Exhibit 10.7
GUARANTY
THIS GUARANTY
is made, executed and delivered this
21 st day of March, 2007 (the
“Guaranty”) by CELLU TISSUE HOLDINGS, INC. , a
Delaware corporation (the “Guarantor”) in favor of
ASSOCIATED BANK, NATIONAL ASSOCIATION , a national banking
association with an office at 200 North Adams Street, Green Bay,
Wisconsin 54301 (the “Bank”).
RECITALS
A.
CityForest Corporation, a Minnesota corporation (“CF
Corporation”), and the Bank are the parties to that certain
Reimbursement Agreement dated as of June 29, 2005 (the
“Original Reimbursement Agreement”).
B.
On the date hereof, all of CF Corporation’s issued and
outstanding capital stock has been acquired by Cellu City
Acquisition Corporation (the “Cellu Tissue Merger
Sub”), a wholly-owned subsidiary of the Guarantor, pursuant
to that certain Merger Agreement dated as of February 26, 2007 (the
“Cellu Tissue Merger Agreement”) among the Guarantor,
the Cellu Tissue Merger Sub, CF Corporation and Wayne Gullstad as
representative of the shareholders of CF Corporation (such
shareholders being the “CF Sellers”), and the Cellu
Tissue Merger Sub has been merged (the “Cellu Tissue
Merger”) into CF Corporation with CF Corporation being the
surviving corporation and CF Corporation has been converted (the
“CF Corporation Conversion”) into Cellu
Tissue-CityForest LLC, a Minnesota limited liability company (the
“Borrower”).
C.
The Borrower has requested that the Bank consent to the Cellu
Tissue Merger and the CF Corporation Conversion, and agree to amend
certain provisions of the Original Reimbursement Agreement pursuant
to that certain Amended and Restated Reimbursement Agreement dated
as of even date herewith (the Amended and Restated Reimbursement
Agreement as it may be amended, modified, supplemented, increased,
restated or replaced from time to time being the
“Reimbursement Agreement”; capitalized terms not
otherwise defined herein being used herein as therein defined)
between the Borrower and the Bank.
D.
As a condition to the “Effective Date” of the
Reimbursement Agreement, the Bank has required that the Guarantor
execute and deliver this Guaranty.
E.
The Guarantor has determined that the execution, delivery and
performance of this Guaranty are in the Guarantor’s best
business and pecuniary interest.
NOW, THEREFORE,
for good and valuable consideration,
the receipt and sufficiency of which are hereby acknowledged by
each of the parties hereto, and in order to induce the Bank to
amend and restate the Original Reimbursement Agreement pursuant to
the Reimbursement Agreement, the Guarantor hereby agrees with the
Bank as follows:
1.
Guaranty of Payment . The Guarantor hereby
unconditionally guarantee(s) the full and prompt payment when due,
whether by acceleration or otherwise, and at all times thereafter,
of all obligations of the Borrower to the Bank, howsoever created,
arising or evidenced, whether direct or indirect, absolute or
contingent, or now or hereafter existing, or due or to become due,
including, without limitation, all Obligations of the Borrower to
the Bank arising under the Reimbursement Agreement or any other
Loan Document (all such obligations being hereinafter collectively
called the “Guaranteed Obligations”) and the Guarantor
further agrees to pay all reasonable expenses, including reasonable
fees of attorneys (who may be employees of the Bank) and legal
expenses, paid or incurred by the Bank in endeavoring to collect
the Guaranteed Obligations, or any part thereof, and in enforcing
this Guaranty.
2.
Representations and Warranties . The Guarantor
represents and warrants to the Bank that:
(a)
Existence. Etc. The Guarantor is a corporation duly
formed and validly existing under the laws of the State of
Delaware. The Guarantor has all power and authority to do
business in, and is in good standing in, all other jurisdictions
where the nature of its business or the nature of the property
owned or leased by it makes such qualification necessary, except
where the failure to effect such qualification could not reasonably
be expected to cause a Material Adverse Occurrence. The Guarantor
has all power and authority to own its properties.
(b)
Due Authorization, No Breach, No Liens. The
execution, delivery and performance by the Guarantor of this
Guaranty and each other Transaction Document to which the Guarantor
is a party are within the Guarantor’s powers, have been duly
authorized by all necessary action by the board of directors of the
Guarantor, and do not contravene (a) the Guarantor’s articles
of incorporation or bylaws, (b) any Governmental Rule or (c) any
indenture, loan or credit agreement or any other material
agreement, lease or instrument to which the Guarantor is a party or
by which it or any of its properties may be bound including,
without limitation, the Cellu Tissue Credit Facility Loan Documents
and the Cellu Tissue Senior Secured Notes Loan Documents; and such
execution, delivery and performance do not result in or require the
creation of any Lien upon or with respect to any of the
Guarantor’s properties. The Guarantor is not in default
under or in violation of any such law, statute, rule or regulation,
order, writ, judgment, injunction, decree, determination or award
or any such indenture, loan or credit agreement or other material
agreement, lease or instrument in any case in which the
consequences of such default or violation could reasonably be
expected to cause a Material Adverse Occurrence.
(c)
Governmental Approvals. No Governmental
Approval is required for the due execution, delivery and
performance by the Guarantor of this Guaranty or any other
Transaction Document to which it is a party, other than those
already obtained and those not yet required but obtainable in the
ordinary course as and when required.
(d)
Transaction Documents. This Guaranty and the other Transaction
Documents to which the Guarantor is a party are the valid and
binding obligations of the Guarantor enforceable against
the
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Guarantor in accordance with their
respective terms, except as the enforceability thereof may be
limited by bankruptcy, insolvency, reorganization, moratorium or
other similar laws of general application affecting the enforcement
of creditors’ rights or by general principles of equity
limiting the availability of equitable remedies. This Guaranty is
in full force and effect in all material respects and no default
under this Guaranty has occurred and is continuing. To the
knowledge of the Guarantor, the other Transaction Documents to
which the Guarantor is a party are in full force and effect in all
material respects and no default under any such other Transaction
Document to which the Guarantor is party has occurred and is
continuing.
(e)
Financial Condition.
(i)
The Guarantor has heretofore furnished to the Bank its consolidated
balance sheet and statements of income, stockholders equity and
cash flows (i) as of and for the fiscal year ended February 28,
2006, reported on by Ernst & Young LLP, independent public
accountants, and (ii) as of and for the fiscal month ended February
28, 2007 and for the portion of the fiscal year elapsed since the
end of the 2006 fiscal year, certified by the chief financial
officer of the Guarantor. Such financial statements present
fairly, in all material respects, the financial position and
results of operations and cash flows of the Guarantor and its
consolidated Subsidiaries as of such dates and for such periods in
accordance with GAAP, subject to year-end audit adjustments and the
absence of footnotes in the case of the statements referred to in
clause (ii) above.
(ii)
No event, change or condition has occurred that has resulted in, or
could reasonably be expected to result, in a Material Adverse
Occurrence since February 28, 2006.
(f)
Disclosure. No exhibit, schedule, report or
other information (unless superseded by a subsequently provided,
corrected exhibit, schedule or report or by corrected information)
provided by the Guarantor or any of its Affiliates or their
respective agents to the Bank in connection with the negotiation
and execution of the Transaction Documents to which the Guarantor
is party and otherwise in connection with the transactions
contemplated thereby contains any material misstatement of fact or
omits to state a material fact necessary to make the statements
contained therein taken as a whole not misleading, as of the date
provided.
(g)
Margin Stock . The Guarantor is not engaged in the
business of extending credit for the purpose of buying or carrying
margin stock (within the meaning of Regulation U issued by the
Federal Reserve Board).
(h)
Incorporation of Representations and Warranties.
Each of the representations
and warranties of the Guarantor or pertaining to the Guarantor or
any of its properties in any Cellu Tissue Merger Document were true
and correct when made and if any such representation and warranty
is a continuing representation and warranty under the relevant
Cellu Tissue Merger Document as of the Effective Date, then
such
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continuing representation and
warranty is true and correct as of the Effective Date. The
Guarantor has no knowledge that any of the representations and
warranties made in the Transaction Documents by or on behalf of any
party thereto other than the Guarantor is untrue or incorrect in
any material respect.
(i)
Status. The Guarantor is not an
“investment company” or a company
“controlled” by an “investment company”
within the meaning of the Investment Company Act of 1940, as
amended, or an “investment advisor” within the meaning
of the Investment Company Act of 1940, as amended.
(j)
Broker’s Fees. Except as disclosed on
Schedule 7.21 attached to the Reimbursement Agreement
and incorporated herein by reference, the Guarantor has not dealt
with any Person who may be entitled to any finder’s fee,
brokerage commission, loan commission or other sum in connection
with the transactions contemplated by the Transaction Documents.
The Guarantor hereby agrees to indemnify, defend and hold harmless
the Bank against any and all loss, liability, cost or expense,
including reasonable attorneys’ fees, that such parties may
suffer or sustain with respect to any finder’s fee, brokerage
commission or other sum due in connection with the Reimbursement
Agreement, the other Loan Documents or any other Transaction
Document.
(k)
Solvency . The Guarantor is Solvent after
giving effect to the making of the Loans in the full amount
available under the Reimbursement Agreement, the issuance of the
Bonds Letter of Credit, the incurrence of any other Indebtedness
pursuant to the Loan Documents, the incurrence of the Indebtedness
under the Second Cellu Tissue Senior Secured Notes Indenture
Supplement, and the incurrence of Indebtedness in the full amount
of the “Commitments” available under the Cellu Tissue
JPMorgan Credit Agreement.
(l)
Trading with the Enemy Act . The execution of this Guaranty and the use
of the proceeds of the Loans does not violate the Trading with the
Enemy Act of 1917, as amended, nor any of the foreign assets
control regulations promulgated thereunder or the under the
International Emergency Economic Powers Act or the U.N.
Participation Act of 1945. Neither the Guarantor nor any person who
owns a controlling interest in or otherwise controls the Guarantor
or any Subsidiary of the Guarantor is listed on the Specially
Designated Nationals and Blocked Person List or other similar lists
maintained by the Office of Foreign Asse
