Exhibit 10.7
GUARANTY FEE AGREEMENT
This Guaranty Fee Agreement (this "Agreement"), dated as of January 26,
2002, is made between SF Holdings Group, Inc., a Delaware corporation ("SF
Holdings"), and Newcup, LLC, a Delaware limited liability company ("Newcup").
All capitalized terms used but not defined herein shall have the respective
meanings ascribed to them in the Guaranty Agreement (as defined below).
W I T N E S S E T H
WHEREAS, pursuant to that certain Note Purchase Agreement, dated as of
January 25, 2002 (as the same may be amended, modified or supplemented from time
to time in accordance with the terms thereof, the "Note Purchase Agreement"), by
and among Newcup, Jefferies & Company, Inc. (the "Purchaser"), and TCW/Crescent
Mezzanine, L.L.C. ("TCW/Crescent"), as collateral agent for the Holders, Newcup
is issuing and selling to the Purchaser an aggregate of $34,500,000 in principal
amount of Series A Notes and an aggregate of $19,500,000 in principal amount of
Series B Notes (collectively, as amended, modified or supplemented in accordance
with the terms thereof, the "Newcup Notes"); and
WHEREAS, pursuant to that certain Guaranty Agreement dated as of January
26, 2002 (as the same may be amended, modified or supplemented from time to time
in accordance with the terms thereof, the "Guaranty Agreement"), by and among SF
Holdings, the Purchaser and TCW/Crescent as collateral agent, SF Holdings is
guaranteeing the obligations of Newcup with respect to the Newcup Notes; and
WHEREAS, Newcup is utilizing a portion of the proceeds from the Newcup
Notes to purchase a portion of SF Holdings' outstanding 12 3/4% Series B Senior
Secured Discount Notes due 2008 (the "SF Notes"); and
WHEREAS, SF Holdings is seeking certain assurances from Newcup, and the
parties desire to enter into this Agreement to set forth certain agreements, in
connection with and related to the foregoing.
NOW, THEREFORE, in consideration of the mutual covenants contained herein
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties hereto hereby agree as follows:
1. Prohibited Activities of Newcup. Newcup shall not, without the prior
written consent of SF Holdings in each instance: (a) incur, directly or
indirectly, any Indebtedness or any other obligation or liability for the
payment of money other than the Indebtedness, obligations and liabilities (i)
under, or in order to effect compliance with, the Note Purchase Agreement, the
Newcup Notes and the other Note Purchase Documents, the Company Guarantee
Documents, and the Guarantor Option Agreement (collectively, the "SF Transaction
Documents"), (ii) under, or by reason of compliance with, this Agreement; and/or
(iii) under, or in order to effect
compliance with (but not as the result of a violation of), the laws of the State
of Delaware and the laws of the United States of America; (b) create or permit
to exist any Lien upon any property or assets now owned or hereafter acquired by
it other than (i) the Liens created under the Note Purchase Documents to which
Newcup is a party, and (ii) Liens required or permitted pursuant to the Note
Purchase Documents; (c) engage in any business or activity or own any assets
other than (i) holding the SF Notes purchased or otherwise acquired by Newcup,
(ii) performing its obligations and activities under the SF Transaction
Documents and incidental thereto, (iii) making payments on the Obligations
evidenced by the Newcup Notes and the other Note Purchase Documents as provided
in Paragraph 2 below to the extent funds are available for such payments, (iv)
performing such activities as from time to time may be reasonably necessary to
maintain its existence and good standing as a separate legal entity and to
effect compliance with the laws of the State of Delaware and the Laws of the
United States of America, and (v) the making of distributions to the members of
Newcup in amounts sufficient to pay income taxes due and owing (including
estimated taxes on the dates the payment of such estimated income taxes are
required) by such members arising from income of Newcup attributable to or
allocated to such members; (d) consolidate with or merge with or into, or
convey, transfer or lease all or substantially all its assets to, any Person
(other than as required under clauses (b)(i) and (b)(ii) of this Paragraph 1);
(e) create or acquire any Subsidiary or make or own any Investment in any
Person, except Investments in Cash Equivalents and the SF Notes; (f) fail to
hold itself out to the public as a legal entity separate and distinct from all
other Persons; (g) amend or waive any of the provisions of the Newcup Notes or
the Note Purchase Agreement requiring the consent of SF Holdings; (h) amend its
Limited Liability Company Operating Agreement; (i) issue any additional
membership interests in Newcup, except as permitted pursuant to Paragraph 5
hereof; or (j) sell, transfer or otherwise dispose of any SF Notes held by
Newcup (other than as required under clauses (b)(i) and (b)(ii) of this
Paragraph 1). Notwithstanding the foregoing, in the event of an Event of Default
(as defined in the Note Purchase Agreement) and an acceleration of Newcup Notes
representing all of the outstanding principal balance thereof, the provisions of
this Paragraph 1 shall thereafter cease to apply and be in effect and the
failure to comply with any of the provisions of this Paragraph 1 shall not
affect, prejudice or compromise the enforceability or rights of the Holders
under the Guaranty Agreement or any of the other Company Guarantee Documents or
the Note Purchase Documents.
2. Application of Payments from SF Holdings. In the event that Newcup
shall at any time receive a payment from SF Holdings or an affiliate or designee
of SF Holdings, Newcup shall, within one (1) Business Day of the receipt
thereof, subject to the provisions of the Newcup Notes and the direction of SF
Holdings, apply the entire amount of such payment first (a) to the maintenance
of the existence in good standing of Newcup and (b) to the satisfaction of
obligations necessary to permit Newcup to comply and remain in compliance with
(i) this Agreement, (ii) the Note Purchase Agreement, the Newcup Notes and the
other Note Purchase Documents, (iii) the laws of the State of Delaware and the
laws of the United States of America and (iv) the making of distributions to the
members of Newcup in amounts sufficient to pay income taxes due and owing
(including estimated taxes on the dates the payment of such estimated income
taxes are required) by such members arising from income of Newcup attributable
to or allocated to such members, and for no other purposes, and then to the
satisfaction of its Obligations with respect to the Indebtedness evidenced by
the Newcup Notes and the Note Purchase Agreement, when and as they become due.
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3. Guaranty Fee. For so long as the Guaranty Agreement shall be in effect
and provided that no Default or Event of Default exists with respect to the
Guaranty Agreement, Newcup shall pay to SF Holdings an annual guarantee fee,
payable in cash on the last Business Day of each calendar year (the "Guaranty
Fee") with respect to each Interest Period occurring during such calendar year,
computed as follows: (a) the Guaranty Fee payable with respect to each Interest
Period occurring within such calendar year that does not constitute a PIK
Quarter (as defined in the Series A Notes) with respect to the Series A Notes
shall be equal to one-half of one percent (0.5%) of the outstanding principal
amount of the Series A notes as of the first day of such Interest Period; (b)
the Guaranty Fee payable with respect to each Interest Period occurring within
such calendar year that does not constitute a PIK Quarter (as defined in the
Series B Notes) with respect to the Series B Notes shall be equal to one-half of
one percent (0.5%) of the outstanding principal amount of the Series B Notes as
of the first day of such Interest Period; (c) the Guaranty Fee payable with
respect to each Interest Period occurring within such calendar year that
constitutes a PIK Quarter (as defined in the Series A Notes) with respect to the
Series A Notes shall be equal to one percent (1.0%) of the outstanding principal
amount of the Series A Notes as of the first day of such Interest Period; and
(d) the Guaranty Fee payable with respect to each Interest Period occurring
within such calendar year that constitutes a PIK Quarter (as defined in the
Series B Notes) with respect to the Series B Notes shall be equal to one percent
(1.0%) of the outstanding principal amount of the Series B Notes as of the first
day of such Interest Period. At Newcup's option (exercisable by written notice
to SF Holdings), the amount of the Guaranty Fee due may be paid through a
reduction of the adjusted issue price (original principal plus accrued but
unpaid original issue discount less any previously paid guaranty fees) of the SF
Notes and such reduction will be deemed to constitute a cash payment under this
Paragraph 3.
4. Modification of SF Notes. As soon as possible and, in any event, within
ten (10) Business Days after the Issue Date and following the effective time of
the Supplemental Indenture (as defined in the Note Purchase Agreement), Newcup
agrees to take all action within its control (a) to cause the Discount Notes to
be modified, effective January 25, 2002, to (i) reduce the aggregate principal
amount thereof to $55 million, (ii) reduce the interest rate thereon to four
percent (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.
5. Newcup Members. Other than Cupcorp, Inc., SF Holdings or any
affiliate of SF Holdings, no person or entity shall become a holder of
membership interests of Newcup.
6. Tax Returns and Financial Statements. Newcup shall provide SF Holdings
with the opportunity to review and comment on any federal income tax returns,
including K-1 filings, prepared for Newcup or any of its members prior to the
filing thereof and the opportunity to review and comment on any financial
statements of Newcup prepared by Newcup or its accountants prior to the adoption
thereof by Newcup as the final versions of such financial statements.
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7. Events of Default. Any breach or violation by Newcup of any of the
covenants contained in this Agreement at any time that the provisions of
Paragraph 1 hereof are applicable and in effect shall constitute an "Event of
Default" under this Agreement. If such breach or violation occurs, and assuming
such breach or violation is curable, is not cured within thirty (30) days
following the earlier of the knowledge of such breach or violation by Newcup or
the receipt of written notice thereof from SF Holdings; provided, however, that
notwithstanding the cure of such violation or breach by Newcup, the obligations
of SF Holdings under the Guaranty Agreement shall be permanently reduced by the
amount of any actual loss, damage or liability suffered or incurred by Newcup or
SF Holdings as a result of such Event of Default.
7. Miscellaneous.
(a) Further Assurances. Each of the parties hereto shall, from time
to time at the other party's reasonable request and cost, execute such further
instruments, documents and agreements, and give such further written assurances,
as is necessary to carry into effect the purposes and intent of this Agreement.
(b) Counterparts. This Agreement may be executed in counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument. Facsimile transmission of any signed
document will be deemed the same as delivery of an original.
(c) Assignment. Neither party hereto shall assign this Agreement or
any rights or obligations hereunder without the prior written consent of the
other party.
(d) No Waiver. No failure or delay on the part of a party hereto in
the exercise of any right hereunder shall impair such right or be construed to
be a waiver of, or acquiescence in, any breach of any covenant or agreement
herein, nor shall any single or partial exercise or waiver of any such right
preclude other or further exercise thereof or of any other right.
(e) Amendment. This Agreement shall be amended only in a
written agreement executed by both parties hereto.
(f) Governing Law. This Agreement shall be governed by, and
construed and enforced in accordance with, the laws of the State of New York.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed as of the date first written above.
SF HOLDINGS GROUP, INC.
By: /s/ Hans H. Heinsen
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Name: Hans H. Heinsen
Title: Senior Vice President
NEWCUP, LLC
By: Cupcorp, Inc., its sole member
By: /s/ Mark Attanasio
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Name: Mark Attanasio
Title: President
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