Exhibit 10.2
THIS
NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED, AND MAY NOT BE SOLD OR OTHERWISE TRANSFERRED IN THE
ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SUCH
ACT.
THIS INSTRUMENT AND THE
RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBORDINATED TO THE
PRIOR PAYMENT OF CERTAIN OBLIGATIONS OF THE OBLIGOR TO THE HOLDERS
OF SENIOR INDEBTEDNESS (AS DEFINED HEREIN).
THIS INSTRUMENT AND THE
RIGHTS AND OBLIGATIONS EVIDENCED HEREBY ARE SUBJECT TO RIGHTS OF
CANCELLATION AND SETOFF AS SET FORTH IN SECTION 3.6 HEREOF AND
AMENDMENT, WAIVER OR CONSENT BY THE SELLERS’ REPRESENTATIVE
AS SET FORTH IN SECTION 8.1 HEREOF.
THIS NOTE MAY NOT BE
TRANSFERRED EXCEPT AS PERMITTED IN SECTION 5.1
HEREOF.
NO:
S-1
CELLU TISSUE HOLDINGS,
INC.
Subordinated Note Due
July 2, 2011
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$6,300,000.00
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July 2,
2008
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Original Holder: ATLANTIC
PAPER & FOIL CORP. OF NY.
FOR VALUE
RECEIVED, the undersigned, Cellu Tissue Holdings, Inc., a
Delaware corporation (the “Company”), hereby promises
to pay to the order of Atlantic Paper & Foil Corp. of N.Y.
or its registered and permitted assigns (such original payee or any
successor or permitted assignee from time to time, each a
“Noteholder”), on July 2, 2011 (the
“Maturity Date”), at the address specified in the
Noteholder Register for such Noteholder (as may be updated pursuant
to Section 9.10 hereof), $6,300,000.00 (subject to adjustment
as provided herein) and to pay interest on the unpaid principal
amount of this Note as provided in Section 2
hereof.
1.
THE
NOTE
This Note (this
“Note”) is issued pursuant to and in accordance with
the Asset Purchase Agreement, dated as of July 2, 2008 among
the Company, Atlantic Paper & Foil Corp of N.Y., Atlantic
Lakeside Properties, LLC, Atlantic Paper & Foil LLC,
Atlantic Paper & Foil of Georgia LLC and Consumer
Licensing Corporation (as from time to time in effect, the
“Asset Purchase Agreement”). This Note, together
with all other subordinated notes which may be issued
hereunder as a
result of any transfer or assignment permitted hereunder (and any
notes issued in exchange therefor), are collectively referred to
herein as the “Notes”, and the holders of Notes are
collectively referred to herein as the
“Noteholders.” Capitalized terms used in this
Note have the meanings ascribed thereto herein or in Schedule A
attached hereto.
2.
INTEREST
PROVISIONS
Any remaining
unpaid principal amount owed under this Note bears interest at an
annual rate equal to 12.0% of such principal amount outstanding
from time to time, and is payable quarterly in arrears on each
March 31, June 30, September 30 and December 31
(each an “Interest Payment Date”) and on the Maturity
Date, with the first such payment due on September 30,
2008. Notwithstanding the foregoing, the interest rate shall
increase to the “Default Rate” (as defined below) on
the following dates and the Default Rate shall continue in effect
until such time as no Event of Default is then continuing or all
Events of Default have been waived in writing by the Sellers’
Representative: (a) on any Interest Payment Date on which any
interest then due on this Note shall not be paid in full unless all
such interest not so paid when due is paid within 10 days following
such Interest Payment Date; (b) on the Maturity Date or any
Refinancing Repayment Event if any portion of the remaining
principal shall not be then repaid; and (c) upon the
occurrence of any other Event of Default. For purposes of
this Note, the “Default Rate” shall be 15% per
annum. On each Interest Payment Date, subject to the
provisions of Section 7 (including Schedule B), the Company
shall pay the accrued and unpaid interest on this Note in
cash. Notwithstanding any provisions of this Note, in no
event will the amount of interest paid or agreed to be paid by the
Company exceed an amount computed at the highest rate of interest
permissible under applicable law.
3.
PAYMENT
PROVISIONS
The Company
covenants that so long as this Note is outstanding:
3.1.
Payment at Maturity or
Refinancing Repayment Event. On the Maturity Date, on any
accelerated maturity of this Note pursuant to the terms hereof or
upon any Refinancing Repayment Event, the Company will pay the
principal amount of this Note then owing, together with all accrued
and unpaid interest thereon.
3.2.
Optional Redemption.
At any time and from time to time, the Company may prepay or redeem
any or all Notes, in whole or in part, at any time without premium
or penalty at a price equal to 100% of the principal amount of the
Note so prepaid or redeemed, together with all accrued and unpaid
interest thereon. Any partial redemption shall be allocated
as among the various Notes on a pro rata basis based on their then
outstanding principal amount at the time of such partial
redemption.
3.3.
Notice of Optional
Redemption. Notice of each optional repayment or redemption
of this Note pursuant to Section 3.2 hereof must be given in
accordance with Section 9.1 hereof not fewer than three
Business Days before the repayment or redemption date, in each case
by mailing to the Noteholder a notice of intention to repay or
redeem, which such notice must specify the date of repayment or
redemption, the principal amount of this Note to be
repaid
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or
redeemed on such date, and the accrued and unpaid interest
applicable to the portion of the Note subject to such repayment or
redemption.
3.4.
Payment and Interest
Cut-Off. Upon each voluntary prepayment or redemption of any
of the Notes, in whole or in part, the Company will pay to the
Noteholder the amount of the Note to be prepaid or redeemed, as set
forth in the notice delivered pursuant to Section 3.3 hereof,
together with unpaid interest in respect thereof accrued to and
including the repayment or redemption date (the “Redemption
Price”). On the prepayment or redemption date, if
requested by the Company, the Noteholder will deliver this Note to
the Company for notation thereon of the amount of principal so
prepaid or redeemed, and in consideration therefor, the Company
shall promptly deliver (x) the Redemption Price to such
Noteholder, which will be payable by wire transfer of immediately
available funds to an account designated with reasonable advance
notice by such Noteholder or by check if requested by the
Noteholder and (y) in the case of a partial redemption, a
replacement Note reflecting the remaining outstanding principal
amount after giving effect to the prepayment or
redemption.
3.5.
Application of
Payments. All payments made by the Company hereunder must be
applied: (i) first, to the payment in full of accrued
and unpaid interest and (ii) second, to the reduction of
unpaid principal.
3.6.
Cancellation;
Offset. For so long as this Note is outstanding,
notwithstanding anything to the contrary in this Note, the Company
may cancel all or a portion of this Note to satisfy amounts due to
the Company or any Buyer Indemnified Person under Sections 2.5 or
Section 8 of the Asset Purchase Agreement. The Company,
in its sole discretion, may elect by written notice to the
Noteholder to cause any such cancellation to be applied on a
dollar-for-dollar basis to (i) the payment of accrued and
unpaid interest, (ii) the payment of interest which will
accrue in the future and (iii) to the reduction of outstanding
principal, or any combination of the foregoing (provided that the
Company makes the same election as to all Notes and that any such
offset shall be made against all Notes pro rata based on their
respective outstanding principal amounts at the time of such
offset). To the extent the Company cancels all or a portion
of this Note, (x) the Noteholder shall be obligated to repay
to the Company the amount of any and all interest that has accrued
(at the rate of interest set forth in Section 2) and been paid
on an amount of principal equal in the aggregate to the amount of
such cancellation from the original date of issuance of this Note
to the date of such cancellation and, in order to satisfy such
repayment obligation of the Noteholder, the Company may, in its
sole discretion, elect by written notice to the Noteholder either
to increase the amount of such cancellation by the amount of such
interest or require the Noteholder to pay back to the Company all
such interest in cash (whether or not the Noteholder was the holder
of the Note at the time such interest was paid) in which event the
Noteholder shall repay such cash amount to the Company within five
(5) Business Days of such notice and (y) the Company
shall be relieved of the obligation to pay any and all interest
that has accrued but not yet been paid on an amount of principal of
the Note equal in the aggregate to such amount from the date of
issuance of the Note until the date of satisfaction of such
amount. If this Note is transferred in accordance with the
terms hereof, it will continue to be subject to the provisions of
this Section 3.6 (whether or not the transferee is a Seller
under the Asset Purchase Agreement). In no event shall the
sum of (a) the aggregate amount of principal and interest with
respect to this Note cancelled by the Company by operation of this
Section 3.6
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and
(b) the aggregate amount of principal and interest with
respect to all other Notes cancelled by the Company by operation of
Section 3.6 thereof exceed $2,500,000.00.
3.7.
Payments Subject to
Subordination. Notwithstanding the foregoing provisions of
this Section 3, no cash payment of interest or principal or
any other amounts payable under this Section 3 shall be made
at any time when the payment thereof is prohibited by the
provisions of Section 7 (including Schedule B)
hereof.
4.
DEFAULTS
4.1.
An “Event of
Default” will exist if any of the following conditions or
events occurs and is continuing:
4.1.1.
The Company
(i) defaults in the payment, when due, of any principal
amount, when due, or (ii) defaults in the payment of any
portion of the interest obligations under Section 2 when due
and such default is not remedied within 10 days after the same
becomes due and payable; or
4.1.2.
The Company
(i) files, or consents by answer or otherwise to the filing
against it of, a petition for relief or Reorganization,
(ii) makes an assignment for the benefit of its creditors,
(iii) consents to the appointment of a custodian, receiver,
trustee or other officer with similar powers with respect to it or
with respect to any substantial part of its property, (iv) is
adjudicated as insolvent or to be liquidated or (v) takes
corporate action for the purpose of approving a Reorganization with
respect to the Company or any of the foregoing; or
4.1.3.
A governmental authority
enters an order appointing, without consent by the Company, a
custodian, receiver, trustee or other officer with similar powers
with respect to it or with respect to any substantial part of its
property, or constituting an order for relief or approving a
petition for Reorganization, or any such petition is filed against
the Company and such petition is not dismissed within 60 days;
or
4.1.4.
The Company increases the
aggregate principal amount outstanding under the Credit Agreements
to in excess of $305 million; or
4.1.5.
Any Credit Agreement at
any time contains a provision that prohibits or limits cash
payments under Section 2 or 3.1 hereof of interest or
principal on this Note when such payments become due (it being
acknowledged and agreed that the Credit Agreements may contain
provisions which require subordination of such payments to the
extent set forth in Section 3.7, Section 7 and Schedule B
of this Note, and, in each case, the existence of such provisions
and their application to such payments shall not constitute an
Event of Default under this Section 4.1.5); or
4.1.6.
The Company or any of its
subsidiary parties thereto (a) shall default in the timely payment of rent
when due on more than seven occasions in aggregate for all Leases
over any period of twelve consecutive months, (b) shall fail
to make any payment of overdue rent under any of the Leases within
ten calendar days after receiving notice thereof from the lessor as
provided in the applicable Lease or (c) shall default in the
payment of purchase price payable under any of the Lea
ses.
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4.2.
Acceleration. Upon
the occurrence and during the continuance of any Event of Default
specified in Section 4.1.2 or Section 4.1.3, this
Note will automatically become immediately due and payable.
Upon the occurrence and during the continuance of any Event of
Default of the type specified in Section 4.1.1, 4.1.4, 4.1.5
or 4.1.6, subject to Section 7 of this Note (including
Schedule B), the Sellers’ Representative may declare this
Note immediately due and payable by providing written notice
thereof to the Company. Interest on the outstanding principal
amount will continue to accrue at the Default Rate during any
period in which an Event of Default exists pursuant to
Section 2 hereof.
5.
TRANSFER AND REPLACEMENTS OF
NOTES
5.1.
Transfer of Notes.
No Noteholder may transfer all or any portion of the Notes held by
such Noteholder, except as set forth in this
Section 5.
5.2.
Permitted
Transfers.
5.2.1.
Any Noteholder to whom any
Notes are issued in connection with the closing under the Asset
Purchase Agreement may transfer any of the Notes held by such
Noteholder, as a
gift, to an Individual Owner or a Member of the Immediate Family of
an Individual Owner for no consideration.
5.2.2.
This Note may not be
transferred in denominations of less than $50,000; provided that if
necessary to enable the registration of a permitted transfer by a
Noteholder of its entire holding of Notes, one Note may be in a
denomination of less than $50,000.
5.2.3.
The Company agrees to
promptly register the transfer of this Note made in accordance with
this Section 5 in the Noteholder Register upon written request
of the Noteholder. No transfer or attempted transfer is
effective until entered on the books and records maintained by the
Company. Any transfer in contravention of any of the
provisions of this Note is void and of no effect and will not bind
nor be recognized by the Company.
5.2.4.
In no event may all or any
part of this Note be transferred to a minor or an incompetent
except in trust or pursuant to the Uniform Gifts to Minors Act or
by will or the laws of descent and distribution (in which event all
reasonable efforts will be made by the executor of the estate of
such Noteholder to have such Note placed in a trust for the benefit
of the transferee).
5.2.5.
Upon surrender of any Note
at the principal executive office of the Company for registration
of a permissible transfer, duly endorsed or accompanied by a
written instrument of transfer duly executed by the registered
Noteholder and accompanied by the address for notices of each
transferee of such Note or part thereof, the Company shall execute
and deliver, at the expense of the Company (except as provided
below), one or more new Notes (as requested by the Noteholder
thereof) in exchange therefor, in an aggregate principal amount
equal to the unpaid principal amount of the surrendered Note.
Each such new Note will be dated and bear interest from the date to
which interest has been paid on the surrendered Note or dated the
date of the surrendered Note if no interest has have been paid
thereon. The Company may require payment (or reasonably
satisfactory evidence of payment) of a sum sufficient to cover any
stamp tax or governmental charge imposed in respect of any such
transfer of Notes.
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5.3.
Replacement of
Notes. Upon receipt by the Company of evidence reasonably
satisfactory to it of the ownership of and the loss, theft,
destruction or mutilation of any Note, and, in the case of loss,
theft or destruction, of indemnity reasonably satisfactory to it,
or, in the case of mutilation, upon surrender and cancellation
thereof, the Company shall, at its own expense, execute and
deliver, in lieu thereof, a new Note, dated and bearing interest
from the date to which interest has been paid on such lost, stolen,
destroyed or mutilated Note or dated the date of such lost, stolen,
destroyed or mutilated Note if no interest has been paid
thereon.
6.
REPRESENTATIONS AND WARRANTIES
OF THE COMPANY
The Company
represents and warrants as of the date of this Note
that:
6.1.
Organization; Power and
Authority. The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State
of Delaware. The Company has the requisite power and
authority to transact the business it transacts and proposes to
transact, and to execute and deliver this Note.
6.2.
Authorization, etc.
This Note has been duly authorized by all necessary corporate
action on the part of the Company, and this Note constitutes a
legal, valid and binding obligation of the Company enforceable
against the Company in accordance with its terms.
6.3.
Non-Contravention.
The execution, delivery and performance by the Company of this Note
will not (i) contravene, result in any breach of, or
constitute a default under its certificate of incorporation or
bylaws or (ii) violate any provision of any material statute
or other rule or regulation of any governmental authority
applicable to the Company or any material debt agreement or other
material agreement of the Company, including without limitation any
of the Credit Agreements as in effect at the date of this Note,
complete and accurate copies of which have been provided to the
Seller’s Representative.
6.4.
Governmental
Authorizations, etc. No consent, approval or authorization
of, or registration, filing or declaration with, any governmental
authority is required in connection with the execution, delivery or
performance by the Company of this Note.
7.
SUBORDINATION
Notwithstanding
any provision of this Note to the contrary, this Note and the
rights and obligations evidenced hereby are subordinate and junior
to the prior payment in full of all other Senior Indebtedness of
the Company, and are subject to the subordination provisions set
forth in Schedule B hereto. Each of the Company and the
Noteholder, by its acceptance hereof, covenants that each of them
will comply with the provisions of Schedule B hereto.
8.
AMENDMENT AND
WAIVER
8.1.
Requirements. This
Note may be amended, and the observance of this Note may be waived
(either retroactively or prospectively) only as
follows:
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(a) in the case of a waiver or consent affecting
only this Note, by a written waiver or consent signed by the party
against whom the waiver is to be enforced;
(b) in the case of a waiver or consent affecting
all Notes, by a written waiver or consent signed, in the case of a
waiver or consent to be enforced against the Company, by the
Company, and in the case of a waiver or consent to be enforced
against the Noteholders, by the Sellers’
Representative;
(c) in the case of an amendment affecting only this
Note, by a written instrument signed by the Company and the
Noteholder; and
(d) in the case of an amendment affecting all
Notes, by a written amendment signed by the Company and the
Sellers’ Representative.
8.2.
Delivery of
Amendments. The Company will deliver true and correct copies
of each executed amendment, waiver or consent effected pursuant to
the provisions of this Section 8 that has been consented to by
the Sellers’ Representative and not been signed by the
Noteholder to the Noteholder promptly (but in no event later than
15 Business Days) following the date on which it is executed and
delivered.
8.3.
Binding Effect,
etc. This Note shall have no effect until it has been
countersigned by the Noteholder and a countersigned copy of the
Note has been delivered to the Company. Any amendment, waiver
or consent consented to as provided in this Section 8 that is
specified to apply equally to all Noteholders will apply equally to
all Noteholders and be binding upon each of them and upon each
future Noteholder and upon the Company without regard to whether
such Note has been marked to indicate such amendment or
waiver. No such amendment or waiver will extend to or affect
any obligation, covenant, agreement, default or Event of Default
not expressly amended or waived or impair any right consequent
thereon. No course of dealing between the Company and the
Noteholders nor any delay in exercising any rights hereunder or
under any Note will operate as a waiver of any rights of any
Noteholder.
9.
MISCELLANEOUS
9.1.
Notices. All
notices, requests, demands, claims and other communications
required or permitted to be delivered, given or otherwise provided
hereunder must be in writing and must be delivered, given or
otherwise provided:
(a) by hand (in which case, it will be
effective upon delivery); or
(b) by overnight delivery by a nationally
recognized courier service (in which case, it will be effective on
the Business Day after being deposited with such courier
service);
in each case, to
the address listed below:
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If to the
Noteholder:
c/o Shaun
Gabbay
PO Box
222144
Great Neck, NY
11022
Telephone: (516)
317-7776
with a copy
to:
Skadden, Arps, Slate,
Meagher & Flom LLP
Four Times Square
New York, NY 10036
Telephone number: (212) 735-2524
Attention: Randall H. Doud
and
Steve Cohn, PC
One Old Country Road
Carle Place, NY 11514
Telephone: (516) 294-6410
If to the Company, to
it at:
Cellu Tissue
Holdings, Inc.
1855 Lockeway Drive
Suite 501
Alpharetta, GA 30004
Telephone number: (678)
393-2651
Attention: Russell Taylor
with a copy
to:
Ropes & Gray
LLP
1211 Avenue of the Americas
New York, NY 10036-8704
Telephone number: (212) 841-0697
Attention: Christopher C. Henry
and
Weston Presidio
Pier 1, Bay 2
San Francisco, CA 94111
Telephone number: (415) 398-0770
Attention: R. Sean Honey, Therese Mrozek and Jim
Morrone
Each of the
Noteholder and the Company may specify a different address for
itse
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