Exhibit 10.1
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GUARANTY AGREEMENT
Dated as of January 26, 2002
Among
SF HOLDINGS GROUP, INC.,
Guarantor
▇▇▇▇▇▇▇▇▇ & COMPANY, INC.,
Purchaser
AND
TCW/CRESCENT MEZZANINE, L.L.C.,
COLLATERAL AGENT
in respect of
Newcup, LLC. Note Purchase Agreement
dated as of January 25, 2002
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ARTICLE ONE GUARANTEE.......................................................1
SECTION 1.01 Unconditional Guarantee..................................1
SECTION 1.02 Evidence of Execution and Delivery of Subsidiary
Guarantee............................................2
SECTION 1.03 Waiver of Subrogation....................................3
SECTION 1.04 Immediate Payment........................................3
SECTION 1.05 No Set-Off...............................................3
SECTION 1.06 Obligations Absolute.....................................3
SECTION 1.07 Obligations Continuing...................................4
SECTION 1.08 Obligations Reinstated...................................4
SECTION 1.09 Obligations Not Affected.................................4
SECTION 1.10 Waiver...................................................5
SECTION 1.11 No Obligation To Take Action Against the Company.........6
SECTION 1.12 Dealing with Newcup and Others...........................6
SECTION 1.13 Default and Enforcement..................................6
SECTION 1.14 Amendment, Etc...........................................7
SECTION 1.15 Acknowledgment...........................................7
SECTION 1.16 Costs and Expenses.......................................7
SECTION 1.17 No Merger or Waiver; Cumulative Remedies.................7
SECTION 1.18 Survival of Obligations..................................7
SECTION 1.19 Guarantee in Addition to Other Obligations...............7
SECTION 1.20 Severability.............................................8
SECTION 1.21 Successors and Assigns...................................8
ARTICLE TWO DEFINITIONS AND INCORPORATION BY REFERENCE......................8
SECTION 2.01 Definitions..............................................8
SECTION 2.02 Other Definitions.......................................24
SECTION 2.03 Rules Of Construction...................................25
ARTICLE THREE OTHER AGREEMENTS.............................................25
SECTION 3.01 Warrants................................................25
SECTION 3.02 Option Agreement........................................25
SECTION 3.03 Cancellation of Notes and Purchase of Newcup............26
SECTION 3.04 Capital Contribution to Newcup..........................26
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ARTICLE FOUR COVENANTS.....................................................26
SECTION 4.01 Reserved................................................26
SECTION 4.02 Reserved................................................26
SECTION 4.03 Reports.................................................26
SECTION 4.04 Compliance Certificate..................................28
SECTION 4.05 Taxes...................................................29
SECTION 4.06 Stay, Extension And Usury Laws..........................29
SECTION 4.07 Restricted Payments.....................................29
SECTION 4.08 Dividend And Other Payment Restrictions Affecting
Subsidiaries........................................32
SECTION 4.09 Incurrence Of Indebtedness And Issuance Of
Preferred Stock.....................................32
SECTION 4.10 Asset Sales And Events Of Loss..........................35
SECTION 4.11 Transactions With Affiliates............................37
SECTION 4.12 Liens...................................................37
SECTION 4.13 Line Of Business........................................38
SECTION 4.14 Corporate Existence.....................................38
SECTION 4.15 Offer To Repurchase Upon An Equity Realization Event....38
SECTION 4.16 Limitations On Issuances And Sales Of Capital Stock
In Wholly Owned Restricted Subsidiaries.............39
SECTION 4.17 Limitation On Issuances Of Guarantees Of
Indebtedness........................................39
SECTION 4.18 Investment Company Act..................................40
SECTION 4.19 Insurance...............................................40
SECTION 4.20 Compliance with Laws, Maintenance of Licenses...........40
SECTION 4.21 Inspection of Properties and Records....................40
SECTION 4.22 Board of Directors Observation Rights...................41
SECTION 4.23 Private Placement Number................................41
SECTION 4.24 Notice of Certain Proceedings...........................41
SECTION 4.25 Opinions of Counsel; Certificates.......................41
SECTION 4.26 Certain Amendments......................................42
SECTION 4.27 Change in Organizational Documents......................42
SECTION 4.28 Limitations on Purchase of Discount Notes...............43
SECTION 4.29 Post-Closing Covenants..................................43
SECTION 4.30 Collateral Delivery.....................................43
ARTICLE FIVE SUCCESSORS....................................................43
SECTION 5.01 Merger, Consolidation, Or Sale Of Assets................43
SECTION 5.02 Successor Corporation Substituted.......................44
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ARTICLE SIX REPRESENTATIONS AND WARRANTIES OF THE COMPANY..................44
SECTION 6.01 Authorization, Capitalization...........................44
SECTION 6.02 No Violation or Conflict, No Default....................46
SECTION 6.03 No Material Adverse Change; Financial Statements........46
SECTION 6.04 Full Disclosure.........................................47
SECTION 6.05 Third Party Consents....................................48
SECTION 6.06 Governmental Regulations................................48
SECTION 6.07 Brokers.................................................48
SECTION 6.08 Solvency................................................49
SECTION 6.09 Litigation..............................................49
SECTION 6.10 Taxes...................................................49
SECTION 6.11 Compliance with Laws....................................50
SECTION 6.12 Indebtedness............................................50
SECTION 6.13 Insurance...............................................50
SECTION 6.14 Affiliate Transactions..................................50
ARTICLE SEVEN COLLATERAL AND SECURITY......................................50
SECTION 7.01 Collateral Documents....................................50
SECTION 7.02 Recording and Opinions..................................51
SECTION 7.03 Release of Collateral...................................52
SECTION 7.04 Authorization Of Actions To Be Taken By The
Collateral Agent Under The Collateral Documents.....52
SECTION 7.05 Authorization of Receipt of Funds By The Collateral
Agent Under the Collateral Documents................53
SECTION 7.06 Termination of Security Interest........................53
SECTION 7.07 Cooperation of the Collateral Agent.....................54
ARTICLE EIGHT EXPENSES AND INDEMNITY.......................................54
SECTION 8.01 Expenses................................................54
SECTION 8.02 General Indemnity.......................................55
SECTION 8.03 Income Tax Indemnity....................................56
ARTICLE NINE AMENDMENT, SUPPLEMENT AND WAIVER..............................56
SECTION 9.01 With Consent Of Holders Of Notes........................56
SECTION 9.02 Revocation And Effect Of Consents.......................57
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ARTICLE TEN EVENTS OF DEFAULT..............................................57
SECTION 10.01 Events of Default......................................57
ARTICLE ELEVEN MISCELLANEOUS...............................................59
SECTION 11.01 Notices................................................59
SECTION 11.02 Statements Required In Certificate Or Opinion..........61
SECTION 11.03 No Personal Liability Of Directors, Officers,
Employees And Stockholders..........................61
SECTION 11.04 Governing Law..........................................61
SECTION 11.05 No Adverse Interpretation Of Other Agreements..........61
SECTION 11.06 Successors.............................................61
SECTION 11.07 Severability...........................................62
SECTION 11.08 Counterpart Originals..................................62
SECTION 11.09 Table Of Contents, Headings, Etc.......................62
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EXHIBITS
EXHIBIT A - FORM OF GUARANTEE
EXHIBIT B - FORM OF PLEDGE AGREEMENT
EXHIBIT C - FORM OF WARRANT AGREEMENT
EXHIBIT D - FORM OF OPTION AGREEMENT
EXHIBIT E - FORM OF OPINION OF COUNSEL TO COMPANY
SCHEDULES
SCHEDULE 6.01 - CAPITALIZATION OF COMPANY AND ITS SUBSIDIARIES
SCHEDULE 6.09 - LITIGATION
SCHEDULE 6.12 - EXISTING INDEBTEDNESS
SCHEDULE 6.13 - INSURANCE
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GUARANTY AGREEMENT
This GUARANTY AGREEMENT is dated as of January 26, 2002, (this
"Agreement"), and entered into by and among SF Holdings Group, Inc., a Delaware
corporation (the "Company"), TCW/Crescent Mezzanine, L.L.C., a Delaware limited
liability company, as Collateral Agent (together with its permitted successor in
such capacity, "Collateral Agent") and ▇▇▇▇▇▇▇▇▇ & Company, Inc. ("Purchaser").
Capitalized terms not otherwise defined herein shall have the
meanings ascribed to such terms in Section 2.01 hereof.
ARTICLE ONE
GUARANTEE
SECTION 1.01 Unconditional Guarantee
(a) In consideration of the promises contained herein and other good
and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged, the Company, subject to Section 1.01(c) hereof, hereby,
irrevocably and unconditionally guarantees and agrees to be liable to each
Holder of a Note and to the Collateral Agent and its successors and assigns,
irrespective of the validity and enforceability of the Notes or the Obligations
of Newcup under the Note Purchase Agreement or the Notes, that: (a) the
principal of, premium, if any, and interest on the Notes shall be duly and
punctually paid in full when due, whether at maturity, upon redemption (whether
upon a Newcup Change of Control, an Equity Realization Event or otherwise), by
acceleration or otherwise, and interest on the overdue principal and (to the
extent permitted by law) interest, if any, on the Notes and all other
Obligations of Newcup to the Holders or the Collateral Agent hereunder or
thereunder (including amounts due the Collateral Agent under Section 9 of the
Note Purchase Agreement, Section 16.12 of the Pledge Agreement and Article Eight
hereof), shall be promptly paid in full or performed, all in accordance with the
terms hereof and thereof; and (b) in case of any extension of time of payment or
renewal of any Notes or any of such other Obligations of Newcup, the same shall
be promptly paid in full when due or performed in accordance with the terms of
extension or renewal, whether at maturity, upon redemption, by acceleration or
otherwise. Failing payment when due of any amount so guaranteed, for whatever
reason, the Company shall be obligated to pay the same immediately.
(b) The Company hereby agrees that its Obligations under this
Guarantee shall be unconditional, irrespective of the validity, regularity or
enforceability of the Notes or the Note Purchase Documents, the absence of any
action to enforce the same, any waiver or consent by any Holder of the Notes
with respect to any provisions thereof, any release of Newcup or any other
Person obligated on the Notes, the recovery of any judgment against Newcup, any
action to enforce the same, whether or not a Guarantee is affixed to any
particular Note, or any other circumstance which might otherwise constitute a
legal or equitable discharge or defense of a guarantor. The Company hereby
waives the benefit of diligence, presentment, demand of
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payment, filing of claims with a court in the event of insolvency or bankruptcy
of Newcup, any right to require a proceeding first against Newcup, protest,
notice and all demands whatsoever and covenants that this Guarantee shall not be
discharged except by complete performance of the Obligations contained in the
Notes, and this Guarantee. This Guarantee is and shall be a guarantee of payment
and not of collection. If any Holder or the Collateral Agent is required by any
court or otherwise to return to Newcup, or any custodian, trustee, liquidator or
other similar official acting in relation to Newcup, any amount paid by Newcup
to the Collateral Agent or such Holder, this Guarantee, to the extent
theretofore discharged, shall be reinstated in full force and effect. The
Company further agrees that, as between it, on the one hand, and the Holders and
the Collateral Agent, on the other hand, (a) subject to this Article One, the
maturity of the Obligations guaranteed may be accelerated as provided in Section
4 of the Note Purchase Agreement and Article Ten of this Agreement for the
purposes of its Guarantee, notwithstanding any stay, injunction or other
prohibition preventing such acceleration in respect of the Obligations
guaranteed thereby, and (b) in the event of any acceleration of such Obligations
as provided in Section 4 of the Note Purchase Agreement or Article Ten of this
Agreement, such Obligations (whether or not due and payable) shall forthwith
become due and payable by the Company for the purposes of this Guarantee.
(c) Notwithstanding anything to the contrary herein or in any other
Company Guarantee Document the obligations of the Company with respect to the
Guarantee set forth in this Section 1.01 shall be reduced by the amount of any
actual loss, damage or liability suffered or incurred by the Company as a result
of any Event of Default (as defined in the Guaranty Fee Agreement) under the
Guaranty Fee Agreement occurring at a time when Newcup is subject to the
restrictions in Paragraph 1 of the Guaranty Fee Agreement, regardless of whether
such Event of Default is cured or waived in accordance with the terms of the
Guaranty Fee Agreement. This Section 1.01(c) shall terminate and be null and
void and of no force or effect immediately upon the occurrence of a Newcup
Change of Control.
SECTION 1.02 Evidence of Execution and Delivery of Subsidiary Guarantee
(a) To further evidence the Guarantee referred to in Section 1.01
hereof, the Company agrees that a notation of such Guarantee, substantially in
the form of Exhibit A hereto shall be endorsed on each Note. Each such
endorsement shall be executed on behalf of the Company by either manual or
facsimile signature of two Officers of the Company, each of whom, in each case,
shall have been duly authorized to so execute by all requisite corporate action.
The validity and enforceability of this Guarantee shall not be affected by the
fact that it is not affixed to any particular Note.
(b) The Company hereby agrees that this Guarantee set forth in
Section 1.01 hereby shall remain in full force and effect with respect to all
Notes and Obligations evidenced by the Notes notwithstanding any failure to so
endorse on any Note a notation of such Guarantee.
(c) If an Officer of the Company whose signature is on a Guarantee
no longer holds that office at the time any Note is delivered to a Holder, or at
any time thereafter, the Company's Guarantee of such Note shall be valid
nevertheless.
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(d) The delivery of any Note to a Holder shall constitute due
delivery of the Guarantee set forth in this Agreement on behalf of the Company.
SECTION 1.03 Waiver of Subrogation
Until all of the Notes are discharged and paid in full, the Company
irrevocably waives and agrees not to exercise any claim or other rights which it
may hereafter acquire against Newcup that arise from the existence, payment,
performance or enforcement of the Obligations of Newcup under the Notes or the
other Note Purchase Documents and the Company's Obligations under its Guarantee
and this Agreement, in any such instance, including, without limitation, any
right of subrogation, reimbursement, exoneration, contribution, indemnification,
and any right to participate in any claim, remedy or right arises in equity, or
under contract, statute or common law, including, without limitation, the right
to take or receive from Newcup directly or indirectly, in cash or other property
or by set-off or in any other manner, payment or security on account of such
claim or other rights. If any amount shall be paid to the Company in violation
of the preceding sentence and any amounts owing to Holders under the Notes, the
other Note Purchase Documents, or any other document or instrument delivered
under or in connection with such agreements or instruments, shall not have been
paid in full, such amount shall have been deemed to have been paid to the
Company for the benefit of, and held in trust for the benefit of, the Holders
and shall forthwith be paid to the Holders to be credited against and applied to
the Obligations of Newcup, whether matured or unmatured, in accordance with the
terms of the Notes and the Note Purchase Agreement. The Company hereby
acknowledges that it will receive direct and indirect benefits from the
financing arrangements contemplated by the Note Purchase Agreement and that the
waiver set forth in this Section 1.03 is knowingly made in contemplation of such
benefits.
SECTION 1.04 Immediate Payment
Subject to Section 1.01(c), the Company agrees to make immediate
payment to the Holders of all Obligations of Newcup and the Company owing or
payable to the Holders upon receipt of a demand for payment therefor by the
Collateral Agent, by the Majority Holders or, with respect to a demand for
payment occasioned by the occurrence of an Event of Default under Section
10.01(a)(1)(A), by any Holder to the Company in writing. The Company agrees that
the Holders need not attempt to collect any amounts guaranteed hereunder from
Newcup or any other Person or to realize upon any Collateral, but, subject to
Section 1.01(c), may require the Company to make immediate payment of all of
such guaranteed amounts to the Holders when due, whether by maturity,
acceleration, redemption or otherwise, or at any time thereafter.
SECTION 1.05 No Set-Off
Each payment to be made by the Company hereunder in respect of the
Obligations under its Guarantee shall be payable in the currency or currencies
in which such Obligations are denominated, and shall be made without set-off,
counterclaim, reduction or diminution of any kind or nature.
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SECTION 1.06 Obligations Absolute
The Obligations of the Company under its Guarantee shall be absolute
and unconditional and any monies or amounts expressed to be owing or payable by
the Company which may not be recoverable from the Company on the basis of this
Guarantee shall be recoverable from the Company as a primary obligor and
principal debtor in respect thereof.
SECTION 1.07 Obligations Continuing
The Obligations of the Company under its Guarantee shall be
continuing and shall remain in full force and effect until all the Obligations
hereunder have been paid and satisfied in full. The Company hereby agrees with
the Holders that it will from time to time deliver to the Holders suitable
acknowledgments of this continued liability hereunder and under any other
instrument or instruments in such form as counsel to the Collateral Agent may
advise and as will prevent any action brought against it in respect of any
default hereunder being barred by any statute of limitations now or hereafter in
force and, in the event of the failure of the Company so to do, it hereby
irrevocably appoints the Collateral Agent as the attorney and agent of the
Company to make, execute and deliver such written acknowledgment or
acknowledgments or other instruments as may from time to time become necessary
or advisable, in the judgment of the Majority Holders on the advice of counsel,
to fully maintain and keep in force the liability of the Company under its
Guarantee.
SECTION 1.08 Obligations Reinstated
The Obligations of the Company under this Guarantee shall continue
to be effective or shall be reinstated, as the case may be, if at any time any
payment which would otherwise have reduced such Obligations of the Company
(whether such payment shall have been made by or on behalf of Newcup or the
Company) is rescinded or reclaimed from any of the Holders upon the insolvency,
bankruptcy, liquidation or reorganization of the Company or otherwise, all as
though such payment had not been made. If demand for, or acceleration of the
time for, payment by Newcup is stayed upon the insolvency, bankruptcy,
liquidation or reorganization of Newcup, all such Indebtedness otherwise subject
to demand for payment or acceleration shall nonetheless be payable by the
Company as provided herein.
SECTION 1.09 Obligations Not Affected
Subject to the limitations contained in Section 1.01(c), the
Obligations of the Company under this Guarantee shall not be affected, impaired
or diminished in any way by any act, omission, matter or thing whatsoever,
occurring before, upon or after any demand for payment (and whether or not known
or consented to by the Company or any of the Holders) which, but for this
provision, might constitute a whole or partial defense to a claim against the
Company under its Guarantee or might operate to release or otherwise exonerate
the Company from any of its Obligations or otherwise affect such Obligations,
whether occasioned by default of any of the Holders or otherwise, including,
without limitation:
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(a) any limitation of status or power, disability, incapacity or
other circumstance relating to Newcup or any other Person, including any
insolvency, bankruptcy, liquidation, reorganization, readjustment, composition,
dissolution, winding-up or other proceeding involving or affecting Newcup or any
other Person;
(b) any irregularity, defect, unenforceability or invalidity in
respect of any Indebtedness or other Obligation of Newcup or any other Person
under the Note Purchase Agreement, this Agreement, the Notes or any other Note
Purchase Document;
(c) any failure of Newcup, whether or not without fault on its part,
to perform or comply with any of the provisions of the Notes or any other Note
Purchase Document, or to give notice thereof to the Company;
(d) the taking or enforcing or exercising or the refusal or neglect
to take or enforce or exercise any right or remedy from or against Newcup or any
other Person or their respective assets or the release or discharge of any such
right or remedy;
(e) the granting of time, renewals, extensions, compromises,
concessions, waivers, releases, discharges and other indulgences to Newcup, or
any other Person;
(f) any change in the time, manner or place of payment of, or in any
other term of, any of the Notes, or any other amendment, variation, supplement,
replacement or waiver of, or any consent to departure from, any of the Notes or
the other Note Purchase Documents, including, without limitation, any increase
or decrease in the principal amount of or premium, if any, or interest on any of
the Notes;
(g) any change in the ownership, control, name, objects, businesses,
assets, capital structure or constitution of Newcup or the Company;
(h) any merger or amalgamation of Newcup or the Company with any
Person or Persons other than Newcup;
(i) the occurrence of any change in the laws, rules, regulations or
ordinances of any jurisdiction by any present or future action of any
governmental authority or court amending, varying, reducing or otherwise affect,
any of the Obligations of Newcup under the Notes or the other Note Purchase
Documents or the Obligations of the Company under this Guarantee; and
(j) any other circumstance (other than by complete, irrevocable
payment) that might otherwise constitute a legal or equitable discharge or
defense of Newcup under the Note Purchase Agreement or the Notes or of the
Company in respect of this Guarantee.
SECTION 1.10 Waiver
Without in any way limiting the provisions of Section 1.01 hereof,
the Company hereby waives notice of acceptance hereof, notice of any liability
of the Company under this
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Guarantee, notice or proof of reliance by the Holders upon the Obligations of
the Company under its Guarantee, and diligence, presentment, demand for payment
on Newcup, protest, notice of dishonor or non-payment of any of Newcup's
Obligations under the Note Purchase Documents or the Notes, or other notice or
formalities to Newcup or the Company of any kind whatsoever.
SECTION 1.11 No Obligation To Take Action Against the Company
No Person shall have any obligation to enforce or exhaust any rights
or remedies or to take any other steps under any security for the Obligations of
Newcup under the Notes or any of the other Note Purchase Documents, or against
Newcup or any other Person or any assets or properties of Newcup or any other
Person before any Holder is entitled to demand payment and performance by the
Company of its liabilities and obligations under its Guarantee or under this
Agreement.
SECTION 1.12 Dealing with Newcup and Others
The Holders, without releasing, discharging, limiting or otherwise
affecting in whole or in part the Obligations of the Company and without the
consent of or notice to the Company, may unless otherwise prohibited by the
Guaranty Fee Agreement:
(a) grant time, renewals, extensions, compromises, concessions,
waivers, releases and discharges Newcup or any other Person;
(b) take or abstain from taking security or Collateral from
Newcup or from perfecting security interests in the Collateral;
(c) release, discharge, compromise, realize, enforce or otherwise
deal with or do any act or thing in respect of (with or without consideration)
any and all collateral, mortgages or other security, including, without
limitation, the Collateral, given by the Company or any third party with respect
to the Obligations of Newcup under, or matters contemplated by, the Notes or the
other Note Purchase Documents;
(d) accept compromises or arrangements from Newcup;
(e) apply all monies at any time received from Newcup or in respect
of the Collateral upon such part of the Obligations of Newcup under the Notes or
the other Note Purchase Documents as the Holders may see fit or change any such
application in whole or in part from time to time as the Holders may see fit;
and
(f) otherwise deal with, or waive or modify their right to deal
with, Newcup and all other Persons and any Collateral as the Holders may see
fit.
SECTION 1.13 Default and Enforcement
If the Company fails to comply with Section 1.04 hereof, each Holder
may, subject to the limitation set forth in the Series A Notes, and Section
10.01(b) hereof proceed in
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the enforcement of this Guarantee and the Company's Obligations thereunder and
hereunder by any remedy provided by law, whether by legal proceedings or
otherwise, and to recover from Company Newcup's Obligations under the Notes and
the other Note Purchase Documents.
SECTION 1.14 Amendment, Etc.
No amendment, modification or waiver of any provision of this
Agreement relating to the Company or consent to any departure by the Company or
any other Persons from any such provision will in any event be effective unless
it is signed by the Company, the Majority Holders and the Collateral Agent.
SECTION 1.15 Acknowledgment
The Company hereby acknowledges communication of the terms of the
Notes and the other Note Purchase Documents and consents to and approves of the
same.
SECTION 1.16 Costs and Expenses
The Company shall pay on demand by the Collateral Agent or the
Majority Holders any and all reasonable costs, fees and expenses (including,
without limitation, legal fees) incurred by Collateral Agent, its agents,
advisors and counsel or any of the Holders in enforcing any of their rights
under this Agreement.
SECTION 1.17 No Merger or Waiver; Cumulative Remedies
The Company's Guarantee hereunder shall not operate by way of merger
of any of the obligations of the Company under any other agreement, including,
without limitation, the Note Purchase Documents. No failure to exercise and no
delay in exercising, on the part of the Holders, any right, remedy, power or
privilege under the Note Purchase Documents or the Notes, shall operate as a
waiver thereof; nor shall any single or partial exercise of any right, remedy,
power or privilege under the Note Purchase Documents or the Notes preclude any
other or further exercise thereof or the exercise of any other right, remedy,
power or privilege. The rights, remedies, powers and privileges in the Guarantee
and under the Note Purchase Documents, the Notes and any other document or
instrument between the Company and/or Newcup and the Holders are cumulative and
not exclusive of any rights, remedies, powers and privilege provided by law.
SECTION 1.18 Survival of Obligations
Without prejudice to the survival of any of the other obligations of
the Company, the obligations of the Company under Section 1.01 hereof shall
survive the payment in full of Newcup's Obligations under the Notes and the
other Note Purchase Documents and shall be enforceable against the Company
without regard to and without giving effect to any defense, right of offset or
counterclaim available to or which may be asserted by Newcup or the Company.
SECTION 1.19 Guarantee in Addition to Other Obligations
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The Obligations of the Company under this Guarantee and the Note
Purchase Documents are in addition to and not in substitution for any other
obligations to any of the Holders in relation to the Note Purchase Documents or
the Notes and any guarantees or security at any time held by or for the benefit
of any of them.
SECTION 1.20 Severability
Any provision of this Article One which is prohibited or
unenforceable in any jurisdiction shall not invalidate the remaining provisions
and any such prohibition or unenforceability in any jurisdiction shall not
invalidate or render unenforceable such provision in any jurisdiction.
SECTION 1.21 Successors and Assigns
This Guarantee shall be binding upon and inure to the benefit of
each of the Holders and their respective successors and permitted assigns,
except that the Company may not assign any of its obligations hereunder or
thereunder.
ARTICLE TWO
DEFINITIONS AND INCORPORATION BY REFERENCE
SECTION 2.01 Definitions.
"Acquired Debt" means, with respect to any specified Person, (i)
Indebtedness of or secured by assets of any other Person existing at the time
such other Person is merged with or into or becomes a Restricted Subsidiary of
such specified Person, including, without limitation, Indebtedness incurred in
connection with, or in contemplation of, such other Person merging with or into
or becoming a Restricted Subsidiary of such specified Person, and (ii)
Indebtedness secured by a Lien encumbering any asset acquired by such specified
Person.
"Affiliate" of any specified Person means any other Person directly
or indirectly controlling or controlled by or under direct or indirect common
control with such specified Person. For purposes of this definition, "control"
(including, with correlative meanings, the terms "controlling," "controlled by"
and "under common control with"), as used with respect to any Person, shall mean
the possession, directly or indirectly, of the power to direct or cause the
direction of the management or policies of such Person, whether through the
ownership of voting securities, by agreement or otherwise.
"Agreement" means this Guaranty Agreement, as amended, modified or
supplemented from time to time, in accordance with the terms hereof.
"Asset Sale" means (i) the sale, lease, conveyance or other
disposition of any assets or rights (including, without limitation, by way of a
sale and leaseback) other than sales of inventory in the ordinary course of
business consistent with past practices (provided that the sale, lease,
conveyance or other disposition of all or substantially all of the assets of the
Company and
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its Restricted Subsidiaries taken as a whole will be governed by Section 4.15
hereof and/or Article 5 hereof and not by Section 4.10 hereof), and (ii) the
issue or sale by the Company or any of its Restricted Subsidiaries of Equity
Interests of any of the Company's Restricted Subsidiaries, in the case of either
clause (i) or (ii) with respect to any issuance or sale by any Restricted
Subsidiary of the Company, whether in a single transaction or a series of
related transactions (a) that have a fair market value in excess of $5.0 million
or (b) for net proceeds in excess of $5.0 million. Notwithstanding the
foregoing, the following items shall not be deemed to be Asset Sales: (i) a
transfer of assets by a Restricted Subsidiary to the Company or to another
Restricted Subsidiary, (ii) a Restricted Payment that is permitted by Section
4.07 hereof and (iii) the sale of all or any portion of the Surplus Real Estate.
"Audax" means Audax Mezzanine Fund, L.P., a Delaware limited
partnership and its Affiliates.
"Bankruptcy Law" means Title 11, U.S. Code or any similar federal or
state law for the relief of debtors.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Legal Holiday.
"Capital Lease Obligation" means, at the time any determination
thereof is to be made, the amount of the liability in respect of a capital lease
that would at such time be required to be capitalized on a balance sheet in
accordance with GAAP.
"Capital Stock" means (i) in the case of a corporation, corporate
stock, (ii) in the case of an association or business entity, any and all
shares, interests, participations, rights or other equivalents (however
designated) of corporate stock, (iii) in the case of a partnership or limited
liability company, partnership or membership interests (whether general or
limited) and (iv) any other interest or participation that confers on a Person
the right to receive a share of the profits and losses of, or distributions of
assets of, the issuing Person, excluding stock appreciation rights issued in the
ordinary course of business.
"Cash Equivalents" means (i) United States dollars, (ii) 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 is pledged in support thereof) having
maturities of not more than six months from the date of acquisition, (iii)
certificates of deposit and eurodollar time deposits with maturities of six
months or less from the date of acquisition, bankers' acceptances with
maturities not exceeding six months and overnight bank deposits, in each case
with any domestic commercial bank having capital and surplus in excess of $500
million and a ▇▇▇▇▇▇▇▇ Bank Watch Rating of "B" or better, (iv) repurchase
obligations with a term of not more than seven days for underlying securities of
the types described in clauses (ii) and (iii) above entered into with any
financial institution meeting the qualifications specified in clause (iii)
above, (v) commercial paper having the highest rating obtainable from ▇▇▇▇▇'▇
Investors Service, Inc. or Standard & Poor's, a division of the
9
▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., and in each case maturing within one year after the
date of acquisition and (vi) money market funds at least 95% of the assets of
which constitute Cash Equivalents of the kinds described in clauses (i) - (v) of
this definition.
"CEG" means Creative Expressions Group, Inc., and CEG Holdings,
LLC.
"Change of Control" means the occurrence of any of the following:
(i) the sale, lease, transfer, conveyance or other disposition (other than by
way of merger or consolidation), in one or a series of related transactions, of
all or substantially all of the assets of the Company and its Restricted
Subsidiaries taken as a whole to any "person" (as such term is used in Section
13(d)(3) of the Exchange Act) or "group" (as defined in Sections 13(d)(3) and
14(d)(2) of the Exchange Act) other than the Principals, (ii) the adoption of a
plan relating to the liquidation or dissolution of the Company or of ▇▇▇▇▇,
Sweetheart or Sweetheart Cup, (iii) the consummation of any transaction
(including, without limitation, any merger or consolidation) the result of which
is that any "person" or "group" (as defined above), other than the Principals,
becomes the "beneficial owner" (as such term is defined in Rule 13d-3 and Rule
13d-5 under the Exchange Act), directly or indirectly, of a direct or indirect
majority in interest (more than 50%) of the voting power of the Voting Stock of
the Company, (iv) the failure of the Principals to own at least fifty-one
percent (51%) of the Equity Interests of the Company, (v) the failure of ▇▇▇▇▇▇
▇▇▇▇▇▇, individually, to own at least forty-five percent (45%) of the Equity
Interests of the Company, (vi) the first day on which more than a majority of
the members of the Board of Directors of the Company are not Continuing
Directors. For purposes of this definition, any transfer of an equity interest
of an entity that was formed for the purpose of acquiring Voting Stock of the
Company will be deemed to be a transfer of such portion of such Voting Stock as
corresponds to the portion of the equity of such entity that has been so
transferred.
"Class C Common Stock" means the Class C Common Stock, par value
$.001 per share, of the Company.
"Collateral" means all shares of Capital Stock in, and all
intercompany notes issued by, all current and future Restricted Subsidiaries of
the Company that are pledged to the Collateral Agent in accordance with this
Agreement and the Pledge Agreement.
"Collateral Agent" means the party appointed as "Collateral Agent"
in the Note Purchase Agreement until a successor replaces it in accordance with
the applicable provisions of the Note Purchase Agreement and thereafter, means
the successor serving hereunder.
"Collateral Documents" means the Pledge Agreement and any other
agreements, instruments, financing statements or other documents that evidence
or set forth the Lien of the Collateral Agent, for the benefit of Holders, in
the Collateral.
"Company Guarantee Documents" means this Agreement, the Warrant
Agreement, the Registration Agreement, the Guaranty Fee Agreement, the Option
Agreement and the Pledge Agreement, collectively, or each of such documents
singularly, and any
10
documents or instruments contemplated by or executed in connection with any of
them or any of the transactions contemplated hereby or thereby.
"Company Preferred Stock" means the 13 3/4% Series B Exchangeable
Preferred Stock Due 2009 of the Company.
"Consolidated Cash Flow" means, with respect to any Person for any
period, the Consolidated Net Income of such Person and its Restricted
Subsidiaries for such period plus (i) an amount equal to any extraordinary loss
plus any net loss realized in connection with an Asset Sale (to the extent such
losses were deducted in computing such Consolidated Net Income), plus (ii)
provision for taxes based on income or profits of such Person and its Restricted
Subsidiaries for such period, to the extent that such provision for taxes was
included in computing such Consolidated Net Income, plus (iii) consolidated
interest expense of such Person and its Restricted Subsidiaries for such period,
whether paid or accrued and whether or not capitalized (including, without
limitation, original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations, but excluding amortization of debt issuance costs), to the extent
that any such expense was deducted in computing such Consolidated Net Income,
plus (iv) depreciation, amortization (including amortization of goodwill, debt
issuance costs and other intangibles but excluding amortization of prepaid cash
expenses that were paid in a prior period) and other non-cash charges (excluding
any such non-cash charge to the extent that it represents an accrual of or
reserve for cash charges in any future period or amortization of a prepaid cash
expense that was paid in a prior period) of such Person and its Restricted
Subsidiaries for such period to the extent that such depreciation, amortization
and other non-cash charges were deducted in computing such Consolidated Net
Income, minus (v) non-cash items increasing such Consolidated Net Income for
such period, in each case, on a consolidated basis and determined in accordance
with GAAP. Notwithstanding the foregoing, the provision for taxes on the income
or profits of, and the depreciation and amortization and other non-cash charges
of, a Restricted Subsidiary of the referent Person shall be added to
Consolidated Net Income to compute Consolidated Cash Flow only to the extent
that a corresponding amount would be permitted at the date of determination to
be dividend to the Company by such Restricted Subsidiary without prior
governmental approval (that has not been obtained), and without direct or
indirect restriction pursuant to the terms of its charter and all agreements,
instruments, judgments, decrees, orders, statutes, rules and governmental
regulations applicable to that Restricted Subsidiary or its stockholders.
"Consolidated Net Income" means, with respect to any Person for any
period, the aggregate of the Net Income of such Person and its Restricted
Subsidiaries for such period, on a consolidated basis, determined in accordance
with GAAP; provided that (i) the Net Income (but not loss) of any Person that is
not a Restricted Subsidiary or that is accounted for by the equity method of
accounting shall be included only to the extent of the amount of dividends or
distributions paid in cash to the referent Person or a Wholly Owned Restricted
Subsidiary thereof, (ii) the Net Income of any Restricted Subsidiary, the
declaration or payment of dividends
11
or similar distributions by such Restricted Subsidiary of that Net Income is not
at the date of determination permitted without any prior governmental approval
(that has not been obtained) or, directly or indirectly, by operation of the
terms of its charter or any agreement, instrument, judgment, decree, order,
statute, rule or governmental regulation applicable to that Restricted
Subsidiary or its stockholders, shall be included only to the extent of the
amount of dividends or distributions paid in cash by such Restricted Subsidiary
to the referent person, (iii) the Net Income of any Person acquired in a pooling
of interests transaction for any period prior to the date of such acquisition
shall be excluded, and (iv) the cumulative effect of a change in accounting
principles shall be excluded.
"Consolidated Net Worth" means, with respect to any Person as of any
date, the sum of (i) the consolidated equity of the common stockholders of such
Person and its consolidated Restricted Subsidiaries as of such date plus (ii)
the respective amounts reported on such Person's balance sheet as of such date
with respect to any series of preferred stock (other than Disqualified Stock)
that by its terms is not entitled to the payment of cash dividends unless such
cash dividends may be declared and paid only out of net earnings in respect of
the year of such declaration and payment, but only to the extent of any cash
received by such Person upon issuance of such preferred stock, less (x) all
write-ups (other than write-ups resulting from foreign currency translations and
write-ups of tangible assets of a going concern business made within 12 months
after the acquisition of such business) subsequent to the Guaranty Date in the
book value of any asset owned by such Person or a consolidated Subsidiary of
such Person, (y) all investments as of such date in unconsolidated Subsidiaries
and in Persons that are not Subsidiaries (except, in each case, Permitted
Investments), and (z) all unamortized debt discount and expense and unamortized
deferred charges as of such date, all of the foregoing determined in accordance
with GAAP.
"Continuing Director" means, as of any date of determination, any
member of the Board of Directors of the Company who (i) was a member of such
Board of Directors on the Guaranty Date or (ii) was nominated for election or
elected to such Board of Directors with the approval of a majority of the
Continuing Directors who were members of such Board at the time of such
nomination or election.
"Conversion Option" shall have the meaning ascribed to such term in
the Series A Notes.
"Credit Facilities" means one or more debt facilities or commercial
paper facilities with banks or other institutional lenders providing for
revolving credit loans, term loans, receivables financing or letters of credit,
in each case, as amended, restated, modified, renewed, refunded, replaced or
refinanced in whole or in part from time to time.
"Default" means any event that is or with the passage of time or the
giving of notice or both would be an Event of Default.
"Discount Notes" means the 12 3/4% Series B Senior Secured Discount
Notes due 2008 of the Company.
12
"Discount Notes Indenture Collateral" means the "Collateral" defined
and described in the Discount Notes Indenture and the "Pledged Collateral"
defined and described in the Discount Notes Indenture Pledge Agreement.
"Discount Notes Indenture" means the Indenture dated as of March
12, 1998, as amended and supplemented from time to time, between the Company and
The Bank of New York, as trustee, pursuant to which the Discount Notes were
issued.
"Discount Notes Indenture Pledge Agreement" means the "Pledge
Agreement" defined and described in the Discount Notes Indenture.
"Disqualified Stock" means any Capital Stock that, by its terms (or
by the terms of any security into which it is convertible, or for which it is
exchangeable, at the option of the holder thereof), or upon the happening of any
event, matures or is mandatorily redeemable, pursuant to a sinking fund
obligation or otherwise, or redeemable at the option of the holder thereof, in
whole or in part, on or prior to the date that is 91 days after the date on
which the Notes mature; provided, however, that any Capital Stock that would
constitute Disqualified Stock solely because the holders thereof have the right
to require the Company to repurchase such Capital Stock upon the occurrence of a
Change of Control or an Asset Sale shall not constitute Disqualified Stock if
the terms of such Capital Stock provide that the Company may not repurchase or
redeem any such Capital Stock pursuant to such provisions unless such repurchase
or redemption complies with Section 4.07 hereof.
"Equity Interests" means Capital Stock and all warrants, options or
other rights to acquire Capital Stock (but excluding any debt security that is
convertible into, or exchangeable for, Capital Stock).
"Equity Offering" means an underwritten public offering of common
stock (other than Disqualified Stock) of the Company registered under the
Securities Act (other than a public offering registered on Form S-8 under the
Securities Act) issues of such common stock, with gross proceeds to the Company
of not less $25,000,000, resulting in the listing of the Company's common stock
on a nationally recognized stock exchange, including the NASDAQ National Market
System.
"Equity Realization Event" means the occurrence of a Change of
Control or the consummation of an Equity Offering by the Company or any of its
successors.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended.
"Existing Indebtedness" means Indebtedness of the Company and its
Restricted Subsidiaries in existence on the Guaranty Date (other than
Indebtedness permitted pursuant to clause (iv) of the definition of Permitted
Debt), until such amounts are repaid.
"Fixed Charges" means, with respect to any Person for any period,
the sum, without duplication, of (i) the consolidated interest expense of such
Person and its Restricted
13
Subsidiaries for such period, whether paid or accrued (including, without
limitation, original issue discount, non-cash interest payments, the interest
component of any deferred payment obligations, the interest component of all
payments associated with Capital Lease Obligations, commissions, discounts and
other fees and charges incurred in respect of letter of credit or bankers'
acceptance financings, and net payments (if any) pursuant to Hedging
Obligations, but excluding amortization of debt issuance costs) and (ii) the
consolidated interest of such Person and its Restricted Subsidiaries that was
capitalized during such period, and (iii) any interest expense on Indebtedness
of another Person that is Guaranteed by such Person or one of its Restricted
Subsidiaries or secured by a Lien on assets of such Person or one of its
Restricted Subsidiaries (whether or not such Guarantee or Lien is called upon)
and (iv) the product of (a) all dividend payments, whether or not in cash, on
any series of preferred stock of such Person, other than dividend payments on
Equity Interests payable solely in Equity Interests of the Company (other than
Disqualified Stock) or to the Company or a Restricted Subsidiary of the Company,
times (b) a fraction, the numerator of which is one and the denominator of which
is one minus the then current combined federal, state and local statutory tax
rate of such Person, expressed as a decimal, in each case, on a consolidated
basis and in accordance with GAAP.
"Fixed Charge Coverage Ratio" means with respect to any Person for
any period, the ratio of the Consolidated Cash Flow of such Person for such
period to the Fixed Charges of such Person for such period. In the event that
the referent Person or any of its Restricted Subsidiaries incurs, assumes,
Guarantees or redeems any Indebtedness (other than revolving credit borrowings)
or issues or redeems preferred stock subsequent to the commencement of the
period for which the Fixed Charge Coverage Ratio is being calculated but prior
to the date on which the event for which the calculation of the Fixed Charge
Coverage Ratio is made (the "Calculation Date"), then the Fixed Charge Coverage
Ratio shall be calculated giving pro forma effect to such incurrence,
assumption, Guarantee or redemption of Indebtedness, or such issuance or
redemption of preferred stock, as if the same had occurred at the beginning of
the applicable four-quarter reference period. In addition, for purposes of
making the computation referred to above, (i) acquisitions that have been made
by the Company or any of its Restricted Subsidiaries, including through mergers
or consolidations and including any related financing transactions, during the
four-quarter reference period or subsequent to such reference period and on or
prior to the Calculation Date shall be deemed to have occurred on the first day
of the four-quarter reference period and Consolidated Cash Flow for such
reference period shall be calculated without giving effect to clause (iii) of
the proviso set forth in the definition of Consolidated Net Income, and (ii) the
Consolidated Cash Flow attributable to discontinued operations, as determined in
accordance with GAAP, and operations or businesses disposed of prior to the
Calculation Date, shall be excluded, and (iii) the Fixed Charges attributable to
discontinued operations, as determined in accordance with GAAP, and operations
or businesses disposed of prior to the Calculation Date, shall be excluded, but
only to the extent that the obligations giving rise to such Fixed Charges will
not be obligations of the referent Person or any of its Subsidiaries following
the Calculation Date.
"▇▇▇▇▇" means The ▇▇▇▇▇ Group, Inc., a Delaware corporation, and
its successors.
14
"▇▇▇▇▇ Notes" means the 9 1/2% Series B Senior Subordinated Notes of
▇▇▇▇▇.
"GAAP" means generally accepted accounting principles set forth in
the opinions and pronouncements of the Accounting Principles Board of the
American Institute of Certified Public Accountants and statements and
pronouncements of the Financial Accounting Standards Board or in such other
statements by such other entity as have been approved by a significant segment
of the accounting profession, which are in effect on the date of the relevant
financial statements.
"Global Cup Entities" means each of Global Cup S.A. de C.V.,
Rentactivos, S.A. de C.V., Servicios Tanairi, S.A. de C.V. and Paper Cups de
Mexico, S.A. de C.V.
"Government Securities" means direct obligations of, or obligations
guaranteed by, the United States of America for the payment of which guarantee
or obligations the full faith and credit of the United States is pledged.
"Guarantee" means a guarantee (other than by endorsement of
negotiable instruments for collection in the ordinary course of business),
direct or indirect, in any manner (including, without limitation, by way of a
pledge of assets or through letters of credit or reimbursement agreements in
respect thereof), of all or any part of any Indebtedness.
"Guaranty Date" means January 26, 2002, the date of this Agreement.
"Guaranty Fee Agreement" means that certain Guaranty Fee Agreement
of January 26, 2002, between Newcup and the Company, as amended, modified, or
supplemented from time to time, in accordance with the terms thereof.
"Hedging Obligations" means, with respect to any Person, the
obligations of such Person under (i) interest rate swap agreements, interest
rate cap agreements and interest rate collar agreements and (ii) other
agreements or arrangements designed to protect such Person against fluctuations
in interest rates.
"Holder" means Purchaser as long as it holds a Note, any
TCW/Crescent Investor as long as it holds a Note and any other holder of a Note.
"Indebtedness" means, with respect to any Person, (i) any
indebtedness of such Person, whether or not contingent, in respect of borrowed
money or evidenced by bonds, notes, debentures or similar instruments or letters
of credit (or reimbursement agreements in respect thereof) or banker's
acceptances or representing Capital Lease Obligations or the balance deferred
and unpaid of the purchase price of any property or representing any Hedging
Obligations, except any such balance that constitutes an accrued expense or
trade payable, if and to the extent any of the foregoing (other than letters of
credit and Hedging Obligations) would appear as a liability upon a balance sheet
of such Person prepared in accordance with GAAP, as well as all Indebtedness of
others secured by a Lien on any asset of such Person (whether or not such
Indebtedness is assumed by such Person) and, to the extent not otherwise
included, the
15
Guarantee by such Person of any indebtedness of any other Person and (ii) all
Disqualified Stock issued by such Person with the amount of Indebtedness
represented by such Disqualified Stock being equal to the greater of its
voluntary or involuntary liquidation preference and its maximum fixed repurchase
price, but excluding accrued dividends if any. The amount of any Indebtedness
outstanding as of any date shall be (x) the accreted value thereof, in the case
of any Indebtedness issued with original issue discount, and (y) the principal
amount thereof, together with any interest thereon that is more than 30 days
past due, in the case of any other Indebtedness. In addition, the amount of any
Indebtedness secured by a Lien on any property or assets owned or held by a
Person which is nonrecourse to that Person shall be equal to the lesser of (i)
the amount of such Indebtedness as determined by the preceding sentence or (ii)
the fair market value of the property or asset encumbered, as determined by such
Person in good faith.
"Indemnified Holder" means each Person who is, was or becomes a
Holder, except the Purchaser.
"Investments" means, with respect to any Person, all investments by
such Person in other Persons (including Affiliates) in the forms of direct or
indirect loans (including guarantees of Indebtedness or other obligations),
advances or capital contributions (excluding commission, travel and similar
advances to officers and employees made in the ordinary course of business),
purchases or other acquisitions for consideration of Indebtedness, Equity
Interests or other securities, together with all items that are or would be
classified as investments on a balance sheet prepared in accordance with GAAP.
If the Company or any Restricted Subsidiary of the Company sells or otherwise
disposes of any Equity Interests of any direct or indirect Subsidiary of the
Company such that, after giving effect to any such sale or disposition, such
Person is no longer a Subsidiary of the Company, the Company shall be deemed to
have made an Investment on the date of any such sale or disposition equal to the
fair market value of the Equity Interests of such Subsidiary not sold or
disposed of in an amount determined as provided in the final paragraph of
Section 4.07.
"Issue Date" means January 25, 2002, the date on which the Notes
were first issued under the Note Purchase Agreement.
"Legal Holiday" means a Saturday, a Sunday or a day on which banking
institutions in the City of New York or at a place of payment are authorized by
law, regulation or executive order to remain closed. If a payment date is a
Legal Holiday at a place of payment, payment may be made at that place on the
next succeeding day that is not a Legal Holiday, and no interest shall accrue
for the intervening period.
"Lien" means, with respect to any asset, any mortgage, lien, pledge,
charge, security interest or encumbrance of any kind in respect of such asset,
whether or not filed, recorded or otherwise perfected under applicable law
(including any conditional sale or other title retention agreement, any lease in
the nature thereof, any option or other agreement to sell or give a security
interest in and any filing of or agreement to give any financing statement under
the Uniform Commercial Code (or equivalent statutes) of any jurisdiction).
16
"Lily Cup" means Lily Cup Inc.
"Majority Holders" means, at any time, the Holder or Holders of at
least a majority in aggregate outstanding principal amount of the Notes.
"Management Services Agreement" means that certain Second Restated
Management Services Agreement, dated March 12, 1998, by and among Sweetheart,
Sweetheart Cup, AIPM and the Company.
"Material Adverse Effect" means (a) a material adverse effect upon
the business, operations, properties, assets, condition (financial or otherwise)
or prospects of the Company and its Restricted Subsidiaries, taken as a whole,
or (b) a material adverse effect on the ability of the Company to perform its
obligations under this Agreement or of any Holder to enforce or collect any of
the obligations hereunder. In determining whether any individual event could
reasonably be expected to 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 could reasonably be expected to result in a Material
Adverse Effect.
"Net Income" means, with respect to any Person, the net income
(loss) of such Person, determined in accordance with GAAP and before any
reduction in respect of preferred stock dividends and restructuring charge,
excluding, however, (i) any gain (but not loss), together with any related
provision for taxes on such gain (but not loss), realized in connection with (a)
any Asset Sale since the Guaranty Date (including, without limitation,
dispositions pursuant to sale and leaseback transactions) or (b) the disposition
of any securities by such Person or any of its Restricted Subsidiaries or the
extinguishment of any Indebtedness of such Person or any of its Restricted
Subsidiaries and (ii) any extraordinary or nonrecurring gain (but not loss),
together with any related provision for taxes on such extraordinary or
nonrecurring gain (but not loss).
"Net Proceeds" means the aggregate cash proceeds received by the
Company or any of its Restricted Subsidiaries in respect of any Asset Sale
(including, without limitation, any cash received upon the sale or other
disposition of any non-cash consideration received in any Asset Sale), net of
the direct costs relating to such Asset Sale (including, without limitation,
legal, accounting and investment banking fees, and sales commissions) and any
relocation expenses incurred as a result thereof, taxes paid or payable as a
result thereof (after taking into account any available tax credits or
deductions and any tax sharing arrangements), amounts required to be applied to
the repayment of Indebtedness secured by a Lien on the asset or assets that were
the subject of such Asset Sale, and any reserve for adjustment in respect of the
sale price of such asset or assets established in accordance with GAAP.
"Newcup" means Newcup, LLC, a Delaware limited liability company.
"Newcup Change of Control" means the acquisition by the Company or
any of its Affiliates, either individually or collectively as a group (as such
term is used in Section 13(d)(3) of the Exchange Act), of a direct or indirect
majority in interest (more than 50%) of the
17
outstanding Voting Stock of Newcup by way of merger or consolidation or exercise
of warrants or options to purchase Voting Stock of Newcup.
"Non-Recourse Debt" means Indebtedness (i) as to which neither the
Company nor any of its Restricted Subsidiaries (a) provides credit support of
any kind (including any undertaking, agreement or instrument that would
constitute Indebtedness), (b) is directly or indirectly liable (as a guarantor
or otherwise), or (c) constitutes the lender; and (ii) no default with respect
to which (including any rights that the holders thereof may have to take
enforcement action against an Unrestricted Subsidiary) would permit (upon
notice, lapse of time or both) any holder of any other Indebtedness (other than
the Notes being offered hereby) of the Company or any of its Restricted
Subsidiaries to declare a default on such other Indebtedness or cause the
payment thereof to be accelerated or payable prior to its stated maturity; and
(iii) as to which the lenders have been notified in writing that they will not
have any recourse to the stock or assets of the Company or any of its Restricted
Subsidiaries.
"Note Purchase Agreement" means the Note Purchase Agreement dated
January 25, 2002, among Newcup and the Purchaser, as amended, modified or
supplemented from time to time, in accordance with the terms thereof.
"Note Purchase Documents" means, collectively, the Notes, the Note
Purchase Agreement and the Securities Account Pledge Agreement and,
collectively, or each of such documents singularly, and any documents or
instruments contemplated by or executed in connection with any of them or any of
the transactions contemplated thereof.
"Notes" collectively, the Series A Notes and the Series B Notes and
each individually, a "Note".
"Obligations" means any principal, interest, penalties, fees,
indemnifications, reimbursements, damages and other liabilities payable under
the documentation governing any Indebtedness.
"Officer" means, with respect to any Person, the Chairman of the
Board, the Chief Executive Officer, the President, the Chief Operating Officer,
the Chief Financial Officer, the Treasurer, any Assistant Treasurer, the
Controller, the Secretary or any Vice-President of such Person.
"Officers' Certificate" means a certificate signed on behalf of the
Company by two Officers of the Company, one of whom must be the principal
executive officer, the principal financial officer, the treasurer or the
principal accounting officer of the Company, that meets the requirements of
Section 11.02 hereof.
"Opinion of Counsel" means an opinion from legal counsel who is
reasonably acceptable to the Collateral Agent, that meets the requirements of
Section 4.25 hereof and Section 7.02 hereof.
18
"Option Agreement" means the Option Agreement dated as of January
26, 2002, between the Company and the Purchaser, as amended, modified, or
supplemented from time to time, in accordance with the terms thereof.
"Organizational Documents" means (i) with respect to any
corporation, its certificate or articles of incorporation or organization, as
amended, and its by-laws, as amended, (ii) with respect to any limited
partnership, its certificate of limited partnership, as amended, and its
partnership agreement, as amended, (iii) with respect to any general
partnership, its partnership agreement, as amended, and (iv) with respect to any
limited liability company, its articles of organization, as amended, and its
operating agreement, as amended.
"Permitted Business" means the business of producing and selling
food service, packaging, tissue and party goods products and such other
businesses as the Company and its Restricted Subsidiaries are engaged in on the
Guaranty Date, and reasonable expansions and extensions thereof.
"Permitted Investments" means (i) any Investment in Newcup, in the
Company or in a Restricted Subsidiary of the Company; provided, that any
Investment by a Restricted Subsidiary in the Company consisting of Indebtedness
shall be unsecured and subordinated, pursuant to a written agreement, to the
Company's obligations under its Guarantee and this Agreement; (ii) any
Investment in Cash Equivalents; (iii) any Investment by any Restricted
Subsidiary of the Company in a Person, if as a result of such Investment (x)
such Person becomes a Restricted Subsidiary of the Company or (y) such Person is
merged, consolidated or amalgamated with or into, or transfers or conveys
substantially all of its assets to, or is liquidated into, a Restricted
Subsidiary of the Company; (iv) any Investment made as a result of the receipt
of non-cash consideration from an Asset Sale that was made pursuant to and in
compliance with Section 4.10 hereof; (v) Investments by any Restricted
Subsidiary of the Company in Lily Cup in an aggregate amount not to exceed $2.0
million; (vi) any Investment by any Restricted Subsidiary of the Company, if as
a result of such Investment, a Restricted Subsidiary becomes a Wholly Owned
Subsidiary; (vii) Investments by any Restricted Subsidiary of the Company in
Equity Interests of Persons other than the Subsidiaries of the Company in an
aggregate amount not to exceed $5.0 million; (viii) other Investments by any
Restricted Subsidiary of the Company, commencing on the Guaranty Date, in an
aggregate amount not to exceed $5.0 million in any fiscal year, and to the
extent the Restricted Subsidiaries of the Company do not utilize the amount
permitted under this clause (viii) in a particular fiscal year, such unutilized
amount shall be added to the amount available in the following fiscal year; (ix)
any Investments by the Company consisting of payments pursuant to this
Agreement; (x) purchases by any Restricted Subsidiary of the Company of ▇▇▇▇▇
Notes; provided that, at the time of any such purchase, not more than 5% of
outstanding principal balance of the Discount Notes, at maturity, are held by
Persons other than Newcup, the Company or any Restricted Subsidiary of the
Company and no Default or Event of Default shall have occurred and be continuing
or would occur as a consequence thereof; and (xi) purchases by the Company and
its Restricted Subsidiaries of Discount Notes, Company Preferred Stock and the
Class C Common Stock so long as no Default or Event of Default shall have
occurred and be continuing or would occur as a consequence thereof.
19
"Permitted Liens" means (i) Liens to secure Indebtedness permitted
by clause (i) of Section 4.09 hereof; (ii) Liens in favor of the Company or any
of its Restricted Subsidiaries; (iii) Liens on property of a Person existing at
the time such Person is merged into or consolidated with the Company or any
Restricted Subsidiary of the Company; provided that such Liens were in existence
prior to the contemplation of such merger or consolidation and do not extend to
any assets other than those of the Person merged into or consolidated with the
Company or any Restricted Subsidiary; (iv) Liens on property existing at the
time of acquisition thereof by the Company or any Restricted Subsidiary;
provided that such Liens were in existence prior to the contemplation of such
acquisition; (v) Liens to secure the performance of statutory obligations,
surety or appeal bonds, performance bonds or other obligations of a like nature
incurred in the ordinary course of business; (vi) Liens to secure Indebtedness
(including Capital Lease Obligations) permitted by clause (v) of Section 4.09
hereof, and Indebtedness incurred pursuant to the first paragraph of Section
4.09 hereof for the purpose of financing all or any part of the purchase price
or cost of construction or improvement of property, plant or equipment used in
the business of the Company or such Restricted Subsidiary, in each case covering
only the assets acquired with such Indebtedness (except that, in the case of
Indebtedness incurred to purchase the property which is the subject of the Sale
and Leaseback Documents, such Liens may only extend to the assets which secure
the Company's obligations under the Sale and Leaseback Documents as of the
Guaranty Date); provided however, that the Lien securing any such Indebtedness
shall be created within 90 days of such acquisition; (vii) Liens existing on the
Guaranty Date; (viii) Liens for taxes, assessments or governmental charges or
claims that are not yet delinquent or that are being contested in good faith by
appropriate proceedings promptly instituted and diligently concluded, that any
reserve or other appropriate provision as shall be required in conformity with
GAAP shall have been made therefor; (ix) Liens incurred in the ordinary course
of business of any Restricted Subsidiary of the Company with respect to
obligations that do not exceed $2.5 million at any one time outstanding and that
(a) are not incurred in connection with the borrowing of money or the obtaining
of advances or credit (other than trade credit in the ordinary course of
business) and (b) do not in the aggregate materially detract from the value of
the property or materially impair the use thereof in the operation of business
by such Restricted Subsidiary; (x) Liens in favor of the holders of Notes; (xi)
Liens on assets of Lily Cup to secure Indebtedness permitted by clause (iv) of
the third paragraph of Section 4.09 hereof, (xii) Liens securing Hedging
Obligations permitted by clause (ix) of the third paragraph of Section 4.09
hereof; (xiii) any Lien granted by a Restricted Subsidiary on Discount Notes
acquired by such Restricted Subsidiary after January 26, 2002, from any Person
other than Newcup, the Company or any other Restricted Subsidiary for the
purpose of securing Indebtedness incurred by such Restricted Subsidiary in
connection with such acquisition; and (xiv) renewals or refundings of any Liens
referred to in clauses (iii) through (viii), (ix) and (xiii) above provided that
any such renewal or refunding does not extend to any assets or secure any
Indebtedness not securing or secured by the Liens being renewed or refinanced.
"Permitted Refinancing Indebtedness" means any Indebtedness of the
Company or any of its Restricted Subsidiaries issued in exchange for, or the net
proceeds of which are used to extend, refinance, renew, replace, defease or
refund other Indebtedness of the Company or any such Restricted Subsidiary;
provided that: (i) with respect to any Indebtedness other than
20
Indebtedness evidenced by the Discount Notes, the principal amount (or accreted
value, if applicable) of such Permitted Refinancing Indebtedness does not exceed
the principal amount of (or accreted value, if applicable), plus accrued
interest on, the Indebtedness so extended, refinanced, renewed, replaced,
defeased or refunded (plus the amount of reasonable expenses incurred in
connection therewith); (ii) with respect to Indebtedness evidenced by the
Discount Notes, the principal amount (or accreted value, if applicable) of such
Permitted Refinancing Indebtedness does not exceed the lesser of (a) the
principal amount of (or accreted value, if applicable), plus accrued interest
on, the Indebtedness so extended, refinanced, renewed, replaced, defeased or
refunded (plus the amount of reasonable expenses incurred in connection
therewith) and (b) the amount paid to purchase such Discount Notes by the
Company or any of its Restricted Subsidiaries (plus the amount of reasonable
expenses incurred in connection therewith); (iii) such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and has a Weighted Average Life to Maturity equal to or greater than the
Weighted Average Life to Maturity of, the Indebtedness being extended,
refinanced, renewed, replaced, defeased or refunded; (iv) if the Indebtedness
being extended, refinanced, renewed, replaced, defeased or refunded is
subordinated in right of payment to the Notes, such Permitted Refinancing
Indebtedness has a final maturity date later than the final maturity date of,
and is subordinated in right of payment to, the Notes on terms at least as
favorable to the Holders of Notes as those contained in the documentation
governing the Indebtedness being extended, refinanced, renewed, replaced,
defeased or refunded; and (v) such Indebtedness is incurred either by the
Company or by the Subsidiary which is the obligor (or successor) on the
Indebtedness being extended, refinanced, renewed, replaced, defeased or
refunded.
"Person" means any individual, corporation, partnership, joint
venture, association, joint-stock company, limited liability company, trust,
unincorporated organization or government or agency or political subdivision
thereof (including any subdivision or ongoing business of any such entity or
substantially all of the assets of any such entity, subdivision or business).
"PIK Quarter" shall have the meaning ascribed to such term in the
Notes.
"Pledge Agreement" means the Pledge Agreement, dated as of the date
this Agreement, by and between the Company and the Collateral Agent and
substantially in the form attached as Exhibit B hereto, as such agreement may be
amended, modified or supplemented from time to time, in accordance with the
terms thereof.
"Principals" means ▇▇▇▇▇▇ ▇▇▇▇▇▇, his spouse, his lineal descendants
and any trust, corporation, partnership, association, limited liability company
or other entity in which ▇▇▇▇▇▇ ▇▇▇▇▇▇, his spouse and/or his lineal descendants
hold at least a majority of the total, combined outstanding voting power or
similar controlling interest.
"Pro Forma" means the unaudited consolidated balance sheets of the
Company and its Subsidiaries as of the date hereof after giving effect to this
Agreement, the other Company Guarantee Documents, the Note Purchase Documents,
the adoption of the
21
Supplemental Indenture and the amendment of the Discount Notes owned by Newcup
and the transactions contemplated hereby and thereby.
"Registration Agreement" means the Registration Agreement, dated as
of the Guaranty Date, by and among the Company and the Purchaser, as amended,
modified or supplemented from time to time, in accordance with the terms
thereof.
"Restricted Investment" means an Investment other than a Permitted
Investment.
"Restricted Subsidiary" of a Person means any Subsidiary of the
referent Person that is not an Unrestricted Subsidiary.
"Sale Leaseback Documents" means that certain Participation
Agreement among Sweetheart, General Electric Capital Corporation, ▇▇▇▇ Lease
Finance Corporation, MDFC Equipment Leasing Corporation, Finova Capital
Corporation, Transamerica Equipment Financial Services Corporation, General
Foods Credit Investors ▇▇. ▇ ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ National Trust Company of
Connecticut, National Association, as Owner Trustee, dated as of June 1, 2000,
and all related documents and amendments thereto.
"SEC" means the Securities and Exchange Commission.
"Securities Act" means the Securities Act of 1933, as amended.
"Series A Notes" means the 14.26% Series A Senior Notes due 2009 of
Newcup issued pursuant to the Note Purchase Agreement, as amended, modified or
supplemented from time to time in accordance with the terms thereof.
"Series B Notes" means the 14.26% Series B Senior Notes due 2009
issued by Newcup pursuant to the Note Purchase Agreement as amended, modified or
supplemented from time to time, in accordance with the terms thereof.
"Solvent" means, with respect to any Person on a particular date,
that on such date, (a) the fair saleable value of the assets of such Person
exceeds its probable liability on its debts as they become absolute and mature;
(b) such Person is able to pay its debts or liabilities as such debts and
liabilities mature; and (c) such Person is not engaged in a business or
transaction, and is not about to engage in a business or transaction, for which
such Person's assets would constitute an unreasonably small capital.
"Subordinated Indebtedness" means any Indebtedness of the Company
that is expressly subordinated in right of payment to the Notes or the Company's
Guarantee of the Obligations evidenced by the Notes and the Note Purchase
Documents.
"Subsidiary" means, with respect to any Person, (i) any corporation,
association or other business entity of which more than 50% of the total voting
power of shares of Capital Stock entitled (without regard to the occurrence of
any contingency) to vote in the election of directors, managers or trustees
thereof is at the time owned or controlled, directly or indirectly, by such
22
Person or one or more of the other Subsidiaries of that Person (or a combination
thereof) and (ii) any partnership (a) the sole general partner or the managing
general partner of which is such Person or a Subsidiary of such Person or (b)
the only general partners of which are such Person or one or more Subsidiaries
of such Person (or any combination thereof.
"Supplemental Indenture" means that certain First Supplemental
Indenture dated as of January 25, 2002, between the Company and The Bank of New
York, as trustee, relating to the Discount Notes and the Indenture, dated as of
March 12, 1998, pursuant to which the Discount Notes were issued, the form of
which is attached as Exhibit C to the Note Purchase Agreement.
"Surplus Real Estate" means Sweetheart's properties located in
▇▇▇▇▇▇▇▇▇▇▇, Massachusetts, and Springfield, Missouri.
"Sweetheart" means Sweetheart Holdings, Inc., a Delaware
corporation, and its successors.
"Sweetheart Cup" means Sweetheart Cup Company Inc., a Delaware
corporation, and its successors.
"Tax Sharing Agreement" means that certain Tax Sharing Agreement,
dated as of March 12, 1998, by and among the Company and ▇▇▇▇▇.
"TCW/Crescent Investors" means, collectively, TCW/Crescent Mezzanine
Partners III, L.P., a Delaware limited partnership and TCW/Crescent Mezzanine
Trust III, a Delaware business trust, TCW/Crescent Mezzanine Netherlands III,
L.P., any of their Affiliates or any Holder for whom Trust Company of the West
or any Affiliate of Trust Company of the West acts as an account manager (each
individually a "TCW/Crescent Investor").
"Transactions" means the sale and issuance of the Notes, the
purchase by Newcup of the Discount Notes, the execution and delivery of the Note
Purchase Documents, the Company Guarantee Documents and any other documents or
agreements related thereto, the execution and delivery of the Supplemental
Indenture with respect to the Discount Notes and the release of the collateral
for such Indebtedness in accordance with the terms thereof and the amendment of
the Company's Organizational Documents, and the payment of all fees, costs and
expenses associated with all of the foregoing.
"Unrestricted Subsidiary" means (i) until such time as they may be
designated as a Restricted Subsidiary in the manner provided below, CEG and (ii)
any Subsidiary (other than ▇▇▇▇▇, Sweetheart or Sweetheart Cup) that is
designated by the Board of Directors as an Unrestricted Subsidiary pursuant to a
Board Resolution; but only to the extent that such Subsidiary: (a) has no
Indebtedness other than Non-Recourse Debt; (b) is not party to any agreement,
contract, arrangement or understanding with the Company or any Restricted
Subsidiary of the Company unless the terms of any such agreement, contract,
arrangement or understanding are no less favorable to the Company or such
Restricted Subsidiary
23
than those that might be obtained at the time from Persons who are not
Affiliates of the Company; (c) is a Person with respect to which neither the
Company nor any of its Restricted Subsidiaries has any direct or indirect
obligation (x) to subscribe for additional Equity Interests or (y) to maintain
or preserve such Person's financial condition or to cause such Person to achieve
any specified levels of operating results, (d) has not guaranteed or otherwise
directly or indirectly provided credit support for any Indebtedness of the
Company or any of its Restricted Subsidiaries; and (e) has at least one director
on its board of directors who is not a director or executive officer of the
Company or any of its Restricted Subsidiaries. Any such designation by the Board
of Directors shall be evidenced to the Collateral Agent by filing with the
Collateral Agent a certified copy of the Board Resolution giving effect to such
designation and an Officers' Certificate certifying that such designation
complied with the foregoing conditions and was permitted by Section 4.07 hereof.
If, at any time, any Unrestricted Subsidiary would fail to meet the foregoing
requirements as an Unrestricted Subsidiary, it shall thereafter cease to be an
Unrestricted Subsidiary for purposes of this Indenture and any Indebtedness of
such Subsidiary shall be deemed to be incurred by a Restricted Subsidiary of the
Company as of such date (and, if such Indebtedness is not permitted to be
incurred as of such date under the covenant described under Section 4.09 hereof,
the Company shall be in default of such covenant). The Board of Directors of the
Company may at any time designate any Unrestricted Subsidiary to be a Restricted
Subsidiary; provided that such designation shall be deemed to be an incurrence
of Indebtedness by a Restricted Subsidiary of the Company of any outstanding
Indebtedness of such Unrestricted Subsidiary and such designation shall only be
permitted if (i) such Indebtedness is permitted under Section 4.09 hereof
calculated on a pro forma basis as if such designation had occurred at the
beginning of the four-quarter reference period, and (ii) no Default or Event of
Default would be in existence following such designation.
"Voting Stock" of any Person as of any date means the Equity
Interests of such Person that is at the time entitled to vote in the election of
the Board of Directors of such Person.
"Warrant Agreement" means the Warrant Agreement, dated as of the
Guaranty Date, by and between the Company and the Purchaser and substantially in
the form attached as Exhibit C hereto, as such agreement may be amended,
modified or supplemented from time to time, in accordance with the terms
thereof.
"Warrants" means the warrants to purchase Class C Common Stock of
the Company issued by the Company pursuant to the Warrant Agreement.
"Weighted Average Life to Maturity" means, when applied to any
Indebtedness at any date, the number of years obtained by dividing (i) the sum
of the product obtained by multiplying (a) the amount of each then remaining
installment, sinking fund, serial maturity or other required payments of
principal, including payment at final maturity, in respect thereof, by (b) the
number of years (calculated to the nearest one-twelfth) that will elapse between
such date and the making of such payment, by (ii) the then outstanding principal
amount of such Indebtedness.
24
"Wholly Owned Restricted Subsidiary" of any Person means a
Restricted Subsidiary of such Person all of the outstanding Capital Stock of
which (other than directors' qualifying shares) shall at the time be owned by
such Person or by one or more Wholly Owned Restricted Subsidiaries of such
Person.
SECTION 2.02 Other Definitions.
Defined in
Term Section
---- -------
"Affiliate Transaction" 4.11
"Asset Proceeds Deficiency" 4.10
"Asset Sale Offer" 4.10
"Asset Sale Offer Price" 4.10
"Company's Subsidiaries" 6.01
"Equity Realization Offer" 4.15
"Equity Realization Offer Price" 4.15
"Equity Realization Payment" 4.15
"Equity Realization Payment Date" 4.15
"Excess Proceeds" 4.10
"Excess Proceeds Offer Triggering Event" 4.10
"Event of Default" 9.01
"▇▇▇▇▇ Option Agreement" 3.02
"Guarantor Option Agreement 3.03
"incur" 4.09
"Indemnitee[s]" 8.02
"Inspectors" 4.21
"Laws" 6.11
"New Sweetheart Indenture" 4.26
"Offered Price" 4.10
"Option Agreement" 3.02
"Other Indebtedness" 4.10
"Other Indebtedness Amount" 4.10
"Pari Passu Offer" 4.10
"Payment Amount" 4.10
"Permitted Debt" 4.09
"Proceedings" 6.09
"Projections" 6.03
"Restricted Payments" 4.07
"Supplemental Data" 6.03
"Transaction Agreements" 8.01
25
SECTION 2.03 Rules Of Construction.
Unless the context otherwise requires:
(1) a term has the meaning assigned to it;
(2) an accounting term not otherwise defined has the meaning
assigned to it in accordance with GAAP;
(3) "or" is not exclusive;
(4) words in the singular include the plural, and in the plural
include the singular;
(5) provisions apply to successive events and transactions; and
(6) the words "including," "includes" and "include" shall be
deemed to be followed by the words "without limitation";
(7) "herein," "hereof," and "hereunder" and other words of similar
import refer to this Agreement as a whole and not to any
particular Section or other subdivision hereof; and
(8) references to sections of or rules under the Securities Act
shall be deemed to include substitute, replacement of
successor sections or rules adopted by the SEC from time to
time.
ARTICLE THREE
OTHER AGREEMENTS
SECTION 3.01 Warrants.
On the Guaranty Date, the Company shall execute and deliver the
Warrant Agreement and issue to the Purchaser Warrants representing the right to
purchase upon exercise an aggregate of 76,082 shares (subject to adjustment) of
the Class C Common Stock of the Company.
SECTION 3.02 Option Agreement.
On the Guaranty Date, the Company shall execute and deliver an
Option Agreement, in substantially the form attached hereto as Exhibit D,
granting to the Purchaser the right, subject to certain terms and conditions
including the condition that the amounts due under the Series A Notes shall have
been accelerated as a result of an Event of Default (as defined in the Note
Purchase Agreement) of the type described under Sections 4.1(a)(1) or 4.1(a)(2)
of the Note Purchase Agreement, to purchase upon exercise 49% of the Capital
Stock, on a fully diluted
26
basis, of ▇▇▇▇▇, 49% of the Voting Stock, on a fully diluted basis, of
Sweetheart and 49% of the Capital Stock, on a fully diluted basis, of Sweetheart
(the "Option Agreement").
SECTION 3.03 Cancellation of Notes and Purchase of Newcup.
Subject to Section 1.08 and Section 1.18 hereof, in the event the
Company is required to pay under its Guarantee of the Notes, upon payment and
satisfaction by the Company of all of its Obligations under its Guarantee and
provided such payment and satisfaction results in the payment in full of all of
the outstanding principal balance of, premium, if any, and all accrued but
unpaid interest on the Notes and all other Obligations evidenced by the other
Note Purchase Documents, (i) the Notes shall be cancelled, (ii) the Collateral
securing the Notes shall be released and (iii) the Company may exercise the
option to purchase the Capital Stock of Newcup granted pursuant to that certain
Option Agreement dated January 26, 2002, by and between Cupcorp, Inc. and the
Company, as amended, modified or supplemented in accordance with the terms
thereof (the "Guarantor Option Agreement").
SECTION 3.04 Capital Contribution to Newcup. On or prior to the Guaranty
Date, Purchaser shall provide to the Company, evidence reasonably satisfactory
to the Company, that Newcup has received a cash equity contribution of at least
$1,000,000.
ARTICLE FOUR
COVENANTS
SECTION 4.01 Reserved
SECTION 4.02 Reserved.
SECTION 4.03 Reports.
(a) The Company will maintain, and will cause each of its Restricted
Subsidiaries to maintain, a system of accounting established and administered in
accordance with sound business practices to permit preparation of financial
statements in conformity with GAAP. The Company will deliver to each Holder the
financial statements and other reports described below:
(i) Monthly Financials. As soon as available and in any event
within thirty (30) days after the end of each month ending after the Guaranty
Date, the Company will deliver, or cause to be delivered, the unaudited
consolidated balance sheets of Sweetheart and their Restricted Subsidiaries as
at the end of such month and the related consolidated statements of income and
stockholders' equity and cash flows for such month and in each case for the
period from the beginning of the then current fiscal year to the end of such
month, setting forth in each case in comparative form the corresponding figures
for the corresponding periods of the previous fiscal year and the corresponding
figures from the budget for the current fiscal year delivered pursuant to
Sections 4.03(a)(v) and 4.03(b) hereof, all in reasonable detail and certified
by the
27
chief financial officer of each of ▇▇▇▇▇ and Sweetheart that they fairly present
in all material respects the financial condition of each of ▇▇▇▇▇ and Sweetheart
and their Restricted Subsidiaries as at the dates indicated and the results of
their operations and their cash flows for the periods indicated, subject to
changes resulting from audit and normal year-end adjustments.
(ii) Quarterly Financials. As soon as available and in any
event within forty-five (45) days after the end of each fiscal quarter of the
Company ending after the Guaranty Date, the Company will deliver, or cause to be
delivered, the unaudited consolidated balance sheets of Sweetheart and their
Restricted Subsidiaries as at the end of such fiscal quarter and the related
consolidated statements of income and stockholders' equity and cash flows for
such fiscal quarter and in each case for the period from the beginning of the
then current fiscal year to the end of such fiscal quarter, setting forth in
each case in comparative form the corresponding figures for the corresponding
periods of the previous fiscal year and the corresponding figures from the
budget for the current fiscal year delivered pursuant to Sections 4.03(a)(v) and
4.03(b) hereof, all in reasonable detail and certified by the chief financial
officer of each of ▇▇▇▇▇ and Sweetheart that they fairly present in all material
respects the financial condition of each of ▇▇▇▇▇ and Sweetheart and their
Restricted Subsidiaries as at the dates indicated and the results of their
operations and their cash flows for the periods indicated, subject to changes
resulting from audit and normal year-end adjustments.
(iii) Year-End Financials. As soon as available and in any
event within ninety (90) days after the end of each fiscal year the Company will
deliver: (A) the consolidated balance sheet of the Company and its Restricted
Subsidiaries as at the end of such year and the related consolidated statements
of income, stockholders' equity and cash flows of the Company and its Restricted
Subsidiaries for such fiscal year, setting forth in each case in comparative
form the corresponding figures for the previous fiscal year and the
corresponding figures from the consolidated plan and budget delivered pursuant
to Section 4.03(a)(v) hereof for the fiscal year covered by such financial
statements, all in reasonable detail and certified by the chief financial
officer of the Company that they fairly present in all material respects the
financial condition of the Company and its Restricted Subsidiaries as at the
dates indicated and the results of their operations and their cash flows for the
periods indicated and (B) in the case of such consolidated financial statements,
a report thereon of Deloitte & Touche LLP or other independent certified public
accountants of recognized national standing selected by the Company, which
report shall be unqualified, shall express no doubts about the ability of the
Company and its Restricted Subsidiaries to continue as a going concern, and
shall state that such consolidated financial statements fairly present in all
material respects the consolidated financial position of the Company and its
Restricted Subsidiaries as of the dates indicated and the results of their
operations, stockholders' equity and their cash flows for the periods indicated
in conformity with GAAP applied on a basis consistent with prior years (except
as otherwise disclosed in such financial statements) and that the examination by
such accountants in connection with such consolidated financial statements has
been made in accordance with GAAP.
(iv) Promptly upon receipt thereof, copies of all reports
submitted to the management of the Company by independent public accountants,
whether in connection with each annual, interim or special audit of the
consolidated financial statements of the Company
28
made by such accountants or otherwise, including the management letter submitted
by such accountants to management in connection with their annual audit.
(v) As soon as available and in any event thirty (30) days
prior to the end of each fiscal year, the plan and budget for the Company and
its Restricted Subsidiaries for the succeeding fiscal year.
(b) Each financial statement delivered pursuant to subsections
(a)(i), (ii) and (iii) of this Section 4.03 shall be in a form reasonably
acceptable to the Collateral Agent and shall be accompanied by any narrative
report included with such financial statements describing the operations of the
Company and its Subsidiaries in the form prepared for presentation to senior
management.
SECTION 4.04 Compliance Certificate.
(a) The Company shall deliver to the Holders, within 45 days after
the end of each fiscal quarter and within 90 days after the end of each fiscal
year, an Officers' Certificate stating that a review of the activities of the
Company and its Subsidiaries during the preceding fiscal quarter or fiscal year
has been made under the supervision of the signing Officers with a view to
determining whether the Company has kept, observed, performed and fulfilled its
obligations under this Agreement, and further stating, as to each such Officer
signing such certificate, whether to the best of his or her knowledge the
Company has kept, observed, performed and fulfilled each and every covenant
contained in this Agreement and whether any Default or Event of Default shall
have occurred under this Agreement or the other Company Guarantee Documents
(and, if such a Default or Event of Default shall have occurred, describing all
such Defaults or Events of Default of which he or she may have knowledge and
what action the Company is taking or proposes to take with respect thereto) and
that to the best of his or her knowledge no event has occurred and remains in
existence by reason of which payments on account of the Company's Guarantee
under this Agreement is prohibited or if such event has occurred, a description
of the event and what action the Company is taking or proposes to take with
respect thereto.
(b) So long as not contrary to the then current recommendations of
the American Institute of Certified Public Accountants, the year-end financial
statements delivered pursuant to Section 4.03(a) above shall be accompanied by a
written statement of the Company's independent public accountants (who shall be
a firm of established national reputation) that in making the examination
necessary for certification of such financial statements, nothing has come to
their attention that would lead them to believe that the Company has violated
any provisions of Article Four or Article Five hereof or, if any such violation
has occurred, specifying the nature and period of existence thereof, it being
understood that such accountants shall not be liable directly or indirectly to
any Person for any failure to obtain knowledge of any such violation.
(c) The Company shall, so long as any of the Notes are outstanding,
deliver to the Collateral Agent, forthwith upon any Officer becoming aware of
any Default or Event of
29
Default arising as a result of the Company's failure to perform or comply with
the terms and provisions of this Agreement or the other Company Guarantee
Documents, an Officers' Certificate specifying such Default or Event of Default
and what action the Company is taking or proposes to take with respect thereto.
SECTION 4.05 Taxes.
The Company shall pay, and shall cause each of its Subsidiaries to
pay, prior to delinquency, all material taxes, assessments, and governmental
levies except such as are contested in good faith and by appropriate
proceedings.
SECTION 4.06 Stay, Extension And Usury Laws.
The Company covenants (to the extent that it may lawfully do so)
that it shall not at any time insist upon, plead, or in any manner whatsoever
claim or take the benefit or advantage of, any stay, extension or usury law
wherever enacted, now or at any time hereafter in force, that may affect the
covenants or the performance of this Agreement, the Notes or the Company
Guarantee Documents; and the Company (to the extent that it may lawfully do so)
hereby expressly waives all benefit or advantage of any such law, and covenants
that it shall not, by resort to any such law, hinder, delay or impede the
execution of any power herein granted to the Collateral Agent or the Holders,
but shall suffer and permit the execution of every such power as though no such
law has been enacted.
SECTION 4.07 Restricted Payments.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly: (i) declare or pay any dividend or make
any other payment or distribution on account of the Company's or any of its
Restricted Subsidiaries' Equity Interests (including, without limitation, any
payment in connection with any merger or consolidation involving the Company or
any of its Restricted Subsidiaries) or to the direct or indirect holders of the
Company's or any of its Restricted Subsidiaries' Equity Interests in their
capacity as such (other than dividends or distributions payable in Equity
Interests (other than Disqualified Stock) of the Company or to the Company or
any Restricted Subsidiary of the Company); (ii) purchase, redeem or otherwise
acquire or retire for value (including, without limitation, in connection with
any merger or consolidation involving the Company) any Equity Interests of the
Company or any direct or indirect parent of the Company or other Affiliate of
the Company (other than the purchase, redemption, acquisition or retirement for
value by any Restricted Subsidiary of the Company of any such Equity Interests
owned by the Company or any other Restricted Subsidiary of the Company); (iii)
make any principal payment on or with respect to, or purchase, redeem, defease
or otherwise acquire or retire for value any Indebtedness that is subordinated
to the Company's Guarantee under this Agreement; or (iv) make any Restricted
Investment (all such payments and other actions set forth in clauses (i) through
(iv) above being collectively referred to as "Restricted Payments"), unless such
Restricted Payment is being made by a Restricted Subsidiary of the Company, and
at the time of and after giving effect to such Restricted Payment:
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(a) no Default or Event of Default shall have occurred and be
continuing or would occur as a consequence thereof;
(b) the Restricted Subsidiaries of the Company would, on a
consolidated basis and, at the time of such Restricted Payment and after giving
pro forma effect thereto as if such Restricted Payment had been made at the
beginning of the applicable four-quarter period, have been permitted to incur at
least $1.00 of additional Indebtedness pursuant to the Fixed Charge Coverage
Ratio test set forth in the first paragraph of Section 4.09 hereof; and
(c) such Restricted Payment, together with the aggregate amount of
all other Restricted Payments made by the Restricted Subsidiaries of the Company
after the Guaranty Date (excluding Restricted Payments permitted by clauses (i)
and (iv) of the next succeeding paragraph), is less than the sum, without
duplication, of (i) 50% of the Consolidated Net Income of the Restricted
Subsidiaries of the Company for the period (taken as one accounting period) from
the beginning of the fiscal quarter commencing September 27, 1999 to the end of
the Company's most recently ended fiscal quarter for which internal financial
statements are available at the time of such Restricted Payment (or, if such
Consolidated Net Income for such period is a deficit, less 100% of such
deficit), plus (ii), without duplication, 100% of the aggregate net cash
proceeds received by the Restricted Subsidiaries from the Company since the
Guaranty Date as a contribution to its common equity capital or from the issue
or sale of Equity Interests of the Restricted Subsidiaries to the Company (other
than Disqualified Stock) or from the issue or sale of Disqualified Stock or debt
securities of the Restricted Subsidiaries to the Company that have been
converted into such Equity Interests (other than Equity Interests (or
Disqualified Stock or convertible debt securities) sold to a Restricted
Subsidiary to the Company), plus (iii) to the extent that any Restricted
Investment that was made after the Guaranty Date is sold for cash or otherwise
liquidated or repaid for cash, 100% of the net cash proceeds thereof (less the
cost of disposition, if any), but only to the extent not included in subclause
(i) of this clause (c).
Compliance by the Company and its Restricted Subsidiaries with the
foregoing clauses (b) and (c) of this Section 4.07 and the Fixed Charge Coverage
Test set forth in the first paragraph of Section 4.09 hereof shall be determined
on a consolidated basis for all Restricted Subsidiaries of the Company taken as
a whole regardless of whether the Restricted Payment is to be made by less than
all such Restricted Subsidiaries.
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The foregoing provisions shall not prohibit:
(i) so long as no Default or Event of Default shall have
occurred and be continuing immediately after such transaction, the redemption,
repurchase, retirement, defeasance or other acquisition of any Equity Interests
of the Company in exchange for, or out of the net cash proceeds of the
substantially concurrent sale (other than to a Restricted Subsidiary of the
Company) of, other Equity Interests of the Company (other than any Disqualified
Stock); provided that the amount of any such net cash proceeds that are utilized
for any such redemption, repurchase, retirement, defeasance or other acquisition
shall be excluded from clause (c) of the preceding paragraph and provided,
further, that such repurchase, redemption or other acquisition or retirement may
not include any Equity Interests owned, directly or indirectly, by the
Principals;
(ii) Restricted Payments required under the terms of the
Management Services Agreement and the Tax Sharing Agreement, each as in effect
on the date hereof or as subsequently amended, modified or supplemented from
time to time with the prior written consent of the Majority Holders;
(iii) the payment of any dividend by a Restricted
Subsidiary of the Company to the holders of its Equity Interests on a pro
rata basis;
(iv) so long as no Default or Event of Default shall have
occurred and be continuing immediately after such transaction, the repurchase,
redemption or other acquisition or retirement for value of any Equity Interests
of the Company held by any member of the Company's (or any of its Restricted
Subsidiaries') management; provided that the aggregate price paid for all such
repurchased, redeemed, acquired or retired Equity Interests shall not exceed
$2.0 million during any fiscal year ending after September 24, 2000, plus the
aggregate cash proceeds received by the Company during such fiscal year, from
any issuance of Equity Interests or securities by the Company to members of
management of the Company (or any of its Restricted Subsidiaries) and to the
extent the Company does not utilize the amount permitted in a particular fiscal
year, such unutilized amount shall be added to the amount available in the
following fiscal year (provided that such proceeds are excluded from clause (c)
of the preceding paragraph; and provided, further, that such repurchase,
redemption or other acquisition or retirement may not include any Equity
Interests owned, directly or indirectly, by the Principals); and
(v) other Restricted Payments by any Restricted Subsidiary of
the Company in an aggregate amount not to exceed $5.0 million.
The Board of Directors may designate any Restricted Subsidiary
(other than ▇▇▇▇▇, Sweetheart or Sweetheart Cup or any successor thereof) to be
an Unrestricted Subsidiary if such designation would not cause a Default. For
purposes of making such determination, all outstanding Investments by the
Company and its Restricted Subsidiaries (except to the extent repaid in cash) in
the Subsidiary so designated shall be deemed to be Restricted Payments at the
time of such designation and shall reduce the amount available for Restricted
Payments under the first paragraph of this Section 4.07. All such outstanding
Investments shall be deemed to
32
constitute Investments in an amount equal to the greatest of (i) the net book
value of such Investments at the time of such designation, (ii) the fair market
value of such Investments at the time of such designation and (iii) the original
fair market value of such Investments at the time they were made. Such
designation shall only be permitted if such Restricted Payment would be
permitted at such time and if such Restricted Subsidiary otherwise meets the
definition of an Unrestricted Subsidiary.
The amount of all Restricted Payments (other than cash) shall be the
fair market value on the date of the Restricted Payment of the asset(s) or
securities proposed to be transferred or issued by the Company or such
Restricted Subsidiary, as the case may be, pursuant to the Restricted Payment.
The fair market value of any non-cash Restricted Payment shall be determined by
the Board of Directors whose resolution with respect thereto shall be delivered
to the Holders, such determination to be based upon an opinion or appraisal
issued by an accounting, appraisal or investment banking firm of national
standing if such fair market value exceeds $3.0 million. Not later than the date
of making any Restricted Payment, the Company shall deliver to the Collateral
Agent an Officers' Certificate stating that such Restricted Payment is permitted
and setting forth the basis upon which the calculations required by this Section
4.07 were computed, together with a copy of any fairness opinion or appraisal
required by this Agreement.
SECTION 4.08 Dividend And Other Payment Restrictions Affecting
Subsidiaries.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create or otherwise cause or suffer to
exist or become effective any encumbrance or restriction on the ability of any
Restricted Subsidiary to (i)(a) pay dividends or make any other distributions to
the Company or any of its Restricted Subsidiaries (1) on its Capital Stock or
(2) with respect to any other interest or participation in, or measured by, its
profits, or (b) pay any Indebtedness owed to the Company or any of its
Restricted Subsidiaries, (ii) make loans or advances to the Company or any of
its Restricted Subsidiaries or (iii) transfer any of its properties or assets to
the Company or any of its Restricted Subsidiaries. However, the foregoing
restrictions shall not apply to encumbrances or restrictions existing under or
by reason of (a) Existing Indebtedness as in effect on the Guaranty Date and any
amendments, modifications, restatements, renewals, increases, supplements,
refundings, replacements or refinancings thereof, provided that such amendments,
modifications, restatements, renewals, increases, supplements, refundings,
replacement or refinancings are no more restrictive, taken as a whole, with
respect to such dividend and other payment restrictions than those as in effect
on the Guaranty Date, (b) this Agreement, (c) applicable law, (d) any instrument
governing Indebtedness or Capital Stock of a Person acquired by the Company or
any of its Restricted Subsidiaries as in effect at the time of such acquisition
(except to the extent such Indebtedness was incurred in connection with or in
contemplation of such acquisition), which encumbrance or restriction is not
applicable to any Person, or the properties or assets of any Person, other than
the Person, or the property or assets of the Person, so acquired, provided that,
in the case of Indebtedness, such Indebtedness was permitted by the terms of
this Agreement to be incurred, (e) customary non-assignment provisions in leases
entered into in the ordinary course of business and consistent with past
practices, (f) purchase money obligations for property acquired in the
33
ordinary course of business that impose restrictions of the nature described in
clause (c) above on the property so acquired, (g) restrictions relating to a
Restricted Subsidiary formed for the sole purpose of engaging in accounts
receivable financing, (h) any agreement for the sale of a Restricted Subsidiary
that restricts distributions by that Restricted Subsidiary pending its sale, (i)
Permitted Refinancing Indebtedness, provided that the restrictions contained in
the agreements governing such Permitted Refinancing Indebtedness are no more
restrictive, taken as a whole, than those contained in the agreements governing
the Indebtedness being refinanced and (j) secured Indebtedness otherwise
permitted to be incurred pursuant to the provisions of Section 4.12 that limits
the right of the debtor to dispose of the assets securing such Indebtedness.
SECTION 4.09 Incurrence Of Indebtedness And Issuance Of Preferred Stock.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, issue, assume, guarantee
or otherwise become directly or indirectly liable, contingently or otherwise,
with respect to (collectively, "incur") any Indebtedness (including Acquired
Debt) and the Company shall not permit any of its Restricted Subsidiaries to
issue any shares of preferred stock; provided, however, that so long as no
Default or Event of Default has occurred or is continuing, the Restricted
Subsidiaries of the Company may incur Indebtedness (including Acquired Debt) if
the Fixed Charge Coverage Ratio for such Restricted Subsidiaries' most recently
ended four full fiscal quarters for which internal financial statements are
available immediately preceding the date on which such additional Indebtedness
is incurred would have been at least 2.0 to 1, determined on a pro forma and
consolidated basis (including a pro forma application of the net proceeds
therefrom), as if the additional Indebtedness had been incurred at the beginning
of such four-quarter period.
Compliance by the Company and its Restricted Subsidiaries with the
Fixed Charge Coverage Test set forth in the first paragraph of this Section 4.09
hereof shall be determined on a consolidated basis for all Restricted
Subsidiaries of the Company taken as a whole regardless of whether the
Indebtedness is to be incurred by less than all such Restricted Subsidiaries.
The provisions of the first paragraph of this covenant shall not
apply to the incurrence of any of the following items of Indebtedness
(collectively, "Permitted Debt"):
(i) the incurrence by the Restricted Subsidiaries of the
Company of Indebtedness under Credit Facilities in aggregate principal amount
not to exceed the greater of (x) 65% of inventory plus 85% of accounts
receivable of the Company and its Wholly Owned Subsidiaries (in each case as
determined in accordance with GAAP, but excluding accounts receivable that are
past due more than 60 days), and (y) $215.0 million at any one time outstanding,
less any Net Proceeds of Asset Sales applied to permanently reduce any such
Indebtedness pursuant to Section 4.10 hereof;
(ii) the incurrence by the Company and its Restricted
Subsidiaries of the Existing Indebtedness;
34
(iii) the incurrence by Lily Cup of Indebtedness under Credit
Facilities not to exceed the greater of (x) 65% of inventory plus 85% of
accounts receivables plus 75% of the fair market value of the plant, property
and equipment of Lily Cup (as determined in accordance with GAAP), and (y) Cn
$30.0 million at any time outstanding and that is without recourse to the
Company or any of its Restricted Subsidiaries or any of their respective assets
(other than Lily Cup and its assets) and is not guaranteed by any such Person;
(iv) the incurrence by the Company of Indebtedness
represented by the Company's Guarantee of the Obligations evidenced by the
Notes and the Company Guarantee Documents;
(v) the incurrence by any of the Restricted Subsidiaries of
the Company of Indebtedness represented by Capital Lease Obligations, mortgage
financings or purchase money obligations, in each case incurred for the purpose
of financing all or any part of the purchase price or cost of construction or
improvement of property, plant or equipment used in the business of such
Restricted Subsidiary, in an aggregate principal amount not to exceed $5.0
million at any time outstanding;
(vi) the incurrence by any of the Restricted Subsidiaries of
the Company of Indebtedness in connection with the acquisition of assets or a
new Restricted Subsidiary; provided that such Indebtedness was incurred by the
prior owner of such assets or such Restricted Subsidiary prior to such
acquisition by one of the Restricted Subsidiaries of the Company and was not
incurred in connection with, or in contemplation of, such acquisition by one of
the Restricted Subsidiaries of the Company; and provided further that the
principal amount (or accreted value, as applicable) of such Indebtedness,
together with any other outstanding Indebtedness incurred pursuant to this
clause (vi) and any Permitted Refinancing Indebtedness incurred to refund,
refinance or replace any Indebtedness incurred pursuant to this clause (vi),
does not exceed $5.0 million;
(vii) the incurrence by the Company or any of its Restricted
Subsidiaries of Permitted Refinancing Indebtedness in exchange for, or the net
proceeds of which are used to refund, refinance or replace Indebtedness (other
than intercompany Indebtedness) that was permitted by this Agreement to be
incurred under the first paragraph hereof or clauses (ii), (iv), (v) or (vi) of
this paragraph;
(viii) the incurrence by the Company or any of its Restricted
Subsidiaries of intercompany Indebtedness between or among the Company and any
of its Restricted Subsidiaries (other than any Indebtedness of the Company or
any of its Restricted Subsidiaries owing to Lily Cup), in each case subject to
no Lien held by any Person other than the Company or a Restricted Subsidiary
(other than Liens securing intercompany notes pledged under documents governing
Indebtedness incurred pursuant to clause (i) above or under the Pledge
Agreement); provided, however, that (a) any subsequent issuance or transfer of
Equity Interests that results in any such Indebtedness being held by a Person
other than the Company or a Restricted Subsidiary thereof and (b) any sale or
other transfer of any such Indebtedness to a Person that is not either the
Company or a Restricted Subsidiary thereof shall be deemed, in each
35
case, to constitute an incurrence of such Indebtedness by the Company or such
Restricted Subsidiary, as the case may be, that was not permitted by this clause
(viii); provided, further, however that any Indebtedness of the Company to any
Restricted Subsidiary of the Company is unsecured and subordinated, pursuant to
a written agreement, to the Company's Obligations under this Agreement and the
Notes;
(ix) the incurrence by any of the Restricted Subsidiaries of
the Company of Hedging Obligations that are incurred for the purpose of fixing
or hedging interest rate risk with respect of any floating rate Indebtedness
that is permitted by the terms of this Agreement to be outstanding;
(x) the incurrence by the Global Cup Entities of Indebtedness
under Credit Facilities in an aggregate principal amount not to exceed 65% of
inventory plus 85% of accounts receivable of the Global Cup Entities (as
determined in accordance with GAAP);
(xi) the incurrence by any of the Restricted Subsidiaries of
the Company of Indebtedness which is recourse solely to newly acquired property
financed with the incurrence of such Indebtedness in an aggregate principal
amount not to exceed $20.0 million at any time outstanding; and
(xii) the incurrence by any of the Restricted Subsidiaries of
the Company of additional Indebtedness in an aggregate principal amount (or
accreted value, as applicable) not to exceed $25.0 million at any one time
outstanding.
For purposes of determining compliance with this covenant, in the
event that an item of Indebtedness meets the criteria of more than one of the
categories of Permitted Debt described in clauses (i) through (x) above or is
entitled to be incurred pursuant to the first paragraph of this covenant, the
Company shall, in its sole discretion, classify such item of Indebtedness in any
manner that complies with this covenant. Accrual of interest, accretion or
amortization of original issue discount, and the payment of interest on any
Indebtedness in the form of additional Indebtedness with the same terms shall
not be deemed to be an incurrence of Indebtedness for purposes of this Section
4.09; provided, in each such case, that the amount thereof is included in Fixed
Charges of the Company as accrued.
SECTION 4.10 Asset Sales And Events Of Loss.
The Company shall not consummate an Asset Sale without the prior
written consent of the Majority Holders. The Company shall not permit any of its
Restricted Subsidiaries to, consummate an Asset Sale unless (i) such Restricted
Subsidiary receives consideration at the time of such Asset Sale at least equal
to the fair market value (evidenced by a resolution of the Board of Directors
set forth in an Officers' Certificate delivered to the Holders) of the assets or
Equity Interests issued or sold or otherwise disposed of and (ii) at least 75%
of the consideration therefor received by such Restricted Subsidiary is in the
form of cash; provided that the amount of (x) any liabilities (as shown on such
Restricted Subsidiary's most recent balance sheet), of such Restricted
Subsidiary that are assumed by the transferee of any such
36
assets pursuant to a customary novation agreement that releases such Restricted
Subsidiary from further liability and (y) any securities, notes or other
obligations received by such Restricted Subsidiary from such transferee that are
contemporaneously (subject to ordinary settlement periods) converted by such
Restricted Subsidiary into cash (to the extent of the cash received), shall be
deemed to be cash for purposes of this provision.
Within 365 days after any Restricted Subsidiary's receipt of any Net
Proceeds from an Asset Sale, such Restricted Subsidiary may apply such Net
Proceeds (a) to permanently repay (and, in the case of revolving borrowings, to
correspondingly reduce commitments with respect thereto) Indebtedness under any
Credit Facilities or other Indebtedness of any Restricted Subsidiaries of the
Company or other Indebtedness having a Lien on the property that was the subject
of such Asset Sale (but only to the extent such Lien was a Permitted Lien), or
(b) to the acquisition of a majority of the assets of, or a majority of the
Voting Stock of, another Permitted Business, the making of a capital expenditure
or the acquisition of other assets that are used or useful in a Permitted
Business. Pending the final application of any such Net Proceeds, the Company
may temporarily reduce revolving credit borrowings or otherwise invest such Net
Proceeds in any manner that is not prohibited by this Agreement. Any Net
Proceeds from Asset Sales that are not applied or invested as provided or
permitted in the first sentence of this paragraph shall be deemed to constitute
"Excess Proceeds" to the extent that payments, advances, dividends or
distributions by the Restricted Subsidiaries to the Company necessary for the
purchase of the Notes or any portion thereof is not prohibited by the terms of
any Credit Facilities or any other agreement or indenture governing any
Indebtedness for borrowed money of the Restricted Subsidiaries and provided that
all offers to purchase Indebtedness of any Restricted Subsidiaries required by
the terms of the agreements or indentures governing any Indebtedness for
borrowed money of such Restricted Subsidiaries have been made and satisfied in
accordance with the terms thereof. When the aggregate amount of Excess Proceeds
exceeds $1.0 million (an "Excess Proceeds Offer Triggering Event"), the Company
shall be required to make an offer to all Holders of Notes and, to the extent
required by the terms thereof, any other Indebtedness that ranks pari passu with
the Notes (the "Other Indebtedness"), to purchase an aggregate principal amount
of Notes and any such Other Indebtedness equal to the amount of Excess Proceeds
as follows:
(i) (A) The Company shall make an offer to purchase (an "Asset
Sale Offer") from all Holders of the Notes in accordance with the procedures set
forth in the Note Purchase Agreement with respect to the optional redemption of
the Notes the maximum principal amount (expressed as a multiple of $1,000) of
Notes that may be purchased at the applicable Asset Sale Offer Price out of an
amount (the "Payment Amount") equal to the product of such Excess Proceeds
multiplied by a fraction, the numerator of which is the outstanding principal
amount of the Notes and the denominator of which is the sum of the outstanding
principal amount of the Notes and such Other Indebtedness, if any (subject to
proration in the event such amount is less than the aggregate Offered Price (as
defined in clause (ii) below) of all Notes tendered), and (B) to the extent
required by any such Other Indebtedness and provided there is a permanent
reduction in the principal amount of such Other Indebtedness, the Company shall
make an offer to purchase such Other Indebtedness (a "Pari Passu Offer") in an
amount (the
37
"Other Indebtedness Amount") equal to the excess of the Excess Proceeds over the
Payment Amount.
(ii) The "Asset Sale Offer Price" shall mean (A) with respect
to any Asset Sale Offer required to be made during the period commencing on the
Guaranty Date and ending on (and including) December 24, 2006, the amount equal
to the sum of (1) 112.037% of the principal amount of the Notes (exclusive of
deferred interest, if any) tendered pursuant to such Asset Sale Offer, plus (2)
112.037% of the aggregate amount of interest deferred under the Notes tendered
pursuant to such Asset Sale Offer for each PIK Quarter ended prior to the date
on which such Asset Sale Offer is made, (B) with respect to any Asset Sale Offer
required to be made during the period commencing on December 25, 2006, and
ending on (and including) March 31, 2007, the amount equal to the sum of (1)
106.944% of the principal amount of the Notes (exclusive of deferred interest,
if any) tendered pursuant to such Asset Sale Offer, plus (2) 100% of the
aggregate amount of interest deferred under the Notes tendered pursuant to such
Asset Sale Offer for each PIK Quarter ended prior to the date on which such
Asset Sale Offer is made, (C) with respect to any Asset Sale Offer required to
be made during the period commencing on April 1, 2007, and ending on (and
including) October 24, 2008, the amount equal to 106.944% of the principal
amount of the Notes tendered pursuant to such Asset Sale Offer, and (D) with
respect to any Asset Sale Offer required to be made at any time on or after
October 25, 2008, the amount equal to 100% of the principal amount of the Notes
tendered pursuant to such Asset Sale Offer. The purchase price for the Notes
tendered pursuant to an Asset Sale Offer shall be payable in cash in an amount
equal to the applicable Asset Sale Offer Price on the Notes tendered pursuant to
an Asset Sale Offer, plus accrued and unpaid interest on such Notes to the date
such Asset Sale Offer is consummated (the "Offered Price"), in accordance with
procedures set forth in the Note Purchase Agreement with respect to the optional
redemption of the Notes. To the extent that the aggregate Offered Price of the
Notes tendered pursuant to an Asset Sale Offer is less than the Payment Amount
relating thereto or the aggregate amount of the Other Indebtedness that is
purchased or repaid pursuant to the Pari Passu Offer is less than the Other
Indebtedness amount (such shortfall constituting an "Asset Proceeds
Deficiency"), the Company may use such Asset Proceeds Deficiency, or a portion
thereof, for general corporate purposes.
(iii) If the aggregate Offered Price of Notes validly tendered
and not withdrawn by Holders thereof exceeds the Payment Amount, Notes to be
purchased will be selected on a pro rata basis. Upon completion of such Net
Proceeds Offer and Pari Passu Offer, the amount of Excess Proceeds shall be
reset to zero.
SECTION 4.11 Transactions With Affiliates.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, make any payment to, or sell, lease, transfer or otherwise
dispose of any of its properties or assets to, or purchase any property or
assets from, or enter into or make or amend any transaction, contract,
agreement, understanding, loan, advance or guarantee with, or for the benefit
of, any Affiliate (each of the foregoing, an "Affiliate Transaction"), unless
(i) such Affiliate Transaction is on terms that are no less favorable to the
Company or the relevant Restricted Subsidiary than
38
those that would have been obtained in a comparable transaction by the Company
or such Restricted Subsidiary with an unrelated Person and (ii) the Company
delivers to the Collateral Agent (a) with respect to any Affiliate Transaction
or series of related Affiliate Transactions involving aggregate consideration in
excess of $1.0 million, a resolution of the Board of Directors set forth in an
Officers' Certificate certifying that such Affiliate Transaction complies with
clause (i) above and that such Affiliate Transaction has been approved by a
majority of the disinterested members of the Board of Directors and (b) with
respect to any Affiliate Transaction or series of related Affiliate Transactions
involving aggregate consideration in excess of $10.0 million, an opinion as to
the fairness to the Holders of such Affiliate Transaction from a financial point
of view issued by an accounting, appraisal or investment banking firm of
national standing, except with respect to transactions in the ordinary course of
business and consistent with past practice between the Company or any of its
Restricted Subsidiaries and Box USA Holding, Inc. or any of its respective
Subsidiaries; provided that the following shall not be deemed to be Affiliate
Transactions: (1) any transactions pursuant to agreements in effect on the
Guaranty Date or any amendment thereto so long as such amendment is not more
disadvantageous to the Holders in any material respect than the original
agreement as in effect on the Guaranty Date; (2) any employment agreement
entered into by the Company or any of its Restricted Subsidiaries in the
ordinary course of business and consistent with the past practice of the Company
or such Restricted Subsidiary in an amount not to exceed $1.0 million per annum;
(3) transactions between or among the Company and its Restricted Subsidiaries;
(4) Restricted Payments and Permitted Investments that are permitted by the
provisions of this Agreement described in Section 4.07 hereof, and (5)
transactions entered into in connection with the Transactions.
SECTION 4.12 Liens.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, directly or indirectly, create, incur, assume or suffer to
exist any Lien on any asset now owned or hereafter acquired, or any income or
profits therefrom or assign or convey any right to receive income therefrom,
except Permitted Liens.
SECTION 4.13 Line Of Business.
The Company shall not, and shall not permit any Subsidiary to,
engage in any business other than Permitted Businesses, except to such extent as
would not be material to the Company and its Restricted Subsidiaries taken as a
whole.
SECTION 4.14 Corporate Existence.
Subject to Article 5 hereof, the Company shall do or cause to be
done all things necessary to preserve and keep in full force and effect (i) its
corporate existence, and the corporate, partnership or other existence of each
of its Restricted Subsidiaries, in accordance with the respective organizational
documents (as the same may be amended from time to time) of the Company or any
such Restricted Subsidiary and (ii) the rights (charter and statutory), licenses
and franchises of the Company and its Restricted Subsidiaries; provided,
however, that the Company shall not be required to preserve any such right,
license or franchise, or the corporate,
39
partnership or other existence of any of its Restricted Subsidiaries, if the
Board of Directors shall determine that the preservation thereof is no longer
desirable in the conduct of the business of the Company and its Restricted
Subsidiaries, taken as a whole, and that the loss thereof is not adverse in any
material respect to the Holders of the Notes.
SECTION 4.15 Offer To Repurchase Upon An Equity Realization Event.
Upon the occurrence of an Equity Realization Event, the Company
shall be required to make an offer to each Holder of Notes to purchase all
(equal to $1,000 or an integral multiple thereof) of such Holder's Notes
pursuant to the offer described below (the "Equity Realization Offer") at the
applicable Equity Realization Offer Price, plus accrued and unpaid interest to
the date of purchase (the "Equity Realization Payment"). The "Equity Realization
Offer Price" shall mean (A) with respect to any Equity Realization Offer
required to be made during the period commencing on the Guaranty Date and ending
on (and including) December 24, 2006, the amount equal to the sum of (1)
112.037% of the principal amount of the Notes (exclusive of deferred interest,
if any), plus (2) 112.037% of the aggregate amount of interest deferred under
the Notes for each PIK Quarter ended prior to the date on which such Equity
Realization Offer is made, (B) with respect to any Equity Realization Offer
required to be made during the period commencing on December 25, 2006, and
ending on (and including) March 31, 2007, the amount equal to the sum of (1)
106.944% of the principal amount of the Notes (exclusive of deferred interest,
if any) , plus (2) 100% of the aggregate amount of interest deferred under the
Notes for each PIK Quarter ended prior to the date on which such Equity
Realization Offer is made, (C) with respect to any Equity Realization Offer
required to be made during the period commencing on April 1, 2007, and ending on
(and including) October 24, 2008, the amount equal to 106.944% of the principal
amount of the Notes tendered pursuant to such Equity Realization Offer, and (D)
with respect to any Equity Realization Offer required to be made at any time on
or after October 25, 2008, the amount equal to 100% of the principal amount of
the Notes tendered pursuant to such Equity Realization Offer. If the Company is
required to make an offer to purchase all of the Notes pursuant to the
provisions of this Section 4.15, it shall, by 12:00 noon (New York City time) on
the date of such Equity Realization Event, deposit with the Collateral Agent
money, in same-day funds, sufficient to pay the Equity Realization Payment and
any amount due or to become due with respect to Section 8.01 of the Guaranty
Agreement. The Collateral Agent shall promptly return to the Company any money
deposited with the Collateral Agent by the Company in excess of the amounts
necessary to pay the Equity Realization Payment and any amount due or to become
due with respect to Section 8.01 of the Guaranty Agreement. If the Company
complies with the provisions of this Section 4.15, on and after the date such
Equity Realization Payment is made, whether or not such Notes are presented for
payment, interest shall cease to accrue on the Notes. If a Note is purchased on
or after an interest record date but on or prior to the related interest payment
date, then any accrued and unpaid interest shall be paid to the Person in whose
name such Note was registered at the close of business on such record date. If
any Note required to be purchased shall not be so purchased upon surrender for
purchase because of the failure of the Company to comply with this Section 4.15,
interest shall be paid on the unpaid principal, from
40
the date of such Equity Realization Event until such principal is paid, and to
the extent lawful on any interest not paid on such unpaid principal, in each
case at the rate provided in the Notes.
SECTION 4.16 Limitations On Issuances And Sales Of Capital Stock In Wholly
Owned Restricted Subsidiaries.
The Company (i) shall not, and shall not permit any Wholly Owned
Restricted Subsidiary of the Company to, transfer, convey, sell, lease or
otherwise dispose of any Capital Stock in any Wholly Owned Restricted Subsidiary
of the Company to any Person (other than the Company or a Wholly Owned
Restricted Subsidiary of the Company), unless (a) such transfer, conveyance,
sale, lease or other disposition is of all the Capital Stock in such Wholly
Owned Restricted Subsidiary and (b) the cash Net Proceeds from such transfer,
conveyance, sale, lease or other disposition are applied in accordance with
Section 4.10 hereof or Section 4.15 hereof, as the case may be, and (ii) shall
not permit any Wholly Owned Restricted Subsidiary of the Company or Sweetheart
to issue any of its Equity Interests (other than, if necessary, shares of its
Capital Stock constituting directors' qualifying shares) to any Person other
than to the Company or a Wholly Owned Restricted Subsidiary of the Company.
SECTION 4.17 Limitation On Issuances Of Guarantees Of Indebtedness.
The Company shall not permit any Restricted Subsidiary, directly or
indirectly, to Guarantee or pledge any assets to secure the payment of any other
Indebtedness of the Company, other than any such Indebtedness incurred pursuant
to clauses (i) and (ii) of the definition of Permitted Debt and any Permitted
Refinancing Indebtedness with respect thereto, unless such Restricted Subsidiary
simultaneously executes and delivers a supplemental agreement to this Agreement
providing for the Guarantee of the payment of the Notes by such Restricted
Subsidiary, which Guarantee shall be senior to or pari passu with such
Restricted Subsidiary's Guarantee of or pledge to secure such other
Indebtedness. Notwithstanding the foregoing, any such Guarantee by a Restricted
Subsidiary of the Notes shall provide by its terms that it shall be
automatically and unconditionally released and discharged upon any sale,
exchange or transfer, to any Person not an Affiliate of the Company, of all of
the Company's stock in, or all or substantially all the assets of, such
Restricted Subsidiary, which sale, exchange or transfer is made in compliance
with the applicable provisions of this Agreement.
41
SECTION 4.18 Investment Company Act.
None of the Company nor any of its Subsidiaries shall become an
investment company subject to registration under the Investment Company Act of
1940, as amended.
SECTION 4.19 Insurance.
The Company and each of its Restricted Subsidiaries shall maintain
liability, casualty and other insurance with a reputable insurer or insurers in
such amounts and against such risk as is carried by responsible companies
engaged in similar businesses and owning similar assets.
SECTION 4.20 Compliance with Laws, Maintenance of Licenses.
The Company shall, and shall cause each of its Restricted
Subsidiaries to, comply with all statutes, ordinances, governmental rules and
regulations, judgments, orders and decrees to which any of them is subject, and
maintain, obtain and keep in effect all licenses, permits, franchises and other
governmental authorizations necessary to the ownership or operation of their
respective properties or the conduct of their respective businesses, except to
the extent that the failure to so comply or maintain, obtain and keep in effect
could not, singly or in the aggregate, reasonably be expected to have a Material
Adverse Effect.
SECTION 4.21 Inspection of Properties and Records.
The Company agrees to allow, and to cause each of its Restricted
Subsidiaries to allow, the TCW/Crescent Investors as a group so long as any
TCW/Crescent Investor is a Holder, and each Holder (other than the Purchaser)
of, together with its Affiliates as a group, at least $15,000,000 in aggregate
principal amount of the Notes or, in the event there is no Holder of at least
$15,000,000 in aggregate principal amount of the Notes, the TCW/Crescent
Investors (so long as any TCW/Crescent Investor is a Holder) and the Holder
(other than the Purchaser) who holds the greatest aggregate principal amount of
the Notes (and so long as a Default or an Event of Default has occurred and is
continuing, the TCW/Crescent Investors (so long as any TCW/Crescent Investor is
a Holder) and each Holder (other than the Purchaser) (or, in each case, such
Persons as any of them may designate) (individually and collectively,
"Inspectors"), (i) to visit and inspect any of the properties of the Company or
any of its Restricted Subsidiaries, (ii) to examine all their books of account,
records, reports and other papers and to make copies and extracts therefrom,
(iii) to discuss their respective affairs, finances and accounts with their
respective officers and employees, and (iv) to discuss the financial condition
of the Company and its Subsidiaries with their independent accountants upon
reasonable notice to the Company of its intention to do so and so long as the
Company shall be given the reasonable opportunity to participate in such
discussions (and by this provision the Company authorizes said accountants to
have such discussions with the Inspectors). All such visits, examinations and
discussions set forth in the preceding sentence shall be at such reasonable
times and upon reasonable notice and as often as may be reasonably requested;
provided that unless a Default or an Event of Default shall have occurred and be
continuing such visits shall be limited to 1 per quarter. If a Default or
42
an Event of Default shall have occurred and be continuing, the Company shall pay
or reimburse all Inspectors for expenses which such Inspectors may reasonably
incur in connection with any such visitations or inspections.
SECTION 4.22 Board of Directors Observation Rights.
The TCW/Crescent Investors as a group so long as any TCW/Crescent
Investor is a Holder and each Holder (other than the Purchaser) of, together
with its Affiliates as a group, at least $15,000,000 in aggregate principal
amount of the Notes, shall have the right to have one representative, who shall
be reasonably acceptable to the Company, present (whether in person or by
telephone) at all meetings of the Board of Directors of the Company, Sweetheart,
Sweetheart Cup and ▇▇▇▇▇; provided that such representative shall not be
entitled to vote at such meetings. The Company shall send to such representative
all of the notices, information and other materials that are distributed to the
directors of the Company, Sweetheart, Sweetheart Cup and ▇▇▇▇▇; provided,
however, that upon the request of such representative, the Company shall refrain
from sending such notices, information and other materials for so long as such
representative shall request. Each Holder having a right to a representative
pursuant to this Section 4.22 shall provide notice to the Company of the
identity and address of, or any change with respect to the identity or address
of, such representative. The Company shall reimburse each such representative
for the reasonable out-of-pocket expenses of such representative incurred in
connection with the attendance at such meetings.
SECTION 4.23 Private Placement Number.
The Company consents to the filing of copies of this Agreement with
Standard & Poor's, a division of ▇▇▇▇▇▇-▇▇▇▇ Companies, Inc., to obtain a
private placement number and with the National Association of Insurance
Commissioners.
SECTION 4.24 Notice of Certain Proceedings.
If the Company or any of its Restricted Subsidiaries is made or
threatened to be made a party to any proceeding that, if determined adversely to
the Company or such Restricted Subsidiary would result, or be likely to result,
in a Material Adverse Effect, then the Company shall promptly deliver to the
Holders a description of such proceedings, indicating the court in which it was
filed, if any, the amount in controversy or other remedies sought and the other
parties thereto.
SECTION 4.25 Opinions of Counsel; Certificates.
(a) The Company shall cause to be delivered to the Purchaser and the
Collateral Agent on the Guaranty Date (i) an Opinion of Counsel dated the
Guaranty Date and addressed to the Purchaser and the Collateral Agent from
▇▇▇▇▇▇ ▇▇▇▇▇, Naftalis & ▇▇▇▇▇▇▇, LLP, counsel for the Company, as to the
matters set forth on Exhibit E, and an Officers' Certificate dated as of the
Guaranty Date and addressed to the Purchaser and the Collateral
43
Agent, certifying that each of the representations and warranties of the Company
set forth in Article Six of this Agreement is true and correct as of the
Guaranty Date.
(b) Upon request by the Purchaser in connection with the closing of
a transaction pursuant to which the Purchaser will transfer the Notes to one or
more Persons (the "Purchaser's Note Sale Transaction"), the Company shall cause
to be delivered to or as directed by the Purchaser, on the date of the Closing
of the Purchaser's Note Sale Transaction (the "Purchaser's Closing Date"), (a)
an Opinion of Counsel dated the Purchaser's Closing Date and addressed to the
Collateral Agent and to each Person to whom Notes will be transferred by the
Purchaser on the Purchaser's Closing Date from ▇▇▇▇▇▇ ▇▇▇▇▇, Naftalis & ▇▇▇▇▇▇▇,
LLP, counsel for the Company, or such other counsel as may be designated by the
Company and reasonably acceptable to the Purchaser and the Collateral Agent, as
to the matters set forth on Exhibit E, and (b) an Officers' Certificate dated as
of the Purchaser's Closing Date and addressed to the Collateral Agent and to
each Person to whom Notes will be transferred by the Purchaser on the
Purchaser's Closing Date, certifying that each of the representations and
warranties of the Company set forth in Article Six of this Agreement is true and
correct as of the Purchaser's Closing Date.
SECTION 4.26 Certain Amendments.
Certain definitions and covenants used in the Company Guarantee
Documents are intended to be substantively identical to the definitions and
covenants in the final version of the indenture governing certain Senior Secured
Notes to be issued by Sweetheart (the "New Sweetheart Indenture"). If the
Majority Holders determine that changes are required in order to ensure that
such definitions and covenants are substantially identical to the definitions
and covenants in the New Sweetheart Indenture, this Agreement and the other
Company Guarantee Documents shall be amended to conform to such definitions and
covenants; provided that in the event the final form of the New Sweetheart
Indenture permits the Restricted Subsidiaries of the Company to (i) incur
Restricted Payments of the type permitted under Section 4.07(v) hereof in an
amount up to $7.5 million, (ii) incur Indebtedness of the type permitted in
clause (y) of Section 4.09(i) hereof in an amount up to $225.0 million, (iii)
incur Indebtedness of the type permitted under clause (y) of Section 4.09(iii)
hereof in an amount up to $33.0 million, (iv) incur Indebtedness of the type
permitted under Section 4.09(v) hereof in an amount up to $7.5 million, (v)
incur Indebtedness of the type permitted under Section 4.09(vi) hereof in an
amount up to $7.5 million, (vi) incur Indebtedness of the type permitted under
Section 4.09(xi) hereof in an amount up to $25 million or (viii) incur
Indebtedness of the type permitted under Section 4.09(xii) hereof in an amount
up to $30 million, the Holders shall amend such provisions to conform to the
amounts permitted under the corresponding provisions of the New Sweetheart
Indenture.
SECTION 4.27 Change in Organizational Documents.
The Company shall not and shall not permit any of Sweetheart or
▇▇▇▇▇ or any of their successors to amend, modify, supplement or restate any of
the Organizational Documents of Sweetheart or ▇▇▇▇▇ without the prior written
consent of the Majority Holders if the effect of
44
such amendment, modification, supplement or restatement, by merger or otherwise,
is to (i) change, alter or amend Section 7 of the by-laws of Sweetheart (except
that clause (xi) of such by-laws may be amended to require four directors to
approve the removal or the election of the chief executive officer, chief
operating officer and chief financial officer) or the comparable provisions of
the by-laws of ▇▇▇▇▇ required to be adopted pursuant to this Section 4.27, or
(ii) the rights, duties, interests and benefits of any of the Capital Stock of
▇▇▇▇▇ or Sweetheart authorized as of the Guaranty Date. Immediately upon the
exercise of the option granted to the Holders of the Series A Notes pursuant to
the Option Agreement, the Company shall cause ▇▇▇▇▇ to adopt a by-law
substantially identical to Section 7 of the by-laws of Sweetheart required by
clause (i) of this Section 4.27.
SECTION 4.28 Limitations on Purchase of Discount Notes.
The Company shall not, and shall not permit any of its Restricted
Subsidiaries to, purchase or otherwise acquire any Discount Notes unless (a) the
full amount of the purchase price for the Discount Notes being so purchased or
acquired is payable in full and in cash concurrently with such purchase or
acquisition, and (b) the purchase price payable for the Discount Notes being so
purchased or acquired does not exceed one hundred percent (100%) of the accreted
value of the Discount Notes being so purchased or otherwise acquired, computed
as of the date on which such purchase or acquisition is consummated. In the
event any Discount Notes are acquired by or distributed, transferred or assigned
to the Company or any of its Unrestricted Subsidiaries, the Company shall or
shall cause such Unrestricted Subsidiary to, promptly cancel and terminate such
Discount Note for no consideration. In the event any Restricted Subsidiary of
the Company becomes the owner or holder of a Discount Note, such Restricted
Subsidiary shall not transfer or assign such Discount Note to any Person other
than the Company or another Restricted Subsidiary and the Company shall, as soon
as such distribution, dividend, transfer or assignment of such Discount Note is
permitted under the agreements and indentures governing the Indebtedness of such
Restricted Subsidiary, cause such Restricted Subsidiary to distribute, dividend,
transfer or assign such Discount Note to the Company for cancellation and
termination in accordance with this Section 4.28.
SECTION 4.29 Post-Closing Covenants.
Promptly after the Guaranty Date, and, in any event, within ten (10)
Business Days after the Guaranty Date, the Company agrees to take all action
within its control (a) to cause the Discount Notes to be modified, effective as
of January 25, 2002, to (i) reduce the aggregate principal amount thereof to $55
million, (ii) reduce the interest rate thereon to 4% per annum and (iii) permit
such interest to be paid in kind until maturity, including, if necessary,
entering into a note modification agreement reflecting such modifications, (b)
to effect the release of the Discount Notes Indenture Collateral, and (c) to
cause the termination of the Discount Notes Indenture Pledge Agreement.
SECTION 4.30 Collateral Delivery.
45
Within ten (10) Business Days after the Guaranty Date, the Company
shall deliver to the Collateral Agent the original certificates (which
certificates shall be properly endorsed in blank for transfer or accompanied by
irrevocable undated stock powers duly endorsed in blank) representing all of the
Capital Stock of ▇▇▇▇▇ and not less than 90% of the outstanding Capital Stock of
Sweetheart and the originals of each intercompany note payable to the Company
from any of its Subsidiaries.
ARTICLE FIVE
SUCCESSORS
SECTION 5.01 Merger, Consolidation, Or Sale Of Assets.
(a) The Company may not consolidate or merge with or into (whether
or not the Company is the surviving entity), or sell, assign, transfer, lease,
convey or otherwise dispose of all or substantially all of its properties or
assets in one or more related transactions, to another Person unless (i) the
Company is the surviving corporation or the Person formed by or surviving any
such consolidation or merger (if other than the Company) or to which such sale,
assignment, transfer, lease, conveyance or other disposition shall have been
made is a corporation organized or existing under the laws of the United States,
any state thereof or the District of Columbia; (ii) the Person formed by or
surviving any such consolidation or merger (if other than the Company) or the
Person to which such sale, assignment, transfer, lease, conveyance or other
disposition shall have been made assumes all the obligations of the Company
under the Registration Agreement , the Warrant Agreement, the Pledge Agreement,
this Agreement and the other Company Guarantee Documents pursuant to
supplemental agreements in a form reasonably satisfactory to Collateral Agent
and the Majority Holders; (iii) immediately after such transaction no Default or
Event of Default exists; and (iv) except in the case of a merger of the Company
with or into a Wholly Owned Restricted Subsidiary of the Company, the Company or
the Person formed by or surviving any such consolidation or merger (if other
than the Company), or to which such sale, assignment, transfer, lease,
conveyance or other disposition shall have been made (A) shall have Consolidated
Net Worth immediately after the transaction equal to or greater than the
Consolidated Net Worth of the Company immediately preceding the transaction and
(B) shall, at the time of such transaction and after giving pro forma effect
thereto as if such transaction had occurred at the beginning of the applicable
four-quarter period, be permitted to incur at least $1.00 of additional
Indebtedness pursuant to the Fixed Charge Coverage Ratio test set forth in the
first paragraph of Section 4.09.
SECTION 5.02 Successor Corporation Substituted.
Upon any consolidation or merger, or any sale, assignment, transfer,
lease, conveyance or other disposition of all or substantially all of the assets
of the Company in accordance with Section 5.01 hereof, the successor Person
formed by such consolidation or into or with which the Company is merged or to
which such sale, assignment, transfer, lease, conveyance or other disposition is
made shall succeed to, and be substituted for (so that from and after the date
of such consolidation, merger, sale, lease, conveyance or other disposition, the
46
provisions of this Agreement referring to the "Company" shall refer instead to
the successor Person and not to the Company), and may exercise every right and
power of the Company under this Agreement with the same effect as if such
successor Person had been named as the Company herein; provided, however, that
the predecessor Company shall not be relieved from the obligation to pay the
Obligations evidenced by the Notes pursuant to the Company's Guarantee of such
Obligations.
ARTICLE SIX
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants as of the Guaranty Date, as follows:
SECTION 6.01 Authorization, Capitalization.
(a) The Company has taken all actions necessary to authorize it (i)
to execute, deliver and perform all of its obligations under this Agreement, the
Warrant Agreement, the Registration Agreement , the Pledge Agreement and the
other Company Guarantee Documents to which it is a party, (ii) to consummate the
transactions contemplated hereby and thereby. Each of this Agreement, the
Warrant Agreement, the Registration Agreement , and the Pledge Agreement and the
other Company Guarantee Documents to which the Company is a party is a legally
valid and binding obligation of the Company, enforceable against it in
accordance with its terms, except for (a) the effect thereon of bankruptcy,
insolvency, reorganization, moratorium and other similar laws relating to or
affecting the rights of creditors generally and (b) limitations imposed by
equitable principles upon the specific enforceability of any of the remedies,
covenants or other provisions thereof and upon the availability of injunctive
relief or other equitable remedies.
(b) The total authorized and total outstanding Equity Interests of
the Company, after giving effect to the consummation of the transactions
contemplated hereby, are as set forth in Schedule 6.01, and in each case such
outstanding Equity Interests of the Company are, to the knowledge of the
Company, free and clear of any preemptive rights, any registration rights and
any limitations on voting rights, of any nature, except as disclosed in Schedule
6.01. On the Guaranty Date and after giving effect to the consummation of the
transactions contemplated by the Company Guaranty Documents, the Equity
Interests of the Company are owned by the Persons listed on Schedule 6.01 in the
amounts set forth thereon. The Subsidiaries of the Company listed on Schedule
6.01 are the only Subsidiaries of the Company (together, the "Company's
Subsidiaries"). Except as set forth as Schedule 6.01, the Company owns 100% of
the outstanding Equity Interests or other securities evidencing equity ownership
of each of the Company's Subsidiaries, in each case free and clear of any Lien
(other than Permitted Liens), limitation on voting rights, encumbrance, equity
or adverse interest of any nature. All of the outstanding Equity Interests of
the Company and each of its Restricted Subsidiaries have been duly authorized
and validly issued, are fully paid and nonassessable and were not issued in
violation of, and are not subject to, any preemptive or similar rights. Except
as set forth on Schedule 6.01, the Company does not own any capital stock or any
other securities of any corporation, nor does it have any Equity Interest in any
Person.
47
(c) On the Guaranty Date, the Warrants will be duly authorized and
validly issued, will be fully paid and nonassessable and will not have been
issued in violation of, nor will they be subject to, any preemptive or similar
rights other than those in favor of the Holders or as contemplated in the
Warrant Agreement. Except as set forth on Schedule 6.01, there are no
outstanding (i) securities convertible into or exchangeable for any Equity
Interests of the Company or any of its Restricted Subsidiaries, (ii) options,
warrants or other rights to purchase or subscribe to Equity Interests of the
Company or any of its Restricted Subsidiaries or securities convertible into or
exchangeable for Equity Interests of the Company or any of its Restricted
Subsidiaries, (iii) contracts, commitments, agreements, understandings,
arrangements, calls or claims of any kind relating to the issuance of any Equity
Interests of the Company or any of its Restricted Subsidiaries, any such
convertible or exchangeable securities or any such options, warrants or rights
or (iv) voting trusts, agreements, contracts, commitments, understandings or
arrangements with respect to the voting of any of the Equity Interests of the
Company or any of its Restricted Subsidiaries.
(d) Except for the Registration Agreement and as set forth on
Schedule 6.01, neither the Company nor any of its Restricted Subsidiaries has
entered into an agreement to register its securities under the Securities Act.
Except for this Agreement and as set forth on Schedule 6.01 hereto, neither the
Company nor any of its Restricted Subsidiaries has entered into any agreement to
issue, purchase or sell any of its securities.
SECTION 6.02 No Violation or Conflict, No Default
(a) Neither the execution, delivery or performance of this
Agreement, the Pledge Agreement, the Registration Agreement , the Guaranty Fee
Agreement, the Option Agreement, the Warrant Agreement or any of the other
Company Guarantee Documents by the Company, as the case may be, nor the
compliance with its obligations hereunder or thereunder, nor the consummation of
the transactions contemplated hereby and thereby, nor the issuance, sale or
delivery of the Warrants will:
(1) violate any provision of the Organizational Documents
of the Company or any of its Restricted Subsidiaries;
(2) violate any statute, law, rule or regulation or any judgment,
decree, order, regulation or rule of any court or governmental authority
or body to which the Company or any of its Restricted Subsidiaries or any
of their respective properties may be subject;
(3) permit or cause the acceleration of the maturity of
any debt or obligation of the Company or any of its Restricted
Subsidiaries; or
(4) violate, or be in conflict with, or constitute a default under,
or permit the termination of, or require the consent of any Person under,
or result in the creation or imposition of any Lien (other than Permitted
Liens) upon any property of the Company or any of its Restricted
Subsidiaries under,
48
any mortgage, indenture, loan agreement, note, debenture, agreement for
borrowed money or any other agreement to which the Company or any of its
Restricted Subsidiaries is a party or by which the Company or any of its
Restricted Subsidiaries may be bound, other than such violations,
conflicts, defaults, terminations and Liens, or such failures to obtain
consents, which could not reasonably be expected to result in a Material
Adverse Effect.
(b) Neither the Company nor any of its Restricted Subsidiaries is in
default (without giving effect to any grace or cure period or notice
requirement) under any agreement for borrowed money or under any agreement
pursuant to which any of its securities were sold.
SECTION 6.03 No Material Adverse Change; Financial Statements
(a) No Material Adverse Change. Since September 30, 2001, neither
the Company nor any of its Restricted Subsidiaries has suffered any material
adverse change in their properties, business, operations, assets, condition
(financial or otherwise) or prospects which could reasonably be expected to
result in a Material Adverse Effect.
(b) Financial Statements. The Company has previously provided to the
Purchaser and certain of the TCW/Crescent Investors or its Account Manager (i)
the audited consolidated balance sheet of the Company, and its Subsidiaries as
of September 30, 2001, and the related audited consolidated statements of
income, changes in stockholders' equity and cash flows of the Company and its
Subsidiaries for each such fiscal year and (ii) the unaudited statement of
operations of the Company and its Subsidiaries for the three-month period ended
December 31, 2001, subject to normal year end adjustments. Such financial
statements present fairly in all material respects the consolidated financial
position, results of operations, stockholders' equity and cash flows of the
Company and its Subsidiaries at the respective dates or for the respective
periods to which they apply. Except as disclosed therein, such statements and
related notes have been prepared in accordance with GAAP consistently applied
throughout the periods involved (except that unaudited interim statements may
not contain footnotes). All financial statements concerning the Company and its
Restricted Subsidiaries that will hereafter be furnished by the Company and its
Restricted Subsidiaries to the Collateral Agent or the Holders pursuant to this
Agreement will be prepared in accordance with GAAP consistently applied (except
as disclosed therein) and will present fairly in all material respects the
financial condition of the corporations covered thereby as at the dates thereof
and the results of their operations for the periods then ended.
(c) Pro Forma. The Pro Forma was prepared in accordance with GAAP,
with only such pro forma adjustments thereto as would be required to present
fairly the information contained therein, and is based upon good faith estimates
and assumptions believed by the Company to be reasonable at the time made.
(d) Projections. True and complete copies of (i) projections of the
consolidated revenues, earnings before depreciation, interest and taxes,
operating margins, net income and capital expenditures the Company and its
Restricted Subsidiaries for each of the
49
fiscal years ending 2002, 2003, 2004, 2005, and 2006, prepared by senior
management of the Company assuming the consummation of the transactions
contemplated hereby and by the other Company Guarantee Documents (the
"Projections") and (ii) the assumptions and supplemental data used in preparing
the Projections (collectively, the "Supplemental Data") have been delivered by
the Company to Purchaser and certain of the TCW/Crescent Investors or its
Account Manager. The Projections were prepared on the basis of the Supplemental
Data which represent a reasonable basis for such preparation. The Projections
and the Supplemental Data reflect the best currently available estimates and
judgment of the Company's senior management as to the expected future financial
performance of the Company and its Restricted Subsidiaries and are based upon
good faith estimates and assumptions believed by the Company to be reasonable at
the time made.
SECTION 6.04 Full Disclosure
Neither this Agreement, the financial statements referred to in Section
6.03, any Company Guarantee Document, nor any other document, certificate or
written statement furnished by or on behalf of any of the Company or any of its
Restricted Subsidiaries or any of their respective agents or employees to
Purchaser or any TCW/Crescent Investor or its Account Manager in connection with
the negotiation and sale of the Notes and the Warrants, when taken as a whole,
contains any untrue statement of a material fact or omits or will omit to state
a material fact necessary to make the statements contained herein or therein not
misleading in light of the circumstances under which they were made. There is no
material fact known to the Company or any of their respective agents or
employees that has had or could reasonably be expected to have a Material
Adverse Effect and that has not been disclosed herein or in such other
documents, certificates and written statements furnished to the Purchaser or any
TCW/Crescent Investor or its Account Manager for use in connection with the
transactions contemplated hereby.
SECTION 6.05 Third Party Consents
Neither the nature of the Company nor of any of its businesses or
properties, nor any relationship between the Company and any other Person, nor
any circumstance in connection with the execution, delivery and performance of
the Company Guarantee Documents and the issuance of the Warrants on the Guaranty
Date nor the performance by the Company of its other obligations hereunder or
under any other Company Guarantee Document, or the consummation of the
transactions contemplated by, this Agreement, or any other Company Guarantee
Document, as the case may be, is such as to require a consent, approval or
authorization of, or notice to, or filing, registration or qualification with,
any governmental authority or other Person on the part of the Company as a
condition to the execution and delivery of this Agreement or any of the other
Company Guarantee Documents or the offer, issuance, sale or delivery of the
Warrants on the Guaranty Date other than such consents, approvals,
authorizations, notices, filings, registrations or qualifications which have
been made or obtained on or prior to the Guaranty Date (and copies of which have
been delivered to the Purchaser and other Collateral Agent) and such filings
under Federal and state securities laws which are permitted to be made
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after the Guaranty Date and which the Company hereby agrees to file within the
time period prescribed by applicable law.
SECTION 6.06 Governmental Regulations
Neither the Company nor any of its Restricted Subsidiaries is subject to
regulation under the Investment Company Act of 1940, as amended, the Public
Utility Holding Company Act of 1935, as amended, the Federal Power Act, the
Interstate Commerce Act, the Commodity Exchange Act or to any Federal or state
statute or regulation limiting its ability to incur Indebtedness or consummate
the transactions contemplated hereby and by the other Company Guarantee
Documents.
SECTION 6.07 Brokers
Except for Purchaser, the Company has not dealt with any broker, finder,
commission agent or other such intermediary in connection with the execution and
delivery of this Agreement and the other Company Guarantee Documents and the
issuance of the Warrants and the transactions contemplated by this Agreement and
the other Company Guarantee Documents, and the Company is under no obligation to
pay any broker's or finder's fee or commission or similar payment in connection
with such transactions.
The Company agrees to indemnify and hold the Holders harmless from and
against any and all actions, suits, claims, costs, expenses, losses, liabilities
and/or obligations in connection with or relating to any broker's or finder's
fees or commission or similar payment in connection with such transactions,
except with respect to such fees or commissions incurred by any Purchaser for
its account, so long as the Company receives notice of any such action, suit,
claim, etc., reasonably promptly after the Holders become aware thereof;
provided that the failure to give such notice as provided in this sentence shall
not relieve the Company of its obligations under this sentence except to the
extent, and only to the extent, that the Company is materially prejudiced by
such failure to give notice (as determined by a court of competent jurisdiction
in a final nonappealable judgment).
SECTION 6.08 Solvency
Immediately prior to and after giving effect to the issuance of the
Warrants and the execution, delivery and performance of this Agreement, the
Pledge Agreement, the Registration Agreement and the other Company Guarantee
Documents and any instrument governing Indebtedness of the Company and its
Restricted Subsidiaries incurred as of the Guaranty Date, the Company is
Solvent.
SECTION 6.09 Litigation
(a) Except as set forth on Schedule 6.09, there is no action, claim,
suit, citation or proceeding (including, without limitation, an investigation or
pre-trial proceeding, such as a deposition) in which the amount in controversy
or the amount of damages claimed or
51
sought from the Company or of any of its Restricted Subsidiaries exceeds
$100,000 (regardless of whether it is covered by insurance), whether commenced,
or to the knowledge of the Company, threatened ("Proceedings") against or
affecting the Company or any of its Restricted Subsidiaries or any of their
properties or assets. None of the Proceedings, if finally determined adversely
to the Company or any of its Restricted Subsidiaries, could reasonably be
expected to have a Material Adverse Effect. There is no Proceeding seeking to
restrain, enjoin, prevent the consummation of or otherwise challenge this
Agreement or any of the other Company Guarantee Documents or the transactions
contemplated hereby or thereby.
(b) Neither the Company nor any of its Restricted Subsidiaries is
subject to any judgment, order, decree, rule or regulation of any court,
governmental authority or arbitration board or tribunal that has had a Material
Adverse Effect or that could reasonably be expected to have a Material Adverse
Effect.
SECTION 6.10 Taxes
All Tax Returns required to be filed by the Company or any of its
Restricted Subsidiaries have been timely filed and such returns are true,
complete and correct in all material respects. All Taxes due or claimed to be
due from the Company or any of its Restricted Subsidiaries that are due and
payable have been paid, other than those (i) being contested in good faith and
for which an adequate reserve or accrual has been established in accordance with
GAAP or (ii) those currently payable without penalty or interest and for which
an adequate reserve or accrual has been established or extensions duly filed.
The Company does not know of (A) any actual or proposed material additional
Taxes or (B) any probable basis for the imposition of any material additional
Taxes for any fiscal period against the Company or any of its Restricted
Subsidiaries.
SECTION 6.11 Compliance with Laws
The Company and each of its Restricted Subsidiaries has obtained and has
maintained in good standing any licenses, permits, consents and authorizations
required to be obtained by it under all laws or regulations relating to its
business (collectively, the "Laws"), the absence of which (individually or in
the aggregate) could not reasonably be expected to have a Material Adverse
Effect, and any such licenses, permits, consents and authorizations remain in
full force and effect, except as to any of the foregoing the absence of which
(individually or in the aggregate) could not reasonably be expected to have a
Material Adverse Effect. The Company and each of its Restricted Subsidiaries are
in compliance with the Laws in all material respects, and there is no pending
or, the Company's knowledge, threatened, action or proceeding against the
Company or any of its Restricted Subsidiaries under any of the Laws, other than
any such actions or proceedings which, individually or in the aggregate, if
adversely determined, could not reasonably be expected to have a Material
Adverse Effect.
SECTION 6.12 Indebtedness
After giving effect to the this Agreement and the transactions
contemplated thereby, other than the Company's Guarantee of the Notes and the
Existing Indebtedness set forth on
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Schedule 6.12, neither the Company nor any of its Restricted Subsidiaries (i) is
a party to any loan or similar agreement, (ii) has any notes, bonds, debentures
or other evidences of indebtedness outstanding nor (iii) has guaranteed the
obligations or liabilities of any Person.
SECTION 6.13 Insurance
Schedule 6.13 hereto lists all material insurance policies insuring, and
all material performance bonds issued in favor of, the Company or any of its
Restricted Subsidiaries, specifying (a) the name of the insurer or bonding
company, (b) the risk insured or bonded, (c) the limits of coverage, (d) the
deductible, if any, (e) the premium (including any proposed premium increases
known to the Company), (f) any notice of cancellation or nonrenewal received by
the Company and (g) the date through which coverage will continue by virtue of
premiums already paid.
SECTION 6.14 Affiliate Transactions
Except as described in the Form 10-K Annual Report pursuant to Section 13
or 15(d) of the Exchange Act of each of the Company, Sweetheart and ▇▇▇▇▇ for
the fiscal year ending September 30, 2001, there are no material Affiliate
Transactions among the Company and its Affiliates.
ARTICLE SEVEN
COLLATERAL AND SECURITY
SECTION 7.01 Collateral Documents.
The due and punctual payment of the principal of, premiums on, if
any, and interest on the Notes when and as the same shall be due and payable,
whether on an interest payment date, at maturity, by acceleration, repurchase,
redemption or otherwise, and interest on the overdue principal of, premiums on,
if any, interest on (to the extent permitted by law) the Notes and performance
of all obligations of the Company to the Holders of Notes under this Agreement
and the Notes, according to the terms hereunder or thereunder, shall be secured
as provided in the Collateral Documents which the Company has entered into
simultaneously with the execution of this Agreement and any Collateral Documents
to be entered into subsequent to the Guaranty Date pursuant to the terms hereof.
Each Holder of Notes, by its acceptance thereof and of the Company's Guaranty
hereunder, consents and agrees to the terms of each Collateral Document
(including, without limitation, the provisions providing for foreclosure and
release of Collateral) as the same may be in effect or may be amended from time
to time in accordance with its terms and authorizes and directs the Collateral
Agent, as agent for the ratable benefit of the Holders, to enter into the
Collateral Documents and to perform its obligations and exercise its rights
thereunder in accordance therewith. The Company shall do or cause to be done all
such acts and things as may be reasonably necessary or proper, or as may be
required by the provisions of the Collateral Documents, to assure and confirm to
the Collateral Agent the security interest in the Collateral contemplated
hereby, by the Collateral Documents or any part thereof, as from
53
time to time constituted, so as to render the same available for the security
and benefit of this Agreement and of the Notes guaranteed hereby, according to
the intent and purposes herein expressed. The Company shall take, or shall cause
its Subsidiaries to take, upon request of the Collateral Agent, any and all
actions reasonably required to cause the Collateral Documents to create and
maintain, as security for the Obligations of the Company under this Agreement,
the Notes and the Collateral Documents, a valid and enforceable perfected first
priority Lien in and on all the Collateral, in favor of the Collateral Agent for
the benefit of the Holders, superior to and prior to the rights of all third
Persons and subject to no other Liens other than Permitted Liens permitted by
the applicable Collateral Document.
SECTION 7.02 Recording and Opinions.
(a) The Company shall furnish to Collateral Agent simultaneously
with the execution and delivery of this Agreement an Opinion of Counsel either
(i) stating that in the opinion of such counsel all action has been taken with
respect to the recording, registering and filing of this Agreement, financing
statements or other instruments necessary to make effective the Lien intended to
be created by this Agreement and the Collateral Documents, and reciting with
respect to the security interests in the Collateral, the details of such action,
or (ii) stating that, in the opinion of such counsel, no such action is
necessary to make such Lien effective.
(b) The Company shall furnish to the Collateral Agent on June 1 in
each year beginning with June 1, 2003, an Opinion of Counsel, dated as of such
date, either (i) (A) stating that, in the opinion of such counsel, action has
been taken with respect to the recording, registering, filing, re-recording,
re-registering and refiling of all supplemental financing statements,
continuation statements or other instruments of further assurance as is
necessary to maintain the Lien of this Agreement and the Collateral Documents
and reciting with respect to the security interests in the Collateral the
details of such action or referring to prior Opinions of Counsel in which such
details are given, (B) stating that, based on relevant laws as in effect on the
date of such Opinion of Counsel, all financing statements and continuation
statements have been executed and filed that are necessary as of such date and
during the succeeding 12 months fully to preserve and protect, to the extent
such protection and preservation are possible by filing, the rights of the
Holders and the Collateral Agent hereunder and under the Collateral Documents
with respect to the security interests in the Collateral, or (ii) stating that,
in the opinion of such counsel, no such action is necessary to maintain such
Lien and assignment.
SECTION 7.03 Release of Collateral.
(a) Collateral may be released from the Lien and security interest
created by the Collateral Documents at any time or from time to time in
accordance with the provisions of the Collateral Documents (including Section
11.6 of the Pledge Agreement upon exercise of the Conversion Option) or with the
prior written consent of the Holders of eighty percent (80%) or more of the
outstanding principal balance of the Notes. In addition, upon the request of the
Company pursuant to an Officers' Certificate certifying that all of the
outstanding principal balance of, premiums on, if any, and all accrued but
unpaid interest on the Notes has been paid in full, the Collateral Agent shall,
at the sole cost and expense of the Company, release the
54
Collateral. Upon receipt of such Officers' Certificate and written confirmation
from Newcup as to the matters set forth in such Officers' Certificate, the
Collateral Agent shall execute, deliver or acknowledge any necessary or proper
instruments of termination, satisfaction or release to evidence the release of
any Collateral permitted to be released pursuant to this Agreement or the
Collateral Documents.
(b) No Collateral shall be released from the Lien and security
interest created by the Collateral Documents pursuant to the provisions of the
Collateral Documents unless there shall have been delivered to the Collateral
Agent the certificate required by this Section 7.03.
(c) At any time when a Payment Default or a Bankruptcy Default (as
such term is defined in the Pledge Agreement) or an Event of Default shall have
occurred and be continuing, no release of Collateral pursuant to the provisions
of the Collateral Documents shall be effective as against the Holders of the
Notes.
SECTION 7.04 Authorization Of Actions To Be Taken By The Collateral Agent
Under The Collateral Documents.
Subject to the provisions of Sections 7.01 and 7.02 hereof, the
Collateral Agent may, in its sole discretion and without the consent of the
Holders of the Notes, take all actions it deems necessary or appropriate in
order to (a) enforce any of the terms of the Collateral Documents, and (b)
collect and receive any and all amounts payable in respect of the Obligations of
the Company under this Agreement and the Collateral Documents. The Collateral
Agent shall have power to institute and maintain such suits and proceedings as
it may deem expedient to prevent any impairment of the Collateral by any acts
that may be unlawful or in violation of the Collateral Documents or this
Agreement, and such suits and proceedings as the Collateral Agent may deem
expedient to preserve or protect its interests and the interests of the Holders
of the Notes in the Collateral (including power to institute and maintain suits
or proceedings to restrain the enforcement of or compliance with any legislative
or other governmental enactment, rule or order that may be unconstitutional or
otherwise invalid if the enforcement of, or compliance with, such enactment,
rule or order would impair the security interest hereunder or be prejudicial to
the interests of the Holders of the Notes or of the Collateral Agent). The
Collateral Agent is not obligated to foreclose on the Collateral, even if
indemnity is offered, if this right may subject the Collateral Agent to personal
environmental liability.
SECTION 7.05 Authorization of Receipt of Funds By The Collateral Agent
Under the Collateral Documents
Upon an Event of Default and so long as such Event of Default
continues, the Collateral Agent may exercise in respect of the Collateral, in
addition to the other rights and remedies provided for herein, in the Collateral
Documents or otherwise available to it, all of the rights and remedies provided
for by the applicable Uniform Commercial Code or other applicable law, and the
Collateral Agent may also upon obtaining possession of the Collateral as set
forth herein, without notice to the Company, except as specified below, sell,
assign or otherwise liquidate, or direct the Company to sell, assign or
otherwise liquidate, any or all of the
55
Collateral or any part thereof in one or more parcels at public or private sale,
at any exchange, broker's board or at any of the Collateral Agent's offices or
elsewhere, for cash, on credit or for future delivery, and upon such other terms
as the Collateral Agent may deem commercially reasonable. The Company
acknowledges and agrees that any such private sale may result in prices and
other terms less favorable to the seller than if such sale were a public sale.
The Company agrees that, to the extent notice of sale shall be required by law,
at least 10 days' notice to the Company of the time and place of any public sale
or the time after which any private sale is to be made shall constitute
reasonable notification. The Collateral Agent shall not be obligated to make any
sale regardless of notice of sale having being given. The Collateral Agent may
adjourn any public or private sale from time to time by announcement at the time
and placed fixed therefor, and such sale may, without further notice, be made at
the time and place to which it was so adjourned.
Any cash proceeds received by the Collateral Agent in respect of any
sale of, collection from, or other realization upon all or any part of the
Collateral shall be deposited in a separate bank account of the Collateral Agent
created for such purpose and applied (unless otherwise provided for in the
Collateral Documents and after payment of any and all amounts payable to the
Collateral Agent pursuant to this Agreement), as the Collateral Agent shall
determine or as the Holders shall direct pursuant to Section 11.5 of the Pledge
Agreement, (i) against the Obligations of the Company under this Agreement, and
the Collateral Documents for the ratable benefit for the Holders, (ii) to
maintain or otherwise protect the Collateral or (iii) to take such other action
to protect the other rights of the Holders or to take any other appropriate
action or remedy for the benefit of the Holders. Any surplus of such cash or
cash proceeds held by the Collateral Agent and remaining after payment in full
of all the Obligations of the Company under this Agreement or the Collateral
Documents shall be paid over to the Company or to whomsoever may be lawfully
entitled to receive such surplus or as a court of competent jurisdiction may
direct.
SECTION 7.06 Termination of Security Interest
Upon the payment or other satisfaction or termination of all
Obligations of the Company under this Agreement, and the Collateral Documents in
full, the Holders shall, at the request of the Company, deliver a certificate to
the Collateral Agent stating that such Obligations have been paid or otherwise
satisfied or terminated in full, and instruct the Collateral Agent to release
the Liens pursuant to this Agreement and the Collateral Documents.
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SECTION 7.07 Cooperation of the Collateral Agent.
In the event the Company pledges or grants a security interest in
additional Collateral, the Collateral Agent shall cooperate with the Company in
reasonably and promptly agreeing to the form of, and executing as required, any
instruments or documents necessary to make effective the security interest in
the Collateral to be so substituted or pledged. To the extent practicable, the
terms of any security agreement or other instrument or document necessitated by
any such substitution or pledge shall be comparable to the provisions of the
existing Collateral Documents.
ARTICLE EIGHT
EXPENSES AND INDEMNITY
SECTION 8.01 Expenses.
Whether or not the transactions contemplated hereby shall be
consummated and regardless of whether Newcup is obligated to pay such expenses,
the Company shall pay promptly (a) all the actual and reasonable costs and
expenses of preparation of the Company Guarantee Documents and the Note Purchase
Documents and any consents, amendments, waivers or other modifications thereto;
(b) all the costs of furnishing all Opinions by Counsel for Newcup, the Company
and its Subsidiaries or the Collateral Agent; (c) the reasonable fees, expenses
and disbursements of counsel to the Collateral Agent, any TCW/Crescent Investor
or Newcup in connection with the negotiation, preparation, execution and
administration of the Company Guarantee Documents and the Note Purchase
Documents and any consents, amendments, waivers or other modifications thereto
and any other documents or matters requested by the Company or Newcup, including
any such expenses incurred in connection with the purchase by any TCW/Crescent
Investor of the Notes and Warrants; (d) all the actual costs and reasonable
expenses of creating and perfecting Liens in favor of Collateral Agent, for the
benefit of the Holders pursuant to the Company Guarantee Documents and the Note
Purchase Documents, including filing and recording fees, expenses and taxes,
stamp or documentary taxes, search fees, title insurance premiums and reasonable
fees, expenses and disbursements of counsel to the Collateral Agent and of
counsel providing any opinions that the Collateral Agent or the Purchaser may
request in respect of this Agreement, the Collateral or the Liens created
pursuant to the Collateral Documents; (e) all the actual costs and reasonable
fees, expenses and disbursements incurred by the Collateral Agent, any
TCW/Crescent Investor or Newcup in connection with the transactions contemplated
by the Note Purchase Documents and the Company Guarantee Documents, including
travel and lodging expenses and all costs incurred in connection with such
Person's review of the Company's and its Subsidiaries business and operations
and the fees, expenses and disbursements of any auditors, accountants,
consultants or appraisers and any rating agency fees incurred in connection with
the purchase of the Notes; (f) all the actual costs and reasonable expenses
(including the reasonable fees, expenses and disbursements of any appraisers,
consultants, advisors and agents employed or retained by Collateral Agent or any
TCW/Crescent Investor in connection with the custody or preservation of any of
the Collateral; (g) all other actual and reasonable costs and expenses incurred
by the
57
Collateral Agent or any Holder (other than the Purchaser) in connection with any
transfer or assignment of any of the Notes and the negotiation, preparation and
execution of the Company Guarantee Documents and the Note Purchase Documents and
any consents, amendments, waivers or other modifications thereto and the
transactions contemplated thereby, including reasonable attorneys fees and
expenses; and (h) after the occurrence of an Event of Default, all costs and
expenses, including reasonable attorneys' fees and costs of settlement, incurred
by the Collateral Agent and the Holders in enforcing any Obligations of or in
collecting any payments due from the Company hereunder or under the other
Company Guarantee Documents or the Note Purchase Documents by reason of such
Event of Default (including in connection with the sale of, collection from, or
other realization upon any of the Collateral or the enforcement of the Companies
Guarantee hereunder) or in connection with any refinancing or restructuring of
the credit arrangements provided hereunder or under the Note Purchase Documents
or the Company Guarantee Documents in the nature of a "work-out" or pursuant to
any insolvency or bankruptcy cases or proceedings. The provisions of this
Section 8.01 shall survive any termination of this Agreement including the
payment in full of all of the Obligations evidenced by the Notes and the other
Note Purchase Documents.
SECTION 8.02 General Indemnity.
In the event that Newcup, any holder of an Equity Interest in
Newcup, any Indemnified Holder or the Collateral Agent (each an "Indemnitee" and
collectively, the "Indemnitees") becomes involved in any capacity in any action,
proceeding or investigation brought by or against any Person, including the
Company, any of its Subsidiaries, the stockholders of the Company or any holder
of any Existing Indebtedness in connection with or as a result of either this
arrangement, the Transactions or any matter referred to in this Agreement the
Note Purchase Documents or the Company Guarantee Documents (together, the
"Transaction Agreements"), the Company periodically will and will cause its
Restricted Subsidiaries to reimburse each Indemnitee for its legal and other
expenses (including the cost of any investigation and preparation) incurred in
connection therewith. The Company also will indemnify and hold each Indemnitee
harmless against any and all losses, claims, damages or liabilities to any such
Person in connection with or as a result of either this arrangement or any
matter referred to in the Transaction Agreements, except to the extent that any
such loss, claim, damage or liability results from the willful misconduct, gross
negligence or bad faith of such Indemnitee in performing the obligations that
are the subject of the Transaction Agreements. If for any reason the foregoing
indemnification is unavailable to any Indemnitee or insufficient to hold such
Indemnitee harmless, then the Company shall contribute or cause its Restricted
Subsidiaries to contribute to the amount paid or payable by such Indemnitee as a
result of such loss, claim, damage or liability in such proportion as is
appropriate to reflect the relative economic interests of the Company on the one
hand and such Indemnitee on the other hand in the matters contemplated by the
Transaction Agreements as well as the relative fault of the Company and such
Indemnified Holder with respect to such loss, claim, damage or liability and any
other relevant equitable considerations. The reimbursement, indemnity and
contribution obligations of the Company under this Section 8.02 paragraph and
Section 8.03 hereof shall be in addition to any liability which the Company may
otherwise have, shall extend upon the same terms and
58
conditions to any Affiliate of any Indemnitee and the partners, members,
directors, agents, employees, attorneys and controlling persons (if any), as the
case may be, of the Company and any such Affiliate, and shall be binding upon
and inure to the benefit of any successors, assigns, heirs and personal
representatives of the Company, each Indemnitee, any such Affiliate and any such
Person. The Company also agrees that neither any indemnified party nor any of
such Affiliates, partners, directors, agents, employees, attorneys or
controlling persons shall have any liability to the Company or any Person
asserting claims on behalf of or in right of the Company or any other Person in
connection with or as a result of either this arrangement or any matter referred
to in the Transaction Agreements except to the extent that any losses, claims,
damages, liabilities or expenses incurred by the Company result from the gross
negligence or bad faith of such indemnified party in connection with the
Transactions; provided, however, that in no event shall such indemnified party
or such other Persons have any liability for any indirect, consequential or
punitive damages in connection with or as a result of such indemnified party's
or such other Person's activities related to the Transaction Agreements. Any
right to trial by jury with respect to any action or proceeding arising in
connection with or as a result of either this arrangement or any matter referred
to in this Agreement is hereby waived by the parties hereto. The provisions of
this Section 8.02 shall survive any termination of this Agreement including the
payment in full of all of the Obligations evidenced by the Notes and the other
Note Purchase Documents.
SECTION 8.03 Income Tax Indemnity.
The Company agrees to indemnify and hold Newcup, each holder of an
Equity Interest in Newcup, and each Indemnitee (as defined in Section 8.02
harmless from and against any and all actions, suits, claims, costs, expenses,
losses, liabilities and/or obligations (including interest and penalties, and
including fees and expenses of attorneys, accountants, and other professionals)
asserted against or incurred or suffered by Newcup, any holder of an Equity
Interest in Newcup and/or any other Indemnitee by reason of, in connection with
or relating to any income taxes incurred by or attributable to Newcup, any
holder of an Equity Interest in Newcup or any Indemnitee arising as a result of
(a) any recharacterization of any interest accruing with respect to the Notes ,
(b) any adjustment or disallowance of the deductibility of any interest accruing
with respect to the Notes or (c) the recognition by Newcup or any holder of an
Equity Interest in Newcup of any taxable income. Any right to trial by jury with
respect to any action or proceeding arising in connection with or as a result of
either this arrangement or any matter referred to in this Agreement is hereby
waived by the parties hereto. The provisions of this Section 8.03 shall survive
any termination of this Agreement including the payment in full of all of the
Obligations evidenced by the Notes and the other Note Purchase Documents.
ARTICLE NINE
AMENDMENT, SUPPLEMENT AND WAIVER
SECTION 9.01 With Consent Of Holders Of Notes.
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(i) The Company, the Collateral Agent and the Holders may
amend or supplement this Agreement with the consent of the Collateral Agent and
the Majority Holders, and compliance with any provision of this Agreement may be
waived with the consent of the Majority Holders and the Collateral Agent.
SECTION 9.02 Revocation And Effect Of Consents.
Until an amendment, supplement or waiver becomes effective, a
consent to it by a Holder of a Note is a continuing consent by the Holder of a
Note and every subsequent Holder of a Note or portion of a Note that evidences
the same debt as the consenting Holder's Note, even if notation of the consent
is not made on any Note. However, any such Holder of a Note or subsequent Holder
of a Note may revoke the consent as to its Note if the Collateral Agent receives
written notice of revocation before the date the waiver, supplement or amendment
becomes effective. An amendment, supplement or waiver becomes effective in
accordance with its terms and thereafter binds every Holder.
ARTICLE TEN
EVENTS OF DEFAULT
SECTION 10.01 Events of Default.
(a) Each of the following constitutes an "Event of Default":
(1) The occurrence of an Event of Default (as defined in the
Note Purchase Agreement) (A) under Section 4(a)(1)(ii) of the Note Purchase
Agreement, (B) under Section 4(a)(2)(i) of the Note Purchase Agreement, but only
if such Event of Default under Section 4(a)(2)(i) of the Note Purchase Agreement
is occasioned by the failure to pay when due any principal of Series A Notes
that becomes due, by acceleration (other than an acceleration based upon the
failure of Newcup to make the mandatory redemption required to be made with
respect to the Series A Notes on January 23, 2007, or based upon the occurrence
of an Event of Default under Section 4(a)(1) of the Note Purchase Agreement) or
otherwise, prior to January 23, 2009, (C) under Section 4(a)(2)(ii) of the Note
Purchase Agreement; or (D) under Section 4(a)(3) of the Note Purchase Agreement;
(2) failure (A) by the Company or any of its Subsidiaries to
comply with the provisions described under Sections 4.07, 4.09, 4.10, 4.15 and
5.01 of the Guaranty Agreement, or (B) by the Company to comply with any of the
provisions of the Option Agreement;
(3) if any of the representations or warranties of the Company
made in this Agreement are untrue in any respect, and the result of which could
reasonably be expected to have a Material Adverse Effect;
60
(4) failure by the Company or any of its Subsidiaries for 30
days after notice to comply with any of the other provisions of this Agreement
or any of the other Guaranty Documents;
(5) default under any mortgage, indenture or instrument under
which there may be issued or by which there may be secured or evidenced any
Indebtedness for money borrowed by the Company or any of its Subsidiaries (or
the payment of which is guaranteed by the Company or any of its Subsidiaries)
whether such Indebtedness or guarantee now exists, or is created after the date
of the Guaranty Agreement, which default (i) is caused by a failure to pay
principal of or premium, if any, or interest on such Indebtedness prior to the
expiration of the grace period provided in such Indebtedness on the date of such
default (a "Payment Default") or (ii) results in the acceleration of such
Indebtedness prior to its express maturity and, in each case, the principal
amount of any such Indebtedness, together with the principal amount of any other
such Indebtedness under which there has been a Payment Default or the maturity
of which has been so accelerated, aggregates $10.0 million or more or such
Indebtedness consists of 25% or more of the principal amount at maturity of the
Discount Notes;
(6) failure by the Company or any of its Subsidiaries to pay
final judgments aggregating in excess of $10,000,000 and either (a) any creditor
commences enforcement proceedings upon any such judgments or (b) such judgments
are not paid, discharged or stayed for a period of 60 days; and
(7) the Company or any of its Subsidiaries pursuant to or
within the meaning of Bankruptcy Law:
(i) commences a voluntary case,
(ii) consents to the entry of an order for relief
against it in an involuntary case,
(iii) consents to the appointment of a custodian of
it or for all or substantially all of its property,
(iv) makes a general assignment for the benefit of
its creditors, or
(v) generally is not paying its debts as they
become due; or
(8) a court of competent jurisdiction enters an order or
decree under any Bankruptcy Law that:
(i) is for relief against the Company or any of its
Subsidiaries;
(ii) appoints a custodian of the Company or any of
its Subsidiaries; or
61
(iii) orders the liquidation of the Company or any of
its Subsidiaries,
and the order or decree remains unstayed and in effect for 60 consecutive
days.
(b) If any Event of Default occurs and is continuing, the Majority
Holders may declare all the Obligations of the Company under this Guaranty to be
due and payable immediately. Notwithstanding the foregoing, in the case of an
Event of Default arising under this Section 10.01(a)(7), all Obligations of the
Company under this Guaranty will become due and payable automatically without
further action or notice. Upon the occurrence of any Event of Default, the
Majority Holders may, at any time and from time to time thereafter so long as
such Event of Default is continuing, enforce this Agreement and exercise as
against the Company such rights and remedies as may be available to the Holders
hereunder or otherwise available at law or in equity, subject to the limitations
set forth in Section 4(b)(1) of the Note Purchase Agreement. The Holders of the
Notes may not enforce this Agreement except as provided in the Notes, this
Agreement and the Note Purchase Agreement.
ARTICLE ELEVEN
MISCELLANEOUS
SECTION 11.01 Notices.
Any notice or communication by the Company or the Collateral Agent
to the others is duly given if in writing and delivered in person or mailed by
first class mail (registered or certified, return receipt requested), telex,
telecopier or overnight air courier guaranteeing next day delivery, to the
others' address:
If to the Company:
SF Holding Group, Inc.
▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With a copy to:
Kramer, Levin, Naftalis & ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopier No.: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
If to the Purchaser:
62
▇▇▇▇▇▇▇▇▇ & Company, Inc.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇.
▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
Telecopy No.: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy to:
TCW Crescent Mezzanine, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With a copy to:
Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ LLP
3000 Thanksgiving Tower
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
If to the Collateral Agent:
TCW/Crescent Mezzanine, L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
With a copy to:
Gardere ▇▇▇▇▇ ▇▇▇▇▇▇ LLP
3000 Thanksgiving Tower
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇
Telecopier No. (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇ ▇. ▇▇▇▇▇
The Company, the Holders or the Collateral Agent, by notice to the
others may designate additional or different addresses for subsequent notices or
communications.
63
All notices and communications shall be deemed to have been duly
given: at the time delivered by hand, if personally delivered; five Business
Days after being deposited in the mail, postage prepaid, if mailed; when
answered back, if telecopied; and the next Business Day after timely delivery to
the courier, if sent by overnight air courier guaranteeing next day delivery.
If a notice or communication is given in the manner provided above
within the time prescribed, it is duly given, whether or not the addressee
receives it.
If the Company mails a notice or communication to Holders, it shall
mail a copy to the Collateral Agent at the same time.
SECTION 11.02 Statements Required In Certificate Or Opinion.
Each certificate or opinion with respect to compliance with a
condition or covenant provided for in this Agreement shall include:
(a) a statement that the Person making such certificate or
opinion has read such covenant or condition;
(b) a brief statement as to the nature and scope of the examination
or investigation upon which the statements or opinions contained in such
certificate or opinion are based;
(c) a statement that, in the opinion of such Person, he or she has
made such examination or investigation as is necessary to enable him or her to
express an informed opinion as to whether or not such covenant or condition has
been satisfied; and
(d) a statement as to whether or not, in the opinion of such Person,
such condition or covenant has been satisfied.
SECTION 11.03 No Personal Liability Of Directors, Officers, Employees And
Stockholders.
No director, officer, employee, incorporator or stockholder of the
Company, as such, shall have any liability for any obligations of the Company
under the Guaranty, this Agreement or for any claim based on, in respect of, or
by reason of, such obligations or their creation. Each Holder of Notes by
accepting a Note waives and releases all such liability. The waiver and release
are part of the consideration for issuance of the Notes. Such waiver may not be
effective to waive liabilities under the federal securities laws and it is the
view of the SEC that such a waiver is against public policy
SECTION 11.04 Governing Law.
THE INTERNAL LAW OF THE STATE OF NEW YORK SHALL GOVERN AND BE USED
TO CONSTRUE THIS AGREEMENT.
64
SECTION 11.05 No Adverse Interpretation Of Other Agreements.
This Agreement may not be used to interpret any other agreement,
indenture, loan or debt agreement of the Company or its Subsidiaries or of any
other Person. Any such agreement, indenture, loan or debt agreement may not be
used to interpret this Agreement.
SECTION 11.06 Successors.
All agreements of the Company in this Agreement shall bind its
successors. All agreements of the Holders and the Collateral Agent in this
Agreement shall bind their respective successors.
SECTION 11.07 Severability.
In case any provision in this Agreement shall be invalid, illegal or
unenforceable, the validity, legality and enforceability of the remaining
provisions shall not in any way be affected or impaired thereby.
SECTION 11.08 Counterpart Originals.
The parties may sign any number of copies of this Agreement. Each
signed copy shall be an original, but all of them together represent the same
Agreement.
SECTION 11.09 Table Of Contents, Headings, Etc.
The Table of Contents, Cross-Reference Table and Headings of the
Articles and Sections of this Agreement have been inserted for convenience of
reference only, are not to be considered a part of this Agreement and shall in
no way modify or restrict any of the terms or provisions hereof.
[Signatures on following page]
65
Dated as of January 26, 2002
SF HOLDINGS GROUP, INC.
BY: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇
------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇
Title: Chairman
Attest:
/s/ ▇▇▇▇ ▇. ▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Financial Officer
▇▇▇▇▇▇▇▇▇ & COMPANY, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇
-----------------------------
Name: ▇▇▇▇ ▇▇▇▇
Title: Executive Vice President
TCW/Crescent Mezzanine, L.L.C.,
as Collateral Agent
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
-----------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Managing Director
EXHIBIT A
GUARANTY
For value received, the undersigned hereby unconditionally guarantees to
the Holder of the Note upon which this Guaranty is endorsed, subject to the
terms of the Guaranty Agreement pursuant to which this Guaranty was issued (a)
the due and punctual payment of the principal of, premium (if any) and interest
on such Note when and as the same shall become due and payable for any reason
according to the terms of such Note, the Agreement and/or this Guaranty
Agreement, and (b) that all other payment obligations of the Company under the
Agreement or the Notes will be promptly paid in full in accordance with the
terms of the Agreement, the Guaranty Agreement and the Notes.
SF HOLDINGS GROUP, INC.
By:
---------------------------------
Name:
-------------------------------
Title:
------------------------------
EXHIBIT B
FORM OF PLEDGE AGREEMENT
[Attached]
EXHIBIT C
FORM OF WARRANT AGREEMENT
[Attached]
EXHIBIT D
FORM OF OPTION AGREEMENT
[Attached]
EXHIBIT E
FORM OF OPINION OF COUNSEL TO THE COMPANY
The closing opinion of Kramer, Levin, Naftalis & ▇▇▇▇▇▇▇, LLP, as counsel
for the Company, which is called for by Sections 4.25 and 7.02(a) of the
Agreement, shall be dated Guaranty Date, shall be addressed to the Collateral
Agent, the Purchaser and each subsequent Holder, shall be reasonably
satisfactory in scope and form to the Collateral Agent and the Purchaser, and
shall be to the effect that:
1. The Company (a) is a corporation duly organized, validly existing, and
in good standing under the laws of its state of incorporation, (b) is duly
qualified to transact business and is in good standing as a foreign corporation
in each jurisdiction where the nature and extent of its business and properties
require it to be qualified to transact business as a foreign corporation under
applicable law, and (c) possesses all requisite corporate power and authority to
conduct its business and execute, deliver and comply with the terms of each of
the Agreement, the Warrant Agreement, the Registration Agreement , the Option
Agreement and the Pledge Agreement.
2. The execution and delivery of, and the performance by the Company of
its obligations under, each of the Agreement, the Warrant Agreement, the
Registration Agreement , the Option Agreement and the Pledge Agreement have been
duly authorized and approved by all necessary corporate action on the part of
the Company.
3. Each of the Agreement, the Warrant Agreement, the Registration
Agreement , the Option Agreement and the Pledge Agreement (a) has been duly
executed and delivered by the Company, (b) constitutes legal, valid, and binding
obligation of the Company, and (c) is enforceable against the Company in
accordance with its respective terms.
4. No consent, approval, authorization or order of, and no filing,
declaration, registration or qualification with, any court or other governmental
agency, authority or body under the laws of the State of New York or the federal
laws of the United States of America, and no approval or consent of any other
Person which has not been obtained on or prior to the date hereof, is required
in connection with the valid execution and delivery by the Company of, or for
the consummation by the Company of the transactions contemplated by, the
Agreement, the Warrant Agreement, the Registration Agreement , the Option
Agreement and the Pledge Agreement, including without limitation, the issuance
by the Company of the Warrants pursuant to the Warrant Agreement to the
Purchaser and the granting by the Company of the Option pursuant to (and as
defined in) the Option Agreement to the Purchaser.
5. Neither the execution, delivery or performance by the Company of, nor
the compliance by the Company with, nor the consummation by the Company of the
transactions contemplated by any one or more of the Agreement, the Warrant
Agreement, the Registration
Agreement , the Option Agreement and the Pledge Agreement, including without
limitation, the issuance by the Company of the Warrants pursuant to the Warrant
Agreement to the Purchaser and the granting by the Company of the Option
pursuant to (and as defined in) the Option Agreement to the Purchaser, will (a)
with or without the giving of notice or lapse of time or both, conflict with or
result in any violation or breach of or default under, or result in the creation
or imposition of any Lien (other than Permitted Liens) under, (i) any of the
Company's Organizational Documents or (ii) any promissory note, debenture
indenture, mortgage, deed of trust, deed to secure debt, security agreement,
pledge agreement, lease agreement, loan or credit agreement, or any other
instrument, agreement or document evidencing, securing or governing any
Indebtedness and to which the Company and/or any one or more of its Restricted
Subsidiaries is a party or by which the Company and/or any one or more of its
Restricted Subsidiaries (or any of their respective properties or assets) may be
bound, (b) conflict with or violate (i) any law, statute, rule or regulation of
the State of New York or of the United States of America, or (ii) the corporate
laws of the State of Delaware, or (c) violate or conflict with any judgment,
decree, writ, injunction, order, statute, rule, or regulation of any court or
any public, governmental or regulatory agency or body that is known to us and
that is binding up the Company and/or any one or more of its Restricted
Subsidiaries or any of their respective properties or assets.
6. To the best of our knowledge, except as referred to in the Agreement
(including the Exhibits and Schedules thereto), there are no actions, suits,
proceedings, or investigations pending or overtly threatened against the Company
or any of its Restrictive Subsidiaries, or their respective properties or
assets, before any court or governmental agency in which the amount in
controversy or the amount of damages claimed or sought from the Company or of
any of its Restricted Subsidiaries exceeds $100,000.
7. The Company is not an "investment company" or an entity "controlled" by
an "investment company," as such terms are defined in the Investment Company Act
of 1940, as amended.
8. The authorized Capital Stock of the Company, the amount of the
Company's Capital Stock that is issued and outstanding, and the holders of
record of the issued and outstanding shares of Capital Stock of the Company are
as set forth on Schedule 6.01 of the Agreement. [___________] shares of Class C
Common Stock have been duly authorized and validly reserved for issuance upon
exercise of the Warrants, and, when so issued, will be duly authorized, validly
issued, fully paid and nonassessable, and free and clear of any Liens. To our
knowledge, there are no options, warrants, conversion privileges, preemptive
rights, or other rights currently outstanding in favor of any Person other than
the Purchaser to purchase or otherwise acquire any authorized but unissued
shares of the Capital Stock or other securities of the Company.
9. To the best of our knowledge, except as provided in the Warrant
Agreement and in the Registration Agreement , the Company is not under any
obligation to register any of its Capital Stock that is outstanding or that is
contemplated to be issued by the Warrant Agreement.
10. Each of the issuance by the Company of the Warrants pursuant to the
Warrant Agreement to the Purchaser and the granting by the Company of the Option
pursuant to (and as defined in) the Option Agreement to the Purchaser
constitutes a transaction that is exempt from the registration requirements of
the Securities Act and any applicable state securities laws.
11. The Pledge Agreement creates in favor of the Collateral Agent a
security interest in the Pledged Securities, the Intercompany Notes, and all of
the Company's right, title, and interest in those items and types of the
Collateral in which a security interest may be created exclusively under Chapter
9 of the Uniform Commercial Code now in effect in the State of New York (the
"UCC"). The Financing Statement to be filed in the UCC Filing Office are in
appropriate form for filing in the UCC Filing Office and the filing thereof in
the UCC Filing Office pursuant to Chapter 9 of the UCC will result in the
perfection of the Collateral Agent's security interest in all Collateral in
which a security interest has been created under the Pledge Agreement and in
which a security interest may be perfected by the filing of financing statements
in the UCC Filing Office under Chapter 9 of the UCC.
12. Upon delivery of (a) the stock certificates evidencing the Pledged
Securities (as defined in the Pledge Agreement) and (b) the promissory notes
evidencing the Intercompany Notes (as defined in the Pledge Agreement), in each
case duly endorsed or accompanied by a duly executed instrument of assignment,
to the Collateral Agent, the security interest of the Collateral Agent granted
by the Company pursuant to the Pledge Agreement in the stock certificates and
the promissory notes so delivered will be perfected under the UCC and will be
prior to any adverse claim (as defined in the UCC) or other Lien of any other
Person.
13. Other than as set forth in the preceding paragraphs 11 and 12, no
action need be taken, as of the date hereof, with respect to the recording,
registering and filing of this Agreement, the Pledge Agreement or any financing
statements or other instruments necessary to make effective the Lien intended to
be created by the Pledge Agreement.
Schedule 6.01
Capital Stock
Holders of Capital Stock, Warrants and Options:
----------------------------------------------
Shares
------
CLASS A COMMON STOCK
(Authorized: 1,400,000 shares)
▇▇▇▇▇▇ ▇▇▇▇▇▇ 378,385.0
▇▇▇▇▇▇ ▇▇▇▇▇▇ (as voting trustee) 134,138.0
AIG 30,990.0
▇▇▇▇▇▇ ▇▇▇▇▇ 9,535.0
Trusts for the children of ▇▇ ▇▇▇▇▇▇▇▇ 9,535.0
---------
Outstanding 562,583.0
Shares underlying stock option issued to DM
currently exercisable 71,515
Shares issuable upon conversion of
Class B Series 1 Preferred Stock 133,494.0
Class B Series 2 Preferred Stock
▇▇▇▇▇▇ ▇▇▇▇▇▇ 116,647.1
▇▇▇▇▇▇ ▇▇▇▇▇ 3,497.5
Albion Alliance 10,679.5
Equitable Life 2,669.9
---------
133,494.0
Reserved for issuance upon conversion of
Class B Common 56,459.0
Class C Common (outstanding) 39,900.0
Class C Common (reserved) 96,000.0
Class D Common (granted) 39,435.0
----------
TOTAL 1,133,580
CLASS B COMMON STOCK
(Authorized: 200,000)
The Equitable Life Assurance Society of the United
States 56,459.0
CLASS C COMMON STOCK
(Authorized: 300,000)
Purchasers of Senior Notes 28,800.0
Purchasers of Exchangeable Preferred 11,100.0
Reserved for issuance on exercise of Warrants 96,000.0
CLASS D COMMON STOCK
(Authorized: 200,000)
Shares underlying stock options issued to
certain management of Sweetheart, ▇▇▇▇▇ and SF 39,435.0
Holdings
[Currently Exercisable 21,478.0
CLASS B PREFERRED STOCK
(Authorized: 100,000 shares)
CLASS B SERIES 1 PREFERRED STOCK
(Authorized: 15,000 shares)
Creative Expressions Group, Inc. 15,000.0
CLASS B SERIES 2 PREFERRED STOCK
(Authorized: 15,000 shares)
▇▇▇▇▇▇ ▇▇▇▇▇▇ 13,107.0
▇▇▇▇▇▇ ▇▇▇▇▇ 393.0
Albion Alliance 1,200.0
Equitable Life 300.0
EXCHANGEABLE PREFERRED STOCK
(Authorized: 20,000 shares)
Purchasers in Private Placement 3,000.0
Shares issued as PIK dividends to date 1,986.1779
Subsidiaries:
------------
a) Sweetheart Holdings Inc. (48.3% ownership of voting stock)
b) The ▇▇▇▇▇ Group, Inc.
c) Creative Expressions Group, Inc.
Agreements:
----------
a) Shareholders' and Voting Trust Agreement, dated as of August 15, 1997,
between ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇
b) Amended and Restated Registration Rights Agreement, dated as of March
12, 1998, among SF Holdings Group, Inc., The ▇▇▇▇▇ Group, Inc., Albion
Alliance Mezzanine Fund, L.P. and The Equitable Life Assurance Society
of the United States
c) Stockholders' Rights Agreement, dated as of March 12, 1998, among SF
Holdings Group, Inc. and the persons listed on Schedule I thereto
Schedule 6.09
Litigation
Plaintiff Defendant Claim Date of Suit
--------- --------- ----- ------------
a) ▇▇▇▇-Illinois, Inc. Sweetheart Cup Company Breach of Contract 5/25/00
b) ▇▇▇▇▇▇▇▇, ▇▇▇▇ Lily Tulip Salary Breach of Contact re: 4/9/87
Retirement Benefit Payment of Earned
Committee and Fort Vacation Time
▇▇▇▇▇▇ Cup Co.
c) Liquidating Sweetheart Fraudulent Transfer; 11/29/01
Trustee of Ace Avoidable Preference
Baking Company,
Limited
Partnership
Schedule 6.12
Indebtedness
a) $144,000,000 principal amount at maturity of 12 3/4% Senior Secured
Discount Notes due 2008 issued by SF Holdings Group, Inc. pursuant to an
Indenture dated as of March 12, 1998.
b) $110,000,000 face amount of 10 1/2% Senior Subordinated Notes due 2003
issued by Sweetheart Cup Company Inc. (as successor to Cup Acquisition
Corporation) pursuant to an Indenture dated as of August 30, 1993.
c) $120,000,000 face amount of 91/2% Senior Subordinated Notes due 2007 The
▇▇▇▇▇ Group, Inc. pursuant to an Indenture dated as of February 27,
1997.
d) Second Amended and Restated Loan and Security Agreement dated as of
June 15, 2000 among Sweetheart Cup Company Inc. as the Borrower, the
Financial Institutions named therein as the Lenders, and Bank of
America, N.A. as the agent.
e) Fourth Amended and Restated Revolving Credit, Term Loan and Security
agreement dated August 28, 2001 between The ▇▇▇▇▇ Group, Inc. as borrower
and IBJ Whitehall Business Credit Corporation as lender and agent.
f) Credit Agreement, as amended, dated June 15, 1998 between Lily Cups
Inc. as borrower and General Electric Capital Canada Inc. as Lender.
g) $1,538,749.40 face amount Subordinated Convertible Note dated May 15,
2000 between Sweetheart Cup Company Inc. and ▇▇▇▇ ▇. ▇▇▇▇▇▇▇.
h) $930,865.81 face amount Subordinated Convertible Note dated May 15,
2000 between Sweetheart Cup Company Inc. and ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
i) $1,300,861.47 face amount Subordinated Convertible Note dated May 15,
2000 between Sweetheart Cup Company Inc. and ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇.
j) $930,865.81 face amount Subordinated Convertible Note dated May 15,
2000 between Sweetheart Cup Company Inc. and ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇.
k) Agreement of Lease dated June 26, 1990 and Option to Purchase dated
October 29, 1991 between Altoona Enterprises, Inc. and The ▇▇▇▇▇ Group,
Inc. for certain real property in Williamsburg, Pennsylvania. The
initial cost of the lease was $2,217,150.
Schedule 6.13
Insurance Policies
[See Attached]