
into any of the events described in subsections (a) through (h)
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 Rice'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 Priority 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 Warrant), 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 Warrant to the contrary the Holders may
exercise the Warrant 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 Holder 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 Warrant, 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 Warrant,
as the case may be. At the request of any Holders and upon surrender
of the Warrant of such Holders, the Company will reissue such Warrant
of such Holders 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 Priority 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 Priority 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 Priority Note
Agreement).
4.10 Warrant Rights. The Company covenants and agrees that during
the term of this Agreement and so long as the Priority Warrant is
outstanding, (a) the Company will at all times have (except as described
in the next clause of this Subsection (a)) 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 Priority
Warrant and the exercise in full of the rights of the Holders under the
Other Shareholder Agreements and Priority Shareholder Agreement; and to
that end will use its diligent best efforts to obtain the approvals
described in Section 4.13(b) below to amend the Certificate increasing the
number of authorized shares of Common Stock as contemplated in Section
4.13 below as soon as possible, but in no event later than July 15, 1998,
and to issue the Priority Warrant to Rice; (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 Priority Warrant would require the payment by the
Holders 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. Rice is a party to the Other
Purchase Agreements. Section 4.11 of such other agreements shall govern
this Section 4.11 as if such other Section 4.11 were set forth herein at
length.
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.
4.13 Issuance of Warrant.
(a) This Agreement is being executed and delivered and the
Priority Warrant is being issued herein prior to the completion of a
"fairness opinion" requested by the Company from Hoak, Breedlove and
Wesneski of Dallas, Texas. Such opinion is expected to address the
question of whether the number of shares of Common Stock of the Company
issuable on exercise of the Priority Warrant of 42,377,173 shares of
Common Stock in consideration of Rice's subordinated debt being advanced
to Southland by Rice and evidenced by the Priority Note is fair to the
shareholders of the Company from a financial point of view. If the
substance of the fairness opinion indicates that the "fair" number of
shares of Common Stock issuable on exercise of the Priority Warrant as
consideration for such financing to Southland under the Priority Note
Agreement would be equal to or greater than the number of shares issuable
on exercise of the Priority Warrant actually issued to Rice hereunder,
then no change shall be made to the number of shares issuable under the
Priority Warrant. However, if such fairness opinion indicates that the
number of shares of Common Stock issuable on exercise of the Priority
Warrant issuable to Rice is not fair to the shareholders of the Company,
then (i) the number of shares of Common Stock that may be issued on
exercise of the Priority Warrant shall be reduced to the number which the
fairness opinion determines is fair (if so stated), (ii) Rice shall
exchange the Priority Warrant issued originally hereunder for a new,
appropriate Priority Warrant reflecting the "fair" number of Issuable
Warrant Shares, and (iii) the provisions of this Agreement and the Other
Purchase Agreements shall be adjusted to reflect such reduction, all with
the purpose and intent of reflecting the conclusions reached in such
fairness opinion. Notwithstanding the foregoing, if either the Company or
Rice disagree with the methodology or findings of the "fairness opinion"
or such opinion shall not state what number of shares should be issued to
be "fair", the Company and Rice shall negotiate in good faith to agree
upon an appropriate number of Issuable Warrant Shares to be owned by Rice.
If the Company and Rice are unable to so agree within thirty (30) days
after receipt of the "fairness opinion" (or a determination that a
fairness level will not be available from the opining firm), then, on
Rice's request and at the Company's expense, such parties shall select an
Appraiser (in accordance with the procedure set forth in the definition of
Appraised Value) to determine the number of Warrant Shares that should be
issued to Rice to fairly compensate Rice for its $1,250,000 subordinated
debt advance made to Southland pursuant to this Priority Note Agreement.
Such determination shall be made by such Appraiser in a manner which, to
the greatest extent applicable, utilizes the principles and methodologies
described in the definition of "Appraised Value" in Article I above.
(b) The Warrant described in Section 2.01 hereof shall be
issued on the Closing Date, but shall be authorized and exercisable in
accordance with and subject to the following conditions:
(i) The Common Shareholder Approval authorizing an
increase in the authorized shares of Common Stock to not less than
150,000,000 shares and the Preferred Shareholder Approval authorizing
the issuance of the Priority Warrant shall be obtained; and
(ii) The Company shall have issued a proxy statement to its
shareholders of record referring to the transactions contemplated in
this Agreement;
(iii) The Amendment to the Certificate to increase the
authorized shares of Common Stock to the level set forth in Section
4.13(b)(i) above shall have duly approved and filed with the
Secretary of State in the State of Florida; and
(iv) the "fairness opinion" described above shall have been
issued or a final agreement or resolution shall have been reached by
the Company and Rice under Section 4.13(a) above with respect to the
number of shares issuable on exercise of the Priority Warrant.
(c) Notwithstanding the provisions of Section 4.13(a) above,
the maximum number of shares issuable upon exercise of the Priority
Warrant and the Second Supplemental Warrant (as defined in the Purchase
Stock and Warrant Purchase Agreement) in the aggregate, shall not exceed
sixty-five percent (65%) of the Capital Stock outstanding (excluding, for
purposes of such percentage calculation, the shares issuable upon exercise
of the Priority Warrant issued in respect of the Priority Note Agreement
and the Second Supplemental Warrant), as of the date the conditions in
paragraph (b) above are fully satisfied.
Article V
Conditions
The obligations of Rice and the Company to effect the transactions
contemplated by this Agreement are subject to the following conditions
precedent (unless waived by Rice):
5.01 Priority Note Agreement Conditions. All of the conditions
precedent to the obligations of Rice and the Company under the Priority
Note Agreement will have been satisfied in full.
5.02 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.
5.03 Execution of this Agreement and Priority Shareholder Agreement.
The Company, the Southland Purchasers, F-Jotan and the Shareholder will
have entered into this Agreement and the Priority Shareholder Agreement
with Rice.
5.04 Representations and Agreements. Each representation and
warranty of the Company and Rice 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 Rice will have fully performed all their covenants and
agreements set forth in this Agreement in all material respects.
5.05 Issuance of Priority Warrant. The Priority Warrant described in
Section 4.13(a) above shall have been duly issued to Rice (subject to (a)
the adjustment provisions in such section, and (b) the conditions to
authorize the exercise of such Priority Warrant shares described in
Section 4.13(b) above).
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 Rice and its counsel and to the Company and its
counsel and Rice and its counsel and the Company 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
Rice or its counsel and the Company and 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 Priority 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. Rice will have received evidence
satisfactory to Rice that the Company has reserved a sufficient number of
shares of Common Stock for Rice to exercise the Warrant (subject to
meeting the conditions set forth in Section 4.13(b)).
5.08 Government Filings. All filings under 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 and Rice.
Article VI
Miscellaneous
6.01 Indemnification. In addition to any other rights or remedies to
which Rice and the Holders may be entitled, the Company agrees to and will
indemnify and hold harmless Rice, and the other 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 under this Agreement, the Priority
Shareholder Agreement, or under any other agreement to which the Company
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 Rice 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 Priority Warrant, the Priority
Shareholder Agreement, the Other Shareholder Agreements, the Other
Purchase Agreements and the documents, agreements, notes and instruments
executed in connection therewith 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, Rice and other Holders.
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
with courtesy copies to: Patton Boggs, L.L.P.
2200 Ross Street
Suite 900
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
FAX: 214-871-2688
If to the Southland, at their counsel's office at:
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 the Company, at: Jotan, Inc.
118 West Adams Street
Jacksonville, Florida 32202
Attn: Chief Executive Officer
Fax: 904-353-0075
with courtesy copies to: Foley & Lardner
The Greenleaf Building
200 North Laura Street
Jacksonville, Florida 32202
Attn: Gardner Davis, Esq.
Fax: (904) 359-8700
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 Holders other than Rice 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 Holders have 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 Priority Shareholder 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 Rice 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 Rice and its
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 other parties hereto 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 Holder may act or refrain from acting under this Agreement as such
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 AND RICE 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 OR RICE, IN THE
NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT HEREOF OR THEREOF. THIS
PROVISION IS A MATERIAL INDUCEMENT FOR RICE TO PURCHASE THE PRIORITY
WARRANT FROM THE COMPANY.
[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:_____________________________
Edward L. Lipscomb
Chief Financial 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
Priority Warrant Shares Issued On Closing Date: 42,377,173
<PAGE>
ANNEX A
FORM OF PRIORITY SHAREHOLDER AGREEMENT
<PAGE>
ANNEX B
FORM OF PRIORITY WARRANT A-3
PRIORITY SHAREHOLDER AGREEMENT
PRIORITY SHAREHOLDER AGREEMENT (the "Agreement") made as of April 14,
1998, by and among JOTAN, INC., a Florida corporation (the "Company"),
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"), F-
JOTAN, L.L.C., a North Carolina limited liability company ("F-Jotan") and
the shareholder named on the signature pages hereto (the "Shareholder").
W I T N E S S E T H:
WHEREAS, subject to adjustment under Section 4.13 of the Priority
Purchase Agreement (as defined below), Rice will own beneficially and of
record the number of shares or share equivalents, set forth under the
signature of Rice on this Agreement arising out of the transactions
contemplated herein and in the Priority Purchase Agreement;
WHEREAS, Rice owns additional equity interests as set forth in the
Other Shareholder Agreements (defined hereinafter);
WHEREAS, the Company, Southland Container Packaging Corp., Rice and
the Southland Purchasers have entered into that certain Note Purchase
Agreement, dated as of February 28, 1997, as amended by Amendment No. 1,
dated as of August 19, 1997, Amendment No. 2, dated as of November 6,
1997, and Amendment No. 3, dated as of April 14, 1998 (the "Original Note
Agreement");
WHEREAS, the Company, Rice, Southland Purchasers, F-Jotan and the
Shareholder have entered into (i) that certain Preferred Stock and Warrant
Purchase Agreement, dated February 28, 1997 (the "Preferred Stock and
Warrant Purchase Agreement"), as supplemented by (ii) that certain First
Supplemental Preferred Stock and Warrant Purchase Agreement, dated as of
September 10, 1997 (the "First Supplemental Purchase Agreement), (iii)
that certain Second Supplemental Preferred Stock Purchase Agreement, dated
November 6, 1997 (the "Second Supplemental Purchase Agreement"), and (iv)
that certain Amended and Restated Second Supplemental Preferred Stock and
Warrant Purchase Agreement by and among the Company, Rice, the Southland
Purchasers, F-Jotan, and the Shareholder, dated as of the date hereof (the
"Amended Second Supplemental Purchase Agreement" and collectively with the
Preferred Stock and Warrant Purchase Agreement, the First Supplemental
Purchase Agreement, and the Second Supplemental Preferred Stock Purchase
Agreement being collectively called the "Other Purchase Agreements");
WHEREAS; the Company has entered into that certain Priority Note
Purchase Agreement, dated as of April 14, 1998 (the "Priority Note
Agreement") by and between the Company, Rice Partners II, L.P. ("Rice")
and Southland Container Packaging Corp., a Texas corporation (as successor
by merger to SHC Acquisition Corp., a Florida corporation, and formerly
called Southland Holding Company, herein "Southland"), pursuant to which
the Southland will issue to Rice its 12.5% Senior Subordinated Note
("Priority Senior Subordinated Note") in the aggregate principal amount of
$1,250,000; and
WHEREAS, in connection with the execution and delivery of the
Priority Note Agreement, the Company will issue a warrant ("Priority
Warrant") for the purchase of up to 42,377,173 shares of the Company's
common stock, par value $0.01 per share (the "Common Stock"), which
Priority Warrant is to be issued by the Company pursuant to a Priority
Warrant Purchase Agreement, dated as of April 14, 1998 (the "Priority
Purchase Agreement"), by and between the Company and Rice; and
WHEREAS, the Company and the Shareholder named therein entered into
(i) that certain Shareholder Agreement, dated as of February 28, 1997 (the
"Original Shareholder Agreement"), with Rice, the Southland Purchasers and
F-Jotan, as supplemented by that certain (ii) First Supplemental
Shareholder Agreement, dated as of September 10, 1997 (the "First
Supplemental Shareholder Agreement") among Company, Rice, the Southland
Purchasers, F-Jotan and each of the Shareholders named therein and (iii)
that certain Second Supplemental Shareholder Agreement, dated as of
November 6, 1997, among Company, Rice, F-Jotan, the Southland Purchasers
and each of the Shareholder named therein (the "Second Supplemental
Shareholder Agreement" and together with the Original Shareholder
Agreement, the First Supplemental Shareholder Agreement, and the Second
Supplemental Shareholder Agreement, being collectively called the "Other
Shareholder Agreements");
WHEREAS, Rice is willing to enter into and consummate the
transactions contemplated by the Priority Note Agreement only if, among
other things, the Company and the Shareholder enter into, and perform
under, this Agreement and the Priority 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, Rice, the Southland Purchasers, the Shareholder, and the
Company, intending to be legally bound, agree as follows:
Article I
Definitions
All terms used in this Agreement will have the meanings ascribed to
them in the Priority Purchase Agreement unless otherwise specifically
defined in this Agreement.
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 Priority Warrant
plus the number of shares of Common Stock that are Issued Warrant Shares
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 exercise of all Priority Warrants.
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 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.
2.04 Preemptive Right and Other Waivers. F-Jotan, the Shareholder,
and the Southland Purchasers each hereby waives (a) its preemptive rights,
if any, hereunder and under the Other Shareholder Agreements and the Other
Purchase Agreements with respect to the issuance of the Priority Warrant
and (b) any dilution or other equity adjustment rights arising under or
relating to the Company's Restated Articles of Incorporation or any
agreement to which the Southland Purchasers, F-Jotan and the Shareholder
are a party with the Company and Rice, with respect to the execution,
delivery and performance of the Other Purchase Documents.
Article III
Dilution Fee
In the event that, during the term of the Priority Warrant, 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 Priority Warrant will be entitled to receive in
respect of its Priority 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 March 4, 2005, 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 Rice under the Priority 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 as contemplated in Section 2.08(a) (ii) and (iii) of
the Priority Purchase Agreement) less than (A) the Registrable
Securities so owned by F-Jotan on March 4, 1997 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
Priority Warrants) so owned by F-Jotan on March 4, 1997), 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 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 Priority Note Agreement) pursuant to
Sections 8.1(a), (b), (f) and (h) of the Priority Note Agreement or
any failure of the Company in any material respect to perform any of
its obligations hereunder or under the Priority 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 Priority
Note Agreement), and constitute Subordinate Debt (as defined in the Senior
Subordination Agreement) thereunder.
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 Priority 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.
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 Priority Warrant and its
Warrant Shares. The Call Option will be effective after March 4, 2003
(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 Priority
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 Priority 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.
5.04 Call Option Closing. The closing for the purchase and sale of
all of the Priority 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 Priority
Warrants will deliver the Priority 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 Call
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 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 Priority 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 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 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 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 Priority Purchase
Agreement in a written instrument in a form and substance satisfactory to
the Holders.
6.04 Limitations on Co-Sales. 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 its respective Capital
Stock on a pro rata basis.
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, with or without
cause.
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 for the accounts of Rice and any other Holder based
upon the respective number of Registrable Securities held by them;
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 a Holder other than Rice, then the amount of
securities to be registered for the accounts of such Holders shall be
reduced first by reducing the Registrable Securities of such Holder to be
so included in such registration and then by reducing pro rata the
Registrable Securities held by Rice.
After receipt of any such a request, the Company will, as soon as
practicable, notify each Holder 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 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
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 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 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, 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.
7.10 Rule 144A. The Company agrees that, upon the request of any
Holder or any prospective purchaser of a Priority 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 Priority 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 Priority 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 Priority 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 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
Priority 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 Priority Warrants or Warrant
Shares into Exchange Common Stock, the Holder will surrender at the
principal office of the Exchange Company the Priority 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 Priority Warrants or Warrant Shares
(the "Exchange Notice"). Priority 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 Priority 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 Original Shareholder Agreement Provisions of Article VIII
Incorporated into this Agreement. The provisions of Article VIII of the
Original Shareholder Agreement are hereby incorporated herein at length
with full application to this Agreement.
Article IX
Representations and Warranties; Covenants
9.01 Representations and Warranties and Covenants of the Company.
Each of the representations and warranties set forth in Section 3.01 of
the Priority Purchase Agreement and each of the covenants set forth in
Article IV of the Priority 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 as made in the Priority Purchase
Agreement for the benefit of Rice.
9.02 Representations and Warranties of Rice. Each of the
representations and warranties of Rice set forth in Section 3.02 of the
Priority 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.
Article X
Conditions
The obligations of Rice to effect the transactions contemplated by
this Agreement are subject to the following conditions:
10.01 Priority Note Agreement and Priority Purchase Agreement
Conditions. All of the conditions precedent to the obligations of Rice
under the Priority Note Agreement and the Priority 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 Rice and its counsel, and Rice and its counsel will have
received copies (executed or certified as may be appropriate) of all
documents, instruments, and agreements that Rice or its counsel may
request in connection with the consummation of such transactions.
Article XI
Priority Rights Over Other Shareholder Agreements; No Duplication of
Rights, Etc.
11.01 Rice Priority. Notwithstanding anything contained herein or
in the Other Purchase Agreements or in the Other Purchase Agreements or in
the Other Shareholder Agreements, Rice shall have the right to exercise
any and all the rights, privileges and benefits under this Agreement with
respect to the Priority Warrant as a Holder or otherwise, including,
without limitation, pursuant to Articles II, III, IV, V, VI and VII
hereof, in preference and priority to, any other Holder, the Southland
Purchasers, F-Jotan, Shareholder or any Affiliate of any thereof under any
provision of this Agreement, the Priority Purchase Agreement, the Other
Shareholder Agreements and the Other Purchase Agreements, except as set
forth in Article VIII with respect to the Board of Directors. Such
preference and priority of Rice shall be exercised exclusively by Rice up
to Rice's Priority Share in Rice's sole discretion. Rice's "Priority
Share", for purposes of this Agreement, shall mean all or any portion such
rights, privileges and benefits attributable to the number of shares of
Common Stock issuable to Rice upon exercise of Rice's Priority Warrant
plus the number of shares of Common Stock that are Issued Warrant Shares
owned by Rice at the date of exercise of such rights. Rice shall have the
right, but not the obligation, to exercise such preference and priority
with respect to all or any part of such shares and may waive any or all of
such rights only by a written instrument signed by Rice.
11.02 No Duplication of Rights or Obligations. The rights,
privileges and obligations of the parties hereto are intended to be
consistent with, and not to alter, expand or duplicate the rights,
privileges or obligations under the Other Shareholder Agreements, except
as and to the extent set forth in of Section 11.01 above and with respect
to Rice's rights hereunder relating to the Priority Warrant. Except with
respect to Section 11.01 above, the parties shall, to the fullest extent
possible, treat this Priority Shareholder Agreement and the Other
Shareholder Agreements as a single agreement with respect to provisions
having the same intent and purpose herein and therein, including with
respect to Registrable Securities (as defined herein and therein) and the
rights of the Holders thereof. If a conflict arises between the
provisions hereof and thereof, the provisions herein shall govern solely
with respect to the Priority Warrant and the rights, privileges and
obligations thereof.
Article XII
Miscellaneous
12.01 Indemnification. In addition to any other rights or remedies
to which Rice and the Holders may be entitled, the Company agrees to and
will indemnify and hold harmless Rice and 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
under this Agreement, the Priority Purchase Agreement, or the Other
Purchase Documents (as defined in Section 11.1 of the Priority Note
Agreement) or under any other agreement to which the Company 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 Rice 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 Rice of its interests in, or the repayment of its
loans to, the Company.
12.02 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 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.
12.03 Integration. This Agreement, the Priority Note Agreement,
the Priority Purchase Agreement, the Other Purchase Agreements, the Other
Shareholder Agreements and the documents, agreements, notes and
instruments executed in connection therewith 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 the Company, the Southland Purchasers, the Shareholder,
F-Jotan and each Holder.
12.04 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.
12.05 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.
12.06 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
with courtesy copies to: Patton Boggs, L.L.P.
2200 Ross Avenue
Suite 900
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
Fax: 214-871-2688
If to F-Jotan, at: Address of F-Jotan beneath the name of F-
Jotan 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.
Fax: (919) 781-4865
If to the Company, at: Jotan, Inc.
118 West Adams Street
Jacksonville, Florida 32202
Attn: President
Fax: (904) 353-0075
with courtesy copies to: Foley & Lardner, L.L.P.
The Greenleaf Building
200 Laura Street
Jacksonville, Florida 32292
Attn: Gardner F. Davis, Esq.
Fax: (904) 359-8700
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 Rice 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.
12.07 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 Priority Purchase
Agreement, and the agreements and instruments related hereto and thereto,
in a form and substance reasonably satisfactory to the Company.
.
12.08 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.
12.09 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.
12.10 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.
12.11 Counterparts. This Agreement may be executed in any number
of counterparts, which will individually and collectively constitute one
agreement.
12.12 Other Business. It is understood and accepted that Rice,
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.
12.13 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-OF-LAW RULES THEREOF OR ANY OTHER
PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY
OTHER JURISDICTION.
12.14 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 Priority Warrant as a condition to the registration of such Priority
Warrant or Registrable Securities thereunder.
12.15 Fiduciary Duties. The Company acknowledges and agrees
that, for so long as any Priority Warrant is outstanding and regardless of
whether the Holder has exercised any portion of this its Priority 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.
12.16 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.
12.17 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 12.17 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 12.17, (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 12.17 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.
Article XIII
Consent of Other Parties
13.1 Consent of Other Parties. All the parties hereto, after review
of the transactions contemplated herein, hereby acknowledge, approve and
consent to the execution, delivery and performance of the Priority Note
Agreement, the Priority Purchase Agreement and all documents, agreements,
notes and instruments executed and delivered in connection therewith or
herewith for purposes of this Agreement and otherwise. Such parties
further agree that no dilution or other adjustment in any equity interest
they may have arising in connection with the Other Shareholder
Agreements, the Restated Articles of Incorporation of the Company or
otherwise, shall be made in connection with, or as a result of, the
issuance of the Priority Warrant or the transactions contemplated herein
or therein, and such adjustment rights are hereby waived.
[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:____________________________
Name: Edward L. Lipscomb
Title: Chief Financial 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:
42,377,173 Warrant Shares (subject to adjustment under Section 4.13 of the
Priority Purchase Agreement)
F-JOTAN, L.L.C.
By: Franklin Street/Fairview
Capital, L.L.C., its manager
By: Franklin Capital, L.L.C.,
its manager
By:____________________________
James D. Lumsden,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
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:____________________________
James D. Lumsden,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
FF-SOUTHLAND, L.P.
By: FSFC Associates, L.P.,
Its general partner
By: Franklin Capital, L.L.C.,
Its general partner
By:____________________________
James D. Lumsden,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
SHAREHOLDER:
_______________________________
Shea E. Ralph
AMENDMENT NO. 3 TO NOTE PURCHASE AGREEMENT
This Amendment No. 3 to Note Purchase Agreement (this "Amendment"),
dated as of April 14, 1998, by and among SOUTHLAND CONTAINER PACKAGING
CORP., a Texas corporation (as successor by merger to SHC Acquisition
Corp., a Florida corporation, and formerly called Southland Holding
Company, herein the "Company"), JOTAN, INC., a Florida corporation
("Parent"), RICE PARTNERS II, L.P., a Delaware limited partnership
("Rice"), F-SOUTHLAND, L.L.C., a North Carolina limited liability company
("F-Southland"), and FF-SOUTHLAND, L.P., a Delaware limited partnership
("FF-Southland") (F-Southland and FF-Southland are individually or
collectively, as the context requires, referred to herein as "Southland
Purchasers") (Rice and Southland Purchasers are individually or
collectively, as the context requires, referred to herein as the
"Purchaser").
RECITALS
A. The Company, Parent, Rice and the Southland Purchasers have
entered into that certain Note Purchase Agreement, dated as of February
28, 1997, as the same has been amended by that certain Amendment No. 1
dated as of August 19, 1997 and Amendment No. 2 dated as of November 6,
1997 (the "Original Agreement" and, as amended hereby, the "Note
Agreement").
B. SHC Acquisition Corp. has merged with and into Southland Holding
Company, with Southland Holding Company surviving and assuming all the
obligations of SHC Acquisition Corp. under the Original Agreement. On
July 31, 1997, all of the subsidiaries of Southland Holding Company and
Atlantic Bag & Paper Company, a Subsidiary of Parent, merged with and into
Southland Holding Company (which concurrently changed its name to
Southland Container Packaging Corp.), with the result that the Company, as
of July 31, 1997, had no Subsidiaries.
C. The Company has advised the Purchaser, the Senior Lender and the
Senior Agent that certain defaults have occurred under the Original
Agreement and under the Senior Loan Agreement.
D. The Company and Parent have requested that the Senior Lender (1)
make certain amendments to the Senior Loan Agreement (as the same has been
amended by that certain letter amendment dated April 30, 1997, that
certain Second Amendment to Credit Agreement dated as of June 20, 1997,
that certain Third Amendment to Credit Agreement dated as of August 19,
1997 and that certain Fourth Amendment to Credit Agreement, dated as of
November 6, 1997), pursuant to the Fifth Amendment to Credit Agreement
among the Company, Parent, Senior Agent and the Senior Lender, which
Purchaser has reviewed and approved (the "Senior Loan Amendment"), and (2)
waive all defaults under the Senior Loan Agreement, and Senior Lender is
willing to do so subject to the terms and conditions set forth in the
Senior Loan Amendment.
E. The Company has requested that the Purchaser make (1) certain
amendments to the Original Agreement, (2) waive all defaults under the
Original Agreement and (3) consent to the subordination of the
indebtedness of the Company to the Purchasers under the Original Agreement
to $1,250,000 of "Priority Senior Subordinated Notes" to be purchased by
Rice under that certain Priority Note Purchase Agreement, dated as of
April 14, 1998 (the "Priority Note Agreement") among Rice, the Company and
Parent (such subordination to be as provided in the Senior Subordination
Agreement, as amended, and this Amendment.
F. The Purchaser is willing to take the actions described in
Recital E above subject to the terms and conditions set forth herein.
AGREEMENT
NOW, THEREFORE, in consideration of the premises herein contained and
other good and valuable consideration, the sufficiency of which is hereby
acknowledged, the parties hereto, intending to be legally bound, agree as
follows:
1. DEFINITIONS. All capitalized terms used but not otherwise defined in
this Amendment shall have the meanings ascribed to them in the Note
Agreement. Unless otherwise specified, all section references herein
refer to sections of the Original Agreement.
2. AMENDMENTS. The Original Agreement is hereby amended as follows:
2.1 Amendment to Section 2.1. Sections 2.1(a) and (b) are hereby
amended by deleting them in their entirety and substituting the following
in lieu thereof:
(a) Principal, including the capitalized PIK Interest evidenced
by the PIK Notes, shall be due and payable in full on the Termination
Date.
(b) Interest shall be due and payable (i) on May 30, 1998 (for
the period from and including the Closing Date to but excluding May
30, 1998), (ii) and thereafter quarterly in arrears on the last
Business Day of each February, May, August and November, commencing
August 31, 1998 and (iii) on the Termination Date; provided, however,
that with respect to interest payable pursuant to clauses (i) and
(ii), the Company shall satisfy its obligation to pay interest in
cash on such dates by the issuance to the Purchaser of one or more
Senior Subordinated Notes substantially in the form of Exhibit A-2 to
this Amendment (each a "PIK Note") evidencing the Company's
obligation to pay such accrued interest (the "PIK Interest") which
shall be due and payable in accordance with 2.1(a) above. Each such
PIK Note shall be in an amount equal to the interest due on such
respective date and shall constitute the capitalization of the PIK
Interest evidenced thereby. The Company shall have no obligation to
pay PIK Interest due on such dates in cash. Each Purchaser
acknowledges that the PIK Notes delivered pursuant to this Section
2.1(b) are "Junior Subordinate Loan Documents" and the Obligations
evidenced thereby are "Subordinate Debt" as both such terms are
defined in the Senior Subordination Agreement. The PIK Notes shall
bear interest at a fixed rate of 12.5% per annum; provided, however,
that upon the occurrence of a Potential Default under Section 8.1
hereof or any Event of Default, and during the continuation thereof,
the unpaid principal amount of the PIK Notes shall bear interest at a
rate of 15.5% per annum. All accrued interest on the PIK Notes shall
be due and payable on the Termination Date.
2.2 Amendments to Section 2.2 and Section 2.3. Sections 2.2 and 2.3
are hereby amended by deleting them in their entirety and substituting the
following in lieu thereof:
2.2 Optional Prepayments. Upon payment in full of the Senior
Debt and the termination of all commitments of the Senior Lender with
respect thereto, at the Company's option, upon notice given as
provided below, the Company may, at any time and from time to time,
prepay all or any part of the principal of the Senior Subordinated
Notes, by payment to the Holders (ratably based on the stated
principal amount of each such Purchaser's Senior Subordinated Note)
of the principal amount to be prepaid, plus (a) any accrued and
unpaid interest on the principal amount so prepaid, plus (b) any
expenses and/or damages for which Purchase may be entitled to receive
payment or reimbursement hereunder or, if the Senior Subordinated
Notes are being prepaid in full, the aggregate amount of all other
Senior Subordinated Obligations, plus (c) a premium equal to the
percentage of the principal amount so prepaid which is applicable in
accordance with the following table based on the date on which such
prepayment is made (a "Prepayment Fee"):
Prepayment Date Premium
Closing Date through February 28, 1998 12.50%
March 1, 1998 through February 28, 1999 10.71%
March 1, 1999 through February 29, 2000 8.92%
March 1, 2000 through February 28, 2001 7.14%
March 1, 2001 through February 28, 2002 5.36%
March 1, 2002 and thereafter 0.00%
Each partial prepayment under this Section 2.2 shall be in a
principal amount of not less than $250,000 or, if greater than
$250,000, then in integral multiples of $100,000. Each prepayment
under this Section 2.2 shall be applied first to any expenses or
costs to which Purchaser may be entitled, second to accrued and
unpaid interest on the principal amount so prepaid, third to any
applicable Prepayment Fee, fourth to installments of principal in the
inverse order of their maturities, and fifth to any damages to which
Purchaser may be entitled. The amount of any such prepayment may not
be reborrowed by the Company. The Company shall give notice of any
optional prepayment to each Purchaser not less than fifteen (15) days
nor more than sixty (60) days before the date for prepayment,
specifying in each such notice the date upon which such prepayment is
to be made and the principal amount (together with accrued and unpaid
interest, if any, thereon and any applicable Prepayment Fee) to be
prepaid on such date. Notice of prepayment having been so given, the
applicable prepayment amount shall become due and payable on the
specified prepayment date. The Company shall have no right to prepay
the Senior Subordinated Notes except as provided in this Section 2.2
or in Section 2.3.
2.3 Mandatory Prepayments. Any prepayment under this
Section 2.3 shall be applied first to any expenses to which any
Purchaser may be entitled, second to accrued interest (including
accrued interest on the PIK Notes), third to any applicable
Prepayment Fee, fourth to principal installments in the inverse order
of their maturities (including capitalized PIK Interest evidenced by
the PIK Notes), and fifth to any damages to which any Purchaser may
be entitled. The amount of any such mandatory prepayment may not be
reborrowed by the Company. The Company shall make mandatory
prepayments to the Holders on a pro rata basis of the original
principal amount of each such Holder's Senior Subordinated Note in
each of the following circumstances:
(a) If during any fiscal year after the Senior Debt is
paid in full and after all commitments of the Senior Lender with
respect thereto have been terminated, Parent or any of its
Subsidiaries (including without limitation the Company) shall
sell or otherwise dispose of (other than as permitted by
Section 6.8 or Section 7.3) any property or properties in excess
of five percent (5%) of its total assets (including as a result
of a Casualty Event (to the extent the net cash proceeds
therefrom are not subsequently applied or committed to apply
toward replacement, restoration, rebuilding or repair of the
damaged property within ninety (90) days after the receipt of
such net cash proceeds)), then the Company shall prepay the
Senior Subordinated Notes in an amount equal to the lesser of
(i) the aggregate net cash proceeds of such sale or other
disposition (minus the cost of any replacement assets or
properties purchased within ninety (90) days either before or
after such sale) or (ii) the aggregate amount of all Senior
Subordinated Obligations (including any applicable Prepayment
Fee), such prepayment and premium to be made within ten (10)
Business Days of receipt of such net proceeds.
(b) In the event of any sale or other disposition of all
or substantially all of the stock or assets of Parent or any of
its Subsidiaries (including without limitation the Company) in a
single transaction or series of transactions or a Casualty Event
(to the extent not subsequently applied or committed to apply
toward replacement, restoration, rebuilding or repair of the
damaged property within 90 days after the receipt of such net
cash proceeds), the Company shall, after the Senior Debt has
been paid in full and after all commitments of the Senior Lender
with respect thereto have been terminated, prepay the Senior
Subordinated Notes in an amount equal to the lesser of (i) the
aggregate net cash proceeds of such sale or other disposition
(minus the cost of any replacement assets or properties
purchased within ninety (90) days either before or after such
sale) or (ii) the aggregate amount of all Senior Subordinated
Obligations (including any applicable Prepayment Fee), such
prepayment to be made within ten (10) Business Days of receipt
of such net proceeds.
2.3 Amendment to Section 6.1(a). The last sentence of Section
6.1(a) is hereby amended by deleting such last sentence in its entirety
and substituting the following in lieu thereof:
The annual audit report required hereby shall not be
qualified or limited because of restricted or limited
examination by the accountant of any material portion
of any of the records of the Company.
2.4 Amendment to Section 6.20. Sections 6.20(a), (b), (c), (d) and
(e) are each hereby amended as follows:
(a) Section 6.20(a), (b) and (e) are hereby deleted in their
entirety, and the capitalized terms, if any, used exclusively in such
sections shall likewise be deemed deleted.
(b) Section 6.20(c) is hereby amended by deleting it in its
entirety and substituting the following in lieu thereof:
(c) Fixed Charge Coverage. Parent shall not permit
the ratio of Operating Cash Flow to Fixed Charges computed
on the basis of the Operating Cash Flow and Fixed Charges
for the twelve (12) month period ending on the last day of
each month (beginning with the month ending January 31,
1999) to be less than the ratio of 0.9:1.
(c) Section 6.20(d) is hereby amended by deleting it in its entirety
and substituting the following in lieu thereof:
(d) EBITDA. Parent shall not permit EBITDA for the
nine (9) month period ending September 30, 1998 to be less
than $2,009,000; and for the twelve (12) month period
ending December 31, 1998, to be less than $2,825,000:
2.5. Amendment to Section 7.9. Section 7.9 is hereby amended by
deleting it in its entirety and substituting the following in lieu
thereof:
7.9 Capital Expenditure Limits. Parent and the Company shall
not make or incur Capital Expenditures during the 1998 Fiscal
Year in excess of the aggregate amount of $400,000. In
calculating compliance with this Section 7.9, 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.
2.6. Amendment to Article IX. Subordination. Article IX is hereby
amended by deleting it in its entirety and substituting the following in
lieu thereof:
IX. SUBORDINATION
Notwithstanding any provision in this Agreement to the
contrary, the Indebtedness evidenced by the Senior Subordinated
Notes shall be subordinate to the Senior Debt, and any
Purchaser's rights and remedies hereunder shall be subordinate
to the rights and remedies of the Senior Lender, all in
accordance with the terms of the Senior Subordination Agreement.
Nothing contained in this Article IX or elsewhere in this
Agreement, in the Senior Subordinated Notes or the Senior
Subordination Agreement is intended to or shall impair, as
between the Company and Purchaser, the obligations of the
Company, which are absolute and unconditional, to pay to
Purchaser the principal of, Prepayment Fee (if any) and interest
on the Senior Subordinated Notes and all other Senior
Subordinated Obligations as and when the same shall become due
and payable in accordance with their terms, or is intended to or
shall affect the relative rights of Purchaser and creditors of
the Company other than the holders of the Senior Debt.
2.7. Amendment to Section 11.1; Amendment and Restatement of Certain
Definitions. The following definitions appearing in Section 11.1 are
hereby amended and restated in their entirety to read as follows:
"EBITDA" means, for any period and any Person, the total of the
following each calculated without duplication for such Person on
a consolidated basis for such period: (a) Net Income; plus (b)
any provision for (or less any benefit from) income or franchise
taxes included in determining Net Income; plus (c) interest
expense deducted in determining Net Income; plus (d)
amortization and depreciation expense deducted in determining
Net Income; plus (e) other noncash charges deducted in
determining consolidated net income and not already deducted in
accordance with clause (d) above or clauses (b) and (c) of the
definition of Net Income; plus (f) all restructuring expenses,
litigation or arbitration costs related to recovery of proceeds
of the Golden State Litigation or the Selling Shareholder
Arbitration, contingency allocations and other non-recurring
non-operating expenses, but, in each case, only to the extent
such amounts were deducted in calculating Net Income.
"Fixed Charges" means, for any period, the total of the
following for Parent and the Company calculated on a
consolidated basis without duplication for such period: (A) cash
interest expense; plus (B) cash federal and state income taxes
paid; plus (C) scheduled amortization of Indebtedness paid or
payable (excluding, to the extent included, nonpermanent
principal repayments under the Revolving Loans (as defined in
the Senior Loan Agreement) and scheduled principal payments with
respect to the unsecured promissory notes issued to trade
creditors and the Company's auditors).
"Operating Cash Flow" means, for any period, the total of the
following for Parent and the Company calculated on a consolidated
basis without duplication for such period: (a) EBITDA; minus (b) all
Capital Expenditures which are not financed with Indebtedness of the
Company as permitted by Section 12.1(f) of the Senior Loan Agreement
but including Capital Expenditures financed with proceeds of the
Revolving Loans (as defined in the Senior Loan Agreement).
"Senior Loan Agreement" means the Credit Agreement by and among
Parent, the Company, the Senior Agent and the Senior Lender, dated as
of the February 28, 1997, as amended by that certain letter amendment
dated April 30, 1997, that certain Second Amendment to Credit
Agreement dated as of June 20, 1997, that certain Third Amendment to
Credit Agreement dated as of August 20, 1997, that certain Fourth
Amendment to Credit Agreement dated as of November 6, 1997, and that
certain Fifth Amendment to Credit Agreement dated as of April 14,
1998, and as further amended from time to time in accordance with the
express provisions of the Senior Subordination Agreement, and all
documents and instruments delivered pursuant thereto in connection
with the loans and advances made thereunder.
"Senior Loan Documents" means the Senior Loan Agreement and all
amendments thereto, including the Senior Loan Amendment, the "Loan
Documents" (as defined in the Senior Loan Agreement), and all
agreements, documents and instruments executed in connection
therewith or contemplated thereby, and all amendments to all the
foregoing.
"Senior Subordination Agreement" means that certain Senior
Subordination Agreement of even date herewith executed by and among
Parent, the Senior Agent and each Purchaser, as amended as of April
14, 1998, and as the same may be further amended, modified, extended
or restated from time to time, including as amended by the amendment
thereto dated as of April 14, 1998.
2.8 New Definitions in Section 11.1. The following new definitions
shall be added to Section 11.1 in alphabetical order:
"Golden State Litigation" means any litigation commenced or
claims asserted (whether now existing or hereafter arising) by
the Parent, Company or any Subsidiary against Golden State
Container, Inc. n/k/a Victory Packaging, Inc., David Rapson,
Pete Dougherty, Fred Brown, Jeff Barber, Mason Shelby, Ron
Sheldon, Dawn Berti, Mike O'Malley, George Miller, Cheryl
Becker, Tomas Toro or any other former employees of Parent or
Company or any of their respective successors and assigns.
"Selling Shareholder Arbitration" means any arbitration, claim,
demand or proceeding commenced by or against the Company and/or
Parent (whether now existing or hereafter arising) and involving
Lester G. Gegenheimer, John L. Sanders, Jr. or William P.
Blincoe.
"Senior Loan Amendment" means the Fifth Amendment to the Credit
Agreement by and among Parent, the Company, the Senior Agent,
and the Senior Lender dated as of April 14, 1998 and all
documents and instruments delivered pursuant thereto or in
connection therewith.
2.9. Amendment to Section 12.5. Section 12.5 is hereby amended by
deleting it in its entirety and substituting the following in lieu
thereof:
12.5 Assignment, Sale of Interest. Neither Parent nor the
Company may sell, assign or transfer this Agreement, or the
Other Agreements or any portion thereof, including, without
limitation, Parent's or the Company's rights, title, interests,
remedies, powers and/or duties hereunder or thereunder. Parent
and the Company hereby consent to Rice's participation, sale,
assignment, transfer or other disposition (collectively, a
"Transfer"), at any time or times hereafter at the Company's
expense, of this Agreement, or the Other Agreements to which
Parent or any Subsidiary is a party, or of any portion hereof or
thereof, including, without limitation, Rice's rights, title,
interests, remedies, powers and/or duties hereunder or
thereunder; provided, however, that except in the case of an
assignment of all of Purchaser's rights under this Agreement and
the Priority Senior Subordinated Notes, the outstanding
principal amount of the Priority Senior Subordinated Notes of
the assigning Purchaser being assigned, pursuant to each
assignment shall in no event be less than One Million Dollars
($1,000,000). In connection with any Transfer, Parent and the
Company agree to cooperate fully with Rice and any potential
Transferee. Such cooperation shall include, but is not limited
to, cooperating with any audits or other due diligence
investigation undertaken by any potential Transferee.
2.10. Amendment to Section 8.1. Section 8.1 shall be amended by
adding thereto the following subsection (l) and by deleting the word "or"
at the end of Section 8.1(j):
(l) an Event of Default shall occur and be continuing
under the Priority Note Purchase Agreement.
3. CONDITIONS TO EFFECTIVENESS. The effectiveness of this
Amendment is subject to the satisfaction of the following conditions
precedent, unless specifically waived in writing by the Purchaser:
3.1. Purchaser shall have received (a) this Amendment duly executed
by the Company; (b) a certificate of each of the Secretary of the Company
and of Parent in the forms of Exhibit A and Exhibit A-1 attached hereto,
respectively (hereinafter collectively referred to as the "Company General
Certificate"), certified by the Secretary of the Company or Parent, as
appropriate, and acknowledging (i) that the Company's Board of Directors
has adopted, approved, consented to and ratified resolutions which
authorize the execution, delivery and performance by the Company of the
Senior Loan Amendment, this Amendment and all Other Agreements to which
the Company is or is to be a party, and (ii) the names of the officers of
the Company authorized to sign the Senior Loan Amendment, this Amendment
and each of the Other Agreements to which the Company is or is to be a
party hereunder (including the certificates contemplated herein) together
with specimen signatures of such officers; (c) an executed copy of the
Senior Loan Amendment, or a certificate executed by the Chief Financial
Officer of the Company certifying that the Senior Loan Amendment attached
thereto is a true, correct and complete copy of the Senior Loan Amendment;
(d) a written consent of the Senior Agent on behalf of the Senior Lender
to the execution and delivery of this Amendment and all documents relating
hereto; and (e) such additional documents, instruments and information as
Purchaser or its legal counsel may request.
3.2. The representations and warranties contained herein and in the
Original Agreement and the Other Agreements, as amended hereby, shall be
true and correct on and as of the date hereof, as if made on the date
hereof.
3.3. The Senior Loan Amendment shall have been duly executed and
delivered by the parties thereto and shall be on terms and conditions
satisfactory to Purchaser.
4. RATIFICATIONS, REPRESENTATIONS AND WARRANTIES; CONSENT TO SENIOR
LOAN AMENDMENT; COVENANT TO ISSUE PIK NOTES.
4.1. The terms and provisions set forth in this Amendment shall
modify and supersede all inconsistent terms and provisions set forth in
the Original Agreement and the Other Agreements and, except as expressly
modified and superseded by this Amendment, the terms and provisions of the
Original Agreement and the Other Agreements are ratified and confirmed
and shall continue in full force and effect. The Company, Parent and
Purchaser agree that the Original Agreement and the Other Agreements, as
amended hereby, shall continue to be legal, valid, binding and enforceable
in accordance with their respective terms.
4.2. The Company hereby represents and warrants to Purchaser that (a)
the execution, delivery and performance of this Amendment and any and all
other agreements executed and/or delivered in connection herewith have
been authorized by all requisite corporate action on the part of the
Company and will not violate the Articles of Incorporation or Bylaws of
the Company; (b) the representations and warranties contained in Sections
4.1 through 4.10 of the Priority Note Purchase Agreement (as if the
reference to Purchase Documents therein refers to Purchase Documents as
defined in the Note Agreement, as amended hereby) are true and correct on
and as of the date hereof as though made on and as of such date; (c) no
Potential Default or Event of Default under the Original Agreement, as
amended hereby, has occurred and is continuing, unless such Potential
Default or Event of Default has been specifically waived in writing by
Purchaser; (d) the Company is in full compliance with all covenants and
agreements contained in the Original Agreement, as amended hereby, and the
Other Agreements, as amended; except if (i) the failure to comply has been
disclosed to Purchaser in writing or (ii) Purchaser has actual knowledge
thereof, and (e) the Company has not amended its Articles of Incorporation
or its Bylaws since August 19, 1997, except for such amendments, if any,
as are attached to the Company General Certificate. The foregoing
representations and warranties shall survive the execution and delivery of
this Amendment.
4.3 Each Purchaser hereby represents that it is the holder of the
Senior Subordinated Notes issued to it on February 28, 1997, and consents
to the execution and delivery by the Company and Parent of the Senior Loan
Amendment. This consent is expressly intended for the benefit of, and may
be relied upon by, the Senior Lender and the Senior Agent for all purposes
of the Loan Documents (as defined in the Senior Loan Agreement) including
the Senior Subordination Agreement.
4.4 Each of Parent and the Company hereby consents to the execution
and delivery by the other of this Amendment and the First Amendment to
Senior Subordination Agreement dated as of April 14, 1998, among Rice, the
Southland Purchasers and the Senior Agent; and Parent hereby confirms its
Parent Guaranty and the Company hereby confirms its Company Guaranty for
all purposes, giving effect to this Amendment and the Senior Loan
Amendment, the Priority Note Agreement, such First Amendment to the Senior
Subordination Agreement; and the transactions contemplated hereby and
thereby.
4.5 The Southland Purchasers hereby represent and warrant that they
have reviewed the provisions of, and consent to, the execution, delivery
and performance of, the Priority Note Agreement and all "Other Agreements"
(as defined therein) in connection therewith.
5. WAIVER.
Subject to the terms and conditions contained in this Amendment,
Purchaser hereby waives all Potential Defaults and Events of Default which
have occurred and are continuing under the Original Agreement and agrees
not to exercise any rights or remedies arising as a result thereof. The
waiver specifically described in this Section 5 shall not constitute and
shall not be deemed a waiver of any Potential Default or Event of Default
arising after the effectiveness of this Amendment or a waiver of any
rights or remedies arising as a result of such a Potential Default or
Event of Default.
6. MISCELLANEOUS.
6.1. Survival of Representations and Warranties. All representations
and warranties made in the Original Agreement or any Other Agreement,
including, without limitation, any document furnished in connection with
this Amendment, shall survive the execution and delivery of this Amendment
and the Other Agreements, and no investigation by Purchaser or any closing
shall affect the representations and warranties or the right of Purchaser
to rely upon them.
6.2. Reference to Original Agreement. Each of the Original Agreement
and the Other Agreements, and any and all other agreements, documents or
instruments now or hereafter executed and delivered pursuant to the terms
hereof or pursuant to the terms of the Original Agreement, as amended
hereby, are hereby amended so that any reference in the Original Agreement
and such Other Agreements to the Original Agreement shall mean a reference
to the Original Agreement as amended hereby.
6.3. Expenses of Purchaser. As provided in the Original Agreement,
the Company agrees to pay on demand all costs and expenses incurred by
Purchaser in connection with the preparation, negotiation and execution of
this Amendment and any other agreements executed pursuant hereto,
including, without limitation, the reasonable costs and fees of
Purchaser's legal counsel.
6.4. Severability. Any provision of this Amendment held by a court
of competent jurisdiction to be invalid or unenforceable shall not impair
or invalidate the remainder of this Amendment and the effect thereof shall
be confined to the provision so held to be invalid or unenforceable.
6.5. Successors and Assigns. This Amendment will inure to the
benefit of and be binding upon the parties hereto and their respective
successors and permitted assigns.
6.6. Headings. The headings of the sections and subsections of this
Amendment are inserted for convenience only and do not constitute a part
of this Amendment.
6.7. Counterparts. This Amendment may be executed in any number of
counterparts, which shall collectively constitute one agreement.
6.8. Law Governing. ALL OBLIGATIONS, RIGHTS AND REMEDIES HEREUNDER,
SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE
INTERNAL LAWS OF THE STATE OF FLORIDA, WITHOUT GIVING EFFECT TO THE
CHOICE-OF-LAW RULES THEREOF. THE SENIOR SUBORDINATED NOTES SHALL BE
GOVERNED BY AND CONSTRUED AND INTERPRETED IN ACCORDANCE WITH THE LAWS OF
THE STATE SPECIFIED THEREIN. EACH PURCHASER RETAINS ALL RIGHTS UNDER THE
LAWS OF THE UNITED STATES OF AMERICA, INCLUDING THOSE RELATING TO THE
CHARGING OF INTEREST.
6.9 Waivers; Modification. NO PROVISION OF THIS AMENDMENT MAY BE
WAIVED, AMENDED, CHANGED OR MODIFIED, OR THE DISCHARGE THEREOF
ACKNOWLEDGED, ORALLY, BUT ONLY BY AN AGREEMENT IN WRITING SIGNED BY THE
PARTY AGAINST WHOM THE ENFORCEMENT OF ANY WAIVER, CHANGE, MODIFICATION OR
DISCHARGE IS SOUGHT.
6.10 Waiver of Jury Trial. AFTER REVIEWING THIS SECTION 6.10 WITH
ITS COUNSEL, TO THE FULLEST EXTENT PERMITTED BY APPLICABLE LAW, PARENT,
THE COMPANY AND EACH PURCHASER HEREBY KNOWINGLY, INTELLIGENTLY AND
INTENTIONALLY, IRREVOCABLY AND EXPRESSLY WAIVE ALL RIGHT TO A TRIAL BY
JURY IN ANY ACTION, PROCEEDING OR COUNTERCLAIM (WHETHER BASED UPON
CONTRACT, TORT, OR OTHERWISE) ARISING OUT OF OR RELATING TO THIS
AMENDMENT, THE SENIOR SUBORDINATED NOTES OR ANY DOCUMENTS ENTERED INTO IN
CONNECTION THEREWITH OR THE TRANSACTIONS CONTEMPLATED THEREBY OR THE
ACTIONS OF EACH PURCHASER IN THE NEGOTIATION, ADMINISTRATION, OR
ENFORCEMENT THEREOF. THIS PROVISION IS A MATERIAL INDUCEMENT FOR EACH
PURCHASER TO ENTER INTO THIS AGREEMENT.
6.11. Final Agreement. THE ORIGINAL AGREEMENT, AS AMENDED HEREBY,
AND THE OTHER AGREEMENTS REPRESENT THE ENTIRE EXPRESSION OF THE PARTIES
WITH RESPECT TO THE SUBJECT MATTER HEREOF ON THE DATE THIS AMENDMENT IS
EXECUTED. THE ORIGINAL AGREEMENT, AS AMENDED HEREBY, AND THE OTHER
AGREEMENTS MAY NOT BE CONTRADICTED BY EVIDENCE OF PRIOR, CONTEMPORANEOUS
OR SUBSEQUENT ORAL AGREEMENTS OF THE PARTIES. THERE ARE NO UNWRITTEN ORAL
AGREEMENTS BETWEEN THE PARTIES.
6.12. Release. THE COMPANY HEREBY ACKNOWLEDGES THAT IT HAS NO
DEFENSE, COUNTERCLAIM, OFFSET, CROSS-COMPLAINT, CLAIM OR DEMAND OF ANY
KIND OR NATURE WHATSOEVER THAT CAN BE ASSERTED TO REDUCE OR ELIMINATE ALL
OR ANY PART OF ITS LIABILITY TO REPAY THE "SENIOR SUBORDINATED
OBLIGATIONS" OR TO SEEK AFFIRMATIVE RELIEF OR DAMAGES OF ANY KIND OR
NATURE FROM PURCHASER. THE COMPANY HEREBY VOLUNTARILY AND KNOWINGLY
RELEASES AND FOREVER DISCHARGES PURCHASER, ITS PREDECESSORS, AGENTS,
OFFICERS, DIRECTORS, EMPLOYEES, SUCCESSORS AND ASSIGNS, FROM ALL POSSIBLE
CLAIMS, DEMANDS, ACTIONS, CAUSES OF ACTION, DAMAGES, COSTS, EXPENSES, AND
LIABILITIES WHATSOEVER, KNOWN OR UNKNOWN, ANTICIPATED OR UNANTICIPATED,
SUSPECTED OR UNSUSPECTED, FIXED, CONTINGENT, OR CONDITIONAL, AT LAW OR IN
EQUITY, ORIGINATING IN WHOLE OR IN PART ON OR BEFORE THE DATE THIS
AMENDMENT IS EXECUTED, WHICH THE COMPANY MAY NOW OR HEREAFTER HAVE AGAINST
PURCHASER, ITS PREDECESSORS, AGENTS, OFFICERS, DIRECTORS, EMPLOYEES,
SUCCESSORS AND ASSIGNS, IF ANY, AND IRRESPECTIVE OF WHETHER ANY SUCH
CLAIMS ARISE OUT OF CONTRACT, TORT, VIOLATION OF LAW OR REGULATIONS, OR
OTHERWISE, AND ARISING FROM THE "SENIOR SUBORDINATED OBLIGATIONS",
INCLUDING, WITHOUT LIMITATION, ANY CONTRACTING FOR, CHARGING, TAKING,
RESERVING, COLLECTING OR RECEIVING INTEREST IN EXCESS OF THE HIGHEST
LAWFUL RATE APPLICABLE, THE EXERCISE OF ANY RIGHTS AND REMEDIES UNDER THE
ORIGINAL AGREEMENT OR OTHER AGREEMENTS, AND NEGOTIATION FOR AND EXECUTION
OF THIS AMENDMENT.
[BALANCE OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, Parent, the Company and Purchaser have caused
this Amendment to be executed and delivered as of the date first written.
PARENT:
JOTAN, INC.
By:__________________________________
Edward L. Lipscomb,
Vice President and Chief Financial
Officer
Address for Notices for Parent and all
Subsidiaries:
118 West Adams Street
Jacksonville, Florida 32202
Attn: Mr. Edward L. Lipscomb
Facsimile: (904) 353-0075
COMPANY:
SOUTHLAND CONTAINER
PACKAGING CORP. (formerly known as
Southland Holding Company and as
successor by merger to SHC Acquisition
Corp.)
By:__________________________________
Edward L. Lipscomb,
Vice President and Chief Financial
Officer
118 West Adams Street
Jacksonville, Florida 32202
Attn: Mr. Edward L. Lipscomb
Facsimile: (904) 353-0075
PURCHASER:
RICE PARTNERS II, L.P.
By: Rice Capital Group IV,
L.P., Its general partner
By: RMC Fund Management,
L P., Its general partner
By: Rice Mezzanine
Corporation, its
general partner
By:________________________
Jeffrey P. Sangalis
Managing Director
F-SOUTHLAND, L.L.C.
By: Franklin Street/Fairview Capital,
L.L.C., its manager
By:_____________________________
James D. Lumsden,
Title:_____________________
FF-SOUTHLAND, L.P.
By: FSFC Associates, L.P.,
its general partner
By: Franklin Capital, L.L.C.,
its general partner
By:________________________
James D. Lumsden,
Title:________________
<PAGE>
EXHIBIT A
Form of Company General Certificate
[See Attached]
<PAGE>
EXHIBIT A-1
Form of Parent General Certificate
[See Attached]
<PAGE>
EXHIBIT A-2
Form of PIK Note
[See Attached]
<PAGE>
EXHIBIT A-2
FORM OF SENIOR SUBORDINATED NOTE
PIK NOTE
[Rice]
THE TRANSFER OF AND PAYMENTS REFERENCED HEREIN ARE RESTRICTED BY AND
SUBJECT TO THE TERMS AND PROVISIONS OF A SENIOR SUBORDINATION AGREEMENT
DATED AS OF FEBRUARY 28, 1997, AS AMENDED, BY AND AMONG BANQUE PARIBAS, A
BANK ORGANIZED UNDER THE LAWS OF FRANCE ACTING THROUGH ITS HOUSTON AGENCY,
AS AGENT FOR ITSELF AND THE OTHER SENIOR LENDERS, RICE PARTNERS II, L.P.,
A DELAWARE LIMITED PARTNERSHIP, F-SOUTHLAND, L.L.C., A NORTH CAROLINA
LIMITED LIABILITY COMPANY AND FF-SOUTHLAND, L.P., A DELAWARE LIMITED
PARTNERSHIP (AS SUCH AGREEMENT MAY BE FURTHER SUPPLEMENTED, MODIFIED,
AMENDED OR RESTATED FROM TIME TO TIME, THE "SENIOR SUBORDINATION
AGREEMENT"), A COPY OF WHICH IS ON FILE AT THE CHIEF EXECUTIVE OFFICES OF
THE COMPANY.
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND NOT WITH A VIEW TO OR FOR
SALE IN CONNECTION WITH THE DISTRIBUTION HEREOF. THIS NOTE HAS 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.
$___________.00 __
FOR VALUE RECEIVED, the undersigned corporation, Southland Container
Packaging Corp., a Texas corporation (as successor by merger to SHC
Acquisition Corp., a Florida corporation, and formerly called Southland
Holding Company, herein the "Company"), hereby promises to pay to the
order of Rice Partners II, L.P. ("Purchaser"), at its offices at 5847 San
Felipe, Suite 4350, Houston, Texas 77057 (or at such other place as the
holder may from time to time designate) the principal sum of _____________
DOLLARS ($______________.00) evidencing the accrued interest due for
______________ and _______________ under the Purchase Agreement (as
defined below).
This note is one of the Senior Subordinated Notes and a PIK Note
referred to in the Note Purchase Agreement dated as of February 28, 1997,
as amended, by and between the undersigned, Jotan, Inc., Purchaser, F-
Southland, L.L.C. and FF-Southland, L.P. (the "Purchase Agreement").
Capitalized terms used in this note are defined in the Purchase Agreement,
unless otherwise expressly stated herein. This note is entitled to the
benefits of the Purchase Agreement and is subject to all of the
agreements, terms and conditions contained therein, all of which are
incorporated herein by this reference. This note is subject to the
agreements, terms and conditions contained in the Senior Subordination
Agreement (as defined in the above legend). This note may not be prepaid,
in whole or in part, except in accordance with the terms and conditions
set forth in the Purchase Agreement.
The outstanding principal balance of this note consists solely of
certain interest that is "payable in kind" in respect of the Senior
Subordinated Note issued by the undersigned to Purchaser under the
Purchase Agreement which shall be due and payable as provided in Section
2.1(a) of the Purchase Agreement. Interest on the principal amount of
this note from time to time outstanding shall be due and payable as
provided in Section 2.1(b) of the Purchase Agreement, at the annual rate
of interest set forth in Section 1.1 of the Purchase Agreement (computed
on the basis of the actual number of days elapsed over a 360-day year and
compounded quarterly). In no event, however, shall interest exceed the
maximum rate permitted by law.
As provided in Section 8.2 of the Purchase Agreement, (a) upon the
occurrence of an Event of Default under Section 8.1(f) of the Purchase
Agreement, this note, and all amounts payable hereunder in accordance with
the terms of the Purchase Agreement, shall immediately become due and
payable, without notice of any kind, and (b) upon the occurrence of any
other Event of Default under the Purchase Agreement, this note, and all
amounts payable hereunder in accordance with the terms of the Purchase
Agreement, shall, at the option of the holder, immediately become due and
payable, without notice of any kind.
THIS NOTE SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH 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 PRINCIPLES THAT COULD REQUIRE THE APPLICATION
OF THE SUBSTANTIVE LAW OF ANY OTHER JURISDICTION.
The undersigned expressly waives any presentment, demand, protest,
notice of default, notice of intention to accelerate, notice of
acceleration or notice of any other kind except as expressly provided in
the Purchase Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
COMPANY:
SOUTHLAND CONTAINER
PACKAGING CORP. (formerly known as
Southland Holding Company and as
successor by merger to SHC Acquisition
Corp.)
By:__________________________________
Edward L. Lipscomb,
Vice President and Chief Financial
Officer
STATE OF _______________ ]
]
COUNTY OF __________________ ]
This instrument was acknowledged before me on this ___ day of January,
1998 by Edward L. Lipscomb, Vice President and Chief Financial Officer of
SOUTHLAND CONTAINER PACKAGING CORP. (formerly known as Southland Holding
Company and as successor by merger to SHC Acquisition Corp.).
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
AMENDED AND RESTATED SECOND SUPPLEMENTAL
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
AMENDED AND RESTATED SECOND SUPPLEMENTAL PREFERRED STOCK PURCHASE
AGREEMENT (this "Agreement") made as of April 14, 1998, by and among
JOTAN, INC., a Florida corporation (the "Company"), RICE PARTNERS II,
L.P., a Delaware limited partnership ("Rice" or the "Purchaser"),
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"), F-
JOTAN, L.L.C., a North Carolina limited liability corporation ("F-Jotan"),
and the SHAREHOLDER named on the signature pages hereto (the
"Shareholder").
W I T N E S S E T H:
WHEREAS, the Company, Rice, the Southland Purchasers, F-Jotan and the
Shareholder named on the signature pages thereof, have entered into (i)
that certain Preferred Stock and Warrant Purchase Agreement, dated as of
February 28, 1997 (the "Preferred Stock and Warrant Purchase Agreement"),
(ii) that certain First Supplemental Preferred Stock and Warrant Purchase
Agreement dated as of September 10, 1997 (the "First Supplemental Purchase
Agreement"), and (iii) that certain Second Supplemental Preferred Stock
Purchase Agreement (the "Second Supplemental Purchase Agreement"), (the
First Supplemental Purchase Agreement, the Second Supplemental Purchase
Agreement and together with this Agreement and the Preferred Stock and
Warrant Purchase Agreement, as the same may be further modified, amended,
supplemented or restated from time to time, collectively being called, the
"Other Purchase Agreements");
WHEREAS, each party 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 (reflecting the departure of David Freedman on December 31,
1997 from employment at the Company and the termination of his options to
purchase up to 275,000 of the Company's Common Stock but not reflecting
the issuance of a certain "Priority Warrant" in connection with the
Priority Note Agreement (as defined in the last recital below);
WHEREAS, F-Jotan is the owner of the 1,435,705 shares of the Series A
Preferred Stock of the Company as of the date hereof;
WHEREAS, the Southland Purchasers and Rice are owners of shares of
Series B Preferred Stock and Warrants exercisable into the Company's
Common Stock, as set forth under the signature of each such party below;
WHEREAS, SHC Acquisition Corp., a wholly-owned Subsidiary of the
Company, has merged with and into Southland Holding Company, with
Southland Holding Company surviving and assuming all the obligations of
SHC Acquisition Corp. under the Preferred Stock and Warrant Purchase
Agreement. On July 31, 1997, all of the subsidiaries of Southland Holding
Company and Atlantic Bag & Paper Company, a Subsidiary of the Company,
merged with and into Southland Holding Company (which concurrently changed
its name to Southland Container Packaging Corp.), with the result that
Southland Container Packaging Corp. ("Southland"), as of July 31, 1997,
had no Subsidiaries;
WHEREAS, the Company, Southland, Rice and the Southland Purchasers
have entered into that certain Note Purchase Agreement, dated as of
February 28, 1997, as amended by Amendment No. 1, dated as of August 19,
1997, Amendment No. 2, dated as of November 6, 1997 and Amendment No. 3,
dated as of April 14, 1998 (as the same may be modified, amended,
supplemented or restated from time to time the "Original Note Agreement");
WHEREAS, the Company, Rice, Southland Purchasers, F-Jotan, and the
Shareholder have entered into (i) a Shareholder Agreement, dated as of
February 28, 1997 (the "Original Shareholder Agreement"), (ii) that
certain First Supplemental Shareholder Agreement, dated as of September
10, 1997 (the "First Supplemental Shareholder Agreement"), (iii) that
certain Second Supplemental Shareholder Agreement, dated as of November 6,
1997 (the "Second Supplemental Shareholder Agreement"), and (iii) that
certain Amended and Restated Second Supplemental Shareholder Agreement,
dated as of the date hereof (the "Restated Second Supplemental Shareholder
Agreement"), (the Original Shareholder Agreement, the First Supplemental
Shareholder Agreement, the Second Supplemental Shareholder Agreement, and
the Restated Second Supplemental Shareholder Agreement are collectively
called the "Other Shareholder Agreements");
WHEREAS, Rice and the Board of Directors of the Company determined
that, in the best interest of the Company, Rice was willing purchase, and
the Company was willing to sell to Rice, $250,000 (the "Purchase Price")
of Series B Preferred Stock, in cash at $200 per share (the "Investment")
to enable the Company to make certain payments to certain individuals who
previously owned minority interests in certain subsidiaries of Southland;
WHEREAS, although Rice was willing to enter into and consummate the
transactions contemplated hereby upon the due issuance of the Warrants and
Preferred Stock (as defined below) in connection with the payment of the
Purchase Price, the Southland Purchasers elected not to purchase Preferred
Stock in this transaction; and
WHEREAS, Rice and the Company agreed that, notwithstanding the
provisions of the Second Supplemental Purchase Agreement and in
consideration of making further financial investments in the Company, the
Company is willing to issue to Rice, and Rice shall receive Warrants in
connection with, and related to, the purchase of the Second Supplemental
Preferred Shares (as defined below), which warrants shall be issued
concurrently with the purchase by Rice of $1,250,000 of "Priority Senior
Subordinated Notes" under that certain Priority Note Purchase Agreement,
dated as of April 14, 1998, among Rice, the Company and Southland
Container Packaging Corp. ("Priority Note 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, Purchaser, Southland Purchasers, F-Jotan, the Southland
Purchasers, the Shareholder, and the Company, intending to be legally
bound, agree as follows:
Article I
Definitions
As used in this Agreement, all capitalized terms have the meanings
indicated in the Preferred Stock and Warrant Purchase Agreement unless
otherwise defined herein. Any such term used in the Preferred Stock and
Warrant Purchase Agreement, but not defined herein, shall be interpreted
to cover all corresponding terms used herein and relating to the Warrants
and Series B Preferred Stock to be issued pursuant to this Agreement, as
if such terms were set forth at length herein and applied to the
transactions contemplated hereby.
Agreement. This Amended and Restated Second Supplemental Preferred
Stock and Warrant Purchase Agreement, as the same may be modified,
amended, supplemented or restated from time to time.
Closing Date. With respect to this Agreement, as of the date first
set forth above.
First Supplemental Warrant. The First Supplemental Warrant A-2
issued concurrently with the issuance of the First Supplemental
Series B Preferred Stock.
Second Supplemental Warrant. The Second Supplemental Warrant A-3,
dated April 14, 1998, to be purchased by Rice under this Agreement
concurrently with the purchase of the Priority Senior Subordinated
Note as defined in the Priority Note Agreement.
Priority Note Agreement. The Priority Note Purchase Agreement, dated
as of April 14, 1998, by and among the Company, Southland Container
Packaging Corp., and Rice and all documents evidencing indebtedness
thereunder or otherwise related to such Agreement, as the same may be
further amended from time to time, and any refinancing, refunding or
replacements of the indebtedness under such Agreement.
Original Closing Date. The Closing Date with respect to the
Preferred Stock and Warrant Purchase Agreement, which occurred as of
February 28, 1997 with respect to the originally issued Warrants and
Preferred Shares under the Preferred Stock and Warrant Purchase
Agreement and March 4, 1997 with respect to the initial funding.
Other Shareholder Agreements. This term is defined in the Preamble.
Preferred Stock or Series B Preferred Stock. For purposes of this
Agreement (except where the context requires a reference to this
Agreement and the Preferred Stock and Warrant Purchase Agreement),
the Second Supplemental Series B Preferred Stock.
Purchase Price. This term is defined in the preamble.
Purchaser. For purposes of this Agreement, the Second Supplemental
Documents and the First Supplemental Documents (as defined in the
First Supplemental Purchase Agreement), Rice; and for purposes of the
Preferred Stock and Warrant Purchase Agreement and the transactions
contemplated thereby, Rice and the Southland Purchasers.
Second Supplemental Documents. This Agreement, the Second
Supplemental Series B Preferred Stock, the Second Supplemental
Shareholder Agreement, and the Restated Second Supplemental
Shareholder Agreement among the parties hereto and the transactions
and documents, instruments, certificates and agreements contemplated
thereby, as the same may be modified, amended, supplemented or
restated from time to time.
Second Supplemental Preferred Shares. Shares of Series B Preferred
Stock (but not any Series A Preferred Stock) issued to Purchaser
under the Second Supplemental Purchase Agreement in connection with
the Investment described therein and herein.
Second Supplemental Series B Preferred Stock. Series B Preferred
Stock issued to the applicable Purchaser under the Second
Supplemental Purchase Agreement in connection with the Investment
described therein and herein.
Southland. This term is defined in the Preamble.
Warrants or Second Supplemental Warrant. For purposes of this
Agreement (except where the context requires a reference to this
Agreement, the First Supplemental Purchase Agreement and the
Preferred Stock and Warrant Purchase Agreement), the Second
Supplemental Warrant (as defined below).
Warrant Shares. For purposes of this Agreement (except where the
context requires a reference to this Agreement, the First
Supplemental Purchase Agreement and the Preferred Stock and Warrant
Purchase Agreement), the shares of Common Stock issuable and issued
on exercise of the Second Supplemental Warrant (defined below), and
all Warrants issued upon the transfer or division of, or in
substitution for, such Warrant.
Article II
The Preferred Shares; Warrants; Warrants
2.01 The Preferred Shares; Warrants. On or prior to 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:
(a) for a purchase price of $100, a Second Supplemental
Warrant A-3 (relating to the Series B Preferred Stock) in
substantially the form attached to this Agreement as Annex B and
incorporated in this Agreement by reference to purchase, at the
exercise price provided in Section 2.03, the number of shares of
Common Stock set forth beneath the name of Rice on the signature
page of this Agreement (the "Second Supplemental Warrant"); and
(b) 1,250 shares of Series B Preferred Stock, at a
purchase price of $200 per share (for a total of $250,000)
having the rights, restrictions, privileges, and preferences set
forth in the articles of amendment of the Company's articles of
incorporation attached to the Preferred Stock and Warrant
Purchase Agreement as Annex H (the "Certificate").
The Company has 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.
Within forty-five (45) business days after the Closing Date, the Company
will deliver to Rice a certificate evidencing and representing the shares
of Second Supplemental Series B Preferred Stock issued to such Purchaser,
which certificate shall be issued in such Purchaser's name or in the name
of its designee.
2.02 Legend. The Company will deliver to Purchaser pursuant to
Section 2.01, one or more certificates representing each of (i) Second
Supplemental Warrant and (ii) the Second Supplemental Series B Preferred
Stock purchased by Rice in such denominations as such Purchaser requests.
Such certificates will be issued in such 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, AND THE TEXAS SECURITIES ACT OF
1957, 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."
It is further understood and agreed that the certificates evidencing the
Second Supplemental Series B 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 TEXAS SECURITIES ACT OF 1957, 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 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 Second Supplemental Warrant;
provided, however, that in no event shall the aggregate Exercise Price for
all of the shares of Common Stock covered by the Second Supplemental
Warrant 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 Warrant. The Second Supplemental Warrant may be
exercised at any time or from time to time on or after the Closing Date
until the tenth (10th) anniversary of the Original Closing Date (March 4,
2007), 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 the Second Supplemental Warrant, in whole or in part, the
Holder will comply with the applicable provisions in Section 2.04 of the
Preferred Stock and Warrant Purchase Agreement as if such provisions were
incorporated herein at length.
2.05 Stock Legend. Without limiting the provisions of Section 2.02
hereof, the Second Supplemental Warrant and the Second Supplemental
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 Second Supplemental Warrant or the Second Supplemental Preferred
Shares, as the case may be, under the Securities Act or under applicable
state securities laws, the Second Supplemental Preferred Shares and, at
the time of exercise of a Second Supplemental Warrant, any stock
certificate issued pursuant to the exercise of a Second Supplemental
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, AND THE TEXAS SECURITIES ACT OF 1957, 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, L.L.C., 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."
All shares of Capital Stock of the Company subject to the Other
Shareholder Agreements will bear a legend to such effect.
2.06 Preferred Stock and Warrant Purchase Agreement Provisions
Incorporated into this Agreement. Except as set forth above, all other
provisions in Article II of the Preferred Stock and Warrant Purchase
Agreement shall be incorporated herein as if set forth at length herein
with full application to the Second Supplemental Warrant and the Second
Supplemental Preferred Shares; and all such Preferred Shares issued
pursuant to this Agreement shall be included in all adjustments and other
calculations under Section 2.08 of the Other Purchase Agreements relating
to Preferred Shares issued as of the Original Closing Date under the
Second Supplemental Warrant and the Second Supplemental Preferred Shares
as if such were issued on the Original Closing Date. Notwithstanding the
issuance of securities contemplated herein, there will be no adjustments
under Section 2.08 of the Preferred Stock and Warrant Purchase Agreement
or under the Certificate (in respect of the issuance of the First
Supplemental Warrant, the Second Supplemental Warrant and the Second
Supplemental Preferred Stock to Rice) and such adjustment rights are
hereby waived with respect to such issuances.
All shares of Capital Stock of the Company subject to the Other
Shareholder Agreements will bear a legend to such effect.
Article III
Representations and Warranties
3.01 Representations and Warranties of the Company. The Company
represents and warrants to the Southland Purchasers, 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 except where the failure to qualify to be
licensed could have a Material Adverse Effect (as defined in the
Original Note Agreement). The Company has no Subsidiaries (other
than Southland) or debt or equity investment in any other Person.
Other than Rice, the Southland Purchasers 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.
(b) The Company 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
Restated Second Supplemental Shareholder Agreement, the Second
Supplemental Warrant, and the officers of Company executing and
delivering this Agreement, the Restated Second Supplemental
Shareholder Agreement, and the Second Supplemental Warrant are duly
authorized to do so; provided, however, that the exercise of the
Second Supplemental Warrant and the performance of the Company's
obligations in connection therewith are subject to (i) approval of
the holders of Common Stock voting as a class to an amendment to the
Restated Articles of Incorporation of the Company increasing the
authorized Common Stock to an appropriate amount in accordance with
applicable state and securities laws (the "Common Shareholder
Approval") and the filing of such amendment with the Florida
Secretary of State; and (ii) approval of two-thirds of holders of
Preferred Stock of the Company voting as a class in accordance with
applicable state and securities laws ("Preferred Shareholder
Approval"); and (iii) the consent to and waiver of certain rights of
F-Jotan and the Southland Purchasers (collectively, the "Fairview
Entities") under the Restated Second Supplemental Shareholder
Agreement, as amended from time to time (including any preemptive
rights contained therein) and under the Restated Second Supplemental
Purchase Agreement of concurrent date therewith and related
agreements, as all have been amended from time to time. Subject to
the foregoing, this Agreement, the Restated Second Supplemental
Shareholder Agreement, and the Second Supplemental Warrant have been,
or will be, duly and validly executed, issued, and delivered and
constitute the legal, valid, and binding obligations of Company,
enforceable in accordance with their respective terms.
(c) The execution, delivery, and performance of this Agreement,
the Restated Second Supplemental Shareholder Agreement, and the
Second Supplemental Warrant 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; provided
that, the Common Shareholder Approval and the Preferred Shareholder
Approval are obtained and the Company's Restated Articles of
Incorporation are amended in accordance with the Common Shareholder
Approval and the Preferred Shareholder Approval.
(d) As of the Closing Date, the authorized capital stock of the
Company will consist of (i) 40,000,000 shares of Common Stock, of
which 21,396,813 shares are issued and outstanding and (ii)
10,000,000 shares of Preferred Stock, of which 1,437,705 shares in
Series A Preferred Stock are issued and outstanding and of which
64,375 shares of Series B Preferred Stock are issued and outstanding.
An aggregate of at least 3,620,473 shares of Common Stock are
reserved for issuance on exercise of the First Supplemental Warrant;
an aggregate of at least 8,475,638 shares of Common Stock are
reserved for issuance on exercise of the Second Supplemental Warrant;
an aggregate of at least 42,377,173 shares of Common Stock or,
subject to compliance with the Section 4.02 below, will be reserved
for issuance on exercise of the "Priority Warrant" issued in
connection with the Priority Note Agreement. All of the issued and
outstanding shares of Common Stock are validly issued, fully paid and
nonassessable. The Common Stock has 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 (w) as otherwise provided in this Agreement, or (x) in
the powers, designations, rights and preferences of the Preferred
Stock contained in the Certificate, as amended, or (y) as provided in
the Second Supplemental Shareholder Agreement) and in compliance with
applicable federal and state securities laws. Except (1) pursuant to
this Agreement, the Second Supplemental Purchase Agreement and
related Warrants and the Second Supplemental Shareholder Agreement
and (2) for the Permitted Stock, (A) the Company is not obligated to
issue or sell any Capital Stock, and, except for this Agreement and
the Other Shareholder Agreements, and (B) the Company is not a party
to, or otherwise bound by, any agreement affecting the voting of any
Capital Stock. Except for the Restated Second Supplemental
Shareholder Agreement and the Other Shareholder Agreements, 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 shares of Common Stock and other consideration issuable
on exercise of the Second Supplemental Warrant when issued in
accordance with the terms of this Agreement or the Warrant, 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 Permitted Liens (as defined the Original 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 Restated Second Supplemental Shareholder Agreement
will there be, any agreement, arrangement, or understanding involving
the Company, other than this Agreement, the Restated Second
Supplemental Shareholder Agreement, the Restated Second Supplemental
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 Priority Note Agreement is true and correct
in all material respects.
(j) None of the documents, instruments, or other information
furnished to Rice by the Company, 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 by the Company in this
Agreement, the Priority Note Agreement, or the Restated Second
Supplemental 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
Priority 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 Rice.
3.02 Representations and Warranties of Purchaser. Rice represents and
warrants to the Company, F-Jotan, the Southland Purchasers and the
Shareholder:
(a) Rice is a limited partnership, duly organized, validly
existing and in good standing under the laws of the jurisdiction of
its organization.
(b) Rice has the right and power and is duly authorized to
enter into, execute, deliver, and perform this Agreement and the
Restated Second Supplemental Shareholder Agreement, and its officers,
managers or agents executing and delivering this Agreement and the
Restated Second Supplemental Shareholder Agreement are duly
authorized to do so. This Agreement and the Restated Second
Supplemental Shareholder Agreement have been duly and validly
executed, issued, and delivered and constitute the legal, valid, and
binding obligation of Rice, enforceable in accordance with their
respective terms.
(c) Rice (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 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 Second Supplemental Preferred Shares, and the Second
Supplemental Warrant and any securities issuable upon exercise of the
Second Supplemental Warrant 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 Second Supplemental Preferred Shares and the
Second Supplemental Warrant and any securities issuable upon exercise
of such Warrants.
(d) Except as otherwise contemplated by this Agreement and the
Shareholder Agreement, Rice is acquiring its Second Supplemental
Series B Preferred Stock, the Second Supplemental Warrant and any
securities issuable upon exercise of the Second Supplemental Warrant
for investment for its own account and not with a view to any
distribution thereof in violation of applicable securities laws.
(e) Rice agrees that the certificates representing the Second
Supplemental Preferred Shares, the Second Supplemental Warrant, and
any Issued Warrant Shares will bear the legends referenced in this
Agreement or the Preferred Stock and Warrant Purchase Agreement, as
the case may be, and such Preferred Shares, Warrants or securities
issuable upon exercise of such Warrants and pursuant to the Restated
Second Supplemental 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) Rice is not acquiring the Second Supplemental Preferred
Shares or the Second Supplemental Warrant or any securities issuable
upon exercise of such 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, such Preferred Shares
or such Warrants of securities issuable upon exercise of such
Warrants, but rather upon an independent examination and judgment as
to the prospects of the Company. Further, Rice acknowledges that no
federal or state administrative entity responsible for securities
registration or enforcement has made any recommendation or
endorsement of such Preferred Shares or such Warrants or any
securities issuable upon exercise of such Warrants or any findings as
to the fairness of an investment in the Preferred Shares of such
Warrants or any securities issuable upon exercise of such Warrants.
(g) Rice 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 Second
Supplemental Preferred Shares, the Second Supplemental Warrant or any
securities issuable upon exercise of the Second Supplemental Warrant
to any Person.
Article IV
Covenants
4.01 Preferred Stock and Warrant Purchase Agreement Covenants
Incorporated Into This Agreement. For so long as the Second Supplemental
Warrant or the Warrant Shares remain outstanding, he Company will comply
with all covenants in Article IV of the Preferred Stock and Warrant
Purchase Agreement as if set forth herein at length.
4.02 Issuance of Warrant.
(a) This Agreement is being executed and delivered and the
Second Supplemental Warrant is being issued herein prior to the completion
of a "fairness opinion" requested by the Company from Hoak, Breedlove and
Wesneski of Dallas, Texas. Such opinion is expected to address the
question of whether the number of shares of Common Stock of the Company
issuable on exercise of the Second Supplemental Warrant of 8,475,402
shares of Common Stock in consideration of Rice's investment of 1,250
shares of Second Supplemental Preferred Stock in the Company is fair to
the shareholders of the Company from a financial point of view. If the
substance of the fairness opinion indicates that the "fair" number of
shares of Common Stock issuable on exercise of the Second Supplemental
Warrant as consideration for such investment in the Company would be equal
to or greater than the number of shares issuable on exercise of the Second
Supplemental Warrant actually issued to Rice hereunder, then no change
shall be made to the number of shares issuable under the Second
Supplemental Warrant. However, if such fairness opinion indicates that
the number of shares of Common Stock issuable on exercise of the Second
Supplemental Warrant issuable to Rice is not fair to the shareholders of
the Company, then (i) the number of shares of Common Stock that may be
issued on exercise of the Second Supplemental Warrant shall be reduced to
the number which the fairness opinion determines is fair (if so stated),
(ii) Rice shall exchange the Second Supplemental Warrant issued originally
hereunder for a new, appropriate Second Supplemental Warrant reflecting
the "fair" number of Issuable Warrant Shares, and (iii) the provisions of
this Agreement and the Other Purchase Agreements shall be adjusted to
reflect such reduction, all with the purpose and intent of reflecting the
conclusions reached in such fairness opinion. Notwithstanding the
foregoing, if either the Company or Rice disagree with the methodology or
findings of the "fairness opinion" or such opinion shall not state what
number of shares should be issued to be "fair", the Company and Rice shall
negotiate in good faith to agree upon an appropriate number of Issuable
Warrant Shares to be owned by Rice. If the Company and Rice are unable to
so agree within thirty (30) days after receipt of the "fairness opinion"
(or a determination that a fairness level will not be available from the
opining firm), then, on Rice's request and at the Company's expense, such
parties shall select an Appraiser (in accordance with the procedure set
forth in the definition of Appraised Value) to determine the number of
Warrant Shares that should be issued to Rice to fairly compensate Rice for
its $250,000 Preferred Stock investment made in the Company pursuant to
this Agreement (and the Second Supplemental Purchase Agreement). Such
determination shall be made by such Appraiser in a manner which, to the
greatest extent applicable, utilizes the principles and methodologies
described in the definition of "Appraised Value" in Article I of the
Preferred Stock and Warrant Purchase Agreement.
(b) The Warrant described in Section 4.01 hereof shall be
issued on the Closing Date, but shall be authorized and exercisable in
accordance with and subject to the following conditions:
(i) The Common Shareholder Approval authorizing an
increase in the authorized shares of Common Stock to not less than
150,000,000 shares and the Preferred Shareholder Approval authorizing
the issuance of the Priority Warrant shall be obtained; and
(ii) The Company shall have issued a proxy statement to its
shareholders of record referring to the transactions contemplated in
this Agreement;
(iii) The Amendment to the Certificate to increase the
authorized shares of Common Stock to the level set forth in Section
4.02(b)(i) above shall have duly approved and filed with the
Secretary of State in the State of Florida; and
(iv) the "fairness opinion" described above shall have been
issued or a final agreement or resolution shall have been reached by
the Company and Rice under this Section with respect to the number of
shares issuable on exercise of the Priority Warrant.
(c) Notwithstanding the provisions of Section 4.02(a) above,
the maximum number of shares issuable upon exercise of the Priority
Warrant and the Second Supplemental Warrant (as defined in the Other
Purchase Agreements) in the aggregate, shall not exceed sixty-five percent
(65%) of the Capital Stock outstanding (excluding, for purposes of such
percentage calculation, the shares issuable upon exercise of the Priority
Warrant and the Second Supplemental Warrant), as of the date the
conditions in paragraph (b) above are fully satisfied.
4.03 Rights of Priority. The Other Purchase Agreements and the Other
Shareholder Agreements, as amended as of the date hereof, are subject to
the priority provisions set forth in Article XI of the Priority
Shareholder Agreement (as defined in the Priority Note Purchase
Agreement), and parties covenant and agreed to carry out the terms and
intent thereof in good faith.
Article V
Conditions
The obligations of Purchaser and the Company to effect the
transactions contemplated by this Agreement are subject to the following
conditions precedent:
5.01 Restated Second Supplemental Shareholder Agreement. The
Company, F-Jotan, the Southland Purchasers and the Shareholder will have
entered into the Restated Second Supplemental Shareholder Agreement with
Purchaser.
5.02 Representations and Agreements. Each representation and
warranty of the Company and Rice 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 Rice will have fully performed all their covenants and
agreements set forth in this Agreement in all material respects.
5.03 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 Purchaser and its counsel, and 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 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 Restated Second Supplemental Shareholder
Agreement will have been received, be in full force and effect, and not be
subject to any onerous condition.
5.05 Issuance of Second Supplemental Warrant. The Warrant described
in Section 4.02(a) above shall have been duly issued to Rice (subject to
(a) the adjustment provisions in such section, and (b) the conditions to
authorize the exercise of such Second Supplemental Warrant described in
Section 4.02(b) above).
5.06 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.
5.07 Government Filings. All filings under 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, Purchaser and the Shareholder.
Article VI
Miscellaneous
6.01 Indemnification. In addition to any other rights or remedies to
which Rice and the Holders may be entitled, the Company agrees to and will
indemnify and hold harmless Rice and the other Holders, if any, and their
respective Affiliates and its 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 under this Agreement, the Other
Shareholder Agreements, or under any other agreement to which the Company
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 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, the Restated Second
Supplemental Shareholder Agreement, the Other Purchase Agreements, Other
Shareholder Agreements and all documents, agreements, notes and
instruments executed in connection therewith 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
with courtesy copies to: Patton Boggs, L.L.P.
2200 Ross Avenue, Suite 900
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
FAX: 214-871-2688
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
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 the Company, at: Jotan, Inc.
118 West Adams Street
Jacksonville, Florida 32202
Attn: President
Fax: 904-353-0075
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 parties listed above 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 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 Rice 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 Purchaser
and its 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 parties hereto 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,
if any, 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, PURCHASER, THE SOUTHLAND PURCHASERS AND 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, PURCHASER, THE SOUTHLAND PURCHASERS
AND SHAREHOLDER IN THE NEGOTIATION, ADMINISTRATION, OR ENFORCEMENT HEREOF
OR THEREOF. THIS PROVISION IS A MATERIAL INDUCEMENT FOR PURCHASER TO
PURCHASE THE WARRANTS AND PREFERRED STOCK FROM THE COMPANY.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY:
JOTAN, INC.
BY:_____________________________________
Edward L. Lipscomb
Vice President and Chief Financial
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:___________________________________
Jeffrey P. Sangalis
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 Preferred
Stock
13,125 Shares of First Supplemental
Series B Preferred Stock
1,250 Shares of Second Supplemental
Series B Preferred Stock
15,717,402 Shares of Common Stock
8,475,638 Second Supplemental Warrant
A-3 Shares
F-JOTAN, L.L.C.
By: Franklin Street/Fairview Capital,
L.L.C., its Manager
By:________________________________
James D. Lumsden,
Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
1,435,705 Shares of Series A
Convertible Preferred Stock
None Shares of Common Stock
None Other Equity Interests
THE SOUTHLAND PURCHASERS:
F-SOUTHLAND, L.L.C.
By: Franklin Street/Fairview Capital,
L.L.C., its Manager
By: _______________________________
James D. Lumsden, 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
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:___________________________
James D. Lumsden,
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
Preferred Stock
None Shares of Common Stock
359,315 Warrant C-1 Shares
1,197,716 Warrant C-2 Shares
SHAREHOLDER:
________________________________________
Shea E. Ralph
OWNED ON CLOSING DATE:
950,000 Shares of Common Stock Owned
on Closing Date
33,000 Other Equity Interests
<PAGE>
ANNEX A
[Second Supplemental Shareholder Agreement]
AMENDED AND RESTATED SECOND
SUPPLEMENTAL SHAREHOLDER AGREEMENT
AMENDED AND RESTATED SECOND SUPPLEMENTAL SHAREHOLDER AGREEMENT (the
"Agreement") made as of April 14, 1998, by and among JOTAN, INC., a
Florida corporation (the "Company"), RICE PARTNERS II, L.P., a Delaware
limited partnership ("Rice" or "Purchaser"), 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"), F-JOTAN, L.L.C., a North Carolina
limited liability company ("F-Jotan") and the shareholder named on the
signature pages hereto the "Shareholder").
W I T N E S S E T H:
WHEREAS, 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 (reflecting the departure of David Freedman on December 31,
1997 from employment at the Company and the termination of his options to
purchase up to 275,000 of the Company's Common Stock) but not reflecting
the issuance of a certain "Priority Warrant" in connection with the
Priority Note Agreement dated as the date hereof, among Rice, the Company
and Southland Container Packaging Corp.;
WHEREAS, F-Jotan is the owner of the 1,435,705 shares of the Series A
Preferred Stock of the Company as of the date hereof;
WHEREAS, SHC Acquisition Corp., a wholly-owned Subsidiary of the
Company, has merged with and into Southland Holding Company, with
Southland Holding Company surviving and assuming all the obligations of
SHC Acquisition Corp. under the Preferred Stock and Warrant Purchase
Agreement dated as of February 28, 1997, by and among Rice, the Southland
Purchasers, the Company and F-Jotan (the "Preferred Stock and Warrant
Purchase Agreement"). On July 31, 1997, all of the subsidiaries of
Southland Holding Company and Atlantic Bag & Paper Company, a subsidiary
of the Company, merged with and into Southland Holding Company (which
concurrently changed its name to Southland Container Packaging Corp.),
with the result that Southland Container Packaging Corp. ("Southland"), as
of July 31, 1997, had no subsidiaries;
WHEREAS, the Company, Southland, Rice and the Southland Purchasers
have entered into that certain Note Purchase Agreement, dated as of
February 28, 1997, as amended by Amendment No. 1, dated as of August 19,
1997, Amendment No. 2, dated as of November 6, 1997 and Amendment No. 3,
dated as of the date hereof (the "Original Note Agreement");
WHEREAS, the Company entered into (i) the Preferred Stock and Warrant
Purchase Agreement, (ii) that certain First Supplemental Preferred Stock
and Warrant Purchase Agreement, dated as of September 10, 1997 (the "First
Supplemental Purchase Agreement"), (ii) that certain Second Supplemental
Preferred Stock Purchase Agreement, dated as of January 23, 1998 (the
"Second Supplemental Purchase Agreement") and (iii) that certain Amended
and Restated Second Supplemental Preferred Stock and Warrant Purchase
Agreement, dated as of the date hereof (or the "Restated Second
Supplemental Purchase Agreement"), each by and among the Company, Rice,
Southland Purchasers, F-Jotan, and the Shareholder (such restated
agreement together with the First Supplemental Purchase Agreement, the
Second Supplemental Purchase Agreement and the Original Purchase
Agreement, as the same may be further supplemented, modified, amended or
restated from time to time, collectively being called the "Other Purchase
Agreements");
WHEREAS, the Company, Rice, the Southland Purchasers, F-Jotan and the
Shareholder have entered into (i) that certain Shareholder Agreement,
dated as of February 28, 1997 (the "Original Shareholder Agreement"), (ii)
that certain First Supplemental Shareholder Agreement, dated as of
September 10, 1997 (the "First Supplemental Shareholder Agreement"), (iii)
that certain Second Supplemental Shareholder Agreement", dated as of
January 23, 1998 (the "Second Supplemental Shareholder Agreement"), (the
Original Shareholder Agreement, the First Supplemental Shareholder
Agreement, the Second Supplemental Shareholder Agreement and this
Agreement are collectively called the "Other Shareholder Agreements");
WHEREAS, concurrently with entering into the Second Supplemental
Shareholder Agreement, Rice purchased $250,000 (the "Purchase Price") of
Series B Preferred Stock, which enabled the Company at that time to make
certain payments to certain minority interests;
WHEREAS, in connection with making additional financial
accommodations to the Company, the parties desire to amend and restate the
Second Supplemental Purchase Agreement to provide for the issuance of the
Second Supplemental Warrant (as defined in the Restated Second
Supplemental Purchase Agreement) to Rice, on the terms set forth in the
Restated Second Supplemental Purchase Agreement, in consideration of
investing such Purchase Price in the Second Supplemental Preferred Shares
(as defined in the Restated Second Supplemental Purchase Agreement) and
for making such additional financial accommodations to Southland; and
WHEREAS, the parties hereto also desire to amend and confirm portions
of the Other Shareholder Agreements, (as amended and confirmed hereby,
this "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 Southland Purchasers, F-Jotan, the
Shareholder, and the Company, intending to be legally bound, agree as
follows:
Article I
Definitions
All terms used in this Agreement will have the meanings ascribed to
them in the Other Purchase Agreements 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 Other Purchase Agreements) 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
Waiver Certain Preemptive Rights of the Holders
2.01 Preemptive Right Waiver. The Company will not issue or sell any
New Securities without first complying with Article II of the Original
Shareholder Agreement; provided, however, that for purposes of this
Agreement and the Other Purchase Agreements, each of the Southland
Purchasers and F-Jotan hereby waives its preemptive rights with respect to
the issuance of the Second Supplemental Preferred Shares and the Second
Supplemental Warrant.
Article III
Confirmation and Incorporation of Original Shareholder Agreement
3.01 Original Shareholder Agreement Provisions Incorporated into this
Agreement. Except as set forth above, all other provisions of the
Original Shareholder Agreement are hereby confirmed as if incorporated
herein at length, with full application to the Second Supplemental Warrant
and the Second Supplemental Preferred Shares (it being agreed that such
securities shall be treated in all respects as Capital Stock).
Accordingly, the Second Supplemental Preferred Shares and the Second
Supplemental Warrant shall be treated as if such securities were issued on
March 4, 1997 and are Registrable Securities hereunder and under the
Original Shareholder Agreement for all purposes.
Article IV
Conditions
The obligations of Rice, the Southland Purchasers, F-Jotan and the
Company to effect the transactions contemplated by this Agreement are
subject to the following conditions:
4.01 Restated Second Supplemental Purchase Agreement Conditions. All
of the conditions precedent to the obligations of the Purchaser under the
Restated Second Supplemental Purchase Agreement will have been satisfied
in full or waived.
4.02 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 of Rice, the Southland Purchasers, F-Jotan and the
Company and their respective counsel, and each of Rice, the Southland
Purchasers, F-Jotan and the Company and their respective counsel will have
received copies (executed or certified as may be appropriate) of all
documents, instruments, and agreements that Rice, the Southland
Purchasers, F-Jotan and the Company or their respective counsel may
request in connection with the consummation of such transactions.
Article V
Miscellaneous
5.01 Indemnification. In addition to any other rights or remedies to
which each of Rice, the Southland Purchasers, F-Jotan 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 of Rice, the
Southland Purchasers 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, 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 Restated Second
Supplemental Purchase Agreement, or the Other Purchase Documents (each as
defined in Section 11.1 of the Original Note Agreement together with all
supplements and amendments to each such agreement or document as of the
date hereof) 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 Rice, the Southland Purchasers and F-Jotan 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 of Rice, the Southland Purchasers and F-Jotan
of its interests in, or the repayment of its loans to, the Company.
5.02 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 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.
5.03 Integration. This Agreement, the Restated Second Supplemental
Purchase Agreement, the Original Note Agreement, the Other Purchase
Agreements, the Other Shareholder Agreements and all documents,
agreements, notes and instruments executed in connection therewith
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, F-
Jotan and each Holder.
5.04 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.
5.05 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.
5.06 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
with courtesy copies to: Patton Boggs, L.L.P.
2200 Ross Avenue
Suite 900
Dallas, Texas 75201
Attn: Larry A. Makel, Esq.
Fax: 214-871-2688
If to F-Jotan, at: Address of F-Jotan beneath the name of F-Jotan 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.
Fax: (919) 781-4865
If to the Company, at: Jotan, Inc.
118 West Adams Street
Jacksonville, Florida 32202
Attn: President
Fax: (904) 353-0075
If to the Shareholder, at: Address of such Shareholder beneath the
name of such Shareholder on the signature
pages of this Agreement
If to the Southland
Purchasers: Address of such Southland Purchasers under their
respective names 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 parties listed above 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.
5.07 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.
5.08 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.
5.09 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 hereof, 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.
5.10 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.
5.11 Counterparts. This Agreement may be executed in any number of
counterparts, which will individually and collectively constitute one
agreement.
5.12 Other Business. It is understood and accepted that Rice,
Southland Purchasers, 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.
5.13 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-OF-LAW RULES THEREOF OR ANY OTHER
PRINCIPLE THAT COULD REQUIRE THE APPLICATION OF THE SUBSTANTIVE LAW OF ANY
OTHER JURISDICTION.
5.14 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.
5.15 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 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.
5.16 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.
5.17 Confidentiality. Each Holder and F-Jotan agrees to keep
confidential any information delivered by the Company to such Holder and
F-Jotan under this Agreement that the Company clearly indicates in writing
to be confidential information; provided, however, that nothing in this
Section 5.17 will prevent such Holder and F-Jotan from disclosing such
information (a) to any Affiliate of such Holder or F-Jotan or any actual
or potential purchaser, participant, assignee, or transferee of such
Holder's or F-Jotan's rights or obligations hereunder that agrees to be
bound by the terms of this Section 5.17, (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 or F-Jotan, (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 or F-Jotan, (f) in connection with the exercise of any remedy
under this Agreement, or (g) to the certified public accountants for such
Holder and F-Jotan. The Company agrees that such Holder and F-Jotan will
be presumed to have met its obligations under this Section 5.17 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.
5.18 Confirmation of Other Shareholder Agreements.
Except as amended and supplemented hereby, the Original Shareholder
Agreement, the First Supplemental Shareholder Agreement and the Second
Supplemental Shareholder Agreement, shall remain in full force and effect,
and, as so amended and supplemented, such agreements are hereby confirmed
in their entirety.
IN WITNESS WHEREOF, the parties have executed and delivered this
Agreement as of the date first above written.
COMPANY:
JOTAN, INC.
BY:______________________________________
Edward Lipscomb
Vice President and Chief Financial
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 Preferred
Stock
13,125 Shares of First Supplemental
Series B Preferred Stock
1,125 Shares of Second Supplemental
Series B Preferred Stock
15,717,402 Shares of Common Stock
8,475,638 Second Supplemental Warrant
A-3 Shares
F-JOTAN, L.L.C.
By: Franklin Street/Fairview Capital,
L.L.C., its manager
By: Franklin Capital, L.L.C.,
its manager
By: ________________________________
James D. Lumsden, Manager
702 Oberlin Road
Suite 150
Raleigh, North Carolina 27605
Attn: James D. Lumsden
Facsimile: (919) 743-2501
OWNED ON CLOSING DATE:
1,435,705 Shares of Series A
Convertible Preferred Stock
None Shares of Common Stock
None Other Equity Interests
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: ________________________________
James D. Lumsden, 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:_____________________________________
James D. Lumsden, 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
SHAREHOLDER:
________________________________________
Shea E. Ralph
OWNED ON CLOSING DATE:
950,000 Shares of Common Stock Owned
on Closing Date
33,000 Common Stock Options
