THE TRANSFER OF AND PAYMENTS ON THE SENIOR SUBORDINATED NOTES REFERENCED
HEREIN ARE RESTRICTED BY AND SUBJECT TO THE TERMS AND PROVISIONS OF A
SENIOR SUBORDINATION AGREEMENT DATED AS OF FEBRUARY 28, 1997, 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
SUPPLEMENTED, MODIFIED, AMENDED OR RESTATED FROM TIME TO TIME), A COPY OF
WHICH IS ON FILE AT THE CHIEF EXECUTIVE OFFICES OF THE COMPANY.
NOTE PURCHASE AGREEMENT
This Note Purchase Agreement (this "Agreement"), dated as of February
28, 1997, is by and among SHC Acquisition Corp., a Florida corporation, to
be merged with and into Southland Holding Company, a Texas corporation
(the "Company"), JOTAN, INC., a Florida corporation ("Parent"), 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") (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"). Capitalized terms used in this Agreement are defined in
Section 11.1.
To induce each Purchaser to purchase the 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 SENIOR SUBORDINATED NOTES AND COMMITMENT
1.1 Description of Senior Subordinated Notes. The Company will
authorize the issuance and sale of its Senior Subordinated Notes which
shall be dated as of February 28, 1997, shall be in the aggregate original
principal amount of $9,000,000.00, 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 Senior
Subordinated Notes shall bear interest at the rate of 15.5% per annum.
The Senior Subordinated Notes shall each be substantially in the form
attached hereto as Exhibit A. Interest on the Senior Subordinated Note
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 each Purchaser, and each
Purchaser agrees to purchase from the Company, a Senior Subordinated Note
in the principal amount set forth beneath the name of such Purchaser on
the Annex I to this Agreement. Delivery of the Senior Subordinated Notes
shall be made on the Closing Date in the offices of Xxxxxx & Bird, One
Atlantic Center, 0000 Xxxx Xxxxxxxxx Xxxxxx, Xxxxxxx, Xxxxxxx 00000-0000,
against payment of the purchase price thereof, in immediately available
funds, disbursed on the Closing Date to such Persons as the Company shall
designate in writing. Each Senior Subordinated Note will be delivered to
each respective Purchaser in fully registered form, and shall be issued in
each Purchaser's name or the name of its nominee.
1.3 Origination Fee. The Company shall pay to Purchaser an
origination fee of $225,000.00 (less a $75,000.00 credit for amounts which
have been paid by the Company to Rice prior to the Closing Date), in
immediately available funds, on the Closing Date, which fee shall be
deemed fully earned and nonrefundable on the Closing Date and allocated to
each Purchaser as set forth in Annex I to this Agreement. Each Purchaser
may, at its option, deduct any and all of its portion of the origination
fee from the purchase price of its Senior Subordinated Note.
1.4 Use of Proceeds. The proceeds from the sale of the Senior
Subordinated Notes shall be used solely to (a) refinance a portion of
Parent's existing Indebtedness, (b) finance a portion of the Acquisition
and related transaction expenses, (c) recapitalize the Company and
(d) 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 each
of the Senior Subordinated Notes shall be due and payable as follows:
(a) Principal shall be due and payable in four (4) equal
quarterly installments (each in an equal amount sufficient to fully
amortize the principal balance of such Senior Subordinated Notes in
four (4) installments), on the last Business Day of each February,
May, August and November, commencing on the last Business Day of May,
2004, with all remaining unpaid principal being due and payable in
full on the Termination Date.
(b) Interest shall be due and payable (i) quarterly in arrears
on the last Business Day of each February, May, August and November,
commencing May 30, 1997, and (ii) on the Termination Date.
2.2 Optional Prepayments. 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 Purchaser 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, third to any applicable Prepayment
Fee, fourth to principal installments in the inverse order of their
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 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, 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,
prepay the 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 Senior Subordinated Obligations
(including any applicable Prepayment Fee), such prepayment to be made
within ten (10) Business Days of receipt of such net proceeds.
2.4 Additional Payments. Unless otherwise provided herein or in the
Other Agreements, all Senior Subordinated Obligations, other than
principal and interest on the Senior Subordinated Notes, shall be payable
by the Company to the Holder thereof, on demand, and shall bear interest
from the date thirty (30) days after demand until paid at the rate of
interest then applicable under Section 1.1. Payment of fees and expenses
due and payable on the Closing Date to each Purchaser and such 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 Senior Subordinated Notes to each Purchaser at the
address specified for such 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 such Purchaser on Annex I, or at such
other address or in such other form as such 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% Senior Subordinated Note/Southland Holding Company" and
shall identify the payment as principal, premium, 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 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 any 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
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 Holders for any damages arising
due to any Excess Interest. If for any period of time interest on any
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 Senior Subordinated Obligations shall remain at the
Maximum Rate until the Holders shall have received the amount of interest
which the Holders would have received during such period on such 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
Senior Subordinated Obligations until payment in full so that the rate or
amounts of interest on account of the 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.
2.9 Certain Rights and Obligations Among Holders. The provisions of
this Section 2.9 are solely for the benefit of the Holders, and neither
the Company nor any other Person shall have any rights with respect to or
be entitled to enforce this Section 2.9.
(a) Sharing of Payments. If, at any time or times, a Holder
shall not have received a payment on its Senior Subordinated Note, then it
shall notify the other Holders of such fact, the amount of such
nonpayment, the date or period to which it relates and, subject to the
terms of the Senior Subordination Agreement, such other Holders which have
received such payments shall remit to the unpaid Holder such amount as is
necessary to allocate the aggregate amount of such payments pro rata among
all Holders. The amount of any such remittance shall be credited on the
Senior Subordinated Note of the Holder to whom it is remitted, and shall
not be credited on the Senior Subordinated Note of the remitting Holder.
(b) Sharing of Prepayments. Subject to the terms and
provisions of the Senior Subordination Agreement, if, at any time or
times, a Holder shall receive a prepayment on its Senior Subordinated
Note, it shall notify the other Holders of the amount and date of such
prepayment. If all other Holders shall not have received a pro rata
prepayment as agreed, the Holder giving such notice shall remit to the
other Holders such amount as is necessary to distribute such prepayment
pro rata among all Holders. The amount of any such remittance shall be
credited on the Senior Subordinated Note of the Holder to whom it is
remitted, and shall not be credited on the Senior Subordinated Note of the
remitting Holder.
III. REPRESENTATIONS AND WARRANTIES OF PURCHASER
Each Purchaser severally and not jointly represents and warrants to
the Company as follows:
3.1 Existence. It is a limited partnership or limited liability
company, as the case may be, duly organized, validly existing and in good
standing under the laws of the jurisdiction of its organization.
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
Senior Subordinated Note 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 Senior Subordinated Note 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 Senior Subordinated Note
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 each Purchaser to enter into this Agreement, Parent and the
Company represent and warrant to each Purchaser that the following
statements are, and after giving effect to the Acquisition, will be, true,
correct and complete:
4.1 Corporate Existence and Authority. Parent and each of its
Subsidiaries (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 each of its Subsidiaries has the corporate power and
authority to execute, deliver, and perform its respective obligations
under this Agreement, the Acquisition 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 Financial Statements. Parent has delivered to each Purchaser
(a) audited consolidated financial statements of Parent and Southland as
at and for the fiscal year ended December 31, 1995, (b) unaudited
consolidated financial statements of Parent and Southland for the fiscal
year ended December 31, 1996, and (c) opening balance sheets for Parent
and its Subsidiaries reflecting a valuation of all of Parent's and each
Subsidiary's assets and liabilities based on GAAP, and a separate balance
sheet based on fair value, each as of the Closing Date taking into account
all transactions taking place on such date, all certified by Parent's
chief financial officer and (except as stated above) based on GAAP and on
financial data as of December 31, 1996 (as adjusted to reflect the
consummation of the transactions contemplated under this Agreement, the
Acquisition Documents, the Other Agreements and the Senior Loan Documents
that are contemplated to have occurred on the Closing Date as if the same
had occurred on December 31, 1996), and which are attached hereto as
Schedule 4.2(a). The financial statements referred to in clauses (a) and
(b) of this Section 4.2 have been prepared in accordance with GAAP (except
as otherwise noted therein), and fairly present both the financial
condition of Parent and Southland as of the respective dates indicated
therein and the results of Parent's and Southland's respective operations
for the respective periods indicated therein. Attached hereto as Schedule
4.2(b) are cash flow projections of the Company for the period beginning
on December 31, 1996 through December 31, 2001 together with a written
statement of the assumptions underlying them. Such cash flow projections
have been prepared in good faith based on estimates and assumptions
believed by the Company to be reasonable as of the date such projections
were prepared, and it is the Company's good faith belief that such cash
flow projections are reasonably achievable by the Company. At December
31, 1996, neither Parent, Southland nor any of their respective
Subsidiaries had any liabilities or obligations (absolute, accrued,
contingent or otherwise) of a nature required by GAAP to be reflected in
such financial statements which were, individually or in the aggregate,
material to the condition, financial or otherwise, or operations of such
Person as of that date which are not reflected on such financial
statements. There has been no material adverse change in the condition,
financial or otherwise, or operations of Parent or, to its knowledge,
Southland, since December 31, 1996, nor has there otherwise occurred a
Material Adverse Effect.
4.3 Default. Neither Parent nor any of its Subsidiaries is in
violation of any material provision under any material loan agreement,
indenture, mortgage, security agreement, lease, franchise, permit, license
or other agreement or obligation to which it is a party or by which any of
its properties is bound. Parent and each of its Subsidiaries are paying
their debts as they become due.
4.4 Authorization and Compliance with Laws and Material Agreements.
The execution, delivery and performance by Parent and its Subsidiaries of
this Agreement, the Acquisition 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 each such
Subsidiary, 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 any of its Subsidiaries pursuant to the
provisions of any loan agreement, indenture, mortgage, security agreement,
franchise, permit, license or other instrument or agreement by which
Parent or any of its Subsidiaries or any of their properties are bound.
Except as set forth on Schedule 4.4, 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 any of its Subsidiaries of this
Agreement, the Acquisition Documents, the Senior Loan Documents, and the
Other Agreements to which each is a party or the validity or
enforceability thereof. All such authorizations, approvals, consents,
filings and registrations described in Schedule 4.4 have been obtained.
Neither Parent nor any of its Subsidiaries 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 and is in material
compliance with all applicable laws, regulations and rules.
4.5 Environmental Condition of the Property. Except as disclosed on
Schedule 4.5:
(a) The location, construction, occupancy, operation and use of
the Property do not violate in any material respect any applicable law,
statute, ordinance, rule, regulation, order or determination of any
governmental authority or other body exercising similar functions, or any
restrictive covenant or deed restriction (recorded or otherwise) affecting
the Property, including, without limitation, all applicable zoning
ordinances and building codes, flood disaster, occupational health and
safety laws and Environmental Laws and regulations (hereinafter sometimes
collectively called "applicable laws");
(b) Without limitation of paragraph (a) above, neither Parent,
any Subsidiary nor the Property is subject to any existing, pending or
threatened investigation or inquiry by any governmental authority or
subject to any remedial obligations due to violations of applicable laws;
(c) Neither Parent nor any Subsidiary is subject to any
material liability or obligation relating to (i) the environmental
conditions on, under or about the Property, including, without limitation,
the soil and ground water conditions at the Property, or (ii) the use,
management, handling, transport, treatment, generation, storage, disposal,
release or discharge of any Polluting Substance;
(d) There is no Polluting Substance or other substance that may
pose any material risk to safety, health or the environment on, under or
about any Property;
(e) Parent and its Subsidiaries have taken reasonable steps to
determine and hereby represent and warrant that no Polluting Substances
have been disposed of or otherwise released on, onto, into, or from the
Property in any material respect, and the use which Parent and its
Subsidiaries make and intend to make of the Property does not and will not
result in the disposal or other release of any Polluting Substances on,
onto, into or from the Property in any material respect; and
(f) Each of Parent and its Subsidiaries has been issued all
required federal, state and local licenses, certificates or permits
relating to, and the Property, Parent, the Subsidiaries and Parent's and
such Subsidiary's facilities, business, assets, leaseholds and equipment
are all in compliance in all material respects with all applicable
federal, state and local laws, rules and regulations relating to, air
emissions, water discharge, noise emissions, solid or liquid waste
disposal, Polluting Substances, or other environmental, health or safety
matters.
4.6 Solvency. After giving effect to the transactions contemplated
by the Senior Loan Agreement, this Agreement and the Other Agreements,
Parent and each of the Subsidiaries individually and on a consolidated
basis will be solvent, able to pay its debts as they mature, have capital
sufficient to carry on its business and all businesses in which it is
about to engage, and
(a) the assets of each of Parent and its Subsidiaries
individually and on a consolidated basis, at a fair valuation, exceed the
total liabilities (including contingent, subordinated, unmatured and
unliquidated liabilities) of Parent and its Subsidiaries;
(b) current projections which are based on underlying
assumptions which provide a reasonable basis for the projections and which
reflect Parent's judgment based on present circumstances, the most likely
set of conditions and Parent's most likely course of action for the period
projected, demonstrate that Parent and its Subsidiaries individually and
on a consolidated basis will have sufficient cash flow to enable them to
pay their debts as they mature; and
(c) Parent and its Subsidiaries do not have an unreasonably
small capital base with which to engage in its anticipated business.
For purposes of clause (a) of this Section 4.6, the "fair valuation" of
the assets of Parent and each of its Subsidiaries shall be determined on
the basis of the amount which may be realized within a reasonable time,
either through collection or sale of such assets at market value, deeming
the latter as the amount which could be obtained for the property in
question within such period by a capable and diligent businessman from an
interested buyer who is willing to purchase under ordinary selling
conditions.
4.7 Litigation and Judgments. Except as disclosed on Schedule 4.7,
there is no action, suit, proceeding or investigation before any court,
governmental authority or arbitrator pending, or to the knowledge of
Parent or the Company threatened, against or affecting Parent or any of
its Subsidiaries, this Agreement, the Acquisition Documents, the Senior
Loan Documents and/or the Other Agreements. Except as disclosed on
Schedule 4.7, there are no outstanding judgments against Parent or any of
its Subsidiaries. None of the matters listed on Schedule 4.7 could
reasonably be expected to have, either individually or in the aggregate, a
Material Adverse Effect.
4.8 Rights in Properties; Liens. Parent and its Subsidiaries have
good and marketable title to all material properties and assets reflected
on its balance sheets, and none of such properties or assets is subject to
any Liens, except Permitted Liens. Parent and its Subsidiaries enjoys
peaceful and undisturbed possession under all leases necessary for the
operation of its 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 its
Subsidiaries has the right to use all of the Intellectual Property
necessary to its business as presently conducted, and Parent's and such
Subsidiary'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 any of its Subsidiaries in any of the Intellectual Property.
Neither Parent nor any of its Subsidiaries owes any royalties, honoraria
or fees to any Person by reason of its use of the Intellectual Property.
4.9 Enforceability. This Agreement, the Acquisition Documents, the
Senior Loan Documents and the Other Agreements to which Parent and any of
its Subsidiaries is a party, when delivered, shall constitute the legal,
valid and binding obligations of Parent and such Subsidiaries enforceable
against Parent and such Subsidiaries in accordance with their respective
terms.
4.10 Indebtedness. After giving effect to the transactions
contemplated hereby, neither Parent nor any of its Subsidiaries has any
Indebtedness, except Permitted Indebtedness. All Indebtedness owed by
Parent and its Subsidiaries to any Affiliate is set forth on Schedule
4.10.
4.11 Taxes. Each of Parent and its Subsidiaries has timely filed all
tax returns (federal, state, and local) required to be filed, including,
without limitation, all income, franchise, employment, property, and sales
taxes, and has timely paid all of its tax liabilities, other than
immaterial amounts and taxes that are being contested by Parent or such
Subsidiary 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 Holders. Neither the Company nor Parent knows of any pending
investigation of Parent or any of its Subsidiaries by any taxing authority
or pending but unassessed tax liability of Parent or any of its
Subsidiaries. Neither Parent nor any Subsidiary has made any presently
effective waiver of any applicable statute of limitations or request for
an extension of time to file a tax return, and neither Parent nor such
Subsidiary is a party to any tax-sharing agreement.
4.12 Use of Proceeds; Margin Securities. Neither Parent nor any of
its Subsidiaries 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, any of its Subsidiaries 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.
4.13 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 any of its Subsidiaries 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 4.13, 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.
4.14 Delivery of Acquisition Documents, Employment Agreements and
Non-Compete Agreements. Each Purchaser has received complete copies of
the Acquisition Documents, the Employment Agreements and the Non-Compete
Agreements and all documents executed in connection therewith (including
all exhibits, schedules and disclosure letters referred to therein or
delivered pursuant thereto, if any) and all amendments thereto, waivers
relating thereto and other side letters or agreements affecting the terms
thereof. None of such documents and agreements has been amended or
supplemented, nor have any of the provisions thereof been waived, except
pursuant to a written agreement or instrument which has heretofore been
delivered to such Purchaser.
4.15 Disclosure. No representation or warranty made by Parent or any
of its Subsidiaries in this Agreement, the Senior Loan Documents, the
Acquisition Documents or any Other Agreement to which Parent or any of its
Subsidiaries is a party contains any material untrue fact or omits to
state any material fact necessary to make the statements herein or therein
not misleading. There is no fact known to Parent or any of its
Subsidiaries which Parent or any of its Subsidiaries has determined has a
Material Adverse Effect, or which Parent or any of its Subsidiaries has
reasonably determined could have a Material Adverse Effect, that has not
been disclosed in writing to Purchaser.
4.16 Subsidiaries and Capitalization. Parent has no Subsidiaries
except as otherwise set forth on Schedule 4.16. All the issued and
outstanding shares of capital stock of Parent and each of its Subsidiaries
are duly authorized, validly issued, fully paid and nonassessable. The
capitalization of Parent and each of its Subsidiaries on the Closing Date
is set forth on Schedule 4.16. No violation of any preemptive rights of
shareholders of Parent or any of its Subsidiaries has occurred by virtue
of the transactions contemplated under this Agreement, the Acquisition
Documents, the Senior Loan Documents or any Other Agreement. There are no
outstanding contracts, options, warrants, instruments, documents or
agreements binding upon Parent or any of its Subsidiaries granting to any
Person or group of Persons any right to purchase or acquire shares of
Parent's or any such Subsidiary's capital stock, except (i) pursuant to
the Purchase Documents, (ii) Permitted Stock (as defined in the Purchase
Documents) and (iii) Series A Preferred Stock (as defined in the Purchase
Documents).
4.17 Current Locations. Schedule 4.17 identifies (a) Parent's and
each Subsidiary's principal place of business and chief executive office,
(b) all the locations where Parent and its Subsidiaries maintain any books
or records relating to any of their assets, (c) all other locations where
Parent or its Subsidiaries have a place of business, and (d) each address
where any of Parent's or its Subsidiaries' assets are located. Schedule
4.17 accurately indicates whether each such location is owned or leased,
and, if leased, identifies the owner of such location. No Person other
than the Company has possession of any material amount of the assets of
the Company except as disclosed on Schedule 4.17.
4.18 Investment Company Act. Neither Parent, any Subsidiary, nor any
company controlling Parent or such Subsidiary is required to be registered
as an "investment company" within the meaning of the Investment Company
Act of 1940, as amended.
4.19 Public Utility Holding Company Act. Neither Parent nor any
Subsidiary is a "holding company" or a "subsidiary company" of a "holding
company" or an "affiliate" of a "holding company" or a "public utility"
within the meaning of the Public Utility Holding Company Act of 1935, as
amended.
4.20 No Burdensome Restrictions. Neither Parent nor any Subsidiary
is a party to, or bound by any agreement, condition, contract or
arrangement which has, or which Parent or any Subsidiary reasonably
expects in the future could have, a Material Adverse Effect.
4.21 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 Senior Subordinated Notes.
4.22 No Labor Disputes. Neither Parent nor any of its Subsidiaries
is involved in any labor dispute. There are no strikes or walkouts or
union organization of any of Parent's or any of its Subsidiaries'
employees threatened or in existence and no labor contract is scheduled to
expire during the term of this Agreement. Parent and its Subsidiaries are
in compliance with all laws, rules, regulations, orders and decrees
applicable to Parent, its Subsidiaries or their properties, except for
instances of noncompliance which, individually or in the aggregate, will
not have a Material Adverse Effect.
4.23 Brokers. Neither Parent, any Subsidiary nor any of its
shareholders has dealt with any broker, finder, commission agent or other
Person in connection with the Acquisition or other transactions referenced
in or contemplated by this Agreement, nor is Parent, any Subsidiary or any
of its shareholders under any obligation to pay any broker's fee or
commission in connection with such transactions, except as set forth on
Schedule 4.23.
4.24 Insurance. The amount and types of insurance carried by Parent
and its Subsidiaries, and the terms and conditions thereof, are
substantially similar to the coverage maintained by companies in the same
or similar business as Parent and its Subsidiaries and similarly situated,
and include, without limitation, property and casualty insurance, general
liability insurance, business interruption insurance and other insurance
in the amounts and of the types described in Section 6.12 hereof.
4.25 Conduct of Business. On the Closing Date, Parent and its
Subsidiaries is engaged only in businesses of the type described in
Schedule 4.25.
4.26 Senior Debt. Simultaneously with the issuance of the Senior
Subordinated Notes the Senior Lender will provide the Company with a
revolving loan facility in an amount not to exceed $12,000,000, a term
loan facility in an amount not to exceed $17,000,000 and, if applicable,
an acquisition term loan facility to fund acquisitions in an amount not to
exceed $10,000,000, all pursuant to the Senior Loan Agreement. The
Company expects that a total of approximately $20,000,000 of the Senior
Debt will be advanced by the Senior Lender to the Company on the Closing
Date.
V. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER
Each 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 Senior Subordinated Notes, and (b) the
satisfaction of the following conditions on or before the Closing Date:
5.1 Effectiveness of Senior Loan Documents. The Senior Loan
Documents shall have been duly executed and delivered by the parties
thereto and shall be on terms and conditions, including amortization
periods, satisfactory to each Purchaser. All conditions precedent to the
making of the Senior Debt shall have been satisfied or waived with Senior
Lender's and each Purchaser's consent.
5.2 Effectiveness of Senior Subordination Agreement. The Senior
Subordination Agreement shall have been duly executed and delivered by the
parties thereto, and shall be on terms and conditions which are
satisfactory to each Purchaser.
5.3 Minimum Availability. The Company shall have available cash and
immediately accessible availability under the Senior Debt in an amount
equal to not less than $3,000,000.00 on the Closing Date after giving
effect to the payment of (a) all prior Indebtedness, (b) all fees payable
to each Purchaser under the terms of this Agreement, and (c) all costs and
expenses arising as a result of the transactions contemplated by this
Agreement, the Acquisition Documents, the Senior Loan Documents and any
Other Agreement to which Parent, the Company and each of its Subsidiaries
is a party, and each Purchaser shall have received satisfactory evidence
thereof.
5.4 Limitation on Fees. Fees paid or payable to all Persons in
connection with the closing of the financing contemplated by this
Agreement, the Acquisition Documents, the Senior Loan Documents and any
Other Agreement shall be satisfactory to each Purchaser.
5.5 Acquisition. The Acquisition Documents shall have been duly
executed and delivered by the parties thereto, all conditions to the
consummation of the Acquisition shall have been satisfied or waived with
each Purchaser's consent, and the terms and provisions of the Acquisition
Documents and the structure of the Acquisition shall be satisfactory to
each Purchaser.
5.6 Due Diligence. The results of each Purchaser's due diligence
regarding, as applicable, Parent, the Company and each of their
Subsidiaries, the documentation in respect of Series A Preferred Stock (as
defined in the Purchase Documents) and the Acquisition shall be
satisfactory to each Purchaser; and each Purchaser shall be satisfied with
the assets and books and records and the business and financial condition
of Parent and its Subsidiaries, the environmental compliance and condition
of Parent, the Company and each of their Subsidiaries, in each case before
and after giving effect to the Acquisition.
5.7 Approval. Each Purchaser's respective investment committee
shall have approved the purchase of its Senior Subordinated Note on terms
set forth herein and in the Other Agreements.
5.8 No Litigation; Consummation of Transactions; HSR Waiting Period.
No injunction, preliminary injunction, or temporary restraining order
shall be threatened or shall exist which prohibits or may prohibit the
transactions contemplated herein or any other related transaction, and no
litigation or similar proceeding (including, without limitation, any
litigation or other proceeding seeking injunctive or similar relief) shall
be threatened or shall exist with respect to the transactions contemplated
herein, which, if adversely determined, could in the judgment of any
Purchaser have a Material Adverse Effect. The HSR waiting period
applicable to the Acquisition shall have expired or terminated.
5.9 Documents. Each Purchaser shall have received the following,
each in form and substance satisfactory to such Purchaser:
(a) Senior Subordinated Notes. Its Senior Subordinated Note
issued in the name of such Purchaser duly executed by the Company;
(b) Warrants, Certificate Evidencing Preferred Stock and
Purchase Documents. The Warrants and a stock certificate evidencing the
Preferred Stock, each of which shall have been duly issued and delivered
by Parent to each Purchaser (as applicable) in the denominations specified
on Annex I hereto, along with the fully executed Purchase Documents and
all other documents and instruments required pursuant thereto;
(c) Junior Subordination Agreements. A junior subordination
agreement duly executed in favor of each Purchaser by each Affiliate to
whom Parent, the Company or any of their respective Subsidiaries owes
Indebtedness;
(d) Other Agreements. All Other Agreements, duly executed by
the parties thereto;
(e) Insurance. Certified copies of all insurance policies and
endorsements thereto required by Section 6.12, together with a written
report from an insurance broker acceptable to each Purchaser, confirming
that the amount of such insurance coverage and the terms and conditions
thereof are substantially similar to policies maintained by companies
similarly situated to Parent, the Company and its Subsidiaries and engaged
in the same or a similar business;
(f) Approvals and Consents. Copies, certified by the Company
of all consents, authorizations, filings, licenses and approvals, if any,
required in connection with the consummation of the Acquisition, the
execution, delivery and performance by Parent, the Company and each of
their Subsidiaries, or the validity and enforceability of, this Agreement,
the Senior Loan Documents, the Acquisition Documents or the Other
Agreements to which each is a party;
(g) Opinion of Counsel to Parent, the Company and the
Subsidiaries. The written legal opinion of Xxxxxx & Bird, legal counsel
to Parent, the Company and the Subsidiaries; and written permission from
each other firm issuing an opinion to the Company or Parent in connection
with the Acquisition authorizing each Purchaser to rely on such opinions;
(h) 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 Acquisition Documents, the Senior
Loan Documents 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;
(i) 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 Acquisition Documents, the Senior
Loan Documents, and the Other Agreements to which Parent is a party,
(B) the issuance of the Preferred Stock to each Purchaser and the
reservation of a sufficient number of shares of Common Stock into
which such shares of Preferred Stock are exercisable (subject to
antidilution adjustments), 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;
(j) General Certificate of each Subsidiary's Secretary or
Assistant Secretary. A certificate of the Secretary or Assistant
Secretary of each Subsidiary of the Company together with true, correct
and complete copies of the following:
(i) Articles of Incorporation. The Articles of
Incorporation of each Subsidiary 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 each Subsidiary of the Company,
including all amendments thereto;
(iii) Resolutions. The resolutions of the Board of
Directors of each Subsidiary of the Company authorizing the
execution, delivery and performance of the Acquisition Documents, the
Senior Loan Documents, and the Other Agreements, in each case to
which each such Subsidiary is a party;
(iv) Existence and Good Standing Certificates.
Certificates of the appropriate government officials of the state of
incorporation of each Subsidiary as to its existence and good
standing, and certificates of the appropriate government officials in
each state where each such Subsidiary 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 each
Subsidiary authorized to sign the Other Agreements to be executed by
such Subsidiary, together with a sample of the true signature of each
such officer;
(k) Senior Loan Documents. Copies of the Senior Loan Documents
and each document relating thereto, and a certificate of the Chief
Executive Officer and Chief Financial Officer of the Company and Parent
certifying that the attached documents are a true, correct and complete
set of the Senior Loan Documents, that all conditions precedent to funding
of the Senior Debt have been met or waived, and that those transactions
are being consummated simultaneously with the sale of the Senior
Subordinated Notes;
(l) Acquisition Documents. Copies of the Acquisition Documents
and each document relating thereto, and a certificate of the Chief
Executive Officer and Chief Financial Officer of the Company and Parent
certifying that the attached documents are a true, correct and complete
set of the Acquisition Documents, that all conditions precedent to funding
of the Acquisition have been met or waived, and that those transactions
are being consummated simultaneously with the sale of the Senior
Subordinate Notes;
(m) Solvency Certificate. A certificate in form and substance
satisfactory to each Purchaser regarding the solvency of Parent, the
Company and their Subsidiaries, individually and on a consolidated basis,
which includes a pro forma balance sheet and cash flow projections and
analyses for the Company and Parent, executed by the Chief Executive
Officer and the Chief Financial Officer of each of the Company and Parent;
(n) Sources and Uses Certificate. A certificate in form and
substance satisfactory to each 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;
(o) Communication with Accountants. Purchaser shall have
received a copy of a letter from each of the Company and Parent addressed
to its accountants authorizing such accountants to disclose to each
Purchaser any and all financial information concerning the Company or
Parent, as the case may be, requested by Purchaser in determining
compliance with any of the financial covenants set forth in Sections 6.20
and 7.9;
(p) 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;
(q) Environmental Reports. Environmental reports of an
independent environmental consulting firm satisfactory to each Purchaser
with respect to the Property and all improvements, fixtures and equipment
located thereon, which reports shall evidence no violation of
Environmental Laws or presence of Polluting Substances which is
unacceptable to any Purchaser in its sole discretion;
(r) Employment Agreements. A copy of each existing Employment
Agreement, in form and substance satisfactory to each Purchaser;
(s) Guaranty Agreements. A Parent Guaranty executed by Parent,
a Company Guaranty executed by the Company and a Subsidiary Guaranty
executed by each Subsidiary of Parent and the Company;
(t) Non-Compete Agreements. The Non-Compete Agreements, in
form and substance satisfactory to each Purchaser, duly executed by the
parties thereto; and
(u) Additional Information, Other Documents and Agreements.
Such other information, documents, agreements, commitments and
undertakings as any Purchaser or any Purchaser's counsel shall reasonably
request.
5.10 Material Adverse Change. For the period from December 31, 1996
to the Closing Date, and except for the transactions contemplated by this
Agreement, the Other Agreements, the Acquisition Documents and the Senior
Loan Documents, there shall have been (a) no occurrence or event which, in
any Purchaser's opinion, has or could have a Material Adverse Effect,
(b) no law, act, rule, regulation or order of any legislative,
administrative or judicial body or official which could prevent any
Purchaser from consummating the transactions contemplated by this
Agreement and the Other Agreements, and (c) no occurrence or event which
would lead the Company or any Purchaser to believe that the Company would
fail to meet the cash flow projections delivered to each Purchaser
pursuant to Section 4.2.
5.11 Fees. An origination fee (less the $75,000.00 credit for
amounts which have been paid by the Company to Rice prior to the Closing
Date) in the amounts set forth in Section 1.3 hereof shall have been paid
to each Purchaser. All other fees then payable pursuant to this Agreement
(including the fees, expenses and disbursements of each Purchaser's
counsel) shall have been paid to each Purchaser (or such counsel, as
applicable).
5.12 No Event of Default. No Event of Default or Potential Default
shall have occurred and be continuing.
5.13 Representations and Warranties. All representations and
warranties contained in this Agreement, the Senior Loan Documents, the
Acquisition Documents and the Other Agreements shall be true and correct
on the Closing Date.
5.14 Issuance of Preferred Stock. Parent shall have amended its
Articles of Incorporation to authorize the issuance of the Preferred
Stock, the Preferred Stock shall have been issued to each of Rice and the
Southland Purchasers, as required in the Certificate and Purchase
Documents, and a certificate evidencing and representing the Preferred
Stock issued to Rice and the Southland Purchasers shall have been
delivered to each of Rice and the Southland Purchasers, respectively.
5.15 Financial Statements. The consolidating financial statements
for Parent and Southland shall be satisfactory to each Purchaser.
5.16 Capital Structure of Parent and its Subsidiaries. The assets,
business structure and capital structure of Parent and each of its
Subsidiaries shall, after giving effect to the Acquisition, be
satisfactory to each Purchaser in its sole discretion.
5.17 Reference Calls. Reference calls made by each Purchaser to any
key customers or suppliers of Parent and each of its Subsidiaries shall be
satisfactory to each Purchaser, in its sole discretion.
5.18 Resignations of Officers and Directors. Each officer and
director of Southland and each of its Subsidiaries and each director,
other than Xxxx Xxxxx, of Parent shall have resigned from such position or
positions and shall have been replaced with such Persons satisfactory to
each Purchaser in accordance with the Purchase Documents and the
Certificate.
5.19 Southland Dividend. The dividend payable to the shareholders of
Southland in connection with the Acquisition pursuant to the terms of the
Acquisition Agreement shall be paid in accordance with all applicable
corporate, securities and other laws.
VI. AFFIRMATIVE COVENANTS
The Company and Parent covenant and agree that, from the date hereof
and until the 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 each 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, 1996, (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 Holders provided that the Holders 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 on the basis that the Company is not a going
concern or otherwise 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 each of its Subsidiaries 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 each of its Subsidiaries prior to the beginning of such fiscal period
and for the fiscal year to date.
(c) As soon as available, and in any event within thirty (30)
days after the Closing Date, a balance sheet of the Company that has been
reviewed by Ernst & Young LLP, or such other independent "Big Six" or
other nationally recognized accounting firm, dated as of the Closing Date,
which has been restated using purchase accounting in accordance with APB
16 and which gives effect to the issuance of the Senior Subordinated Notes
and the Purchase Documents, and the financing transactions contemplated by
the Senior Loan Agreement as if all commitments therein available to the
Company as of the Closing Date were fully utilized, certified by the Chief
Executive Officer and the Chief Financial Officer of the Company as fairly
presenting the Company's financial position.
(d) 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 each
Purchaser all of the following:
(a) Concurrently with the delivery of each of the financial
statements referred to in Section 6.1(a), Section 6.1(b) and
Section 6.1(c), 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) showing in reasonable detail the calculations showing compliance with
Sections 6.20 and 7.9, (iii) 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,
the Company and their Subsidiaries at the date and for the period
indicated therein, (iv) containing summaries of accounts payable agings,
accounts receivable agings, and inventory, (v) containing a schedule of
the outstanding Indebtedness for borrowed money of Parent, the Company and
their Subsidiaries 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, (vi) containing
management's discussion and analysis of the business and affairs of
Parent, the Company and their Subsidiaries which includes, but is not
limited to, a discussion of the results of operations compared to those
originally budgeted for such period, and (vii) 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, the Company or any Subsidiary 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 any of its Subsidiaries is a party,
(iv) copies of all press releases and other statements made available
generally by Parent or any of its Subsidiaries to the public generally
concerning material developments in Parent's or such Subsidiary'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,
the Company and their Subsidiaries as any Purchaser may reasonably
request.
6.3 Books and Records; Accounting System. Parent and the Company
will, and will cause each of the Subsidiaries to, 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, and
will cause each of the Subsidiaries to, 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 each
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 each 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 each 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,
and will cause each of the Subsidiaries to, promptly upon learning
thereof, report to each 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
or their Subsidiaries 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 its
Subsidiaries and any of its suppliers or customers.
6.6 Performance of Obligations. Parent and its Subsidiaries will
duly and punctually pay and perform their obligations, as applicable,
under this Agreement, the Acquisition Documents and the Other Agreements
(excluding, to the extent included, the Senior Loan Documents) to which
each is a party.
6.7 Preservation of Existence and Conduct of Business. Parent and
Company will, and will cause each of the Subsidiaries to, 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; provided, however, that nothing contained in this Section 6.7
shall prohibit the occurrence of the Acquisition Merger and other
acquisitions and mergers permitted under the terms of the Senior Loan
Agreement.
6.8 Maintenance of Properties. Parent and the Company will, and
will cause each of the Subsidiaries to, 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, and
will cause each of the Subsidiaries to, 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, and
will cause each of the Subsidiaries to, 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
such Subsidiary 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
its Subsidiaries 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 Holders, 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, and will
cause each of the Subsidiaries to, 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 such Subsidiary's
business if noncompliance with such acts, rules, regulations or orders
could have a Material Adverse Effect; provided, however, Parent or such
Subsidiary 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 Holders.
6.11 Payment of Leasehold Obligations. Parent and the Company will,
and will cause each of the Subsidiaries to, 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 Holders, will provide evidence of its having done so;
provided, however, Parent or such Subsidiary 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, and
will cause each of the Subsidiaries to, maintain, with financially sound,
reputable and solvent companies, insurance policies acceptable to the
Holders (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 its
Subsidiaries 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 Holders. Parent and Company will, and
will cause each of the Subsidiaries to, provide copies of all such
insurance policies to each Purchaser within ten (10) days following such
Purchaser's request for the same. Parent and the Company will, and will
cause each of the Subsidiaries to, (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 each Purchaser satisfactory proof of the
timely making of such payments, (iii) deliver all renewal policies to each
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 each 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 each Purchaser of any Casualty Event. If Parent
or any of its Subsidiaries fails to provide and pay for any such
insurance, each Purchaser may, at its option, but shall not be required
to, pay the same and charge Parent or any Subsidiary therefor.
6.13 Inspection Rights. At any reasonable time and from time to
time, Parent and Company will, and will cause each of the Subsidiaries to,
permit representatives of any Purchaser to examine and make copies of the
books and records of, and visit and inspect the properties of, Parent and
its Subsidiaries, and to discuss the business, operations, and financial
condition of Parent and its Subsidiaries 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 Senior Subordinated Notes. In
accordance with the terms of Section 12.1 hereof, Parent will promptly
reimburse each Purchaser for all expenses incurred by representatives of
Purchaser in connection with such inspections.
6.14 Notices. Parent and the Company will, and will cause each of the
Subsidiaries to, promptly, but in any event within two (2) Business Days
after first becoming aware thereof, notify each Purchaser via telephone,
subsequently confirmed or, if requested by such Purchaser, in writing of:
(a) the commencement of any event, including but not limited
to, any action, suit, or proceeding against Parent or any Subsidiary, that
could have a Material Adverse Effect, which notice shall specify the
nature of such event and what action Parent or such Subsidiary 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 or under any instrument or
agreement evidencing any other Indebtedness of Parent or such Subsidiary,
which notice shall specify the nature of such event, condition or default
and what action Parent or such Subsidiary 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 such Subsidiary 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 such Subsidiary proposes to take with respect thereto.
6.15 Additional Notices. Immediately upon receipt by Parent or any
Subsidiary, Parent or the Company will, and will cause the Subsidiaries
to, 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
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 such Subsidiary.
6.16 Senior Loan Document Amendments. Parent and Company will, and
will cause the Subsidiaries to, promptly provide each Purchaser with
copies of all proposed amendments to the Senior Loan 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, and will cause
the Subsidiaries to, execute and deliver to each Purchaser from time to
time, upon demand, such supplemental agreements, statements, assignments
and transfers, or instructions or documents as any 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, and will cause each of the Subsidiaries to, 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, and will cause each of the Subsidiaries to, 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 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 Financial Covenants.
(a) Total Debt to EBITDA. As of the end of each Fiscal Quarter
during the periods set forth below beginning with the Fiscal Quarter
ending March 31, 1998, Parent shall not permit the ratio of Total
Debt of Parent determined on a consolidated basis which is
outstanding as of the date of determination to EBITDA for the twelve
(12) month period (or portion thereof since the Closing Date) then
ending to exceed the ratio set forth below opposite the applicable
period below:
Period Ratio
------ -----
March 31, 1998 through June 30, 1998 4.95 to 1.00
July 1, 1998 through September 30, 1998 4.68 to 1.00
October 1, 1998 through December 31, 1998 4.40 to 1.00
January 1, 1999 through June 30, 1999 4.13 to 1.00
July 1, 1999 through September 30, 1999 3.85 to 1.00
October 1, 1999 through December 31, 1999 3.58 to 1.00
January 1, 2000 through June 30, 2000 3.30 to 1.00
July 1, 2000 through September 30, 2000 3.03 to 1.00
October 1, 2000 and the end of each
Fiscal Quarter thereafter 2.75 to 1.00
(b) Interest Coverage. Parent shall not permit the ratio of
Operating Cash Flow to cash interest expense of Parent and the
Subsidiaries determined on a consolidated basis, both calculated for
the twelve (12) month period (or portion thereof since the Closing
Date) ending on the last day of each Fiscal Quarter (beginning with
the Fiscal Quarter ending June 30, 1997) during the periods set forth
below, to be less than the ratio set forth below opposite the
applicable period below:
Period Ratio
------ -----
Closing Date through June 30, 1997 1.35 to 1.00
July 1, 1997 through September 30, 1997 1.67 to 1.00
October 1, 1997 through March 31, 1998 1.80 to 1.00
April 1, 1998 through September 30, 1998 2.03 to 1.00
October 1, 1998 through March 31, 1999 2.25 to 1.00
April 1, 1999 through September 30, 1999 2.48 to 1.00
October 1, 1999 through March 31, 2000 2.70 to 1.00
April 1, 2000 through September 30, 2000 2.93 to 1.00
October 1, 2000 and the end of each
Fiscal Quarter thereafter 3.15 to 1.00
(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 (or portion thereof since the Closing Date) ending on the last
day of each Fiscal Quarter (beginning with the Fiscal Quarter ending
June 30, 1997) to be less than the ratio set forth below opposite the
applicable period below:
Period Ratio
------ -----
Closing Date through June 30, 1997 1.00 to 1.00
July 1, 1997 through June 30, 1998 1.04 to 1.00
July 1, 1998 through September 30, 1998 1.08 to 1.00
October 1, 1998 and the end of each
Fiscal Quarter thereafter 1.12 to 1.00
(d) EBITDA. As of the end of each Fiscal Quarter set forth
below, Parent shall not permit EBITDA for the twelve (12) month
period (or portion thereof since the Closing Date) then ending to be
less than the Dollar amount set forth below for such Fiscal Quarter:
Period Dollar Amount
------ -------------
June 30, 1997 $1,710,000
September 30, 1997 $3,420,000
December 31, 1997 $4,860,000
March 31, 1998 $5,625,000
June 30, 1998 $5,850,000
September 30, 1998 $6,075,000
December 31, 1998 $6,300,000
March 31, 1999 $6,525,000
June 30, 1999 $6,750,000
September 30, 1999 $6,975,000
December 31, 1999 $7,200,000
March 31, 2000 $7,425,000
June 30, 2000 $7,650,000
September 30, 2000 $7,875,000
December 31, 2000 $8,100,000
March 31, 2001 $8,325,000
June 30, 2001 $8,550,000
September 30, 2001 $8,730,000
December 31, 2001 and the last each
Fiscal Quarter thereafter $9,000,000
(e) Net Worth. Parent will at all times maintain Consolidated
Net Worth in an amount not less than the sum of (a) Twelve Million
Dollars ($12,000,000); plus (b) sixty seven and one-half percent
(67.5%) of Parent's Net Income for each Fiscal Quarter to have
completely elapsed since the Closing Date; plus (c) ninety percent
(90%) of the net cash proceeds of any sale of Securities or other
contributions to the capital of Parent received by Parent since the
Closing Date, calculated without duplication. If Net Income for a
Fiscal Quarter is zero or less, no adjustment to the requisite level
of Consolidated Net Worth shall be made.
6.21 Fiscal Year. The Company and Parent will cause their fiscal
year to be the twelve month period ending on December 31 of each year.
6.22 Board Observation and Membership. Parent and the Company
will, and will cause each of the Subsidiaries to, deliver to each Holder a
copy of the minutes of and all materials distributed at or prior to all
meetings of the board of directors (including the executive, compensation
and other committees thereof) or shareholders of such Person, certified as
true and accurate by the Secretary of such Person, promptly following each
such meeting. Parent and the Company will, and will cause each of the
Subsidiaries to, (a) permit each Holder to designate one (1) person to
attend all meetings of such Person's board of directors (including
executive, compensation and other committee meetings), (b) provide such
designees not less than twenty-one (21) calendar days' actual notice of
all regular meetings and seven (7) calendar days' actual notice of all
special meetings of such Person's board of directors (including the
executive, compensation and other committees thereof) or shareholders,
(c) permit such designees to attend all such meetings as an observer, and
(d) provide to such designees a copy of all materials distributed at such
meetings or otherwise to the board of directors of Parent and its
Subsidiaries. Parent and each Subsidiary agrees to reimburse each
individual referred to in Subsection (a) above for all reasonable expenses
incurred in traveling to and from such meetings and attending such
meetings.
6.23 Environmental Costs.
(a) Parent and the Company hereby indemnify and hold each
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 each Subsidiary.
(b) To the extent the laws of the United States or any state in
which property, leased or owned, of Parent or any Subsidiary provide that
a Lien upon the property of Parent or such Subsidiary 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 such Subsidiary. 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, and will cause each of the Subsidiaries to,
remove, or cause to be removed, such Lien and such Polluting Substance at
Parent's and the Company's expense.
6.24 Employment Agreements and Non-Compete Agreements. Parent and
the Company will, and will cause each of the Subsidiaries to, as
applicable, at all times maintain the Employment Agreements and Non-
Compete Agreements in full force and effect, and will diligently enforce
the Employment Agreements and Non-Compete Agreements against any parties
thereto who violate or attempt to violate any of such Employment
Agreements or Non-Compete Agreements.
VII. NEGATIVE COVENANTS
Parent and the Company covenant and agree that from the date hereof
until the 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 Holders:
7.1 Indebtedness. Parent and the Company will not, and will not
permit the Subsidiaries to, 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 such Subsidiary 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 Senior Subordinated Obligations shall continue to
be subordinated to the Senior Subordinated Obligations on terms and
conditions satisfactory to the Holders.
7.2 Limitation on Liens. Parent and the Company will not, and will
not permit the Subsidiaries to, 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 of each of its Subsidiaries,
whether now owned or hereafter acquired, except Permitted Liens.
7.3 Merger, Acquisition, Dissolution and Sale of Assets. Parent and
the Company will not, and will not permit the Subsidiaries to, (a) become
a party to a merger or consolidation (other than the Acquisition Merger
and any other merger permitted by the Senior Loan Agreement), (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
(other than acquisitions permitted under the terms of the Senior Loan
Agreement), (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, and will
not permit the Subsidiaries to, 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 or its
Subsidiaries to Parent to the extent necessary to permit Parent to pay the
Senior Subordinated Obligations due and payable from Parent to each
Purchaser, (ii) dividends from the Subsidiaries of the Company to the
Company to the extent necessary to permit the Company to pay the Senior
Subordinated Obligations, (iii) dividends on the Preferred Stock as
provided in the Certificate and payments made pursuant to the Purchase
Documents, and (iv) 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 or any Subsidiary, (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 any Subsidiary or of any warrant,
option or other right to acquire such shares (except pursuant to the
Purchase Documents or the Certificate or 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 Senior Subordinated Notes
(except that Subsidiaries may make distributions to the Company).
7.5 Loans and Investments. Except for Permitted Investments, Parent
and the Company will not, and will not permit any Subsidiary to, 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, and
will not permit any Subsidiaries to, enter into any transaction with any
director, officer, employee, shareholder, or Affiliate of Parent,
Southland or any of their respective Subsidiaries 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, Southland or any of their
respective Subsidiaries, as the case may be.
7.7 Nature of Business. Parent and the Company will not, and will
not permit any Subsidiary to, engage in any business other than the
businesses set forth on Schedule 4.25, or any business reasonably related
thereto.
7.8 Modification of Senior Loan Agreement. Parent and the Company
will not, and will not permit any Subsidiary to, 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 Holders
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.
7.9 Capital Expenditure Limits. The aggregate amount of all Capital
Expenditures of Parent and the Subsidiaries during any Fiscal Year will
not exceed the Capital Expenditure Limit for such Fiscal Year:
Period Amount
------ ------
Closing Date through December 31, 1997 $440,000
January 1, 1998 through December 31, 1998 $550,000
January 1, 1999 through December 31, 1999 $660,000
January 1, 2000 through December 31, 2000 $770,000
January 1, 2001 and each Fiscal Year
thereafter $880,000
The term "Capital Expenditure Limit" means, for the Fiscal Years set forth
above, the sum of (i) the Dollar amount set forth in the table above
opposite the applicable Fiscal Year (the Dollar amount as set forth for
each Fiscal Year herein the "Yearly Limit") plus (ii) fifty percent (50%)
of the portion of the Yearly Limit from the immediately preceding Fiscal
Year which was not expended by Parent and its Subsidiaries for Capital
Expenditures in such preceding Fiscal Year. In calculating compliance
with this Section 7.9, (a) Capital Expenditures made in a Fiscal Year
shall first be debited against the Yearly Limit for such Fiscal Year then
debited against the carryover of the Yearly Limit, if any, from the
preceding Fiscal Year and (b) the aggregate amount of all payments due
under a Capital Lease for the entire term thereof (excluding, however, the
interest portion of capitalized lease payments) shall be considered
expended in full on the date that the Capital Lease is entered into.
7.10 Remuneration. Parent and the Company will not, and will not
permit any Subsidiary to, (a) pay any management, consulting, or similar
fees to any shareholder or Affiliate of Parent or any Subsidiary or to any
director, officer, employee or immediate family member of any such
Affiliate or shareholder, except as set forth in Schedule 7.10, or (b) pay
any compensation to the Persons identified on Schedule 7.10 in excess of
the amounts set forth on Schedule 7.10, whether such compensation consists
of salary, bonus, management, consulting or other fees, capital
distributions, or other benefits or otherwise, and regardless of whether
such compensation is paid by Parent and/or any Subsidiary or Affiliate of
Parent.
7.11 Modification of Employment Agreements, the Acquisition Documents
or Non-Compete Agreements. Parent and the Company will not, and will not
permit any Subsidiary to, agree to any modification, amendment or waiver
of any of the terms or provisions of the Employment Agreements, the
Acquisition Documents or Non-Compete Agreements without the prior written
consent of the Holders.
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 Senior
Subordinated Notes, (ii) the Company shall fail to pay within three (3)
Business Days of the date due any interest payable under the Senior
Subordinated Notes or this Agreement, or (iii) the Company, Parent or any
Subsidiary shall fail to pay within five (5) Business Days after receipt
of notice of failure to pay (whether by acceleration or otherwise), any
other Senior Subordinated Obligations;
(b) the Company, Parent or any Subsidiary 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 $750,000.00;
(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
Senior Subordinated Notes or in Section 6.20 or Article VII of this
Agreement; (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, the Company or any Subsidiary 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, Parent or any Subsidiary in
connection with this Agreement or the Other Agreements or otherwise to
induce each Purchaser to purchase its Senior Subordinated Note, Preferred
Stock or Warrants was incorrect or misleading in any material respect,
when made;
(f) the Parent or any Subsidiary shall become subject to an
Event of Bankruptcy;
(g) any judgment or order for payment of money shall be
rendered against Parent, the Company or any Subsidiary 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 (provided, that the fact that Xxxxxx X. Xxxxxxxx has a Lien on the
shares of capital stock of Southland which are held in treasury shall not
result in the occurrence of an Event of Default under this clause (i)
unless Xxxxxx X. Xxxxxxxx forecloses on or otherwise causes such treasury
shares to be issued out of the treasury);
(j) the occurrence of a material change in ownership in Parent
(for purposes of this subsection a "change in ownership" means the
circumstance that (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) so owned by such party on the Closing Date 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 the Closing Date, (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 the Closing
Date, 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); or
(k) Parent, the Company or any Subsidiary shall revoke or
attempt to revoke its guaranty agreement executed in favor of each
Purchaser, or shall repudiate its liability thereunder or shall fail to
comply in any material respect with the terms thereof.
8.2 Remedies of Holders 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 Holders by law) declare
the entire amount of the Senior Subordinated Obligations, including,
without limitation, the entire principal, Prepayment Fee (if any) and all
interest accrued then outstanding under the 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 Holders 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 Senior Subordinated
Obligations, including, without limitation, the entire principal,
Prepayment Fee (if any), and all accrued interest then outstanding under
the 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 Holders of the 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 Holders 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, Parent,
the Company or any Subsidiary shall be in default under the 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 the other Holders 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. All expenses incurred and all amounts realized
shall be apportioned among the Holders, pro rata, and reimbursed by the
Company as provided in this Agreement.
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
Senior Subordinated Obligations have been declared or have otherwise
become immediately due and payable by reason of the occurrence of any
Event of Default, Rice, with the prior written approval of the majority-
in-interest of the Holders may (so long as Rice is a Holder), by written
instrument delivered to the Company (an "Annulment Notice"), rescind and
annul such declaration and the consequences thereof as to the Senior
Subordinated Notes, 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 Senior Subordinated Obligations in connection
therewith, and (b) all arrears of interest and all other sums payable on
such 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 Holders; 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 majority-in-
interest of the Holders.
8.4 Payment of Senior Subordinated Obligations. Subject to the
terms of the Senior Subordination Agreement, each Purchaser shall have the
right, which is absolute and unconditional, to receive payment of the
principal of and interest on its Senior Subordinated Note and payment of
all other 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, the Company and/or any Subsidiary on behalf of the Holders for the
enforcement of any such payment. 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, Rice, on
behalf of each and every Holder, 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 Rice or any other 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 Rice or any other Holder may be
exercised from time to time and as often as may be deemed expedient by
Rice or such other Holder.
8.6 Conduct No Waiver. No course of dealing on the part of any
Purchaser, nor any delay or failure on the part of any 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 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 such Purchaser in
collecting any sums due on the Senior Subordinated Note or in otherwise
enforcing any of such Purchaser's rights.
IX. SUBORDINATION
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
principal and interest with respect to the Senior Debt, and any
Purchaser's rights and remedies hereunder shall be subordinate to the
rights and remedies of the Senior Lender, 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, nor shall anything
herein or therein prevent Purchaser from exercising all remedies otherwise
permitted by applicable law upon an Event of Default under this Agreement.
X. FORM OF SENIOR SUBORDINATED NOTE, REGISTRATION, TRANSFER AND
REPLACEMENT
10.1 Form of Senior Subordinated Notes. The Senior Subordinated
Notes initially delivered under this Agreement will be a fully registered
note in the form attached hereto as Exhibit A. The Senior Subordinated
Notes are issuable only in fully registered form in denominations of at
least $1,000,000 (or the then-remaining outstanding balance thereof, if
less than $1,000,000).
10.2 Senior Subordinated Notes Register. The Company shall cause to
be kept at the principal office a register for the registration and
transfer of the Senior Subordinated Notes. The names and addresses of
each Holder of the Senior Subordinated Notes, the transfer thereof and the
names and addresses of the transferees of the Senior Subordinated Notes
shall be recorded in such register.
10.3 Issuance of New Senior Subordinated Notes upon Exchange or
Transfer. Upon surrender for exchange or registration of transfer of any
Senior Subordinated Note 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 Senior Subordinated Notes of
any authorized denomination requested by the Holder of the surrendered
Senior Subordinated Note, each dated the date to which interest has been
paid on the Senior Subordinated Note so surrendered (or, if no interest
has been paid, the date of the surrendered Senior Subordinated Note), but
in the same aggregate unpaid principal amount as the surrendered Senior
Subordinated Note, and registered in the name of such Person or Persons as
shall be designated in writing by such Holder. Every Senior Subordinated
Note 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 Senior Subordinated Note or by his attorney duly authorized
in writing.
10.4 Replacement of Senior Subordinated Notes. Upon receipt of
evidence satisfactory to the Company of the loss, theft, mutilation or
destruction of a Senior Subordinated Note 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
Senior Subordinated Note, the Company, without charge to the Holder
thereof, will make and deliver a new Senior Subordinated Note of like
tenor and the same series in lieu of such lost, stolen, destroyed or
mutilated Senior Subordinated Note. If any such lost, stolen or destroyed
Senior Subordinated Note 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 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 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:
"Acquisition" means the purchase of all the outstanding shares of
capital stock of Southland and certain assets of Southland Container,
Inc. pursuant to the Acquisition Documents.
"Acquisition Agreement" means that certain Share Purchase Agreement
dated as of December 19, 1996, by and among Parent, Southland, Xxxxxx
X. Xxxxxxxxxxx, Xxxx X. Xxxxxxx, Xx. and Xxxxxxx X. Xxxxxxx, as the
same has been (i) assigned to the Company pursuant to that certain
Assignment of Rights Under Share Purchase Agreement dated as of
February 28, 1997, by and among Southland, Xxxxxx X. Xxxxxxxxxxx,
Xxxx X. Xxxxxxx, Xx., Xxxxxxx X. Xxxxxxx, Parent and the Company,
(ii) amended by that certain Agreement Regarding the Purchase Price
Adjustment, Bonus and Additional Consideration dated as of February
28, 1997, by and among Parent, the Company, Xxxxxx X. Xxxxxxxxxxx,
Xxxx X. Xxxxxxx, Xx., Xxxxxxx X., Xxxxxxx, III, and Southland, and
(iii) further amended or otherwise modified as of the Closing Date.
"Acquisition Documents" means the Acquisition Agreement and the
agreements, documents and instruments executed in connection
therewith or contemplated thereby, including, without limitation, the
Non-Compete Agreements and the Minority Shareholder Agreements, and
all amendments thereto.
"Acquisition Merger" means the merger of the Company with and into
Southland, with Southland as the surviving Person.
"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 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 its Subsidiaries which are classified as capital
expenditures in accordance with GAAP including all such expenditures
associated with Capital Lease Obligations but excluding, to the
extent included, any such expenditures made in connection with an
acquisition funded with the proceeds of 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 any
of its Subsidiaries, 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 its Subsidiaries 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 each Purchaser's
satisfaction and the purchase price for the Senior Subordinated Notes
has been paid, but in any event not later than March 4, 1997.
"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 $.01 par value common stock of Parent.
"Company" means SHC Acquisition Corp., a Florida corporation, who
will merge with and into Southland Holding Company, a Texas
corporation and, unless the context requires otherwise, shall include
its Subsidiaries, if any.
"Company Guaranty" means the guaranty of Company in favor of each
Purchaser, in form and substance satisfactory to each Purchaser, as
the same may be amended or otherwise modified from time to time.
"Consolidated Net Worth" means, at any particular time, all amounts
which, in conformity with GAAP, would be included as stockholders'
equity on a consolidated balance sheet of Parent and the
Subsidiaries.
"Controlled Group" means any group of organizations within the
meaning of Section 414(b), (c), (m) or (o) of the Code of which
Parent or any of its Subsidiaries is a member.
"Dollars" and "$" 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; (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.
"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.
"Employment Agreements" means (i) those certain Employment Agreements
by and between (A) Xxxx X. Xxxxx and Parent, dated as of November 22,
1996, as amended, modified or supplemented from time to time,
(B) Xxxxx Xxxxxxx and Parent, dated as of November 22, 1996, as
amended, modified or supplemented from time to time, (C) Xxxxx X.
Xxxxxxxx and Parent, dated as of November 22, 1996, as amended,
modified or supplemented from time to time, and (ii) any other
employment or non-compete agreement now existing or hereafter entered
into by and between Parent or any Subsidiary and any other officer or
employee of Parent or any Subsidiary, including, without limitation,
such employment agreements that may be entered into by Parent or the
Company as a result of the Acquisition or the transactions
contemplated hereby or thereby, (iii) consulting agreements to which
Parent or the Company may be a party, including without limitation,
such agreements with Fairview Capital, L.L.C. or its affiliates and
officers of any thereof, including Xxxxxxxx X. Xxxxxxxx, and (iv) all
non-compete or buy-sell agreements by and between Parent, Company or
any Subsidiary of either thereof, and any employee, officer or
director of any thereof, together, in each case, with all renewals,
modifications, amendments or supplements thereto (each such agreement
at all times to be in form and substance satisfactory to the
Holders).
"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 any Subsidiary 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 Subsidiaries calculated on a consolidated basis
without duplication for such period: (A) interest expense; plus (B)
cash federal and state income taxes paid; plus (C) scheduled
amortization of Indebtedness paid or payable (excluding, to the
extent included, nonpermanent principal repayments under the
Revolving Loans (as defined in the Senior Loan Agreement)); plus (C)
the Dollar amount paid in connection with repurchases of stock,
options or warrants consummated in accordance with Section 12.4 of
the Senior Loan Agreement.
"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 Holders, 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.
"Holder" when used in reference to the Senior Subordinated Notes
and/or the Senior Subordinated Obligations, means the Person or
Persons who, at the time of determination, is the lawful owner of all
or a portion of each Senior Subordinated Note or an obligee of all or
a portion of the Senior Subordinated Obligations. Unless otherwise
provided in this Agreement, in each instance that the Holders are
required to request or consent in concert to or otherwise express
approval of an action, the Holders 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 Senior Subordinated Notes so request,
consent or approve.
"HSR" means the Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976,
as amended.
"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.
"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 any Subsidiary 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
any Purchaser to enforce or collect any of the 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.
"Minority Shareholder Agreements" means, collectively, (a) that
certain Termination of Stock Option and Repurchase Agreement dated as
of February 28, 1997, by and among Southland Container Inc. of
Maryland, Xxxxxx Xxxxxxx Xxxxx and Xxxx Xxxxxxx Xxxxx, (b) that
certain Stock Purchase Agreement dated February 28, 1997, by and
between the Company and Xxxxxx Xxxxxxx Xxxxx, (c) those certain
employment agreements dated February 28, 1997, by and between the
Company and each of (i) Xxxxxxxxx Xxxxx, (ii) Xxxxxx Xxxxxxx Xxxxx,
(iii) Xxxx X. Xxxxxxxxx, (iv) Xxxxxxx X. Xxxx, (v) Xxxxxx X. Xxxxxx,
Xx., (vi) Xxxx Xxxxxxx Xxxxx and (vii) Xxxx Xxxxxx.
"Net Income" means, for any period and any Person, such Person's
consolidated net income (or loss), but excluding: (a) the income of
any other Person (other than its subsidiaries) in which such Person
or any of it subsidiaries has an ownership interest, unless received
by such Person or its subsidiary in a cash distribution; (b) any
after-tax gains or losses attributable to asset disposition; and (c)
to the extent not included in clauses (a) and (b) above, any
after-tax extraordinary, non-cash or nonrecurring gains or losses.
"Non-Compete Agreements" means collectively, those certain Non-
Compete Agreements, dated as of February 28, 1997 between Parent and
each of (a) Xxxxxx X. Xxxxxxxxxxx, (b) Xxxx X. Xxxxxxx, Xx. and (c)
Xxxxxxx X. Xxxxxx, and any other non-compete agreement now or
hereafter entered into by and between Parent, the Company or any of
their Subsidiaries and any officer of such parties, together with all
renewals, modifications, amendments or supplements thereto.
"Operating Cash Flow" means, for any period, the total of the
following for Parent 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
Indebtedness of the Company (including Capital Lease Obligations)
incurred after the Closing Date not to exceed $1,500,000 in the
aggregate at any time outstanding secured by purchase money Liens
permitted by Section 12.2(g) 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 Senior Subordinated Notes, the Purchase
Documents, each Subsidiary 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 any Purchaser or any Person participating with any
Purchaser in the 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 each
Purchaser, in form and substance satisfactory to each 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) purchase money
Indebtedness of the Company (including Capital Lease Obligations)
incurred after the Closing Date 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 7.9, (d) any Indebtedness of a Subsidiary to
the Company permitted by the Senior Loan Agreement; provided that (i)
the proceeds of such Indebtedness shall be used to finance the
working capital requirements of such Subsidiary and (ii) such
Indebtedness shall have such other terms and conditions as the
Purchaser may reasonable require, (e) the other Indebtedness set
forth on Schedule 11.1(a) and approved by the Holders, (f) guaranties
by Parent or any Subsidiary of such Indebtedness and (g) any other
Indebtedness permitted by the Senior Loan Agreement.
"Permitted Investments" means the following:
(a) securities issued or directly and fully guaranteed or
insured by the United States Government or any agency or
instrumentality thereof (provided that the full faith and credit of
the United States Government is pledged in support thereof), having
maturities of not more than twelve (12) months from the date of
acquisition;
(b) time deposits and certificates of deposit (i) of any
commercial bank incorporated in the United States of recognized
standing having capital and surplus in excess of $100,000,000 with
maturities of not more than twelve months from the date of
acquisition or (ii) which are fully insured by the Bank Insurance
Fund with maturities of not more than twelve (12) months from the
date of acquisition;
(c) commercial paper issued by any Person incorporated in the
United States rated at least A-1 or the equivalent thereof by
Standard & Poor's Corporation or at least P-1 or the equivalent
thereof by Xxxxx'x Investors Service, Inc. and in each case maturing
not more than twelve (12) months after the date of acquisition;
(d) investments in money market funds substantially all of
whose assets are comprised of securities of the types described in
clauses (a) through (c) above; or
(e) advances, loans, extensions of credit or capital
contributions and investments permitted by the Senior Loan Agreement.
"Permitted Liens" means (a) Liens in favor of the Senior Lender under
the Senior Loan Agreement 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 7.9 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.
"Polluting Substances" means all pollutants, contaminants, chemicals,
or industrial, toxic or hazardous substances or wastes and shall
include, without limitation, any flammable explosives, radioactive
materials, oil, hazardous materials, hazardous or solid wastes,
hazardous or toxic substances or related materials defined in the
Comprehensive Environmental Response, Compensation and Liability Act
of 1980, the Superfund Amendments and Reauthorization Act of 1986,
the Resource Conservation and Recovery Act of 1976, the Hazardous and
Solid Waste Amendments of 1984, and the Hazardous Materials
Transportation Act, as any of the same are hereafter amended, and in
the regulations adopted and publications promulgated thereto;
provided, in the event any of the foregoing Environmental Laws is
amended so as to broaden the meaning of any term defined thereby,
such broader meaning shall apply subsequent to the effective date of
such amendment and, provided, further, to the extent that the
applicable laws of any state establish a meaning for "hazardous
substance," "hazardous waste," "hazardous material," "solid waste,"
or "toxic substance" which is broader than that specified in any of
the foregoing Environmental Laws, such broader meaning shall apply.
"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 Holders' exercise of their
rights and remedies under Section 8.2.
"Prior Target" means all Targets acquired or whose assets have been
acquired in an acquisition permitted under the terms of the Senior
Loan Agreement.
"Property" means all real property owned, leased or operated by
Parent or any Subsidiary thereof.
"Purchase Documents" means, collectively, (a) the Warrants, (b) the
Preferred Stock and Warrant Purchase Agreement dated as of February
28, 1997, executed by and between Parent and each Purchaser and the
other parties names therein, with respect to the issuance to each
Purchaser of the Warrants and the issuance to each Purchaser of its
Preferred Stock, (c) the Preferred Stock, and (d) the Shareholder
Agreement dated as of February 28, 1997 executed by each Purchaser,
Parent and the other parties named therein, as each of the foregoing
may be amended from time to time.
"Purchaser" means collectively and individually Rice and the
Southland Purchasers, together with all of their respective
transferees, successors and assigns of all or any portion of the
Senior Subordinated Notes or the 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.
"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 Loan Documents" means the Senior Loan Agreement, the "Loan
Documents" (as defined in the Senior Loan Agreement) and the
agreements, documents and instruments executed in connection
therewith or contemplated thereby, and all amendments thereto.
"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 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 Subordinated Notes" means the term promissory notes issued to
each Purchaser pursuant to this Agreement, 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 and any Subsidiary to each
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 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 of even date herewith executed by and among
Parent, the Senior Agent and each Purchaser, and all amendments and
modifications thereto.
"Shareholder Agreement" means that certain Shareholders' Agreement
dated as of the date hereof among Parent, each Purchaser, F-Jotan,
L.L.C. and the other parties thereto, as the same may be amended,
modified, extended or restated from time to time.
"Southland" means Southland Holdings Company, a Texas corporation
and, unless the context requires otherwise, shall include its
Subsidiaries, if any.
"Subsidiary" means any Person of which or in which the Company and
its other Subsidiaries or Parent and its Subsidiaries or Southland,
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.
"Subsidiary Guaranty" means the guaranty of a Subsidiary of Parent or
the Company in favor of each Purchaser, in form and substance
satisfactory to each Purchaser, as the same may be amended or
otherwise modified from time to time.
"Subsidiary Mergers" means the merger of Atlantic Bag and Paper
Company and each Subsidiary owned directly by the Company (after
giving effect to the Acquisition Merger) with and into the Company,
with the Company as the surviving Person.
"Target" is defined in Section 9.2 of the Senior Loan Agreement.
"Termination Date" means the earliest to occur of (a) February 28,
2005, (b) the date on which the Senior Subordinated Notes are
accelerated pursuant to Article VIII, or (c) the date on which the
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.
"Total Debt" means, at the time of determination, the sum of (a) all
the Indebtedness of Parent and the Subsidiaries determined on a
consolidated basis other than the Letter of Credit Liabilities (as
defined in the Senior Loan Agreement) and Indebtedness outstanding
under the Revolving Loans (as defined in the Senior Loan Agreement)
plus (b) the arithmetic average of the sum of (i) the principal
balance of the Revolving Loans outstanding as of the date of
determination plus (ii) the principal balance of the Revolving Loans
on the last day of each of the eleven (11) calendar months
immediately preceding the date of determination, plus (c) the
arithmetic average of the sum of (i) the Letter of Credit Liabilities
outstanding as of the date of determination plus (ii) the Letter of
Credit Liabilities outstanding on the last day of each of the eleven
(11) calendar months immediately preceding the date of determination.
"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 in Annex I hereto.
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 each 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 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 any 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 each Purchaser, on
demand, and shall be additional 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
each 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 EACH 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 a Purchaser, addressed to such Purchaser at the
address specified on Annex I hereto or to such other addresses as such
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
any Purchaser at the closing of the purchase of the Senior Subordinated
Notes, and (c) financial statements, certificates and other information
previously or hereafter furnished to any Purchaser, may be reproduced by
such Purchaser by any photographic, photostatic, microfilm, microcard,
miniature photographic or other similar process and such 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 a Purchaser's rights under
this Agreement and the Senior Subordinated Notes, the outstanding
principal amount of the Senior Subordinated Notes of the assigning
Purchaser being assigned, pursuant to each assignment shall in no event be
less than Three Million Dollars ($3,000,000). 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.
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 each Purchaser, notwithstanding any investigation
heretofore or hereafter made by any Purchaser or on such Purchaser's
behalf, and (b) shall survive the delivery of this Agreement and the
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 each 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 any 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. THIS AGREEMENT HAS BEEN SUBSTANTIALLY
NEGOTIATED AND IS BEING EXECUTED, DELIVERED, AND ACCEPTED, AND IS INTENDED
TO BE PERFORMED, IN PART IN THE STATE OF FLORIDA. ALL OBLIGATIONS, RIGHTS
AND REMEDIES HEREUNDER, SHALL BE GOVERNED BY AND CONSTRUED AND INTERPRETED
IN ACCORDANCE WITH THE LAWS OF THE STATE OF FLORIDA. 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.
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 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
AGREEMENT, 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 PURCHASE THE SENIOR SUBORDINATED NOTES FROM THE COMPANY.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
IN WITNESS WHEREOF, Parent, the Company and each Purchaser have
caused this Agreement to be executed and delivered by their respective
officers thereunto duly authorized.
PARENT:
JOTAN, INC.
By: /s/ Shea E. Xxxxx
Xxxx X. Xxxxx,
Chief Executive Officer
Address for Notices for Parent and all
Subsidiaries:
000 Xxxx Xxxxx Xxxxxx
Xxxxxxxxxxxx, Xxxxxxx 00000
Attn: Mr. Xxxxx Xxxxxxxx
Facsimile: (000) 000-0000
with a copy to:
Xxxxxx & Bird
One Atlantic Center
0000 Xxxx Xxxxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxx 00000
Attn: Xxxxx Xxxxxx
Facsimile: (000) 000-0000
COMPANY:
SHC ACQUISITION CORP. (who will merge
with and into Southland Holding
Company)
By: /s/ Shea E. Xxxxx
Xxxx X. Xxxxx,
Chief Executive 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: /s/ Xxxxxxx X. Xxxxxxxx
Xxxxxxx X. Xxxxxxxx
Managing Director
F-SOUTHLAND, L.L.C.
By: Franklin Street/Fairview Capital,
L.L.C., its manager
By: /s/ Xxxxxxxx X. Xxxxxxxx
Xxxxxxxx X. Xxxxxxxx,
Manager
FF-SOUTHLAND, L.P.
By: FSFC Associates, L.P.,
Its general partner
By: Franklin Capital, L.L.C.,
its general partner
By: /s/ Xxxxxxxx X. Xxxxxxxx
Xxxxxxxx X. Xxxxxxxx,
Manager
STATE OF GEORGIA ]
]
COUNTY OF XXXXXX ]
This instrument was acknowledged before me on this ___ day of
_____________, 1997 by Xxxx X. Xxxxx, Chief Executive Officer of Jotan,
Inc.
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
STATE OF GEORGIA ]
]
COUNTY OF XXXXXX ]
This instrument was acknowledged before me on this ___ day of
_____________, 1997 by Xxxx X. Xxxxx, Chief Executive Officer of SHC
Acquisition Corp.
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
STATE OF GEORGIA ]
]
COUNTY OF XXXXXX ]
This instrument was acknowledged before me on this ___ day of
_____________, 1997 by Xxxxxxx X. Xxxxxxxx, Managing Partner of Rice
Mezzanine Corporation, as general partner of RMC Fund Management, L.P., as
general partner of Rice Capital Group IV, L.P. as general partner for Rice
Partners II, L.P.
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
STATE OF GEORGIA ]
]
COUNTY OF XXXXXX ]
This instrument was acknowledged before me on this ___ day of
_____________, 1997 by Xxxxxxxx X. Xxxxxxxx, Manager of
Franklin/Street/Fairview Capital, L.L.C., as general partner of F-
Southland, L.L.C.
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
STATE OF GEORGIA ]
]
COUNTY OF XXXXXX ]
This instrument was acknowledged before me on this ___ day of
_____________, 1997 by Xxxxxxxx X. Xxxxxxxx, Manager of Franklin Capital,
L.L.C., as general partner of FSFC Associates, L.P., as general partner of
F-Southland, L.L.C.
_____________________________________
Notary Public
_____________________________________
Printed Name
My commission expires:
_______________________
(SEAL)
SOUTHLAND ACKNOWLEDGMENT
By execution below, Southland (a) acknowledges that as a result of
the Acquisition Merger, Southland has succeeded to the rights and
obligations of the Company under this Agreement and the Other Agreements,
(b) assumes the Senior Subordinated Obligations and (c) agrees to be bound
by this Agreement and the Other Agreements as the Company.
SOUTHLAND HOLDING COMPANY
By: /s/ Shea E. Xxxxx
Xxxx X. Xxxxx
Chief Executive Officer
Annex I
to
Note Purchase Agreement
Information Concerning Rice
Rice: Rice Partners II, L.P.
Principal Amount of
Senior Subordinated Note: $7,000,000.00
Denomination of Warrants: Warrant A-1 - 9,581,726 shares of the common
stock of Parent on a fully diluted basis
Warrant A-2 - 2,515,203 shares of the common
stock of Parent on a fully diluted basis
Origination Fee: $175,000
Address for notices: Rice Partners II, L.P.
c/o Rice Capital Group IV, L.P.
0000 Xxx Xxxxxx, Xxxxx 0000
Xxxxxxx, Xxxxx 00000
Attn: Xxxxxxx X. Xxxxxxxx
Facsimile: (000) 000-0000
and with a copy to:
Xxxxxx & Xxxx, L.L.P.
0000 Xxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxx 00000
Attn: Xxxxx X. Xxxxx, Esq.
Facsimile: (000) 000-0000
Payments to be made
by wire transfer to: Southwest Bank of Texas, N.A.
Houston, Texas
ABA Routing #000000000
Accounting #0000000
For the Account of:
Rice Partners II, L.P.
Money Market Account #0000000
re: Southland Holding Company 12.5% Senior
Subordinated Note
Information Concerning the Southland Purchasers
The Southland Purchasers: F-Southland, L.L.C.
FF-Southland, L.P.
Principal Amount of
Senior Subordinated Note
F-Southland, L.L.C.: $ 1,000,000.00
Principal Amount of
Senior Subordinated Note
FF-Southland, L.P.: $ 1,000,000.00
Denomination of Warrant: Warrant B-1 - 359,315 shares of the common stock
of Parent on a fully diluted basis (F-Southland,
L.L.C.)
Warrant B-2 - 1,197,716 shares of the common
stock of Parent on a fully diluted basis
(F-Southland, L.L.C.)
Warrant C-1 - 359,315 shares of the common stock
of Parent on a fully diluted basis (FF-Southland,
L.P.)
Warrant C-2 - 1,197,716 shares of the common stock
of Parent on a fully diluted basis (FF-Southland,
L.P.)
Origination Fee: F-Southland, L.L.C.: $ 25,000.00
FF-Southland, L.P.: $25,000.00
Address for notices: F-Southland, L.L.C.
FF-Southland, L.P.
c/o Fairview Capital
000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000
Attn: Xxxxx X. Xxxxxxx
Facsimile: 000-000-0000
and with a copy to:
Wyrick, Robins, Xxxxx & Xxxxxx, L.L.P.
0000 Xxxx Xxxxx Xxxxx, Xxxxx 000
Xxxxxxx, Xxxxx Xxxxxxxx 00000-0000
Attn: Xxxxx X. Xxxxx, Xx., Esq.
Facsimile: (000) 000-0000
Payments to be made
by wire transfer to
F-Southland, L.L.C.: WACHOVIA Bank of Xxxxx Xxxxxxxx
Xxxxxxx Xxxxxxx Xxxxxx, Xxxxxxx, XX
ABA Routing #000000000
Account #6263126828
For the Account of:
F-Southland, L.L.C.
re: Southland Holding Company
12.5% Senior Subordinated Note
Attention: Xxxxxx Xxxxxx (000) 000-0000
Payments to be made
by wire transfer to
FF-Southland, L.P.: WACHOVIA Bank of Xxxxx Xxxxxxxx
Xxxxxxx Xxxxxxx Xxxxxx, Xxxxxxx, XX
ABA Routing #000000000
Accounting #6269094508
For the Account of:
FF-Southland, L.P.
re: Southland Holding Company
12.5% Senior Subordinated Note
Attention: Xxxxxx Xxxxxx (000) 000-0000
Schedule 4.3
to
Note Purchase Agreement
Defaults under Existing Agreements
Schedule 4.4
to
Note Purchase Agreement
Authorizations, Approvals, Consents and Filings
Schedule 4.5
to
Note Purchase Agreement
Environmental Condition of Property
Schedule 4.7
to
Note Purchase Agreement
Litigation and Judgments
Schedule 4.16
to
Note Purchase Agreement
Capitalization
Schedule 4.17
to
Note Purchase Agreement
Current Locations
Schedule 4.23
to
Note Purchase Agreement
Brokers
Schedule 4.26
to
Note Purchase Agreement
Conduct of Business
Schedule 7.10
to
Note Purchase Agreement
Remuneration
Exhibit A
to
Note Purchase Agreement
Form of Senior Subordinated Notes
Exhibit B
to
Note Purchase Agreement
Form of Legal Opinion
Exhibit C
to
Note Purchase Agreement
Form of Officer's Compliance Certificate
Exhibit D
to
Note Purchase Agreement
Permitted Indebtedness
Exhibit E
to
Note Purchase Agreement
Permitted Liens
